Tower Limited (NZX/ASX:TWR) has today announced continued strong growth and improvement of sales through digital channels, a declining expense ratio, and positive progress through a major technology upgrade, demonstrating that the transformation of the company is well underway.
While more customers are choosing to insure with Tower, the removal of the Peak Re legacy issue, impacts of severe weather and short-term claims challenges have resulted in Tower reporting a full year loss of $6.7 million, a $1.3 million improvement on the prior year.
Features of Tower’s 2018 full year result:
Strong growth achieved
- Gross written premium in core book increased 11.9% over prior year
- Growth of 18,192 risks in core book
- 45% of new business sales online in September 2018, up from less than 10% during FY16
Increases to claims costs
- Severe weather in the Pacific contributed to claims cost increases as well as development of prior year claims - and other cost impacts in New Zealand
- Each of these is well understood with pricing and underwriting responses either already implemented or in train to improve performance through the coming year
Management expense ratio decreased
- Management expense ratio decreased to 39% compared to 39.9% in prior year
Major technology upgrade progressing well
- Full replacement of core platform with leading technology is tracking to expectations, with costs remaining within tolerances
- IT simplification is a critical enabler for Tower’s transformation and will accelerate growth and reduce expenses, delivering a step change in results from the end of FY19
Reported full year loss of $6.7 million impacted by
- $16.2 million after-tax impact from Peak Re settlement
- $11 million before-tax impact from weather and large events
- Minor adjustment to Canterbury provisions, resulting in a $3.6 million after-tax impact
Continued positive progress closing Canterbury earthquake claims, with open claims almost halved, down to 163, from 323 on October 1 2017
Transformation into a challenger brand is driving growth
Tower’s full year result shows that its efforts to transform into a digital challenger brand are driving improved performance.
Strong growth is a result of more customers choosing to insure with Tower thanks to a continued focus on simplifying insurance and delivering fairer pricing for all.
Tower Chief Executive Richard Harding is pleased with Tower’s progress in the transformation of the business.
"The strong growth we’ve achieved, especially through our digital channels, is testament to the work we’ve done to make insurance simpler and easier, and I’m pleased customers are noticing and choosing to insure with us," said Harding.
Mr Harding said that while the reported result is disappointing, finalising the Peak Re dispute and removing this legacy issue from the business provides confidence and certainty for the future of the company.
"While it offsets our growth, the resolution of the Peak Re dispute is a positive step forward, and the short-term challenges we’ve seen in claims have been addressed through pricing and underwriting responses.
"We are now building on this positive momentum and expect to see strong growth continue over the coming year as we keep transforming our business.
"Combined with the successful delivery of our new IT platform in the coming year, we are well placed to continue challenging the market and offering customers a genuinely different option when it comes to insurance, said Harding.
Full details on Tower's annual results can be found here: https://www.nzx.com/companies/TWR/announcements