Slide 1: 2021 full year results
2021 full year results 1 October 2020 to 30 September 2021 24 NOVEMBER 2021
Slide 2: Agenda
Agenda Chairman’s update 1 Michael Stiassny, Chairman Business update 2 Blair Turnbull, Chief Executive Officer FY21 financial performance 3 Jeff Wright, Chief Financial Officer Looking forward 4 Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman's update – Dividends & premium growth in a challenging market
Chairman’s update – Dividends & premium growth in a challenging market TACKLING THE CHALLENGES STRONG AND WELL CAPITALISED POSITIONED FOR LONG-TERM GROWTH • Addressing profit challenges first • 2.5¢ dividend bringing full year to • Flagship Tower Direct digital business signalled at the half year 5¢
Slide 4: Good growth in a challenging environment
Good growth in a challenging environment 4
Slide 5: A journey of continued focus & innovation
A journey of continued focus & innovation 2021+ LONG TERM EARNINGS, DIVIDENDS & PREMIUM GROWTH Scaling leading platform - Pacific digitisation rollout, migrating ANZ and Youi books 2020-2021 Expanding quality product suite STRENGTHENING THE Innovating the customer experience BUSINESS Building leadin
Slide 6: Results achieved while navigating a challenging environment
Results achieved while navigating a challenging environment REPORTED PROFIT ($m) REPORTED PROFIT UNDERLYING NPAT incl. large events incl. large events $19.3m $20.8m vs $11.2m prior year vs $28.4m prior year U N D E R LY I N G N P AT E X C L . L A R G E E V E N T S ( $ m ) COMBINED OPERATING TOWER GR
Slide 7: Impact of external factors
Impact of external factors NET INVESTMENT LARGE EVENTS INCOME (pre-tax) (pre-tax) M O V E M E N T I N U N D E R LY I N G N P AT ( $ m ) $0.2m $13.9m vs $5.3m prior year vs $9.7m prior year LARGE HOUSE CLAIMS CLAIMS INFLATION (pre-tax) 92 $7.1m vs 57 prior year Increase in claims expense 7
Slide 8: Good growth in customers and premium
Good growth in customers and premium GWP BY BUSINESS UNIT ($m) NZ GWP GROWTH CUSTOMERS 7.9% 304,000 To $350m GWP Up 5% on prior year NET PROMOTER SCORE MYTOWER REGISTRATIONS NZ PERSONAL LINES MARKET SHARE 43% 132,000 vs 27% prior year vs 45k prior year 8 Note 1: There has been a minor customer defin
Slide 9: Product, pricing and underwriting enhanced through data
Product, pricing and underwriting enhanced through data NZ PRODUCT MIX GWP ($m) NZ BAU LOSS RATIO NZ UNDERWRITING IMPROVEMENTS Full house fire 53.6% replacement cap Flood risk-based Up 4% on prior year pricing NZ CUSTOMERS WITH MULTIPLE PRODUCT NZ NEW BUSINESS RISKS – MULTIPLE PRODUCTS HOLDER TENURE
Slide 10: Investing in digital platform for efficiency and scalability
Investing in digital platform for efficiency and scalability N Z S E RV I C E TA S K S C O M P L E T E D D I G I TA L LY NZ SERVICE TASKS NZ CLAIMS LODGED COMPLETED DIGITALLY DIGITALLY 51% 31% vs 40% prior year vs 23% prior year TECHNOLOGY SYSTEM RELEASES TOTAL CUSTOMERS CORE ADMIN LEGACY MIGRATED T
Slide 11: MER improving while continuing to invest
MER improving while continuing to invest M A N A G E M E N T E X P E N S E R AT I O ( % N E P ) TOWER MANAGEMENT ACQUISITION COST EXPENSE RATIO 37% 12.6% 2% better than prior vs 13% in prior year year NET COMMISSION DIGITAL AND DATA EXPENSE REDUCED CO M M I S S I O N E X P E N S E R AT I O ( % G E P
Slide 12: 2.5¢ dividend bringing full year to 5¢ per share
Strong capital & solvency, delivering shareholder returns TOWER PARENT SOLVENCY FULL YEAR DIVIDEND PAYMENT 271% $21m 2.5¢ dividend Before return of capital $10.5m to be paid 2 Feb 2022 bringing full year to ORDINARY PROPOSED CAPITAL RETURN 5¢ per share DIVIDEND POLICY OF 60-80% $30.4m Of cash earnin
Slide 13: FY21 financial performance
FY21 financial performance 13
Slide 14: Group underlying financial performance
Group underlying financial performance • Solid FY21 GWP of $404.1m. GWP growth $18.9m on FY20 (+5%) $ million FY21 FY20 Change • BAU claims expense impacted by higher volume of large house Gross written premium 404.1 385.1 18.9 claims and emerging claims inflation Unearned premium (9.2) (4.6) (4.5)
Slide 15: Claims challenges for insurers
Claims challenges for insurers Tower’s FY21 result reflects the claims challenges that insurers can face The volatility of large events in New Zealand and the Pacific is high. Large events The reinsurance programme is Tower's main tool in managing this. External factors Large fire-related house clai
Slide 16: Claims inflation in New Zealand impacted us heavily
Claims inflation in New Zealand impacted us heavily S E C O N D H A N D V E H I C L E C P I YOY % • Claims inflation was anticipated due to Covid-19, but when it emerged it was more sudden and extreme than expected • Covid-19 lockdowns and supply chain delays mean there are more open claims than nor
Slide 17: Sharp focus on claims management
Sharp focus on claims management N Z M OTO R F R E Q U E N CY & S E V E R I T Y • Both BAU and large events ratios were the highest since 2018 • Inflation has been a significant driver of this with average motor claims up 6% and average house claims up 7% • Rate increases have been applied to all po
Slide 18: Large house claims and large events
Large house claims and large events NZ LARGE HOUSE CLAIMS ($m)× LARGE EVENTS CLAIMS ($m)² (BASED ON EVENT DATE) • Both NZ large house claims and large events were at their highest for many years in FY21 • With most large house claims being fire related, Tower has removed the uncapped replacement ben
Slide 19: Continued focus on management expenses
Continued focus on management expenses • Management expenses reduced $3.9m to $123.3m in FY21 MOVEMENT IN MANAGEMENT EXPENSES ($m) • MER improved 2.3% on FY20, down to 37% • Amortisation expense increased largely due to ANZ & EIS amortisation • Liability adequacy test (LAT) resulted in an additional
Slide 20: Macroeconomic factors impact investment income
Macroeconomic factors impact investment income A S S E T A L LO C AT I O N PORTFOLIO BENCHMARK YIELD • Tower maintains a conservative investment policy, with the focus on high credit quality and liquidity, and an investment duration of six to twelve months • Net investment income $0.2m vs $5.3m in F
Slide 21: Canterbury earthquake claims continue to reduce
Canterbury earthquake claims continue to reduce OPEN CEQ CLAIMS • Continued reduction in open claims with 56 claims closed in FY21 • 30 new EQC overcaps and reopenings in line with expectations with the flow reducing through FY21 • Gross outstanding claims down to $22.6m • Several complex open claim
Slide 22: Robust reinsurance programme supports resilience
Robust reinsurance programme supports resilience FY22 reinsurance renewal REINSURANCE PROGRAMME OVERVIEW • Increase of catastrophe cover from $812m to $873m, with increase of retention to $11.25m (from $10m) • Aggregate cover placed with an excess of $20m (up from $14m) and event range of $2m to $10
Slide 23: Strong capital and solvency position
Strong capital and solvency position • Tower's solvency margin above minimum solvency capital T O W E R S O LV E N C Y - N Z PA R E N T ( $ m ) (MSC) at the end of FY20 was $98.1m, boosted by the settlement of the EQC Receivable. This has increased to $113.2m at the end of FY21 • Before returning ca
Slide 24: Dividend and proposed capital return
Dividend and proposed capital return Dividend Proposed capital return by way of compulsory share buyback* Amount 2.5 cents per share Amount 1 share for every 10 Record date 19 January 2022 Price per share $0.72 Payment date 2 February 2022 Notice of meeting 20 December 2021 Meeting (shareholder vote
Slide 25: Expecting increased return to shareholders in FY22
Expecting increased return to shareholders in FY22 FY21 Actual FY22 Guidance Underlying NPAT $30.8m $35.4m to $39.4m excluding large events Large events after tax (before tax) $10m ($13.9m) $14.4m ($20m) Underlying NPAT $20.8m $21m to $25m Dividend 5 cents per share 5 cents per share* * At current n
Slide 26: Our plan for long term growth & improvement
Our plan for long term growth & improvement
Slide 27: Clear strategy leverages our technology, customer and partnership advantages
Clear strategy leverages our technology, customer and partnership advantages GROW AND INNOVATE BUILD FINANCIAL STRENGTH & CAPABILITY Relentless focus Leverage digital & Partner wherever Embracing agile Maintain a strong on customer data everywhere possible culture & talent capital & solvency relatio
Slide 28: Building deeper, more engaged customer relationships
Building deeper, more engaged customer relationships TOWER DIRECT QUOTES (‘000s) INCREASE IN QUOTES TOWER QUICK QUOTE 31% 24% vs FY20 for Tower Conversion rate up Direct from 18% prior to implementation N Z AV G GW P P E R C U S TO M E R DIGITAL SALES QUOTE TO BUY NET PROMOTER SCORE 59% 57% Of Tower
Slide 29: Progressive product, pricing and underwriting
Progressive product, pricing and underwriting NEW & ENHANCED NEW & ENHANCED PRODUCTS DELIVERED PRODUCTS PLANNED Boat, EV, Travel, Pacific motor, home Pet, Renovation, & contents, Rural & SME Sustainability benefit GO CARMA CUSTOMERS OP EN AND TRANSP ARENT HAVE DRIVEN PRICING Premium 10.5 million kms
Slide 30: Simplifying and digitising the Pacific
Simplifying and digitising the Pacific PAPUA NEW SAMOA & STREAMLINING NZ & 1 ST O N L I N E GUINEA AMERICAN SAMOA PACIFIC OPERATIONS INSURANCE OFFERING IN THE PACIFIC VANUATU COOK ISLANDS FIJI NPI Fiji, Vanuatu SOLOMON ISLANDS 100% shareholding EIS live Fiji Dec '20, TONGA from Dec ‘21 Vanuatu Dec '
Slide 31: Partnering for new capabilities & winning experiences
Partnering for new capabilities & winning experiences PRODUCT CONTINUOUSLY PARTNERING USING DATA 1.7 billion data Allianz points Pet & travel From over 25 GWP FROM PARTNERS EXCL. ANZ× ($m) external partners TECHNOLOGY GWP FROM PARTNERS PARTNERING Microsoft, EIS, Friss, Amodo, 10% Ushur Increase on F
Slide 32: Supporting our people and communities
Supporting our people and communities REDUCTION IN ANNUAL SUPPORTING OUR CARBON EMISSIONS COMMUNITIES Bachelor of 31% Climate Change Rainbow tick re-accreditation From 551 tCO2e in FY20 to Partnerships, Scholarships & 378 tCO2e in FY21 Internships EMPLOYEE ENGAGEMENT CULTURAL DIVERSITY • Beginning o
Slide 33: Well positioned to deliver dividends and growth
Well positioned to deliver dividends and growth • FY21 was a challenging year with actions taken to deliver improvements in FY22 • Well capitalised with strong balance sheet and solvency margins • Delivered customer and premium growth while improving management expenses • 5 cents full year dividend
Slide 34: Questions?
Questions?
Slide 35: Reconciliation between underlying profit after tax and reported profit after tax
Reconciliation between underlying profit after tax and reported profit after tax Underlying and reported profit: FY21 Non- Claims FY21 • “Underlying profit” does not have a standardised meaning Other $ million underlying underlying handling reported under Generally Accepted Accounting Practice items
Slide 36: 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