Insurer Tower posts big jump in profit after lifting premiums, paying out less in claims

Tuesday, 20 May 2025

House, car and contents insurer Tower has seen a huge jump in profit after tax after lifting premiums for policyholders, while paying out less in claims.

Once provisions for refunds to overcharged policyholders and tail costs for Canterbury earthquakes are excluded, Tower’s profit after tax for the six month period to the end of March rose from $36.6 million last year to $61.7m.

With those provisions included, the insurer’s after-tax profit was still substantially up at $49.7m.

Tower collected 4% more in premiums from customers, excluding discontinued business lines, taking in $297m in premiums, up from $290.6m in the same period last year.

But it paid just $89.2m in claims compared to $115.8m it paid out in the same period last year. That was partly due to a prolonged period of favourable weather, easing inflation, and fewer total loss house claims.

Tower’s interim chief executive Paul Johnston said the “strong” profit was also in part due using risk-based pricing.

This is the process of quoting higher premiums for owners of flood-prone homes, or people whose cars are among those most popular for thieves, the result of which is many people choose to get their cover from another insurer.

“Tower’s risk-based pricing approach in the house portfolio continues to reduce Tower’s risk exposure to flooding,” Johnston said.

“Ninety-one per cent of new house insurance policies in the year were rated by Tower as low or very low for flood risk, up from 86% in the prior year.”

The insurer said its “off-risking” of cars most often targeted by thieves had lowered the frequency and severity of motor claims, and its improved “house selection” was reducing the number of house-related claims it received.

Tower grew its customer numbers grew to 312,000 up from 309,000.

The average premium paid by its policyholders was lower than a year before.

Johnston said this was the result of it having fewer policies on issue insuring higher-risk assets, but also pricing competition from other insurers.

Despite it now being a decade and a half since the devastating Canterbury earthquakes, Tower said its reported profit included a $6.2m provision for an increase in Canterbury earthquake cost estimates, due to Tower continuing to receive more over-cap claims than expected from the Natural Hazards Commission.

The insurer had also set aside $4.9m to pay refunds to policyholders it had accidentally overcharged.

It appears to expect possible legal action, as it also revealed it has “provided for costs associated with regulatory action, however, the action taken by the FMA is still in progress”.

The FMA is the Financial Markets Association Te Mana Tā tai Hokohoko.

Tower’s large events costs at the half year were $3m due to the Dunedin flooding event in October 2024. The April 2025 Cyclone Tam flooding event in New Zealand will be recorded as a large event in the second half with an estimated cost of $4m.

Johnston said: “These positive first half results reflect Tower’s commitment to delivering sustainable, profitable growth by upholding core insurance fundamentals: robust risk selection and pricing, and claims management.

“Tower is focused on continuing to grow high quality risks while enhancing the company’s resilience and claims performance. This year we will expand risk-based pricing to include sea surge and landslide risks, helping our customers better understand their risks and how these factors impact their insurance pricing,” he said.

Tower’s reinsurance costs fell from $41.8m to $39.1m.

The insurer will pay $45m to shareholders as a capital return.