Why the Tower (ASX:TWR) share price is up 4% today

The Tower Limited (ASX: TWR) share price is up 4.6% today after entering a settlement agreement with Earthquake Commission.

| More on:
three building blocks with smiley faces, indicating a rise in the ASX share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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%.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »