Tower Grows Customer Base 5% to 327,000 While Holding FY26 Profit Guidance
Tower delivers solid HY26 earnings as customer base grows to 327,000
Tower Limited (NZX/ASX: TWR) reported Tower HY26 earnings results of $36.8 million in underlying net profit after tax (NPAT) and a reported profit of $22.9 million for the half year ended 31 March 2026. The result was achieved against a more challenging backdrop of elevated weather claims, pricing pressure, and global market volatility, and compares against an exceptionally strong prior period that benefited from unusually benign weather conditions (HY25 underlying NPAT: $61.7 million).
The Board declared a fully imputed interim dividend of 5 cents per share, payable 25 June 2026 (record date: 11 June 2026).
CEO Commentary
“Over the 12 months to 31 March, we welcomed 15,000 new customers to Tower, with continued strong growth in house policies despite a subdued economic environment. Competitive pricing is supporting customer affordability and growth, while our expanded risk-based pricing is strengthening portfolio quality and reducing exposure to weather-related impacts.” — Paul Johnston, Chief Executive Officer
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HY26 results at a glance
The key metrics from the half year ended 31 March 2026 are summarised below:
- Underlying NPAT: $36.8m (HY25: $61.7m)
- Reported profit: $22.9m (HY25: $49.7m)
- Gross written premium (GWP): $301m, up 1% (HY25: $297m)
- Customer numbers: 327,000, up 5% year-on-year (HY25: 312,000)
- BAU claims ratio: 44% (HY25: 38%; long-run average: 48%–50%)
- Management expense ratio (MER): 31.4% (HY25: 30.4%)
- Large event costs: $18.5m (HY25: $3m)
- Basic EPS: 6.7 cents (HY25: 13.2 cents)
- Solvency ratio: 143% (Parent); A- financial strength rating reaffirmed by AM Best in April 2026
- Interim dividend: 5 cents per share (HY25: 8 cents)
| Metric | HY26 | HY25 | Change | Notes |
|---|---|---|---|---|
| Gross Written Premium | $301m | $297m | +1% | Growth constrained by lower average premiums and increased competition |
| Underlying NPAT | $36.8m | $61.7m | -40% | Reflects normalisation from unusually benign HY25 |
| Reported Profit | $22.9m | $49.7m | -54% | Impacted by $13.9m in non-underlying items |
| BAU Claims Ratio | 44% | 38% | +6 ppts | Still below long-run average of 48%–50% |
| Management Expense Ratio | 31.4% | 30.4% | +1 ppt | Within FY26 guidance range of 31%–32% |
What drove the year-on-year movement
Underlying NPAT declined from $61.7m in HY25 to $36.8m in HY26, driven by four key factors:
- BAU claims normalisation (–$11.9m): The claims ratio returned toward the long-run average following an unusually benign HY25, compounded by prior-year pricing reductions earning through the portfolio.
- Large event costs (–$11.1m): Four large events in HY26 generated costs of $18.5m, compared with just $3m in HY25.
- Investment income decline (–$3.5m): Lower yields and mark-to-market losses arising from global market volatility reduced net investment income to $5.1m (HY25: $10.0m).
- Business growth (+$0.7m): Higher net insurance revenue provided a modest positive offset, partially countered by the associated increase in claims and operating expenses.
Reported profit was further reduced by $13.9m in non-underlying items. The largest component was a $10.9m after-tax customer remediation charge, predominantly related to a now-resolved historical discount error in a legacy pricing system. Additional non-underlying items included Rotorua office closure costs of $1.8m after tax.
Understanding the claims environment — what investors need to know
The BAU claims ratio measures the proportion of net insurance revenue consumed by everyday claims, excluding large catastrophe events. It is a core indicator of how efficiently an insurer is managing its routine claims activity.
Tower’s ratio rising from 38% to 44% is expected and reflects a normalisation of weather patterns after an unusually benign HY25. Importantly, 44% remains well below Tower’s long-run average of 48%–50%, indicating the portfolio continues to perform above historical norms.
At Tower, “large events” are defined as individual incidents costing Tower $2 million or more, with lodged claims from two or more policyholders. Tower budgets $45m annually for large events; $18.5m was consumed across four events in HY26, leaving approximately $21.5m available for the second half of FY26.
A Wellington flooding event in April 2026 (post balance date) has been assessed as an H2 large event, with an estimated cost of approximately $5m. This falls within the remaining allowance. Any portion of the $45m allowance that remains unused at year end will, after tax, flow directly into underlying NPAT, potentially improving the full-year result above the base guidance range.
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Growth pipeline and FY26 guidance
GWP guidance revised; underlying NPAT range maintained
GWP growth guidance has been revised to low-single digits, down from the prior guidance of 5%–10%, due to lower average premiums and subdued market conditions. FY26 underlying NPAT guidance is maintained at $55m–$65m, assuming full utilisation of the $45m large event allowance. The MER is expected to remain within the 31%–32% range.
| Metric | HY26 Actual | FY26 Guidance | FY28 Target |
|---|---|---|---|
| GWP Growth | 1% | Low-single digit | >$750m (>7.5% CAGR) |
| Management Expense Ratio | 31.4% | 31% – 32% | 28% – 30% |
| Combined Operating Ratio | 82.6% | 86% – 88% | 85% – 87% |
| Underlying NPAT (excl. large events) | $50m | $87m – $97m | — |
| Underlying NPAT (full large event utilisation) | $36.8m | $55m – $65m | — |
Second-half catalysts to watch
Management outlined several growth and operational priorities for the second half of FY26:
- Launch of the Westpac partnership to offer general insurance products to Westpac retail customers
- Back-book referral arrangement to offer insurance products to a group of Kiwibank customers
- Continued rollout of AI-enabled contact centre enhancements, with average call handling time already reduced by 2 minutes
- Building customer data foundations to enable personalisation
- Ongoing customer remediation and regulatory change implementation
NZ house policies grew 9% year-on-year, and over 90% of new house policies sold were assessed as Low or Very Low risk for flood, sea surge, and landslide, reinforcing the ongoing improvement in portfolio quality.
Looking further ahead, Tower’s FY28 medium-term targets include GWP greater than $750m (representing a compound annual growth rate of over 7.5%), a MER of 28%–30%, and a combined operating ratio of 85%–87%.
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