Slide 1: Tower 2023 Full Year Results
Tower 2023 Full Year Results 1 October 2022 to 30 September 2023 23 November 2023
Slide 2: Agenda
Agenda Chairman’s update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer FY23 financial performance Paul Johnston, Chief Financial Officer Looking forward Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman's update
Chairman’s update Tower has navigated a challenging year, remains resilient 1. Tower demonstrates resilience to challenges • Risk-based pricing underpins competitive positioning, robust underwriting and continued growth • Continued support from global reinsurers 2. Insurance remains critical • Stron
Slide 4: Business update
Business update Blair Turnbull Chief Executive Officer 4
Slide 5: Results summary
Results summary • Proven resilient through record breaking catastrophe events • Strong premium growth from rate and volume • Organisational efficiency continues with further reductions in MER • Comprehensive reinsurance programme renewed for FY24 at competitive rates • Remediation payments and incre
Slide 6: Our performance
Our performance Business performance impacted by catastrophe events GWP growth BAU claims ratio MER 1 Customers (Gross written premium) (Business as usual) (Management expense ratio) 1 17% | $527m 321,000 55.5% 32.2% vs $457m in FY22 vs 310,000 in FY22 vs 48.9% in FY22 vs 36% in FY22 2 Large event c
Slide 7: Catastrophic and large weather events
Catastrophic and large weather events Tower large events $241m Current gross Claim numbers 1 Event description estimate Net cost Settled % Mitigating large event impacts in FY24 • Large event allowance of $45m included within FY24 guidance Auckland & upper North Island weather event $174m $12m 83% •
Slide 8: Managing impacts of inflation
Managing impacts of inflation Tower effective average premium growth Managing macro environment (annual increase) • Monthly inflation rate changes • 77 rate changes during FY23 • Sum insured amounts matched to Cordell or CPI • Rating for reinsurance and weather-related costs • High theft vehicle rat
Slide 9: Delivering on our strategy
Delivering on our strategy
Slide 10: Our purpose
10 Our purpose To inspire, shape and protect the future for the good of our customers and communities Our vision To deliver beautifully simple and rewarding experiences that our people and our customers rave about. Our strategy To be the best direct insurer in our selected markets differentiated thr
Slide 11: Targeted customer and premium growth
Targeted customer and premium growth GROSS WRITTEN PREMIUM BY PRODUCT($m) 1 • 17% GWP growth (75% rate: 25% volume) 1 • 19% GWP growth in NZ; 4% GWP growth in Pacific • 26% GWP growth in active partnerships to $82m • NZ retention stable at 77% (FY22: 78%) • 50% of customers hold multiple policies an
Slide 12: Customer experience improves through digital and data
Customer experience improves through digital and data NZ DIRECT SALES ONLINE • NPS improved to 28% (FY22: 20%); NZ online NPS at 55% • Service levels improved, abandonment rate reduced to 12% (FY22: 17%) • My Tower registrations increase 32% to 264k • Substantial progress made in multi-policy discou
Slide 13: Reducing MER through simplification and digitisation
Reducing MER through simplification and digitisation MANAGEMENT EXPENSE RATIO (% NEP) • Scale and rating reducing MER • Increased digitisation lowers cost to acquire and serve • Operational efficiency: Suva hub answering 16% of inbound calls relating to NZ policies • Management expense increase belo
Slide 14: Profit impacted by record events and claims inflation
Profit impacted by record events and claims inflation 1 UNDERLYING NPAT (including large events) • Despite unprecedented weather events, inflation, and crime our core business remains profitable • Streamlined business, efficiencies, digitisation, and targeted growth • Underlying NPAT of $7.6m, repor
Slide 15: Financial performance
Financial performance Paul Johnston Chief Financial Officer
Slide 16: Group underlying financial performance
Group underlying financial performance • Strong premium growth of 17% $ million FY23 FY22 Change • BAU loss ratio of 55.5% as a result of increased motor frequency, Gross written premium 526.8 457.3 69.5 high inflation, and higher number of small weather events Unearned premium (41.0) (
Slide 17: Underlying NPAT impacted by large events
Underlying NPAT impacted by large events 1 MOVEMENT IN UNDERLYING NPAT • Underlying NPAT of $7.6m, $19.7m below FY22 • Reduction in MER contributes $11.4m post tax to underlying NPAT • Business growth at a BAU COR of 90% • Additional large events impact of $26.4m post tax including • Higher BAU loss
Slide 18: BAU claims challenged by motor frequency and inflation
BAU claims challenged by motor frequency and inflation 2 1 NZ MOTOR FREQUENCY & SEVERITY • High inflation period and supply chain capacity constraints impacting cost of claims (severity) • NZ motor claims frequency above historical norms • Covid lockdowns lowered motor frequency in previous periods
Slide 19: BAU claims challenged by motor frequency and inflation
BAU claims challenged by motor frequency and inflation • BAU loss ratio increased by 6.6% to 55.5% in FY23 • Motor severity impacted by high inflation and supply chain disruptions. Loss ratio increasing due to inflation running ahead • FY22 benefited from a lower frequency as a result of Covid of ra
Slide 20: Continued improvement in management expenses
Continued improvement in management expenses MOVEMENT IN MANAGEMENT EXPENSE RATIO (MER) • MER reduced 3.8% to 32.2% • Scale contributes a 4.8% reduction in MER • Commission expenses decreased due to the purchase of legacy portfolios • Inflationary impacts offset by cost containment and efficiencies
Slide 21: Higher investment returns as yields increase
Higher investment returns as yields increase • Net investment income (NII) $14.3m for FY23, $13.1m higher than FY22 • Running yield on the core investment portfolio has increased to 6.07% at 30 September 2023 • Benefit from low duration strategy (target of 0.5 years) minimised mark to market losses
Slide 22: Reinsurance programme supports resilience
Reinsurance programme supports resilience $750m FY23 • Reinsurance expected to cover $204m of large events costs in FY23 • Catastrophe cover was reinstated following the two Reinsurance Reinsurance catastrophic events at a cost of $17.4m coverage of coverage of $733.1m $733.1m FY24 • Catastrophe rei
Slide 23: Canterbury earthquake claims reducing
Canterbury earthquake claims reducing OPEN CEQ CLAIMS • Full year charge of $1.2m after tax as a non-underlying item • 23 properties open as at 30 September 2023 with numbers of new claims reducing • Remaining gross outstanding claims provision is $19.1m down from $24.5m at September 2022 23
Slide 24: Capital and solvency position
Capital and solvency position 1 TOWER SOLVENCY - NZ PARENT ($m) • Solvency ratio of 159% (FY22: 205%) SR = 225% SR = 159% • Solvency margin is $53.8m above RBNZ minimum SR = 215% SR = 205% 2 solvency capital although below new internal target SR = 125% of $67.4m • Minimum solvency capital has increa
Slide 25: FY24 guidance
FY24 guidance FY23 Actual FY24 Guidance FY25 Target GWP growth 17% 10% - 15% 10% - 15% (excluding operations sold) Large events allowance $38m $45m Underlying NPAT $7.6m $22m - $27m (assuming full utilisation of large events allowance) Management expense ratio 32.2% 30% - 32% <28% Combined operating
Slide 26: Looking forward
Looking forward Blair Turnbull Chief Executive Officer
Slide 27: FY24 priorities
FY24 priorities • Continuing to invest in customer experience and targeting profitable growth • Completing remediation and further improving transparency of discounts • Settling FY23 catastrophe event claims • Continuous efficiency, digitisation, and process improvements • Investing in future resili
Slide 28: Leading customer experience and targeted growth
Leading customer experience and targeted growth • Enhanced risk-based pricing – landslide, sea surge automated through quote to buy in FY24 • New business product mix shift towards house • Leverage existing partnerships to grow organically • Rating changes made in FY23 will continue to flow through
Slide 29: Continuous improvement on efficiency & processes
Continuous improvement on efficiency & processes MANAGEMENT EXPENSE RATIO (% NEP) • Targeting 80% digital transactions of all NZ service tasks by end FY25 (FY23: 55%) • New house and motor assessing systems to be launched in FY24 reducing assessment time and repair costs • Expecting Suva hub to answ
Slide 30: Investing in future resilience and sustainability
Investing in future resilience and sustainability • Large event response embedded within operations and conservative financial allowance within guidance • Parametric partnership with CelsiusPro, global insurtech • Targeting to sell 10K+ parametric policies across five countries by FY25 • Emissions n
Slide 31: Questions?
Questions? Grower
Slide 32: Appendices
Appendices
Slide 33: Channel and efficiency improvements
Channel and efficiency improvements TOWER DIRECT PARTNERSHIPS PACIFIC • 22% premium growth to $391m • 26% active partner growth to $82m • Simplifying: PNG & Solomon Islands sale • 88% legacy portfolio policy retention • Advisor network grew 66% to 2,500 • My Tower live in 7 countries • 264k My Tower
Slide 34: Reconciliation between underlying profit after tax and reported loss after tax
Reconciliation between underlying profit after tax and reported loss after tax Underlying and reported (loss)/profit: • “Underlying (loss)/ profit” does not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently it may not be comparable to similar measures pres
Slide 35: 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