Tower slashes its FY23 NPAT guidance

Tower (ASX:TWR) is another insurer that has been feeling the pinch from catastrophic weather events. The company has been hit by claims from Cyclone Gabrielle as well as two further cyclones that have hit Vanuatu.

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Tower hit with claims

Tower was hit with over 3,000 claims from Cyclone Gabrielle and anticipates a $55-$75m cost when all is said and done. A further 5,550 claims have come in from the Auckland and Upper North Island Weather event, leading to a $195-$225m cost. Vanuatu’s cyclones have led to another 250 claims with a $10m net financial impact after proportional reinsurance.

In all instances, costs above $11.9m will be covered by Tower’s reinsurance for catastrophic events, which provides up to $889m of catastrophe cover.

FY23 NPAT guidance slashed

Tower previously guided to a $18-$23m NPAT for FY23 – the 12 months to September 30, 2023. But given these events, this guidance was slashed. The company is now expecting $8m-$13m for the full year and a loss for H1 of around $3m.

The company told shareholders it would take a number of steps to minimise future losses, including that it wouldn’t pay an interim dividend and has increased its large events allowance from $40m-$50m. Shares fell by nearly 10% this morning.

Tower (ASX:TWR) share price chart, log scale (Source: TradingView)

Some good news was that it upgraded its gross written premium (GWP) growth from 10-15% to 15-20%, as more people seek protection. But whilst this is a blessing for now, in the form of short-term revenues, it could be a curse down the track if catastrophic weather events continue in the South Pacific.

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