Mayank Bansal, CFA
Mayank Bansal is a CFA Charterholder and heads the Equity Research team at Kapitales Research, with over 5 years of experience analysing global equity markets. He leads fundamental, data-driven research combining rigorous financial analysis with macro trends.
Tower Trims Growth Forecast as Claims Pressure Half-Year Earnings
Highlights
Tower Limited (ASX: TWR) released its half-year results on 21 May 2026, revealing weaker profits as increased weather claims and softer insurance pricing weighed on performance. Underlying net profit after tax for the six months ended 31 March 2026 totalled NZ$36.8 million, compared to NZ$61.7 million a year earlier. Reported profit fell to NZ$22.9 million, compared to NZ$49.7 million.
More Customers, Slower Premium Growth
Tower increased its customer base by 5% to 327,000, while New Zealand home insurance policies rose 9%. However, gross written premium advanced just 1% to NZ$301 million, demonstrating how lower average prices constrained growth despite higher volumes.
Competitive conditions and a shift towards lower-risk properties contributed to reduced average premiums. More than 90% of new house policies carried low or very low assessed exposure to flooding, sea surge and landslides.
This approach supports portfolio risk management, although the results show that customer acquisition alone does not guarantee equivalent premium growth.
Weather Events Lift Claims Costs
The business-as-usual claims ratio reached 44%, compared to 38% in the previous corresponding period. Tower attributed the increase to targeted price reductions and more frequent storm activity. The ratio nevertheless remained below its historical average of 48%–50%.
Estimated costs from four large events reached NZ$18.5 million, compared to NZ$3 million a year earlier. Wellington’s April flooding was expected to contribute another NZ$5 million in the second half.
Customer remediation, changes to Tower’s operating footprint and a software impairment also affected reported earnings. Remediation largely concerned a historical discount error that the insurer said had been resolved.
Outlook Hinges on Profitable Expansion
Tower lowered its FY2026 gross written premium growth forecast to low-single digits, compared to its earlier 5%–10% projection. Underlying net profit guidance remained NZ$55 million–NZ$65 million, assuming its NZ$45 million large-event allowance is fully used.
Shareholders will receive a fully imputed interim dividend of five New Zealand cents per share on 25 June 2026, following board approval.
A new Westpac partnership and referrals involving existing Kiwibank customers are expected to broaden distribution during the second half. Their contribution will depend on Tower securing profitable business while managing claims, competitive pricing and continued investment in technology.
Note- All data presented is based on information available at the time of writing.
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