Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Tower to raise $70.8 mln at 45% discount to bolster balance

Tower to raise $70.8 mln at 45% discount to bolster balance sheet; narrows annual loss

By Paul McBeth

Nov. 14 (BusinessDesk) - Tower wants to raise $70.8 million at a 45 percent discount to bolstered its balance sheet while it continues to contend with escalating costs from the Canterbury earthquakes seven years ago. The insurer narrowed its annual loss.

The Auckland-based company will sell shares at 42 cents apiece in a one-for-one pro-rata renounceable entitlement offer fully underwritten by Goldman Sachs New Zealand, it said in a statement. Suncorp Group subsidiary Vero Insurance, which would have paid $1.40 a share to buy Tower had it not been blocked by the regulator, has committed to the capital raise.

Tower said the offer is a 29 percent discount to the theoretical ex-rights price of 59 cents, based on the shares last trading price at 76 cents. The stock has dropped 9 percent this year. It had two suitors keen on taking it over when the share price bottomed out last year after it suspended dividends in the face of mounting Canterbury earthquake claims.

"That capital will provide Tower with a strong, durable base to appropriately manage risk and give confidence that the legacy of Canterbury is adequately provided for," chair Michael Stiassny said in a statement. "We are confident that investment will not only unlock that potential, but also deliver a true step change in results and long-term value for shareholders."

Tower reported a net loss attributable to shareholders of $8.5 million, or 5.02 cents per share, in the 12 months ended Sept. 30, narrowing from a loss of $22.3 million, or 13.21 cents, a year earlier when it wore an impairment charge of $19.6 million after writing down the value of software. The latest period included $3.5 million of fees attached to the Vero and Fairfax Financial Holdings bids.

The bottom line was also hit by a $1.6 million increase in outstanding claims from the Canterbury quakes, taking the annual expense to $11.4 million, and an additional $7.2 million risk margin.

The board decided to create an additional risk margin of $10 million above what the appointed actuary recommended, citing the complexity of the Canterbury claims and the ongoing uncertainty. As at Sept. 30, Tower had gross outstanding Canterbury claims of $117.2 million on 323 open claims.

The new capital raised will let Tower repay a $30 million loan to Bank of New Zealand and increase its surplus margin above the Reserve Bank's solvency capital requirements.

"Tower recognises the need for capital in the medium-term, however, remains strongly committed to paying dividends and the efficient management of capital," the insurer said. "The Tower board will review the dividend policy and look to recommence dividends in FY18."

The insurer's net premium revenue edged up 1.2 percent to $256.9 million, while net claims costs increased 1.1 percent to $187.6 million, due largely to a reduction in reinsurance recoveries. Underlying profit fell 10 percent to $18 million, which Tower blamed on the high number of natural events.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Gordon Campbell: On The Tax Working Group’s Road Map

Trying to analyse the interim report on the Tax Working Group (TWG) is like trying to review an entire All Blacks game, but at the half- time mark… More>>

ALSO:

Cut Before Using: Australian Strawberries Withdrawn

Needles were found in a punnet of strawberries sourced from Western Australia, which was bought in a Countdown supermarket in Auckland. The Choice brand of strawberries was sold nationwide last week. More>>

ALSO:

"Broad-Based Growth": GDP Rises 1 Percent In June Quarter

Gross domestic product (GDP) rose 1.0 percent in the June 2018 quarter, up from 0.5 percent last quarter, Stats NZ said today. This is the largest quarterly rise in two years. More>>

ALSO:

Judicial Review: China Steel Tarrif Rethink Ordered

On 5 July 2017 the Minister determined not to impose duties on Chinese galvanised steel coil imports. NZ Steel applied for judicial review of the Minister’s decision. More>>