Tower to cut product lines in bid to cut costs

Tower to cut product lines in bid to cut costs

By Paul McBeth

Feb. 11 (BusinessDesk) - Tower, which posted an annual loss last year on ballooning costs from the Canterbury earthquakes, plans to whittle down the number of products it offers customers and clamp down on costs in a bid to sharpen up the business.

Chief executive Richard Harding told shareholders in Auckland that he has conducted a thorough review of the business since starting in the role five months ago, and has kicked off a number of projects to lift the general insurer's performance. Two key actions he sees as improving Tower's operations are cutting the number of products it offers from 150 to about 20 and cutting out easy-to-remove costs from the business.

"We expect to see the benefits of incremental product rationalisation in FY2017 as we move through the product renewal cycle," he said in speech notes published on the NZX. "The end game, as I said earlier, is all about growing and retaining our customer base, and cost reduction is a vital part of that story."

In November, Tower reported a net loss of $7 million, largely due to a $36.2 million charge from increased provisioning on its remaining Canterbury earthquake claims, which exhausted the reinsurance cover the company took out in April.

Harding said Tower will be able to work through the balance of its Canterbury claims with its capital well above prudential requirements.

The company didn't provide guidance for the current financial year.

The shares fell 0.6 percent to $1.74, and have dropped 7.9 percent this year.

(BusinessDesk)

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