Slide 1: Leading light
Leading light Half year results to 31 March 2015 26 May 2015
Slide 2: Chairman's message: leading light in NZ and Pacific general insurance
Michael Stiassny Chairman “Deliver attractive shareholder returns by being the leading light in New Zealand and Pacific general insurance.” 2
Slide 3: Delivering shareholder returns
Delivering shareholder returns General Insurance strategy underpinning attractive returns in New Zealand and Pacific Rim Significant investment in digital and direct platforms to leverage growth opportunities Further progress on Canterbury claims supported by reserve strengthening and extended reins
Slide 4: What we are covering today
David Hancock Chief Executive Officer What we are covering today + Performance highlights + General insurance and operations + Financial performance and risk management + Strategy and outlook 4
Slide 5: Performance highlights
Performance Significant highlights progress on operational strategy General Insurance Underlying profit up strongly Additional provisions for Canterbury supported by premium rate increases, solid earthquake claims to reflect higher costs; Pacific growth and a benign claims environment further signif
Slide 6: Financial highlights
Financial highlights Strong underlying growth General Insurance HY15 HY14 Movement % ++ TOWER Group underlying profit of $17.5m, up 27.2% Gross Written Premium (GWP) ($m) 145.9 139.2 4.9% ++ Canterbury provisions increased Underlying underwriting profit ($m) 19.8 13.5 46.1% $22.6m after tax Underlyi
Slide 7: Performance indicators
Performance indicators Solid GWP growth, lower claims GROSS WRITTEN Gross written premium ($m) NET EARNED Net earned premium ($m) PREMIUM PREMIUM Reinsurance ratio (% of GWP) Underlying expense ratio (%) 160 20 160 17.8% 16.9% 16.2% 15.5% 17.6% 120 16.6% 16 120 ++ GWP and NEP continue to grow 15.5%
Slide 8: A New Zealand and Pacific insurer
A New Zealand and Pacific insurer Platform for growth HY15: HY15: As at 31 March 2015: As at 31 March 2015: $ 145.9m $ 17.9m 487,718 270,515 GWP NPAT Inforce policies Clients 1 2 UNDERLYING New Zealand 80% New Zealand 72% New Zealand 86% New Zealand 85% Pacific Islands 20% Pacific Islands 28% Pacifi
Slide 9: General insurance and operations
David Hancock Chief Executive Officer + Performance highlights + General insurance and operations + Financial performance and risk management + Strategy and outlook 9
Slide 10: Strategic priorities
Strategic priorities Execution on priorities The Vision leading light in New Zealand general insurance ++ Focus for HY15: -- alliances and digital platforms Customer satisfaction -- transforming customer interactions Strategic pillars Staff Net promoter score -- growth in Pacific Rim markets engagem
Slide 11: Alliance distribution channel
Alliance distribution New markets and channel customers ++ Alliance partners bring new business through new marketing channels ++ Strong partnerships with major banks, planner networks and specialist brokers ++ Significant investment in digital capabilities and customer service to support alliance o
Slide 12: Transforming our customer interactions
Transforming our Better customer interactions service; creating efficiencies ++ Reconfiguration of sales and services teams -- aligning people structures to our customers -- creating efficiencies and improved customer experience ++ Digital platform to transform the customer experience -- a world-cla
Slide 13: Transforming our customer interactions: customer satisfaction
Transforming our customer interactions Customer satisfaction ++ Net Promoter Score (NPS) monitors the quality of our service, interactions and customer satisfaction 20 -- NPS can be a volatile measure Trend line -- NPS supports sales and reduces lapse rates ++ Positive trend over 18 months reflects
Slide 14: Leadership in Pacific Rim markets
Leadership in Pacific Rim markets Strong growth ++ A leading insurer in the Pacific with 100 year history – attractive margins and growth ++ Underlying NPAT up 86.9% to $5.1m HY15 GWP by territory ++ Pacific highlights -- GWP growth of 14% (NZ$) Papua New Guinea $10.0m Solomon Islands $1.6m -- stron
Slide 15: Investing for growth in the Pacific Rim
Investing for growth in the Pacific Rim Pacific opportunity ++ Long operating history and strong brands in the region ++ Upgrade underway of core insurance platform across the Pacific ++ New websites launched in Fiji, Papua New Guinea and the Solomon Islands ++ New alliance partnerships implemented
Slide 16: Unlocking brand potential through innovation
Unlocking brand potential through innovation Award winning innovation ++ A trusted New Zealand and Pacific insurer -- Revised brand strategy to be launched shortly -- Text messages sent to customers regarding Cyclone Pam, example of TOWER looking out for its customers ++ Recognised innovator -- Laun
Slide 17: Canterbury progress
Canterbury progress Further progress on claims CLAIMS SETTLED ON TRACK OUTSTANDING ++ The resolution of Canterbury claims remains a key operational priority AND CLOSED TO EXCEED PROPERTIES ++ Dedicated team committed to providing 94% As at 30 April 2015 95% SETTLEMENT AND CLOSURE 914 As at 30 April
Slide 18: Financial performance and risk management
Brett Wilson Chief Financial Officer + Performance highlights + General insurance and operations + Financial performance and risk management + Strategy and outlook 18
Slide 19: Provisions for Canterbury
Provisions for Canterbury Certainty for Canterbury Background Provision increase Earthquake allocation ++ Four separate events make up the ++ Most recent actuarial Canterbury earthquakes review projected that costs Feb 11 event Total Canterbury ++ Reinsurance cover for each event attributed to TOWER
Slide 20: TOWER Group profit summary
TOWER Group Profit summary Strong underlying results $ million HY15 HY14 Movement $ Movement % ++ General insurance underlying profit up strongly General Insurance 17.9 13.1 4.8 36.4% ++ Underlying EPS of 10.0 cps for the Life1 - 3.7 (3.7) (100.0%) half year; starting to reflect the new operating st
Slide 21: Underlying performance General Insurance
Underlying performance General Insurance Net premiums growing $ million HY15 HY14 Movement $ Movement % ++ Reinsurance costs stabilised allowing for net premium growth Gross earned premiums 150.4 139.1 11.3 8.2 ++ No large claim events Reinsurance (25.7) (23.5) (2.2) 9.4 ++ We continue to invest for
Slide 22: Strong balance sheet
Strong Balance sheet Well capitalised $ million HY15 HY14 Movement $m ++ Simplification of corporate structure to realise value for Cash & call deposits 152.3 286.6 (134.3) shareholders and focus on general Investment assets 215.7 809.6 (593.9) insurance Deferred acquisition costs 19.9 18.4 1.5 ++ D
Slide 23: Capital and solvency – General Insurance
Capital and solvency – General Insurance Strong solvency ++ TOWER holds significant capital above solvency minimums required by the Reserve Bank of New Zealand. As part of its risk management programme TOWER has arranged Adverse Development Cover for Canterbury to reduce uncertainty in relation to t
Slide 24: Capital management for shareholder returns
Capital management for shareholder returns Maximise shareholder returns Achievements Moving forward ++ Total Shareholder Return ++ Capital management remains a remained attractive in first half priority and shareholder returns ++ TOWER remains highly solvent a key strategic outcome with capital abov
Slide 25: Strategy and outlook
David Hancock Chief Executive Officer + Performance highlights + General insurance and operations + Financial performance and risk management + Strategy and outlook 25
Slide 26: Strategic scorecard
Strategic scorecard Good progress Staff engagement and efficiency Management of risk and capital Significant investment in Increased reinsurance, dividends up systems and training 30.8% and $34 million capital return Leadership in Pacific Financial performance markets General Insurance Pacific NPAT
Slide 27: Strategic priorities
Strategic priorities Implementing growth plan Strategic theme Forward actions Unlocking brand potential Investment in staff, systems and processes Service and sales culture: NPS 35 by FY15 Product innovation and next phase of brand campaign Extend online presence Alliance growth opportunity Signific
Slide 28: Outlook
Outlook Maximise shareholder returns Industry TOWER ++ Reinsurance cost growth and premium growth ++ Grow New Zealand GWP, focus on easing but industry margins stable customer service and cost control ++ New competition. Increased media spending ++ Pursue further growth in exciting Pacific ++ Improv
Slide 29: Thank you
Thank you Questions
Slide 30: Appendix
Appendix + NZ Performance + General insurance + Balance Sheet detail + TOWER history
Slide 31: New Zealand performance
New Zealand performance HY15 CLOSING INFORCE HY15 CLOSING INFORCE NEW ZEALAND TOTAL TOWER’S SHARE IN GWP BY PRODUCT GWP BY CHANNEL GWP MARKET SHARE 2015 PERSONAL LINES House 10.8% Contents 9.8% Motor 6.3% Home 39% Direct 61% IAG / Lumley 47.2% Motor 26% Finance 35% Vero / AA 24.3% Contents 19% Finte
Slide 32: Underlying performance General Insurance
Underlying performance General Insurance $ million Mar15 Sep14 Mar14 Sep13 Mar13 Sep12 Mar12 Sep11 Mar11 Gross earned premiums 150.4 146.0 139.1 136.4 130.8 125.0 113.9 106.2 102.1 Reinsurance (25.7) (24.5) (23.5) (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) Net premiums 124.7 121.5 115.6 112.0 107.3 1
Slide 33: Adverse Development Cover reduces uncertainty
Adverse Development Cover reduces uncertainty 60 ++ TOWER arranged an Adverse Development Cover (ADC) for Canterbury in respect of February 2011 event Additional cost to TOWER ($m) 40 ++ Cover against continued cost increases witnessed by the industry 30 ++ September provision level of $358 million
Slide 34: Reported profit General Insurance
Reported profit General Insurance $ million Mar15 Sep14 Mar14 Sep13 Mar13 Sep12 Mar12 Gross earned premiums 150.4 146.0 139.1 136.3 130.8 125.0 113.9 Reinsurance (25.7) (24.5) (23.5) (24.4) (23.5) (21.2) (20.0) Catastrophe reinsurance reinstatement - (0.2) - (0.7) - - - Net premiums 124.7 121.3 115.
Slide 35: Group balance sheet
Group balance sheet As at 30 March 2015 General $ millions Corporate Total Group Insurance Cash & call deposits 89.6 62.7 152.3 Total investment assets 215.7 - 215.7 Deferred acquisition costs 19.9 - 19.9 Intangible assets - 42.7 42.7 Other operational assets/(liabilities) 271.5 25.0 296.6 Total ass
Slide 36: New operating model implemented over two years
New operating model Implemented over two years Company transformed November 2012 April 2013 August 2013 August 2014 Renewed General Insurance ++ Sale of TOWER ++ Sale of TOWER ++ Sale of majority of ++ Sale of remaining focus Medical Insurance Managed Funds Life business to Life business to Limited
Slide 37: Disclaimer
Leading light 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. Disclaimer A copy of this webcast of the briefing is available at h