Slide 1: Tower 2024 Half Year Results
Tower 2024 Half Year Results 1 October 2023 to 31 March 2024 28 May 2024
Slide 2: Agenda
Agenda Chairman’s update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer HY24 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 1. Delivering shareholder value • Improved capital position; interim 3 cent per share dividend declared • Any unused portion of the large events allowance at year end will increase underlying NPAT, 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 operational and digital efficiencies • Claims ratio reduced due to lower claims frequency and operational improvements • No large events • Solvency position improved • 3 cent per share interim divi
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 20% | $291m 309,000 49.7% 31.3% vs $245m in HY23 vs 312,000 in HY23 vs 51.1% in HY23 vs 35.0% in HY23 2 3 Large event cos
Slide 7: Continued premium growth
Continued premium growth 1 GROSS WRITTEN PREMIUM • 20% GWP growth vs same period prior year ($m) ROLLING 12 MONTHS • House and Contents product mix at 50% (HY23: 48%) • House GWP growth; 83% rate, 17% volume • 55% of motor cancellations are single policy motor 2 • NZ retention stable at 77% (78% Mar
Slide 8: Business unit distribution
Business unit distribution TOWER DIRECT PARTNERSHIPS PACIFIC • House new risks sold +14% vs HY23 • Total in force risks increased 6% to • Solomon Islands business sale 106,000 completed in HY24, Vanuatu sale • 54% of Tower Direct customers hold expected to complete in FY24 multiple policies (HY23: 5
Slide 9: Customer experience improves
Customer experience improves 1 NZ SERVICE & CLAIMS TASKS ONLINE • NPS improved to 31% (Sep-23: 28%); NZ sales online NPS at 52% • Sales & service abandonment rate improved to 7% (HY23: 16%) • Digital service transactions up to 57% • Active users of My Tower increased by 10% to 156k • Substantial pro
Slide 10: Continued improvement in MER
Continued improvement in MER 1 • MER further improved to 31.3% MANAGEMENT EXPENSE RATIO • Achieving scale with targeted premium growth and lower than inflation increase in expenses • Suva hub answering 50% of NZ sales and service calls • Streamlining the business; sale of Solomon Islands and NZ rura
Slide 11: BAU claims ratio back within target range
BAU claims ratio back within target range Key drivers have improved BAU claims from second half 2023 peak 1 BAU CLAIMS RATIO • Effective pricing and underwriting • Targeted rating reduced claims from high-risk assets • Rating for inflation and reinsurance earning through • Faster and more efficient
Slide 12: Business performance continues to improve
Business performance continues to improve UNDERLYING NPAT EXCLUDING LARGE EVENTS ($m) • Underlying NPAT excluding large events was $35m for HY24 • Underlying business performing well and improving year on year • Investment income benefiting from higher interest rates 12
Slide 13: Financial performance
Financial performance Paul Johnston, Chief Financial Officer
Slide 14: Group underlying financial performance
Group underlying financial performance 1 • Premium growth of 20% • BAU loss ratio of 49.7% reduced due to targeted rate increases and operational improvements • No FY24 large events in HY24; favourable release of $1.9m on FY23 Vanuatu Cyclones • Management expense ratio improved to 31.3% as a result
Slide 15: Movement in underlying NPAT
Movement in underlying NPAT $0m 1 • Underlying NPAT of $36.6m, vs loss of $3.7m HY23 • Increase in expenses driven by inflationary increases partially offset by cost efficiencies • No large events in HY24 vs $37.3m in HY23 • Reported profit impacted by change in CEQ valuation, • Business growth incl
Slide 16: BAU claims ratio reduced
BAU claims ratio reduced 1 2 NZ MOTOR SEVERITY & FREQUENCY • High inflation and supply chain capacity constraints continuing to impact cost of claims (severity) • Motor theft frequency starting to reduce from peak in FY23 • Calmer weather in comparison to HY23 lowered house frequency TOTAL CLAIMS RA
Slide 17: Continued improvement in management expense ratio
Continued improvement in management expense ratio • MER reduced 3.7% to 31.3% MOVEMENT IN MANAGEMENT EXPENSE RATIO (MER) • Business growth contributes 4.7% reduction in MER • Net commission contributed 0.5% decrease in MER due to the purchase of legacy portfolios • Amortisation increases from invest
Slide 18: Higher investment returns as yields have increased
Higher investment returns as yields have increased • Net investment income (NII) $10.0m in HY24, $3.7m higher than same period last year • Running yield on the core investment portfolio is 5.67% as at 31 March 2024 • Conservative investment strategy with low duration (target of 0.5 years) • Outlook
Slide 19: Reinsurance programme supports resilience
Reinsurance programme supports resilience $750m HY24 • No large events recorded in HY24 FY24 Reinsurance Reinsurance • Catastrophe reinsurance of up to $750m for two coverage of coverage of events. Reinsurance cover was reduced from $889m $733.1m $733.1m in FY23 following EQC cap change • Additional
Slide 20: Capital and solvency position
Capital and solvency position 1 • Solvency ratio of 162% (139% as at 30 Sep 23) TOWER SOLVENCY NZ PARENT ($m) • Adjusted solvency margin is $117.1m, an increase from $79.8m as at 30 Sep 2023 • Tower’s regulatory solvency position is now calculated under the new Interim Solvency Standard (ISS) effect
Slide 21: Looking forward
Looking forward Blair Turnbull, Chief Executive Officer
Slide 22: Second half priorities
Second half priorities • Continue to invest in customer experience and initiatives to support affordability • Expanding risk-based pricing to include landslips and sea surge • Multi-policy discount remediation and FMA proceedings, and other customer remediations • Continue to drive efficiency, digit
Slide 23: FY24 guidance and future targets
FY24 guidance and future targets • Combined operating ratio updated to be less than 93%, down from previous guidance of between 95% and 97% • FY24 assumes full utilisation of $45m large event allowance. Any unused portion of the large events allowance at year end will increase underlying NPAT, and i
Slide 24: Questions?
Questions? a TOWER
Slide 25: Appendices
Appendices
Slide 26: Historical large events
Historical large events 1 $255m TOWER LARGE EVENTS Allowance • 5 year average of 3.8 events per annum and 10 year average of 3.6 events per annum • No large events incurred in HY24; $45m large event allowance still conservatively included within FY24 guidance Note 1: Large events are defined as havi
Slide 27: Canterbury earthquake claims reducing
Canterbury earthquake claims reducing OPEN CEQ CLAIMS • Half year charge of $0.8m after tax as a non-underlying item • 21 properties open as at 31 March 2024 1 • Remaining gross outstanding claims provision is $21.4m down from $23.4m at 30 September 2023 • Due to the low level of open properties and
Slide 28: 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 29: 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