Cover-More profit slumps as underwriting costs continue to weigh

The travel insurer has booked a fall in profit, as underwriting costs continue to weigh despite growing revenue.

Travel insurer Cover-More has reported a sharp drop in full-year profit, despite stabilising after a disappointing first half that was affected by a weaker dollar increasing premiums to its local underwriting partner.

For the year to June 30, the ASX-listed group said its net profit slumped 27.5 per cent to $18.7 million, while pre-tax earnings were off 14.2 per cent at $44.6m.

Beyond volatility in underwriting premiums, Cover-More (CVO) said earnings were also hurt by $2.1m in costs for its international expansion, higher advisory fees and a provision of $0.6m for an interim underwriting agreement as it chases a new partner.

The company said it had received “significant interest” from potential new underwriting partners and had received indications “satisfactory” commercial terms could be reached.

The decline in earnings came despite a lift in sales, with revenue up 7.6 per cent to $502.1m.

Incoming chief executive Mike Emmett, who joined the firm on July 4, said the group had more work ahead of it to return to growth despite improvements being recorded in the second half.

“As signposted to the market in February, Cover-More’s first-half results have negatively impacted our full year outcomes,” he said.

“While our second-half results improved on the first half, particularly when taking into account the impact of the underwriting provision, we will continue to take actions to improve profitability.”

Cover-More declared a final dividend of 2.6c a share, down from 4.1c last year.