Tower to return $45 million to shareholders after stellar year

Tuesday, 11 February 2025

Tower Insurance, which has operations in New Zealand and Fiji, has done so well in the past year it will return $45 million to its shareholders.

House, car and contents insurer Tower intends to pay a capital return of $45 million to its shareholders after what its chair Michael Stiassny called “a great year” for the insurer.

When added to declared dividends, Tower, which is listed on the NZX sharemarket, would be returning $81m to shareholders.

The news comes following a period in which households faced sharp rises in insurance premiums for house, car and contents cover.

Stiassny said an absence of extreme weather events had helped Tower post an underlying profit after tax of $83.5m in the year to the end of up September, up from $7.1m in the previous year.

“The weather has been kind,” he said at the insurer’s annual general meeting at Eden Park in Auckland on Tuesday.

The premiums collected by the insurance company increased to $595m, up 15% on the previous year, however, chief executive Blair Turnbull said premium rises had now slowed.

Firefighters are battling to maintain the upper hand on a huge and rapidly-moving wildfire that swept through rugged mountains north of Los Angeles.

Stiassny said the increase in premiums was predominantly driven by “prior period” premium increases designed to mitigate the impacts of inflation, crime and increased reinsurance costs following 2023’s catastrophic flooding and cyclone events.

Tower had also invested heavily in cost-cutting automation and digitisation, and off-shoring call centre operations to Fiji, shareholders heard.

Tower had led insurers in bringing in greater risk-based pricing, designed to charge higher premiums to owners of assets on which there was a higher chance of the insurer having to pay a claim.

These included cars that were most commonly targeted by thieves, and homes at higher risk of flooding.

That had seen its market share of policies on higher-risk assets like homes fall, shareholders were told.

“At the end of full year 2025, 91% of house policies rated low or very low for flood risk,” Turnbull said. That was an increase on the previous year.

“Our risk-based pricing and underwriting continues to give us a competitive advantage by enabling more accurate risk selection and pricing,” he said.

As a result of insuring lower-risk assets, it had seen a decrease in its “business as usual” claims.

The insurer’s risk-based pricing was being deepened.

Landslide and sea-surge risk-ratings would be added to pricing in the current year, meaning some homeowners could see larger increases in their premiums.

Wildfires in California destroyed more than 10,000 homes. Many of them were inadequately insured.

During the year, Tower lost 2% of its customers.

Stiassny used the AGM to send a message to politicians, in case they were tempted to use their law-making powers to regulate them to do things like limiting premium increases, or requiring insurers to provide insurance to all.

“In the wake of the recent tragic California wild fires, there are lessons for New Zealand,” Stiassny said.

It was the last AGM for Tower chief executive Blair Turnbull, who is leaving the insurer to head KiwiSaver provider Milford Asset Management in March. Turnbull has been with Tower since 2020.

“These fires have wreaked havoc and had a huge human cost, in terms of both loss of life and property. Sadly, they have also laid bare a massive insurance gap that has been decades in the making.

“California is the largest insurance market in the United States and subject to wildfires, earthquakes and other natural disasters. Climate change has made these events more frequent and severe, pushing up insurance and reinsurance costs at a time when California set regulatory limits on premiums. Unable to fully price in the increased likelihood and severity of risk, unsurprisingly, many insurers decamped.”

As a result of insurers exiting the California market, many residents had been forced to rely on Fair Access to Insurance Requirements (FAIR) policies provided by a centralised pooling insurance programme for homeowners who couldn’t obtain insurance from private insurance companies.

“These plans offer limited cover, comparatively expensive premiums, low policy caps,” Stiassny said.

As a result, many homeowners didn’t bother taking out this limited cover, he said.

“The end result is the vast majority of people and properties affected in the most recent fires have little or no insurance at all,” he said.

In addition, he said the US had no comprehensive climate adaptation policy to incentivise risk reduction or support people to leave areas made unsafe by climate change-related risks.

The Government in New Zealand is developing a climate adaptation strategy.