Tower stock slumps to 12-year low on extra Canterbury earthquake costs
The company said today it expects to have a $16.2 million hit to its after-tax profit.
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Tower [NZX: TWR] shares slumped to their lowest in more than a decade after the general insurer warned it expects to have to fork out more for Canterbury earthquake claims.
The Auckland-based company said today it expects to have a $16.2 million hit to its after-tax profit due to increased claims provisions for the Canterbury earthquake following greater-than-expected new claims from the Earthquake Commission and increased litigation and customer disputes. It also signalled it will review its dividend and its dividend policy at its full-year earnings result.
The shares shed 20 percent to $1.10, the lowest level since May 2004 and making the stock the biggest decline on the benchmark S&P/NZX 50 Index in early trading today.
Tower said it has about 560 claims remaining of the almost 16,000 claims lodged. Still, it said the insurance industry has received over 800 new claims over the past six months as EQC accelerates its programme. It's estimated more than 6,000 EQC claims require remediation, and some of these will exceed the $100,000 EQC threshold, resulting in the cost being borne by insurers, and Tower said it has also experienced a greater number of disputes and extended time to reach agreement with customers.
"It's a very big disappointment for shareholders in that company with further provisions to be made for the Canterbury earthquakes," said Grant Williamson, a director at Hamilton Hindin Greene. "It's really going to weaken their financial position somewhat."
Tower may be hit harder than other insurers given its smaller size and relatively higher exposure to Christchurch, he said.
"The uncertainty around the provisions for Canterbury earthquakes is going to remain for quite some time," Williamson said. "Insurers have paid out the easy ones but there are a lot of remaining difficult ones that it's very difficult to know exactly what the final costs will be."
(BusinessDesk)
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Tina Morrison
Thu, 08 Sep 2016
Thu, 08 Sep 2016
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Tower stock slumps to 12-year low on extra Canterbury earthquake costs
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