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Tower profit may take $7.2m hit from quake

NZ NewswireNZ Newswire 14/11/2016 Paul McBeth

Tower says the cost of Monday's 7.5 magnitude earthquake near Kaikoura is limited by the insurer's reinsurance programme and can only hit profit by a maximum $7.2 million.

The Auckland-based insurer's shares sank 7.1 per cent to 79 cents in response to the quake, and Tower on Tuesday said it was in the early stages of assessing the impact of the event.

Because of the extent of the damage, which has cut off Kaikoura, left thousands of households without power and water, and killed two people, Tower said it won't have thorough understanding of the financial implications for some days, it said.

The company's reinsurance programme provides more than $700m of cover for these types of events once the excess of $10m has been passed, which Tower says leaves the maximum possible impact of $7.2m after tax.

Tower's shares have been punished by investors this year who have questioned its ability to pay dividends after receiving more claims than expected in the Canterbury earthquakes in 2010 and 2011.

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