New Zealand’s Tower expects underlying net profit to rise to $NZ27-32 million ($25-30 million in fiscal 2023 and gross written premium (GWP) to increase 10-15%.

The insurer said today its underlying net profit jumped 31% in the year to September to $NZ27.3 million ($25.33 million). It affirmed previously flagged GWP of $NZ457 million ($423.95 million), a rise of 13%.

The combined operating ratio improved to 90.1%, from 91.4% a year earlier, and customer numbers increased 5% to 319,000. My Tower registrations hit 200,000 customers.

“The decisive actions taken to combat record inflation, global supply chain blockages, and increasing frequency and severity of large events together with consistent growth and strong underlying business performance, have delivered a strong result,” CEO Blair Turnbull said.

"Our business fundamentals continue to improve as we drive double digit growth and our investments in our core technology platform and actions to control inflationary pressures continue to deliver efficiencies.”

The insurer says its claims ratio reduced to 48.9%, from 50.2%, and planned claims efficiencies will result in a 3% saving in total claims costs in the year to September 2023.

Large events incurred net claims costs after reinsurance of $NZ19 million ($17.63 million) due to a “one-in-a-thousand-year" Tongan volcanic eruption and subsequent tsunami, and multiple storms and floods across New Zealand. Annual house claims rose 7% amid the wettest winter on record in New Zealand.

Tower says it continues to address the increasing severity and frequency of extreme weather events, including “future proofing” its underwriting capability by expanding risk-based pricing to inland flooding and coastal hazards.

“Supporting customers and communities through the increasing impacts of climate change is our most important challenge as a New Zealand and Pacific insurer,” Mr Turnbull said.

Tower has increased its perils allowance to $NZ30 million ($27.83 million) for 2023 and says a $NZ934 million ($866.37 million) catastrophe reinsurance cover will provide “important protection from this volatility”.

The 2022 result was hit by a $NZ5.5 million ($5.1 million) Canterbury earthquake valuation increase as a result of new claims valued above $NZ100,000 ($92,738), the complexity of existing claims and inflation. A one-off provision was made for customer remediation arising from an error in the calculation of multi-policy discounts. Tower is in the process of identifying affected customers and determining refunds.

Tower plans to add 100 staff in Suva, Fiji, over the coming year, which it says will see the mix of staff more evenly spread between operational centres in Auckland, Rotorua and Suva, and staff permanently working from home.

Tower also revealed it now insures more than 4000 electric vehicles, and it is using a new artificial intelligence-based tool that identifies potentially unjustified claims. The detection rate is up 300%, leading to a greater proportion of customers withdrawing claims or Tower declining them.