Slide 1: 2021 half year results
2021 half year results 1 October 2020 to 31 March 2021 26 MAY 2021
Slide 2: Agenda
Agenda Chairman’s update 1 Michael Stiassny, Chairman Business update 2 Blair Turnbull, Chief Executive Officer HY21 financial performance 3 Jeff Wright, Chief Financial Officer Looking forward 4 Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman’s update – solid earnings with positive growth
Chairman’s update – solid earnings with positive growth SOUND BUSINESS PERFORMANCE STRONG AND WELL CAPITALISED POSITIONED FOR LONG-TERM GROWTH • Delivered solid earnings in 1H21 • Tower has shed its legacy issues - now • Leading Tower Direct digital business a quality business with very strong • Foc
Slide 4: Solid performance with a strong platform for growth
Solid performance with a strong platform for growth
Slide 5: Solid performance with a strong platform for growth
Solid performance with a strong platform for growth REPORTED PROFIT UNDERLYING NPAT TOWER GROSS WRITTEN MANAGEMENT EXPENSE incl. large events excl. large events PREMIUM (GWP) RATIO (MER) $12m $18m $194m 36.5% vs $14.9m prior year vs $18.9m prior year up 6% from $184m prior year -2.5% improvement on
Slide 6: A journey of continued focus and streamlining
A journey of continued focus and streamlining 2021 + GROW, PARTNER AND INNOVATE Grow flagship Tower Direct Unique Partnership model Digitising Pacific to drive efficiency 2020 - 2021 Leading digital and data capability RESOLVING LEGACY ISSUES STRENGTHENING THE BUSINESS EQC settlement Addressing emer
Slide 7: Customer and premium growth
Customer and premium growth GWP BY BUSINESS UNIT $184m $194m • Tower Direct 14% year on year growth $170m $25m T OWE R G ROS S WRI T T E N $30m PRE MI UM (G WP) H Y21 $28m • Tower Partnership 3% year on year $194m $55m $54m growth $52m up 6% on HY20 • Pacific business declined 16% $100m $113m primar
Slide 8: Continued improvement in cost efficiencies
Continued improvement in cost efficiencies MER T OWE R M AN A G E ME NT 41.3% • Continuing track record of E XP E NS E RA T I O (ME R) 39.0% 39.3% decommissioning legacy 36.5% 36.5% systems to improve efficiency. Targeting to move from 6 to 2 2.5% improvement by year end. on prior year • Future comm
Slide 9: Emerging claims inflation
Emerging claims inflation CLA IMS RATI O 53% 54% 52% CLA IM S RATI O E XCL. LA RG E LA RG E E V EN TS 6% 1% 4% E V E NT S 46% Ōhau fire 2% 48% Napier flood 52% 45% 48% 48% 3.6% higher than prior year $9.3m impact FY19 H2 FY20 H1 FY20 H2 FY21 H1 BAU Events Large Events HISTORICAL LARGE EVENTS $9.3m A
Slide 10: Decisive action to address claims challenges
Decisive action to address claims challenges Working with supply chain to enhance efficiencies Supply chain optimisation and moderate increases in supply chain costs Research & analysis on Working with data science partners & multiple Priorities house fires stakeholders to analyse risks Automation t
Slide 11: Core business solid and positioned for long term growth
Core business solid and positioned for long term growth U N D E R LY I N G N P A T $18.9m $18.0m $2.0m $15.8m $6.7m $4.3m $8.8m • Three focused businesses – Direct, Partnerships $0.8m and Pacific $8.0m $16.9m $11.5m $11.3m • Total HY21 premium of $194m underpinned by FY19 H2 FY20 H1 FY20 H2 FY21 H1
Slide 12: Delivering Shareholder Return
Delivering Shareholder Return ORDI N ARY T OTA L IN T E RIM DIV I DEN D DIV I DE N D POLI CY PA YME N T 60-80% $10.5m Interim dividend of cash earnings* where confirmed to be paid 14 July 2021 prudent to do so DIV I DE N D RE S UM PT ION I NDI CA T I VE COM BI NE D FULL A ND HA LF YEA R DI V I DE N
Slide 13: HY21 financial performance
HY21 financial performance
Slide 14: Group underlying financial performance
Group underlying financial performance $ million HY21 HY20 Change • HY21 GWP of $193.9m. GWP growth $10.3m on HY20 (+6%) Gross written premium 193.9 183.6 10.3 • BAU claims expense impacted by higher volume of large house Unearned premium 1.3 3.7 (2.4) claims and emerging house claims inflation Gros
Slide 15: Movement in underlying profit
Movement in underlying profit • Net earned premium higher due to Youi acquisition, and growth in Tower Direct and Tower M O V E M E N T I N U N D E R LY I N G P R O F I T Partnerships • Management expenses reduced $1m following completion of EIS $8m $9m platform build $2m • Large event claims expens
Slide 16: Continued focus on improving claims ratio
Continued focus on improving claims ratio C H A N G E I N C LA I M S R AT I O VS . P R I O R Y E A R 5.6% 3 1.1% 1.9% 0.4% 1.4% 2.3% 1 2 53.8% 44.6% 48.2% HY20 claims ratio, Higher large house Higher house Change in mix to Lower motor Lower Pacific HY21 claims ratio, Large Events HY21 claims ratio,
Slide 17: Continued discipline on management expenses
Continued discipline on management expenses • HY21 management expenses reduced $1.5m on MOVEMENT IN MANAGEMENT EXPENSES HY20 to $61m in HY21 • MER improved 2.5% on HY20, down to 36.5% • Salary expenses reduced $4.9m following the $1.3m completion of the EIS project and May 2020 $4.9m $1.2m $0.9m reo
Slide 18: CEQ claims continue to reduce
CEQ claims continue to reduce OPEN CEQ CLAIMS 19 • Continued reduction in open claims with 35 35 claims closed in HY20 • 16 new EQC overcaps in line with 59 expectations 43 • Gross outstanding claims down to $26.5m following strengthening of $2.2m due Properties open as at 30 New/reopened Closed Ope
Slide 19: Strong capital and solvency structure
Strong capital and solvency structure T O W E R S O LV E N C Y $ M ( N Z PA R E N T ) T OWE R S OLV E NCY RAT I O RBN Z LOWE RS LI CE NCE ASC = $180.4m (PA RE NT) CONDIT I ON Ratio = 309% 309% $25m ASC = $150.4m Ratio = 287% $97m capital above regulatory $97.1m from $50m to $25m $48.1m minimums, fol
Slide 20: Robust reinsurance programme supports resilience
Robust reinsurance programme supports resilience HIGH-LEVEL REINSURANCE STRUCTURE OVERVIEW $812m Extended Cat Cover to $812m • Lake Ōhau and Napier Flood events resulted in event claims $767m increasing $6.5m on HY20, to $9.3m in HY21. Amount of cover for a single catastrophe event Catastrophe • Agg
Slide 21: FY21 guidance
FY21 guidance FY20 Actual FY21 Guidance Based on FY20 large events ($9.7m) Underlying NPAT $28.4m $25m to $27m • Recognising increasing house claims cost and reducing investment income, guidance has been revised from underlying NPAT of greater than $29.8m to underlying NPAT of $25m to $27m for the y
Slide 22: Our plan for long term growth & improvement
Our plan for long term growth & improvement
Slide 23: Clear strategy leveraging our technology, customer and partnership advantage
Clear strategy leveraging our technology, customer and partnership advantage GROW AND INNOVATE BUILD FINANCIAL STRENGTH & CAPABILITY Relentless focus Leverage digital & Partner wherever Embracing agile Maintain a strong on customer data everywhere possible culture & talent capital & solvency relatio
Slide 24: MyTower platform improves growth and efficiency
MyTower platform improves growth and efficiency MY TOWER REGISTERED CUSTOMERS MYT OWE R RE GI S T RA TI ONS BUI LDI N G MYTOWE R MOME N TUM 100k 18k 100,000 44% 50k 13k 82k at April 2021 of Tower Direct customers on 13k MyTower 37k 4k 8k Mar-20 Sep-20 Apr-21 Direct Partners DIGITAL SALES N Z CUS T O
Slide 25: Unique partnerships distribution drives scalable growth
Unique partnerships distribution drives scalable growth PARTNERSHIPS GWP (excludes closed books) LEADING RETAIL NEW CORPORATE PARTNERSHIPS PARTNERSHIPS $29m $26m $23m TradeMe CSC Buying Group, NZDF, Auckland Council To r e n e w f o r f u r t h e r five years HY19 HY20 HY21 LEADING ADVISORY NEW INSU
Slide 26: Quality product mix to improve revenue and retention
Quality product mix to improve revenue and retention N EW P RODUCT S I NN OV A T I NG T RA DI T ION AL PRODUCT S Pet, Travel, Boat Barracks, insurance Pacific motor going online • Tower partnering with one of the world’s largest insurers • New Pet and Travel products offered in 2H, 2021 MODERN I SI
Slide 27: Supporting our Culture & Community
Supporting our Culture & Community S I X G RE E N S TAR AU C K LA ND N Z FOOT PRI NT M E AS URE D CULTURA L DI V E RSI T Y OFFICE FROM AUGUST 2021 Carbon audit completed 58% of our workforce committed to long-term identify as non-European improvements FLE X IB LE WORKPLA CE WORKIN G WI TH DA T A S C
Slide 28: Investing for long term growth
Investing for long term growth Core business • Digital & data cloud-based platform • EIS Pacific rollout • Customer experience innovation Total FY21 New Distribution • Corporate partnerships investment • Insurtechs – Huddle, Sentro $22m Product Innovation • Boat, Travel, Pet • Risk-adjusted pricing
Slide 29: Summary – solid business performance with a platform for long term growth
Summary – solid business performance with a platform for long term growth • Well capitalised with strong balance sheet and solvency margins. • Focus remains on driving shareholder value by accelerating growth and innovation through a relentless focus on customers. • Taking decisive action to address
Slide 30: Questions?
Questions?
Slide 31: Tower Direct
Tower Direct CUSTOMERS GWP 187,000 $113m 6% growth on HY20 14% growth on HY20 MER ANZ BUY-OUT 31% 23,000 Customers to migrate to Tower improvement of 4% on HY20 Direct • Second consecutive half of double digit GWP growth • Increased customer digital adoption • Launched GoCarma App in December 2020 3
Slide 32: Tower Partnerships
Tower Partnerships CUSTOMERS GWP 85,000 $55m 1% growth on HY20 3% growth on HY20 MER COR • Five new partnerships secured in HY21 44% 95% • TradeMe in the process of renewing for a further five years up from 91% year on year versus 43% in HY20 • Strong pipeline for growth in FY21 32
Slide 33: Tower Pacific
PAPUA NEW VANUATU GUINEA FIJI Tower Pacific SAMOA & AMERICAN SAMOA SOLOMON ISLANDS CUSTOMERS GWP TONGA NEW COOK ZEALAND ISLANDS 34,000 $25m 8% decline on HY20 16% decline on HY20 • Moving from bespoke, manual intensive legacy system and MER GOING DIGITAL IN THE PACIFIC operating model to digitised p
Slide 34: Reconciliation between underlying profit after tax and reported profit after tax
Reconciliation between underlying profit after tax and reported profit after tax HY21 GWP CEQ HY21 reported $ million underlying adjustments (1) reclassifications Other (3) profit Underlying and reported profit: profit (2) Gross written premium 193.9 - 0.6 - 194.6 • “Underlying profit” does not have
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