The TOWER Limited (ASX: TWR) share price lifted today after the company entered a settlement agreement with the Earthquake Commission (EQC). The deal regards an outstanding receivable resulting from Canterbury earthquakes. At the time of writing, the Tower share price is up 4.6% to 58.5 cents. In comparison, the All Ordinaries Index (ASX: XAO) is hovering above 1.2% to 6,855 points.
Let's take a closer look at the New Zealand-based insurer and what's driving the Tower share price higher today.
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Settlement reached
Tower said it had settled with EQC for $42.1 million, with the funds including disbursement to reinsurers and costs.
The company advised that the write-off of the residual amount would impact its FY20 reported net profit by $9.5 million. The additional funds will further strengthen its capital position moving forward into FY21.
Pleasingly for Tower, the settlement amounted to 76% of the gross carrying value listed in its accounts. Tower will provide an update on dividend payments with its FY20 results to be released tomorrow.
What did management say?
Commenting on the agreement, Tower chief executive Sid Miller said:
The series of earthquakes suffered by the Canterbury region caused a number of complexities in allocating building and land damage and the cost of repair between different earthquake events. This settlement is a significant milestone for EQC in our Canterbury Earthquake recovery program.
Tower chair Michael Stiassny, added:
The Canterbury earthquakes remain a significant event in New Zealand's history and will have a lasting impact on the community. For Tower, this legacy resulted in distractions that have been progressively removed over the years and it is important we provide the management team with clear air to move the business forward and accelerate.
The board determined that reaching this settlement agreement dealt with any remaining unpredictability and gave certainty to our shareholders, who will be pleased to see this risk removed from our business.
Tower share price summary
The Tower share price has had a challenging 2020, falling from its multi-year high of 74.5 cents in December 2019 to today's price of 58.5 cents. This represents a decline of 21%.
