Slide 1: Half Year 2016 Results for Announcement to Market
Market Information Company Announcements Office NZX Limited Australian Securities Exchange Limited Level 2, NZX Centre Exchange Centre 11 Cable Street Level 6, 20 Bridge Street Wellington Sydney NSW New Zealand 2000 Australia 24 May 2016 TOWER Limited Half Year 2016 Results for Announcement to Marke
Slide 2: Tower reports first half result loss
TOWER 24 May 2016 Market Information Company Announcements Office NZX Limited Australian Securities Exchange Limited Level 2, NZX Centre Exchange Centre 11 Cable Street Level 6, 20 Bridge Street Wellington Sydney NSW 2000 New Zealand Australia Tower reports first half result loss TOWER Limited (NZX/
Slide 3: Media release continued: CEO comments and dividend
TOWER “The half year has been characterised by Tower focusing on the core of the business, ensuring we have the fundamentals in place to become a high performing insurer. Our focus on costs has resulted in a reduction in management expenses over the second half of 2015. Our retention initiatives hav
Slide 4: Tower Management Review - Half year to 31 March 2016
TOWER 24 May 2016 Market Information NZX Limited Level 2, NZX Centre 11 Cable Street Wellington New Zealand Company Announcements Office Australian Securities Exchange Limited Exchange Centre Level 6, 20 Bridge Street Sydney NSW 2000 Australia Tower Management Review - Half year to 31 March 2016 Fea
Slide 5: Half year summary
TOWER Half year summary Tower reported a net Loss after tax of $8.7 million for the half year ended 31 March 2016 (H1 2016) compared to a loss of $4.9 million for the half year ended 31 March 2015 (H1 2015). The result was impacted by impairments on IT assets and adjustments to Canterbury provisions
Slide 6: Financial performance
TOWER Financial performance $ million H115 Movement % Gross written premium 145.9 0.2% Total underlying profit after tax* 17.5 (56.9%) Canterbury impact (22.6) n/a Impairment of intangibles - n/a Profit on discontinued businesses 02 n/a Reported profit after tax (4.9) n/a Key ratios Underlying EPS (
Slide 7: Underlying earnings performance
TOWER Underlying earnings performance $ million H115 Movement % Gross written premium 145.9 0.2% Gross earned premium 150.4 0.7% Reinsurance costs (25.7) (4.5%) Net earned premium 124.7 1.8% Net incurred claims (55.5) 13.4% Large events claims* - n/a Management and sales expenses (49.2) 3.4% Depreci
Slide 8: Strong balance sheet maintained
TOWER Recently launched cost out initiatives have reversed this trend and have successfully reduced management expenses in the half. As a result of the focus on costs, Tower expects further improvement in the expense base in the second half. Investment revenue was $4.4 million, a decrease of 39.8% a
Slide 9: High performance customer service culture
TOWER 1. High performance customer service culture - retention focus to drive growth - review of customer service - continued strong Pacific performance For the first time since March 2014, Tower has delivered positive policy growth on its core New Zealand book (that excludes the ANZ book in run off
Slide 10: Claims, pricing and IT initiatives
TOWER Tower is currently identifying options that would enable it to increase productivity, reduce expenses and provide a better customer experience. Across the insurance industry, claims costs have risen sharply over the past two years. However, Tower also acknowledges the need to better manage its
Slide 11: Investor Day in late July
TOWER The management team looks forward to welcoming investors to an Investor Day in late July. The company recognises the need for investors to have greater insight into the drivers of the business. Tower intends to provide further detail about the insurance industry, Tower's place in it and the va
Slide 12: Results for Announcement to the Market (NZX Appendix 1)
APPENDIX 1 HALF YEAR PRELIMINARY ANNOUNCEMENTS AND HALF YEAR RESULTS RESULTS FOR ANNOUNCEMENT TO THE MARKET TOWER LIMITED Reporting Period 6 months to 31 March 2016 Previous Reporting Period 6 months to 31 March 2015 Amounts (000s) Percentage change Revenue from ordinary activities NZ$ 157,488 1.3%
Slide 13: Notice of event affecting securities
APPENDIX 7 – NZSX Listing Rules EMAIL: announce@nzx.com Number of pages including this one Notice of event affecting securities (Please provide any other relevant NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages) For change to allotment, NZSX L
Slide 14: Interim Financial Statements for the half year ended 31 March 2016
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016
Slide 15: Table of contents
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 TABLE OF CONTENTS Consolidated Income Statement 2 Consolidated Statement of Comprehensive Income 3 Consolidated Balance Sheet 4 Consolidated Statement of Changes in Equity 5 Consolidated Statement of Cash Flows 6 Notes
Slide 16: Consolidated Income Statement
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 CONSOLIDATED INCOME STATEMENT $ thousands Unaudited Unaudited For the half year ended Note 31-Mar-16 31-Mar-15 Revenue Premium revenue 2 151,452 150,398 Less: Outwards reinsurance expense (24,500) (25,664) Net premium r
Slide 17: Consolidated Statement of Comprehensive Income
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME $ thousands Unaudited Unaudited For the half year ended Note 31-Mar-16 31-Mar-15 Loss for the half year (8,679) (4,872) Other comprehensive income Currency translation diff
Slide 18: Consolidated Balance Sheet
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 CONSOLIDATED BALANCE SHEET $ thousands Unaudited Audited As at Note 31-Mar-16 30-Sep-15 Assets Cash and cash equivalents 94,665 125,113 Receivables 271,453 257,851 Investments 13 200,919 213,593 Derivative financial ass
Slide 19: Consolidated Statement of Changes in Equity
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited Attributed to shareholders Non- Contributed Accumulated controlling $ thousands equity loss Reserves Total interest Total Equity Half year ended 31 March 2016 At the
Slide 20: Consolidated Statement of Cash Flows
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 CONSOLIDATED STATEMENT OF CASH FLOWS $ thousands Unaudited Unaudited For the half year ended Note 31-Mar-16 31-Mar-15 Cash flows from operating activities Premiums received 146,072 148,831 Interest received 5,469 8,060
Slide 21: Notes to the Interim Financial Statements
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 SUMMARY OF GENERAL ACCOUNTING POLICIES Entities reporting The interim financial statements presented are those of TOWER Limited (the Company) and its subsidiaries (the Group).
Slide 22: Notes: Investment revenue
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS $ thousands Unaudited Unaudited For the half year ended 31 March Note 2016 2015 3 INVESTMENT REVENUE Fixed interest securities Interest income 5,470 8,060 Net realised gain (los
Slide 23: Notes: Canterbury earthquakes provisions
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 4A CANTERBURY EARTHQUAKES (continued) The table below presents a financial representation of TOWER’s net outstanding claims provision at 31 March 2016 in relation to the four ma
Slide 24: Notes: Catastrophe reinsurance cover and key judgements
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 4A CANTERBURY EARTHQUAKES (continued) Catastrophe reinsurance cover Date of event remaining September 2010 $17.1 million June 2011 $261.8 million December 2011 $487.7 million Th
Slide 25: Notes: Intangible assets
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 5 INTANGIBLE ASSETS SOFTWARE Application software is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over the est
Slide 26: Notes: Intangible assets (continued)
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 5 INTANGIBLE ASSETS (continued) Software Internally Under $ thousands Goodwill Acquired developed development Total Half year ended 31 March 2016 Unaudited Net book value At cos
Slide 27: Notes: Segmental reporting
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS Unaudited Other (Holding companies & $ thousands New Zealand Pacific Islands eliminations) Total 6 SEGMENTAL REPORTING Half year ended 31 March 2016 Revenue Revenue - external 1
Slide 28: Notes: Provisions and distributions to shareholders
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 7 PROVISIONS Unaudited Audited $ thousands Note 31-Mar-16 30-Sep-15 Business separation 8 209 Employee benefits 3,683 3,064 Total provisions 3,691 3,273 Analysed as: Current 3,6
Slide 29: Notes: Reconciliation of profit to operating cash flows
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 10 RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES $ thousands Unaudited Unaudited For the half year ended 31 March Note 2016 2015 Loss for t
Slide 30: Notes: Fair value of financial assets and liabilities
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 13 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The following tables present the Group's assets and liabilities categorised by fair value measurement hierarchy levels. $ thous
Slide 31: Notes: Fair value (continued)
TOWER LIMITED INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 MARCH 2016 NOTES TO THE INTERIM FINANCIAL STATEMENTS 13 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued) Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly tra
Slide 32: Independent Review Report
tk pwe Independent Review Report to the shareholders of TOWER Limited Report on the Interim Financial Statements We have reviewed the accompanying group financial statements of TOWER Limited (the “Group”) on pages 2 to 17, which comprise the condensed balance sheet as at 31 March 2016, and the conde
Slide 33: Independent Review Report conclusion
i pwe Conclusion Based on our review, nothing has come to our attention that causes us to believe that these financial statements of the Group are not prepared, in all material respects, in accordance with NZIAS 34. Restriction on Use of Our Report This report is made solely to the Company’s shareho
Slide 34: Half Year Results to March 2016
‘fA TOWER Half Year Results to 31 March 2016 24 May 2016
Slide 35: Results overview
fi TOWER Results overview > c ” Yn © s 2 § ge a Ye =O
Slide 36: Results overview
Results overview Brower + Underlying profit of $7.6m reflecting weather and current industry environment + Reported loss of $8.7m “Our core business is - $14.1m post tax impact from IT impairments general insurance in New - $2.1m post tax impact from adjustments to Canterbury provisions Zealand and
Slide 37: Performance summary
Performance summary Richard Harding Chief Executive Officer _, | @
Slide 38: Focusing on the core
Focusing on the core {rower Our strategic imperatives will drive high performance * Growth delivered through retention * Ongoing Pacific growth + Customer service delivery * Improvement in risk selection * Focus on costs reduces expenses * Riskibased pricing + IT platform review underway * Product r
Slide 39: First half performance summary
First half performance summary Underlying earnings impacted by current environment and weather events Industry environment affects underlying profit of $7.6m Reported loss of $8.7m due to non-recurring costs Strong Pacific GWP performance Further progress on Canterbury claims GWP (NZ$m) UNDERLYING P
Slide 40: Financial Performance
4A TOWER Financial Performance Brett Wilson Chief Financial Officer vy)
Slide 41: Financial performance
Financial performance airower Reported loss of $8.7m; half year dividend of 8.5 cps GROUP PROFIT SUMMARY (NZ$m) S million H115 Movement $ Movement % . Reported profit reflects : Gross written premium 145.9 03 0.2% . Net earned premium 1247 23 18% - $2.1m impact from BAU claims cost (555) 74) (13.4%)
Slide 42: Change in underlying profit
Change in underlying profit A TOWER Higher claims cost due to adverse weather conditions and claims inflation in New Zealand and the Pacific MOVEMENT IN UNDERLYING PROFIT (NZSm) vs 74 || 33 — 40 76 — 17 09 29 H115 . H116 7 Claims costs Management 3 underlying cupenses Investment underlying profit pr
Slide 43: Canterbury progress
Canterbury progress Ongoing progress in Canterbury improves confidence MOVEMENT IN PROPERTIES 641 249 Open New Reopened properties properties properties 10ct 15 Closed Remaining properties properties 31 Mar 16 + New and reopened claims due to — EQC over cap claims (industry wide issue) — additional
Slide 44: Strong solvency position
Strong solvency position rower Target solvency operating range revised to 180 - 200% of MSC SOLVENCY? SOLVENCY RATIO (NZ$m) (% of MSC) $155.2m 234% Regulatory capital surplus? 200% Target * Strong capital position with solvency of 234% operating . 180% range of MSC in Tower Insurance Group $116.5m 1
Slide 45: Capital and dividends
Capital and dividends rower Maintaining solid dividends for shareholders + $300m returned to shareholders over the past TOWER DIVIDENDS (cps) five years through dividends and capital returns 16.0 14.5 * Capital surplus — $23m solvency above target operating range in 110 110 Tower Insurance Limited 8
Slide 46: Slide 46
Slide 47: Focusing on the core
Focusing on the core {rower Our strategic imperatives will drive high performance * Growth delivered through retention * Ongoing Pacific growth * Customer service delivery * Focus on costs reduces expenses * Improvement in risk selection * Risk based pricing * Product rationalisation + IT platform r
Slide 48: Core policy growth
Core policy growth Operational. Focus on retention has delivered policy growth et |__| Greta CORE ! NEW ZEALAND POLICY MOVEMENT + First half of positive policy growth in core New (policies) Zealand book since March 2014 due to retention initiatives — focus on driving profitable growth * Brand reposi
Slide 49: Unique position in the Pacific
Unique position in the Pacific The Pacific continues to deliver growth * Strong H116 performance — GWP growth driven by Vanuatu, American Samoa, Samoa and Fiji — increase in underlying claims ratio due to active storm season — NPAT impacted by Vanuatu launch and Cyclone Winston * Further growth expe
Slide 50: Focus on costs
Focus on costs Reduced management expenses through targeted initiatives Accurate Operational, icing of pnts excellence MANAGEMENT EXPENSES (NZ$m) We currently have a programme of work underway to reduce non-personnel expenses 55.0 53.6 + Examples of short-term initiatives include: 510 — 27 — vendor
Slide 51: Claims management is a top priority
High performance ‘customer service culture Claims management is a top priority Weare taking significant action to reduce claims costs Accurate pricing of visk Operational excellence « Aswith others in the industry, we have seen growth in claims costs due to: BAU CLAIMS COST (NZ$m) — weather events i
Slide 52: IT simplification
High performance customer service culture IT simplification Simplifying our IT environment will reduce costs and drive growth Accurate pricing of risk Operational excellence CURRENT STATE FUTURE STATE a i igi Single core rss oot eats roccee crm ee Ekg otter * Unstable - resulting in significant down
Slide 53: Risk based pricing
Risk based pricing We will continue to enhance pricing to improve underwriting performance and competitiveness ACTIVITIES TO ENHANCE PRICING RECENT HOUSE PRICE REVIEW . _ Competitiveness: . + Review of pricing segments to Percentage of quotes where Immediate analyse loss ratio vs market Tower is mos
Slide 54: Outlook
Outlook Investment in the business will drive high performance, building shareholder value over the long term INDUSTRY DYNAMICS * Flat premiums * Increasing claims costs * Increased competition * Continued Canterbury claims progress + Low interest rate environment TOWER DYNAMICS Short term * Improve
Slide 55: Appendices
‘fA TOWER Appendices
Slide 56: A New Zealand and Pacific general insurer
A New Zealand and Pacific general insurer girower $7.6m $146.2m 477k Personal lines focus wenn NPAT GWP INFORCE POLICIES GWP breakdown m@ New Zealand74% m New Zealand80% lm New Zealand86% mouse 35.85 @ Pacific Istands26%? ll Pacific Islands 20% @ Pacific Islands 14% mMotor 30.6% mOther 17.7% New Zea
Slide 57: Underlying performance
Underlying performance Tower Group is million H2.15 H115 H214 Gross Written Premium 159.7 1459 158.4 Gross Earned Premium 154.3 150.4 146.0 Reinsurance Costs (26.3) (25.7) (24.5) Net earned premium 128.1 124.7 121.5 Net incurred claims (60.1) (65.5) (62.6) Large events claims" (49) 0.0 (96) Manageme
Slide 58: Underlying performance: General Insurance
Underlying performance General Insurance Gross earned premiums. Reinsurance (23.5) (24.4) (23.5) (21.2) (20.0) Net premiums 1156 112.0 1073 103.8 93.9 Net incurred claims (53.4) (48.7) (52.6) (46.4) (44.9) Large claim events" (48) (6.2) (3.3) (0.2) (ay Management and sales expenses (43.9) (41.3) (41
Slide 59: Balance sheet
Balance sheet Tower Group Cash & call deposits Investment assets Deferred acquisition costs Intangible assets Other operational assets/(liabilities) Total assets Policy liabilities & insurance provisions External debt Other operational (liabilities)/assets Total liabilities Total equity H115 Movemen
Slide 60: General Insurance: New Zealand
General Insurance New Zealand Key financial metrics Gross written premium BAU claims Large event claims’ Underwriting profit Underlying NPAT® Key operating metrics BAU loss ratio Total loss ratio Core policies inforce (O00's) ANZ inforce policies (000's) Total policies inforce (000's) 1277 528 49 46
Slide 61: General Insurance: Pacific
General Insurance Pacific S million Key financial metrics Gross Written Premium BAU claims Large event claims" Underwriting profit Underlying NPAT Key operating metrics BAU loss ratio Total loss ratio Policies outstanding (O00's) 32% 32% 687 28% 28% 68.2 31% 31% 657
Slide 62: Impact of Canterbury claims
Impact of Canterbury claims Feb 11 event Total Canterbury H116 H2 15 H115 H116 H2 15 H115 Balances outstanding Customer Claims 4614 4575 Reinsurance recoveries. (375.4) (374.4) Net claims cost to Tower 86.0 83.2 8223 (719.7) 102.7 792.0 (692.2) 99.8 Intra period movements Movements in claims costs.