Slide 1: Tower 2024 Full Year Results
Tower 2024 Full Year Results 1 October 2023 to 30 September 2024 28 November 2024
Slide 2: Agenda
Agenda Chairman’s update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer FY24 financial performance Paul Johnston, Chief Financial Officer Looking forward Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman's update
Chairman’s update Strong business performance driven by focus on strategy and operational delivery Delivering shareholder value • Final dividend of 6.5 cents per share declared; FY24 total dividends declared of 9.5 cents per share • Capital return of $45m declared, subject to high court approval and
Slide 4: Business update
Business update Blair Turnbull, Chief Executive Officer 4
Slide 5: Results summary
Results summary • Continued targeted premium growth • Continued improvement in MER, achieved through premium growth, and operational & digital efficiencies • Claims ratio improved due to actions to mitigate cost increases from inflation, reinsurance, and motor crime • No large events; robust reins
Slide 6: Our performance
Our performance Positive operational and business performance GWP growth BAU claims ratio MER 1 Customers (Gross written premium) (Business as usual) (Management expense ratio) 1 15% | $595m 305,000 48% 31.4% vs $527m in FY23 vs 311,000 in FY23 vs 55% in FY23 vs 32.0% in FY23 3 Large event costs Und
Slide 7: Continued premium growth
Continued premium growth 15% underlying GWP growth1 Targeted growth G R O S S W R I T T E N P R E M I U M ($m) • House GWP growth 18%; 72% rate, 28% volume • Motor GWP growth 13%; off-risking of high theft vehicles reduces number of motor policies • Risk-based pricing improving exposure; 91% of poli
Slide 8: Customer experience improves
Customer experience improves Net promoter score improved to +38 NET PROMOTER SCORE Digital journey • New Zealand digital tasks1 – 63% sales, 45% service; 64% claims • Active users of My Tower increased by 5% to 164k Assisted journey • Sales & service contact centre abandonment rate reduced to 8% (FY
Slide 9: Continued improvement in MER
Continued improvement in MER Management expense ratio (MER) improved to 31.4% Operational efficiencies MANAGEMENT EXPENSE RATIO 1 • Achieving scale with targeted premium growth • Suva hub answering 55% of NZ sales and service calls (FY23: 16%) Streamlining the business • Sale of Solomon Islands, Van
Slide 10: BAU claims ratio significantly improves
BAU claims ratio significantly improves Business as usual claims ratio improved to 48.1% BAU CLAIMS RATIO 1 Effective pricing and underwriting • Targeted rating has reduced high-risk policies • Rating for inflation, reinsurance, high motor theft Faster and more efficient claims management • Digital
Slide 11: Underlying business performance improving consistently
Underlying business performance improving consistently Underlying NPAT excluding large events was $81.9m in FY24 UNDERLYING NPAT1 EXCLUDING LARGE EVENTS ($m) • Underlying business improving half-on-half • Reduction in BAU claims ratio from targeted rate increases and high-risk vehicle off-risking •
Slide 12: Financial performance
Financial performance Paul Johnston, Chief Financial Officer
Slide 13: Group underlying financial performance
Group underlying financial performance • Premium growth of 15%1 • BAU claims ratio reduced to 48.1% due to targeted rate increases and operational improvements • No large events in FY24; favourable release of $2.3m from FY23 Vanuatu Cyclones • Management expense ratio improved to 31.4% as a result o
Slide 14: Movement in underlying NPAT
Movement in underlying NPAT • Underlying NPAT1 of $83.5m vs $7.1m in FY23 • BAU claims ratio improved from rating and underwriting actions, reduction in open BAU claims, and lower motor • No new large events in FY24 vs $55.6m of large event theft frequency costs in FY23 • Non-underlying items includ
Slide 15: BAU claims ratio reduced
BAU claims ratio reduced NZ MOTOR SEVERITY1 & FREQUENCY2 • Targeted rate increases and high-risk vehicle off-risking • Inflationary pressures easing • Motor theft frequency reduced from peak in FY23 • Risk-based pricing – improved house exposure reduces frequency of house claims • Calmer weather in
Slide 16: Continued improvement in management expense ratio
Continued improvement in management expense ratio MOVEMENT IN MANAGEMENT EXPENSE RATIO (MER) • MER reduced 0.6% to 31.4% • Business growth contributes 4.2% reduction in MER • Net commission contributes 0.3% reduction in MER driven by an increase in reinsurance profit share commission income • Increa
Slide 17: Higher investment returns
Higher investment returns • Net investment income $21.6m in FY24, $7.2m higher than FY23 • Running yield on the core investment portfolio is 4.9% as at 30 September 2024 • Conservative investment strategy with low duration (target of 0.5 years) • Now past the peak of the rating cycle, with yields ex
Slide 18: Reinsurance programme
Reinsurance programme FY24 $800m • No large events; $2.3m release from FY23 Vanuatu Cyclones FY25 Reinsurance Reinsurance • Catastrophe reinsurance of up to $800m for two events, coverage of coverage of $781.2m $781.2m up from $750m in FY24 • Additional prepaid third event catastrophe cover up to $8
Slide 19: Capital and solvency position
Capital and solvency position • Solvency ratio1 of 212% (139% as at 30 Sep 23) TOWER SOLVENCY1 • Adjusted solvency margin is $171.4m, an increase from $79.8m NZ PARENT ($m) as at 30 Sep 23 • Adjusted solvency margin at 30 Sep 24 is net of final dividend of 6.5 cents per share.2 The planned capital r
Slide 20: Looking forward
Looking forward Blair Turnbull, Chief Executive Officer
Slide 21: Focus on customer experience and targeted growth
Focus on customer experience and targeted growth • Enhancing risk-based pricing – landslide and sea surge applied to renewal book and included in purchase journey • New partnerships for further growth • Motor policy growth through targeted risk approach • Renewal journey uplift to increase retention
Slide 22: Continuous efficiency & process improvements
Continuous efficiency & process improvements MANAGEMENT EXPENSE RATIO (% NEP) • Targeting 80% of all NZ sales, service, and claim lodgement tasks to be digital by end FY27 (FY24: 45%) • New house assessing system planned, reducing assessment time and repair costs Targets • New contact centre platfor
Slide 23: Fostering sustainability
Fostering sustainability Our people • Staff engagement score 8.1 • Gender pay equity gap 0.9%1 • Tower staff spent 2,300 hours volunteering in our communities • 30% of Tower staff are members of representation groups2 • Winner 2024 ANZIIF NZ Insurance Industry Awards Excellence in Workplace Diversit
Slide 24: FY25 guidance and future targets
FY25 guidance and future targets FY24 FY25 FY27 Actual Guidance Target GWP growth 15% 10% - 15% 10% - 15% (excluding operations sold) Large events cost/allowance -$2.3m $50m Management expense ratio 31.4% < 29% < 26% Combined operating ratio 79% 87% - 89% < 86% Underlying NPAT $83.5m $50m - $60m (as
Slide 25: FY25 priorities
FY25 priorities • Customer experience • Customer remediations, FMA proceedings and implementing lessons • Conduct of Financial Institutions (CoFI) • End-to-end customer data management • Risk-based pricing - landslips and sea surge • Efficiency, digitisation, and process improvements 25
Slide 26: Questions?
Questions?
Slide 27: Appendices
Appendices
Slide 28: Business unit distribution
Business unit distribution TOWER DIRECT PARTNERSHIPS PACIFIC • Underlying growth of 16%1 • Underlying growth of 24% • Underlying growth of -2%1 • House new risks sold +14% vs FY23 • Total in force risks increased 6% to • Solomon Islands & Vanuatu 109,000 businesses sold in FY24; PNG in FY23 • 55% of
Slide 29: Reconciliation between underlying profit after tax and reported profit after tax
Reconciliation between underlying profit after tax and reported profit after tax Underlying and reported profit/(loss): • “Net insurance revenue”, “net insurance service expense” and “underlying profit” do not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequen
Slide 30: Disclaimer
Disclaimer This presentation has been prepared by Tower Limited to provide shareholders with information on Tower’s business. This document is part of, and should be read in conjunction with an oral briefing to be given by Tower. A copy of this webcast of the briefing is available at http://www.towe