Tower downgrades profit guidance, completes strategic review
By Hannah Lynch
Sept. 4 (BusinessDesk) - Tower, the insurance company that’s about one third owned by Guinness Peat Group, has downgraded its annual profit expectations because of the impact of Christchurch earthquake claims and concluded a strategic review.
The Auckland-based company said market expectations of profit for the year ending Sept. 30 should be reduced by $9.4 million “to take into account increases in claims provisioning relating to the February 2011 event.”
Tower made a profit of $33.4 million a year earlier and the downgrade amounts to a one-time impact of 3.5 cents a share, it said.
Tower’s reinsurance cover hasn’t been used up but ongoing notification of claims, together with an “appropriate” risk margin and allowing for inflation would “bring total claims and provisions over Tower’s $325 million of cover,” it said.
Tower increased its reinsurance cover to $500 million per event after the Christchurch earthquakes.
The insurance company also said it has completed its strategic review which began earlier this year. The review included an evaluation of Tower's capital structure, its health, life, investments and general insurance units and strategic acquisition and divestment opportunities. It will provide more information on the review next week, managing director Rob Flannagan said.
Tower's shares last traded at $1.84 and have gained about 20 percent this year. The stock is rated 'hold' based on the consensus of five analyst recommendations compiled by Reuters.