25 Nov 2011

Tower profit slashed after Christchurch quakes

9:00 pm on 25 November 2011

The devastating earthquakes in Christchurch have hurt the bottom line of insurer and fund manager Tower.

The company made $33.4 million in year to September, a decrease of 43% on the same period a year ago. Quake costs totalled $23.6 million.

Excluding quake costs and other unrealised one-off charges, the listed company's profit fell 6% to $54.6 million.

Revenue fell 11% to $540 million, with lower profits at its general and life insurance arms offseting a stronger health business while kiwisaver gains pushed up investment returns.

Tower chief executive Rob Flanagan says the diversity of its operations helped cushion the company through extraordinary times.

He says the company has remained strong as a group and its capital has been held intact.

Mr Flanagan says Tower remains interested in buying troubled insurer AMI and has been approached about buying Ansvar Insurance, which is quitting New Zealand.

Need to redesign insurance cover

He says the industry needs to rethink the insurance products its offers, as the cost of cover rises.

Mr Flanagan says reinsurance costs rose 300%, and rates for its house, contents and motor vehicle policies will rise by an average 20% to 30%, which may be unaffordable for some people.

"That may mean higher excesses, for example, and by higher excesses we're talking in the thousands of dollars."

But he says some people may be willing to carry the risk of higher excesses in exchange for lower premiums.