2 Jul 2014

Tower plans payout to shareholders

8:05 am on 2 July 2014

Tower Insurance is eyeing a large dividend payout to shareholders once the majority of its earthquake-related claims are settled next year.

The company on Tuesday announced it had sold its residual interest in its life insurance business for $36 million.

Tower has sold $406 million worth of businesses over recent years as it looks to focus on its core, general insurance operations.

The divestment allowed Tower to boost returns to shareholders, in-line with its policy of paying out between 90 percent and 100 percent of net profit as dividends.

Tower chief executive David Hancock said the next major event, likely to affect the company's capital reserves and dividend payouts, was the settlement of its Canterbury earthquake claims by the end of 2015.

He said Tower had now dealt with 82 percent of the claims and it expected that 95 percent of claims would be completed by the end of 2015.

Mr Hancock said Canterbury was important for the company in terms of capital release but more fundamentally it was about Tower's policy holders.

He said the company wanted to get its customers back into their dwellings as quickly as possible.

"The second thing is that we've been holding capital as a requirement from the RBNZ against the events in Canterbury, so as long as we can continue to have industry leading stats in regard to settlements it's very important for us that we actually get done as quickly as possible."

The Reserve Bank has asked Tower to hold extra capital of $80 million in relation to the Canterbury Earthquakes.