Kiwi insurer Tower Ltd (ASX: TWR) has more than doubled its final dividend after reporting a record underlying profit.
The company's unfranked dividend yield was already running at a generous 7.4% according to the ASX website; however, the company is looking like an even stronger dividend play after Thursday's announcement.
Good numbers across the board
Tower said in a statement to the ASX that its underlying profit came in at a record NZ$107.2 million, up from $NZ$83.5 million the previous year, while net profit was NZ$83.7 million, up from NZ$74.3 million.
The company said the board had considered the strong financial results and decided to pay a final dividend of NZ16.5 cents, up from NZ6.5 cents for the same period the previous year.
Tower Chief Executive Officer Paul Johnston said the company had performed well:
This is an exceptional result, underpinned by Tower's transformation, driven by investment in our digital platform and continued focus on underwriting discipline, technology, data, and efficiency. These actions demonstrate Tower's commitment to delivering sustainable growth and building a resilient, customer-focused business for the future.
There was a caveat, however, with Mr Johnston saying that the company expected the conditions which underpinned the record results, including relatively benign weather, to normalise in the current financial year.
The company said it had increased its customer base 4% over the year to 318,000, with home insurance policies up 11%.
Cautious forecast on profit going forward
Tower said it expected its full-year results for the current year to drop back to be in the range of NZ$55 million to NZ$65 million, "assuming full utilisation of an updated NZ$45m large events allowance''.
The company said on Thursday that there were only two large events in FY25, which meant it only incurred NZ$7.2 million in large events costs, "allowing us to return NZ$30.8m after tax of our large events allowance to underlying NPAT".
The company went on to say:
Benign weather, together with lower motor claims and prior-year targeted underwriting actions – such as tightening our risk appetite for high-theft-risk vehicles – also contributed to a reduction in NZ business-as-usual claims, from 57,783 in FY24 to 56,825 in FY25, while customers and policy count grew in the year. While policy and customer volumes have continued to grow, average premiums have reduced. This is due to a higher proportion of lower-risk new policies, consistent with Tower's risk-based pricing approach, and more competitive pricing in the New Zealand market.
Tower's ex dividend date has been set for 14 January, with the dividend to be paid on 29 January.
