29 May 2020

Tower plans to cut 108 jobs despite HY profit rise

12:09 pm on 29 May 2020

Tower has posted an improved half year profit but plans to shed jobs to cut costs and do more digital trading to cope with an expected fall in business.

Tower Insurance bulding at 45 Queen Street, Auckland

Photo: RNZ / Dan Cook

The insurance company's profit for the six months ended March was $14.9 million compared with $11.9m a year ago, as income rose 11 percent on the back of increased premiums, and the cost of claims stabilised. The result contains three months of business done by Youi, which Tower bought at the end of last year.

However, outgoing chief executive Richard Harding said the company was bracing for reduced investment income and slower growth because of the Covid-19 pandemic, which was prompting the company to cut costs and make greater use of digital platforms for customers.

"We are currently working through a process to deliver cost savings of $7.2m per year, which includes a proposal for 108 redundancies, along with other cost-out initiatives."

Tower Insurance chief executive Richard Harding

Tower's outgoing chief executive Richard Harding. Photo: Supplied / Tower Insurance

However, he said more business was being done on digital platforms and it planned to create 30 new flexible and part-time roles, which allow for quicker and better response to customer demands.

Harding said vehicle claims had fallen sharply during the lockdowns and Tower would refund at least $6.8m to customers as a result.

Tower still had 76 unresolved Canterbury quake claims, and has a claim for $69m for outstanding costs from EQC, which is now expected to go to court to be adjudicated on.

The company scrapped its first half dividend to bolster its finances and ensure adequate solvency to cover future claims. A decision on a final dividend would depend on the results and the economic conditions at the time.

The full year profit forecast was between $25m and $28m.

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