Tower (TWR) H2 2024 earnings summary

Executive summary

• Underlying net profit after tax reached NZD 83.5 million, with reported profit at NZD 74.3 million, marking a significant turnaround from the prior year’s loss, driven by no large events and improved claims performance.

• Gross written premium (GWP) grew 15% year-over-year to NZD 595 million, with house insurance GWP up 18%, supported by prior period rating increases and operational efficiencies.

• Customer numbers declined 2% to 305,000 due to a focus on higher-quality, lower-risk policies, but are expected to grow in FY 2025.

• The company declared a final dividend of 6.5 cents per share, totaling 9.5 cents per share for FY24, and approved a NZD 45 million capital return, subject to approvals.

• Entered the NZX 50 Portfolio Index and MidCap Index, reflecting growth and stability.

Financial highlights

• Underlying NPAT rose from NZD 7.1 million in FY 2023 to NZD 83.5 million; reported profit improved from a NZD 1 million loss to NZD 74.3 million.

• GWP increased by NZD 68.5 million, or 15%, to NZD 595 million, excluding divested portfolios.

• Management expense ratio (MER) improved to 31.4%, down from 32% in FY 2023.

• Net investment income increased by NZD 7.2 million to NZD 21.6 million, benefiting from higher interest rates.

• Large event costs were only NZD 2.3 million, down from NZD 55.6 million in FY23, due to the absence of major events and favorable revisions.

Outlook and guidance

• FY 2025 GWP growth expected between 10% and 15%, excluding revenue from divested operations.

• Management expense ratio targeted to be less than 29% in FY 2025, with a medium-term goal of below 26% by FY 2027.

• Combined operating ratio targeted between 87% and 89% for FY25, with a goal of below 86% by FY27.

• Underlying NPAT guidance for FY 2025 is NZD 50–60 million, assuming full utilization of a NZD 50 million large events allowance.

• Return on equity targeted between 13% and 17% for FY25, aiming for above 18% by FY27.