Slide 1: Half year results
Tower Limited Half year results 24 May 2017
Slide 2: Introduction
Introduction Michael Stiassny Chairman
Slide 3: Chairman's update
Chairman’s update • Business performance Underlying business continues to perform well • Canterbury Operating result is impacted by increase to Canterbury provisions • Scheme vote and non-binding proposal Timing of Fairfax scheme vote to be confirmed, in the absence of a superior offer, the To
Slide 4: Performance overview
Performance overview Richard Harding Chief Executive Officer
Slide 5: First half performance summary
First half performance summary 2017 has seen Tower continue on its transformation STRATEGIC IMPERATIVES DELIVERS RESULTS ACHIEVEMENTS ACROSS ALL FOCUS AREAS • Growth of core book Total GWP remains steady Gross written premium in core book increased Continued policy growth in the core book 2.4%
Slide 6: Financial performance
Financial performance Reported result reflects impacts of adjustments to Canterbury provisions and other large loss events • Underlying profit of $8.1m after tax, an increase GROUP PROFIT SUMMARY ($m) of 7.6% on H1 16 H1 17 H1 16 Movement % Gross written premium 145.8 146.2 (0.2%) Underlying profi
Slide 7: Underwriting results improving
Underwriting results improving Improvements in pricing, underwriting and claims costs are growing underwriting profits UNDERWRITING PROFITS AND INVESTMENT INCOME ($m) • Underwriting profit has increased $4.1m before tax, excluding large loss events, 6.7 3.0 4.1 compared to the same period in 2016 4.
Slide 8: Underlying profit before tax
Underlying profit before tax Year on year change in underlying profit before tax reflects improved claims performance and lower management expenses, partly offset by impact of large loss events and lower investment income MOVEMENT IN UNDERLYING PROFIT BEFORE TAX1 ($m) 2.6 (0.2) (1.4) (1.6) 3.2 (5.0)
Slide 9: Solvency position
Solvency position Liquidity facility drawn down to support solvency position TOWER INSURANCE LIMITED SOLVENCY POSITION ($m) 2.2 30.0 37.4 5.2 200% • Tower is required to hold $50m of capital 180% Surplus margin above Minimum Solvency Capital (MSC) 50.0 50.0 RBNZ margin MSC • Additional Canterbury pr
Slide 10: Confident in our future
Confident in our future
Slide 11: Focusing on the core
Focusing on the core Our strategic imperatives continue driving high performance High performance MEDIUM TERM TARGETS customer service culture GWP growth 4 – 6% Expense ratio <35% Accurate Operational ROE of 12 – 14% through the cycle pricing excellence of risk Culture and Capability 11
Slide 12: Focus on customers delivers growth
Focus on customers delivers growth Core book growing as a result of strong retention GROWTH IN CORE 1 NEW ZEALAND PORTFOLIO ACHIEVEMENTS 2.4% 2.1% Roll out of digital program, including quote to 1.6% buy functionality, supporting core policy 0.6% 4,949 growth 1,285 1,224 H2 15 H1 16 H2 16 H1 17
Slide 13: Underwriting excellence
Underwriting excellence Attracting the right customers with better offerings ACHIEVEMENTS Customers have more choice through a tiered MOTOR COMPREHENSIVE CLAIM FREQUENCY COMPARISON product selection Easier for customers to purchase – less time on the phone makes them happier and increases our pr
Slide 14: Claims update
Claims update Excluding the impact of large loss events, underlying claims costs are showing improvement ACHIEVEMENTS TOWER CLAIMS EXPENSES (EXCLUDING LARGE LOSS EVENTS) 1 ($m) Claims expenses1 decreasing despite 62.9 industry-wide claims cost inflation 61.0 60.1 59.7 Closer management of claims
Slide 15: Focus on management expenses
Focus on management expenses Savings initiatives continue to remain a focus and have delivered a reduction in the expense base ACHIEVEMENTS MANAGEMENT EXPENSES 1 ($m) Increased focus on efficiency and driving greater productivity Lower technology expenditure for business and software support act
Slide 16: Leveraging digital capability
Leveraging digital capability Continued focus on digital capability and partnership to deliver more customers New product suite available online, providing access to a whole new range of customers through: MONTHLY GWP ACROSS DIGITAL CHANNELS increased online presence and capability Trade Me Insu
Slide 17: Canterbury update
Canterbury update
Slide 18: Canterbury claims snapshot
Canterbury claims snapshot Open claims are reducing, yet we continue to receive new over-cap claims from EQC 4,000 50 3,500 • Canterbury earthquakes continue to impact 40 every facet of the insurance industry 3,000 • From over 16,000 claims received, 474 remain 2,500 30 • As with other industry part
Slide 19: Progress in closing claims
Progress in closing claims We continue to reduce the number of open claims MOVEMENT IN PROPERTIES • Reduction in new and reopened claims • Additional claims continue to be received 51 30 due to: 564 474 EQC over-cap claims 171 Additional DFPP and accommodation claims as EQC finalise under-cap pr
Slide 20: Outstanding claims
Outstanding claims IBNR/IBNER and risk margins have been increased to allow for further claims escalation or litigation % of case % of case (NZ$m) Mar-17 estimates2 Sep-16 estimates2 • The Appointed Actuary has recommended Case estimates 73.9 93.2 an increase to IBNR/IBNER and risk IBNR/IBNER1 47.4
Slide 21: Outlook
Outlook
Slide 22: Outlook
Outlook Transformation will continue to deliver improved financial performance INDUSTRY DYNAMICS TOWER DYNAMICS Short term Medium term • High claims environment • Ongoing improvement • GWP growth 4 – 6% resulting in movement on Digital to drive GWP growth pricing • Expense ratio <35% Management
Slide 23: Appendices
Appendices
Slide 24: A New Zealand and Pacific general insurer
A New Zealand and Pacific general insurer HY17 HY17 As at 31 March 2017 As at 31 March 2017 $ 8.1m 1 $ 145.8m 475k Personal lines focus UNDERLYING NPAT GWP INFORCE POLICIES GWP breakdown New Zealand 52%2 New Zealand 81% New Zealand 86% (Direct House 45% Pacific Islands 48% 2 67% / Alliances 33%) Con
Slide 25: Underlying performance Tower Group
Underlying performance Tower Group $ million H1 17 H1 16 Movement % Gross written premium 145.8 146.2 (0.2%) Gross earned premium 150.5 151.5 (0.6%) Reinsurance costs (23.8) (24.5) (3.0%) Net earned premium 126.8 127.0 (0.1%) 1 Net incurred claims (59.7) (62.9) (5.2%) 2 Large loss events (5.0) (3.3)
Slide 26: Balance sheet Tower Group
Balance sheet Tower Group $ million HY17 HY16 Movement $Movement % Cash & call deposits 70.1 94.7 (24.6) (25.9%) Investment assets 183.5 201.3 (17.8) (8.9%) Deferred acquisition costs 19.9 19.8 0.2 1.0% Intangible assets 33.3 29.2 4.1 14.0% Other assets 329.3 324.8 4.4 1.4% Total assets 636.1 669.8
Slide 27: General Insurance New Zealand
General Insurance New Zealand $ million H1 17 H2 16 H1 16 H2 15 Key financial metrics Gross written premium 117.5 127.6 116.3 127.7 1 Net incurred claims 52.6 53.5 54.4 52.8 2 Large loss events 5.1 (0.3) (0.1) 4.9 Underwriting profit 9.2 9.2 5.4 3.5 3 Underlying NPAT 4.7 9.6 6.0 6.1 Key operating me
Slide 28: General Insurance Pacific
General Insurance Pacific $ million H1 17 H2 16 H1 16 H2 15 Key financial metrics Gross written premium 28.3 29.4 29.9 32.0 1 Net incurred claims 7.1 7.4 8.5 7.3 2 Large loss events (0.1) 0.8 3.3 - Underwriting profit 6.2 4.8 3.2 6.0 Underlying NPAT 4.4 3.4 2.1 4.5 Key operating metrics Net incurred
Slide 29: This presentation has been prepared by Tower Limited to provide shareholders with information on
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.tower.co.nz/inv