New Zealand insurer Tower says flooding caused by Cyclone Tam in April is likely to cost it $NZ4 million ($3.7 million). 

Tower last week reported a first-half underlying net profit of $NZ61.7 million ($57.38 million), up from $NZ36.6 million ($34.04 million) a year earlier. 

Reported profit for the six months to March was $NZ49.7 million ($46.22 million), dented by provisions for customer remediation costs and an increase in Canterbury earthquake estimates as Tower continues to receive more claims than expected from the Natural Hazards Commission. 

It made a $NZ6.2 million ($5.77 million) provision in the half-year and received a further 15 new or reopened claims related to the 2011 quakes. 

Customer growth in the New Zealand home and contents portfolio was partly tempered by reduced average premiums. There were improvements in claims performance, gross written premium growth and the management expense ratio. 

Interim CEO Paul Johnston says the insurer has adhered to “core insurance fundamentals: robust risk selection and pricing, and claims management”.  

It will expand risk-based pricing to include sea surge and landslide risks, he says, helping customers better understand how risks affect their premiums. 

“Tower is focused on continuing to grow high-quality risks while enhancing the company’s  resilience and claims performance,” Mr Johnston said. 

First-half GWP rose 4% to $NZ297 million ($276.21 million). 

New Zealand home and contents GWP increased 11%. The motor portfolio fell 4% due to rate reductions and slower policy growth following actions to tighten risk appetite. 

The business-as-usual claims ratio was 38.1%, compared with 49.7% a year earlier, and the combined operating ratio was 69.7%, improving from 80.2%. 

A prolonged period of favourable weather, easing inflation, fewer total loss house claims, claims process improvements and enhanced risk selection helped the combined ratio.  

The insurer has recorded one large event so far this financial year – Dunedin floods in October, which are estimated to have cost $NZ3 million ($NZ2.71 million). 

Tower’s full-year large events allowance is $NZ50 million ($46.5 million). 

Last month, it raised its profit guidance for the year to September to $NZ70-$NZ80 million ($65-$75 million). The forecast annual combined operating ratio range is 82%-84% and GWP growth is expected to be “mid single digits”.