Slide 1: Tower Limited Half Year 2021 Results Announcement
Tower Limited Level 14, 45 Queen Street Auckland 1142, New Zealand ARBN 645 941 028 Incorporated in New Zealand 26 May 2021 Tower Limited Half Year 2021 Results Announcement In accordance with NZX Listing Rule 3.5.1, please find enclosed the following for release to the market in relation to Tower L
Slide 2: Tower records sound half year result, restarts dividend payments
Tower Limited Level 14, 45 Queen Street Auckland 1142, New Zealand ARBN 645 941 028 Incorporated in New Zealand Market Information Company Announcements Office NZX Limited ASX Limited Level 1, NZX Centre Exchange Centre 11 Cable Street Level 6, 20 Bridge Street Wellington Sydney NSW 2000 New Zealand
Slide 3: Premium growth through new partnerships and product innovation
Tower Limited Level 14, 45 Queen Street Auckland 1142, New Zealand ARBN 645 941 028 Incorporated in New Zealand Turnbull says, “Tower’s investments in technology mean we are well placed to respond rapidly with rating and underwriting actions to address these challenges. We have commenced a review of
Slide 4: Results announcement
Results announcement Results for announcement to the market Name of issuer Tower Limited Reporting Period 6 months to 31 March 2021 Previous Reporting Period 6 months to 31 March 2020 Currency NZD Amount (000s) Percentage change Revenue from continuing $203,539 2% operations Total Revenue $203,539 2
Slide 5: Consolidated interim financial statements
Tower Limited Consolidated interim financial statements for the half year ended 31 March 2021
Slide 6: Consolidated interim financial statements contents
Tower Limited Consolidated interim financial statements Financial Statements Consolidated statement of comprehensive income 2 Consolidated balance sheet 3 Consolidated statement of changes in equity 4 Consolidated statement of cash flows 5 Notes to the interim financial statements 1 Overview 6 1.1 A
Slide 7: Consolidated statement of comprehensive income
Tower Limited Consolidated statement of comprehensive income For the half year end 31 March 2021 $ thousands Note 31-Mar-21 31-Mar-20 Gross written premium 194,563 183,627 Unearned premium movement 1,317 3,708 Gross earned premium 195,880 187,335 Outward reinsurance premium (27,320) (28,271) Movemen
Slide 8: Consolidated balance sheet
Tower Limited Consolidated balance sheet As at 31 March 2021 $ thousands Note 31-Mar-21 30-Sep-20 Assets Cash and cash equivalents 7.1 85,127 80,108 Investments 3.2 267,481 237,904 Receivables 2.3 197,801 250,746 Current tax assets 12,892 12,892 Deferred tax assets 22,328 26,832 Deferred insurance c
Slide 9: Consolidated statement of changes in equity
Tower Limited Consolidated statement of changes in equity As at 31 March 2021 Attributed to Shareholders Contributed (Accumulated losses) / Non-controlling $ thousands equity Retained earnings Reserves interest Total Equity Half year ended 31 March 2021 Balance as at 30 September 2020 492,424 (42,99
Slide 10: Consolidated statement of cash flows
Tower Limited Consolidated statement of cash flows For the half year ended 31 March 2021 $ thousands Note 31-Mar-21 31-Mar-20 Cash flows from operating activities Premiums received 195,216 188,372 EQC settlement receipt* 42,142 - Interest received 2,555 4,015 Fee and other income received 1,406 3,57
Slide 11: Notes to the interim financial statements
Tower Limited Notes to the interim financial statements 1 Overview This section provides information that is helpful to an overall understanding of the interim financial statements and the areas of critical accounting judgements and estimates included in the interim financial statements. It also inc
Slide 12: Segmental reporting
Tower Limited 1.3 Segmental reporting a. Operating segments Tower operates in two geographical segments, New Zealand and the Pacific region. New Zealand comprises the general insurance business underwritten in New Zealand. Pacific Islands comprises the general insurance business underwritten in the
Slide 13: Underwriting activities
Tower Limited 2 Underwriting activities This section provides information on Tower's underwriting activities. Tower collects premiums from customers in exchange for providing insurance coverage. These premiums are recognised as revenue when they are earned by Tower, with a liability for unearned pre
Slide 14: Receivables
Tower Limited 2.3 Receivables $ thousands 31-Mar-21 30-Sep-20 Gross premium receivables 169,072 171,041 Provision for impairment (1,558) (1,383) Premium receivables 167,514 169,658 Reinsurance recoveries (non Canterbury earthquake) 15,957 15,105 Canterbury earthquake reinsurance recoveries 3,147 3,2
Slide 15: Investments
Tower Limited 3 Investments Tower invests funds collected as premiums and provided by shareholders to ensure it can meet its obligations to pay claims and expenses and to generate a return to support its profitability. Tower has a low risk tolerance and therefore the majority of its investments are
Slide 16: Risk Management
Tower Limited 4 Risk Management Tower is exposed to multiple risks as it works to set things right for its customers and their communities whilst maximising returns for its shareholders. Everyone across the organisation is responsible for ensuring that Tower's risks are managed and controlled on a d
Slide 17: Capital Structure
Tower Limited 5 Capital Structure This section provides information about how Tower finances its operations to provide financial security to its customers, employees and other stakeholders. 5.1 Contributed equity $ thousands 31-Mar-21 30-Sep-20 Opening balance 492,424 209,990 Issue of share capital
Slide 18: Other balance sheet items
Tower Limited 6 Other balance sheet items This section provides information about assets and liabilities not included elsewhere. 6.1 Intangible assets As at 31 March 2021 Customer $ thousands Goodwill Software Relationships* Total Composition: Cost 17,744 103,127 28,222 149,093 Accumulated amortisat
Slide 19: Other information
Tower Limited 7 Other information This section includes additional disclosures which are required by financial reporting standards. 7.1 Notes to the consolidated statement of cash flows Composition of Cash and cash equivalents $ thousands 31-Mar-21 31-Mar-20 Cash at bank 67,357 46,221 Deposits at ca
Slide 20: Contingent liabilities
Tower Limited 7.2 Contingent liabilities Claims and disputes The Group is occasionally subject to claims and disputes as a commercial outcome of conducting insurance business. Provisions are recorded for these claims or disputes when it is probable that an outflow of resources will be required to se
Slide 21: Independent auditor's review report
Independent auditor’s review report To the shareholders of Tower Limited Report on the consolidated interim financial statements Our conclusion We have reviewed the consolidated interim financial statements of Tower Limited (the Company) and its subsidiaries (the Group), which comprise the consolida
Slide 22: Independent auditor's review report (continued)
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing and International Standards on Auditing (New Zealand) and consequently does not enable us to obtain assurance that we might identify in an aud
Slide 23: 2021 half year results
2021 half year results 1 October 2020 to 31 March 2021 26 MAY 2021
Slide 24: 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 25: 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 26: Solid performance with a strong platform for growth
Solid performance with a strong platform for growth
Slide 27: 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 28: 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 29: 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 30: 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 31: 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 32: Priorities
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 33: 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 34: 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 35: HY21 financial performance
HY21 financial performance
Slide 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: 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 43: 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 44: Our plan for long term growth & improvement
Our plan for long term growth & improvement
Slide 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: Questions?
Questions?
Slide 53: 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 54: 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 55: 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 56: 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 57: 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
Slide 58: Tower HY results script
Tower HY results script 26 May, 2021 Slide 3 – Chairman’s update Michael Stiassny Mōrena, good morning and thank you for making the time to join us for this investor call and presentation of our half year results. With me in Auckland is our Chief Executive Officer, Blair Turnbull and our Chief Finan
Slide 59: Script: guidance, capital position and dividend
Accordingly, last week we revised our guidance on underlying profit for the 2021 financial year to between $25 and $27 million. Capital position and dividend Despite these unprecedented times, Tower remains a resilient, strong and well capitalised business with a solid base for continued investment
Slide 60: Script: acknowledging the Tower team
I’d like to acknowledge the Tower team. Sustained premium growth and a downward trend in management expenses is testament to a solid strategy and the discipline and dedication of the people that implement it. In short, despite the COVID-induced breeze, Tower continues to be well positioned for susta
Slide 61: Script: sound performance
was a strong result, achieved despite the Pacific business declining 16% primarily as a result of economic challenges related to Covid-19. Disciplined cost control and further efficiencies have seen Tower’s overall management expense ratio further improve by 2.5%, to 36.5%. Customer numbers showed h
Slide 62: Script: strengthening the business
businesses and more recently the addition of Insurtechs; and the Pacific business with operations in eight countries. Strengthening the business remains a priority and this is particularly heightened as we face claims inflation and wider environmental macro pressures. Jeff and I will talk about this
Slide 63: Script: partnerships and Pacific
generation of partnerships such as corporate, retail and advisory referral partnerships and insurtechs. All of our key partners are now on our cloud- based digital platform at more sustainable commission levels and we have a strong partner pipeline. Our Pacific business GWP declined by 16% primarily
Slide 64: Script: large events and claims
Large events in this half included the large fire at Lake Ōhau village and the severe flooding in Napier in late 2020, resulting in a $9.3 million impact before tax. This is a significant increase over the $2.8 million in large events claims in the 2020 half year and should be viewed against histori
Slide 65: Script: decisive action and core business
We also have the ability through our leading technology capability to act swiftly to adjust ratings and underwriting if necessary. These actions will take time to gain traction, however we expect to begin realising benefits in the second half. Slide 11 – Core business solid The fundamentals of Tower
Slide 66: Script: financial results
I will now hand over to Jeff Wright who will take you through our financial results in more detail. Slide 13 – HY21 financial performance title slide Jeff Wright Thank you, Blair, and good morning everyone. Slide 14 – Group financial performance Looking at the consolidated results, we can see that G
Slide 67: Script: movement in underlying profit
Compared with the 2020 half year underlying profit before tax and large events of $28 million, net earned premium increased $8 million in HY21 through the Youi acquisition and growth in Tower Direct and Tower Partnerships. Management expenses have reduced, but the increase in BAU claims, driven, as
Slide 68: Script: claims ratio and management expenses
Lower Pacific claims expenses reduced the overall loss ratio by 1.4%. Finally, the higher large event experience added 5.6% to the first half 2020 loss ratio, bringing the first half 2021 loss ratio to 53.8%. Slide 17 – Continued discipline on management expenses Tower’s management expenses reduced
Slide 69: Script: CEQ claims and solvency
reopened claims continues to slow, the remaining claims are the most complex. Gross outstanding claims are now down to $26.5 million following a strengthening of $2.2 million due to tribunal claims settling for more than expected and Tower prudently increasing the allowance for future claims. We hav
Slide 70: Script: FY21 guidance
Tower’s long term average for large events is $8 million per annum. Slide 21 – FY21 guidance As we announced on Monday 17 May, we have revised our guidance for Tower’s underlying NPAT in FY21 to a range of between $25 and $27 million. The change from the previous guidance of greater than $29.8 milli
Slide 71: Script: strategy and priorities
Today’s results demonstrate the resilience of a customer and digitally-led Tower business, even in the face of Covid and inflationary headwinds. We are continuing to grow; to drive down expenses; and to respond quickly to the changing economic environment. You can be confident that we are very focus
Slide 72: Script: MyTower and digital
To this end digital and data are central to Tower. Our flagship business, Tower Direct, operates fully on our new platform. It’s paving the way for our other businesses, Partnerships and the Pacific. MyTower is at the centre of our digital platform. A full online sales and service experience that no
Slide 73: Script: partners and product mix
We are providing insurance for a range of new corporate partners including CSC Buying Group, the New Zealand Defence Force and Auckland Council. Today we also announced a partnership with a leading Australian insurtech, Open which will see Tower underwrite their new personalised insurance brand, Hud
Slide 74: Script: culture and community
Continuing to grow, partner and innovate as a leading digital and data business will only be possible with the support of our fantastic Tower team and the communities we serve. It’s particularly pleasing to see that cultural diversity across our business is strong with well over half of our people i
Slide 75: Script: summary
seek opportunities to invest in the business and look for further sensible and prudent investment opportunities. Slide 29 – Summary Tower is a well-capitalised business with a strong balance sheet and solvency margins. We have delivered a sound result with above market premium growth, we have furthe
Slide 76: Distribution Notice
Distribution Notice Section 1: Issuer information Name of issuer Tower Limited Financial product name/description Ordinary Shares NZX ticker code TWR ISIN (If unknown, check on NZX NZTWRE0011S2 website) Type of distribution Full Year Quarterly (Please mark with an X in the Half Year X Special releva
Slide 77: Distribution re-investment plan and authority
Section 4: Distribution re-investment plan (if applicable) DRP % discount (if any) Start date and end date for determining market price for DRP Date strike price to be announced (if not available at this time) Specify source of financial products to be issued under DRP programme (new issue or to be