An increase in large insurance events and large house claims largely caused by fires has dragged down the underlying profit for insurer Tower.
The NZX-listed company reported an underlying profit of $20.8 million for the year to September 30, down from $28.4m in the prior financial year.
Tower's net profit after tax was up 72 per cent from $11.2m to $19.3m but that was due to FY2020 being impacted by the impairment of a receivable from the EQC.
Chief executive Blair Turnbull said the result reflected challenging external factors which it had first signalled at its half-year result.
These included large events like the Lake Ohau fire and Napier and Westport floods, large house claims predominantly driven by house fires and Covid-related claims cost inflation as well as lower investment income.
"Tower has navigated a difficult year. Our focus has been on addressing a range of external challenges, while supporting our customers and delivering on our technology and distribution growth strategies," Turnbull said.
The large events impact was $13.9m, up from $9.7m in the prior year while large house claims rose 61 per cent over the year to 92 with a total cost of $21.1m.
Inflation pushed up its costs by $17.1m to $166.8m while its investment income fell by $5.1m to $200m for the year.
Chairman Michael Stiassny told investors at a briefing call that the challenges had continued to put pressure on Tower's profits but action was under way to address the issues.
"We have already implemented rating and underwriting changes including the introduction of a full house fire replacement cap and risk-based pricing for inland flooding."
Earlier this month Tower revealed it would move to charge more to insure properties with a higher flood risk.
Despite the challenges Tower had written a milestone $404m in premiums this year, up 5 per cent on the prior financial year.
Its New Zealand gross written premiums rose 7.9 per cent to $350m through an increase in customers and premiums.
Tower's customer base grew 5 per cent to 304,000, increasing its market share to 9.2 per cent.
Stiassny said the business remained well capitalised, with a solvency ratio of 271 per cent and the company was holding $56.6m above its target solvency margin, he said.
Considering its current opportunities and capital position the board was proposing to return $30.4m in excess capital to shareholders.
Tower will pay a final dividend of 2.5 cents per share bringing total dividends for the year to 5cps.