Slide 1: TOWER
TOWER
Slide 2: Financial Results Year Ended 30 September 2002
ITOWER Financial Results Year Ended 30 September 2002 Keith Taylor — Acting Group CEO Sydney, 5 December 2002
Slide 3: FY2002 NPAT loss of NZ$74.9 million
TOWER m FY 2002 NPAT loss of NZ$74.9 million — significantly impacted by weak investment markets and large one-off costs and write-downs mw NZ operations — good performance m@ Bridges - good growth in profits and FUM mw TOWER Australia — very disappointing result - intensive operational focus — new
Slide 4: Expected profit result $80m+
|TOWER Expected profit result $80m+ >» Investment markets - $26.1m » Write-offs (IT & other) - $31.2m » TAL operational & experience losses -$44.0m » Restructuring costs (including redundancies) -$10.1m » Bridges revaluation -$35.8m
Slide 5: Group results year ended September 2002
TOWER Year ended 30 Sept 2 2001 Change NZ$ million Premium Income 458.8 419.3 +9% Fee income 175.1 184.17 -5% Investment Income (53.3) 93.7 -157% NPAT (pre Bridges revaluation) Bridges revaluation NPAT EPS cents (42.0) 43.4 -197% Net Asset Backing NZ$ 4.36 5.05 -14% Assets Under Management NZ$ billi
Slide 6: Group operating profit components
|TOWER Year ended 30 September NZ$ million Company Operating Profits (12.4) 66.4 65.1 Group tax items 4.7 8.7 8.3 Group expenses (28.3) (14.1) (11.4) Movement in value of life co owned subs. (34.1) 17.5 2.4 Net investment returns on SHF 17.9 17.5 27.3 Interest & partly paid shares (22.7) (18.8) (10.
Slide 7: Profit analysis by component
ITOWER Year ended 30 Sept 2002 2001 2000 NZ$ million Planned Profits 42.3 45.1 49.6 Experience profits/(losses) (62.7) 3.8 (7.5) Capitalised loss reversal/(recognition) (12.4) 0.7 4.4 Other business operating margins > operating companies 25.1 25.6 18.6 > holding company (28.3) (14.1) (3.1) Movement
Slide 8: Drivers of profit movements
|TOWER m= Planned profits down 6% (NZ$2.8m) > Currency > Higher lapse rates and lower levels of new business in TOWER Australia > Run-off of TOWER Life NZ business m Experience losses in TOWER Australia, NZ$65.9m = Capitalised loss recognition, NZ$12.4m > Higher expense assumptions and lapses in TOW
Slide 9: Experience profits by half-year
|TOWER NZ $million H2/02 H1/02 Lapses & Surrenders Lump sum claims/mortality Investment income/Disc Rate Taxation Other Operational
Slide 10: Experience losses: lapses, claims, expenses
ITOWER m Lapses + surrenders (mainly in TOWER Australia) > Impact of poor investment markets on some closed investment products > Increase in disability premiums causing higher than expected lapses m Disability income claims — continued improvement in experience m Expense profit (Experience loss $48
Slide 11: TOWER Australia: write downs and review
TOWER m Write downs and adjustments following review responsible for 2002 loss mw Jim Minto (prev CEO TOWER NZ) - started 6 Nov m Some progress but more urgency required-— full operational review underway by new leadership team m Experience loss of A$54.8 million @ Write down in valuation of life ow
Slide 12: TOWER Australia profit analysis (A$ million)
TOWER Year ended 30 Sept 2002 2001 2000 A$ million Planned Profits 26.4 27.1 29.2 Experience profits/(losses) (54.8) (6.8) 9.1* Capitalised loss reversal/(recognition) (10.2) 0.5 3.9 Other bus operating margins 0.0 0.0 1.7 Movement in value of life co owned subs. (28.4) 14.0 1.9 Net investment retur
Slide 13: Bridges results
ITOWER Bridges (A$ million) 2002 2001 Change Income 38.7 33.8 +15% m FUM increased by A$231m (8%) to A$3.1 billion m TPS 10* largest discretionary master trust in Australia (maintaining market position) m 111 Bridges planners (in 40 locations), plus 18 planners from other dealers exclusively support
Slide 14: Bridges valuation
TOWER m Valuation as at 30 September 2002 A$168 million m Independently valued every 6 months m Good profit in 2002 m Poor investment markets m Margin squeeze m Planner income sharing m Future growth m 5.5% of funds under management 414
Slide 15: TOWER New Zealand retail investments
TOWER NZ$ million 2002 2001 2000 Operating income 48.7 50.3 44.6 Net premium income 27.8 33.0 91.4 Investment income (14.7) (34.3) 77.4 u a Challenging year due to continued trend away from managed investment products to cash/mortgage funds in current volatile investment climate a N2's largest retai
Slide 16: Wealth management results
ITOWER 2001 2000 74.2 67.2 NZ$ million Net income m Decision to retain business after seeking offers m Profit down due to sale process and one-offs m Income relatively static across all categories = Mgt & sales expenses up $4.5m, including $2.3m of one-off costs m Assets under management and adminis
Slide 17: Asset management results
ITOWER NZ$ million 2002 2001 2000 Net income 19.4 18.3 20.0 Mgt & sales expenses 13.3 12.3 12.2 m FUM as at 30 Sept 02 $7.9 billion — external $1.8 billion, internal $6.1 billion m New Zealand continues to be strong in investment performance (wholesale balanced super fund best returns for 2"¢ year i
Slide 18: TOWER Insurance and Health & Life
TOWER TOWER Insurance NZ$ million 2002 2001 2000 Net premium income 143.8 140.2 133.7 Investment incom > Profit 84% up — improved investment income + good cost control. > Maintained record of positive underwriting despite unusually high fire claims TOWER Health & Life NZ$ million Net premium income
Slide 19: Corporate and other costs
|TOWER NZ$ million 2002 2001 2000 Shareholder admin 4.3 49 44 Other mgt expenses 29.2 12.5 10.4 TOWER China 3.6 2.5 1.7 Tax expense (8.0) (5.5) (4.4) m Other Mgt expenses include > $8.4m - due to restructuring > $6.0m- BCG/due diligence costs > $14.8m - recurring m Exited China — no more costs going
Slide 20: Business units outlook
ITOWER m TOWER Australia m TOWER New Zealand m Wealth Management — Bridges and TOWER Trust m Asset Management 20
Slide 21: TOWER Australia issues and strategy to reverse
|TOWER m Issues for last year > Increased actual expenses > Switch acquisition to maintenance > Lapses higher than planned for DI book > Write offs > Lower sales momentum m Strategy to reverse > Immediate review of business scope > Cost reductions > Sales momentum rebuild > Focus on quality of servi
Slide 22: High level strategy going forward
|TOWER m High level strategy going forward > Business model > Markets > Products/services > Alliances > Distribution 22
Slide 23: Credit union alliance and wealth management model
TOWER m Key objective is to extend its reach into CU movement’s 3.6 million members to grow TOWER FUM on sustainable basis m Two main pillars to wealth management business model: > Pre-retirement stage. High value/advice members referred to Bridges planners > Accumulation stage. Low value/advice mem
Slide 24: Achievements in first months
TOWER Achievements in first 9 months m 10 key Credit Unions have agreed to partnership with 3 fully operational m Infrastructure at TOWER CU Alliance complete m Focus now on building the business around the model m Promising levels of new business > Over 700 new leads for financial advice > Addition
Slide 25: Debt, gearing and capital adequacy
ITOWER m™ Total Debt $443 million ($512 million in 2001) m Gearing 36.6% (36.1% in 2001) m™ Capital adequacy meet all regulatory requirements ™ Capitalised expenses $63.1 million ($50.6 million IT) m= Future Capex <$20 million in 2003 ($30-40m in recent years} 25
Slide 26: Depreciation and dividend policy
|TOWER m Depreciation — expense will be lower due to large write-off of capitalised expenditure m Dividend policy — intention to resume paying dividends from 1H03 — lower level than previously 26
Slide 27: New Group CEO and strategic review
TOWER m Appointment of new Group CEO imminent m Strategic and operational review due early in New Year > IAC, personal trustee business, asset management capability, capital management m Divestments/Acquisitions m Domicile/Franking credits 27
Slide 28: Outlook: issues largely non-recurring
TOWER m Most issues of 2001/2 are non-recurring m Made management, staffing, financial and structural changes necessary for good base going forward m Benefits of restructuring will emerge in 2002/3 m Sales momentum will take time to re-build in TOWER Australia 28
Slide 29: Summary
|TOWER m Very weak investment markets m Operational difficulties in TOWER Australia — sales, expenses, IT m Other operations performed well m™ Significant restructuring — particularly since July 29