Slide 1: Leading light: Half year results to 31 March 2014
For personal use only Leading light Half year results to 31 March 2014 27 May 2014
Slide 2: Disclaimer
Leading light For personal use only 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 ava
Slide 3: Chairman's vision statement
For personal use only “Deliver attractive shareholder returns Michael Stiassny by growing a general insurance business that Chairman is a leading light in New Zealand and the Pacific” 3
Slide 4: Progress on strategy
Progress on strategy For personal use only New operating model implemented General insurance first half net profit after tax up strongly First half dividend 6.5 cents, up 30% Capital returned via buy back and bonds repaid TOWER has further surplus capital to support shareholder returns and growth 4
Slide 5: CEO David Hancock
For personal use only 5 CEO David Hancock
Slide 6: What we are covering today
What we are covering today For personal use only + Performance highlights + General insurance and operations + Capital and risk management + Strategy and outlook 6
Slide 7: Performance highlights: solid result despite weather events
solid Performance result despite weather highlights events For personal use only General Insurance profit up strongly, supported by rate Investment in brand, product and service to support increases due to rising reinsurance costs growth in direct and alliance channels Improved customer satisfaction
Slide 8: Financial highlights: delivering financial performance
delivering Financial financial performance highlights For personal use only change on HY14 HY13 pcp General insurance • Combined ratio improved Reported • Underlying General Insurance NPAT up 122% Gross written premium ($m) 139.2 132.5 5% • Adverse weather impacting General insurance NPAT ($m) 11.8
Slide 9: Performance indicators and margins improving
revenue Performance indicators and margins improving For personal use only GROSS WRITTEN Gross written premium ($m) NET EARNED Net earned premium ($m) PREMIUM PREMIUM Underlying combined ratio (%) Underlying expense ratio (%) 160 160 120 120 90.3% 91.0% 88.3% 87.6 80 85.9% 80 82.6% 83.4% 39.1% 41.3%
Slide 10: A solid base: New Zealand and Pacific insurer
A New Zealand solid base and Pacific insurer For personal use only HY14: HY14: As at 31 March 2014: As at 31 March 2014: $139.2m $13.1m 496,167 264,565 GWP (6 MONTHS) UNDERLYING NPAT 1 Inforce policies Clients 2 New Zealand 82% New Zealand 79% New Zealand 87% New Zealand 86% Pacific Islands 18% Paci
Slide 11: Execution on priorities: TOWER roadmap
Priorities execution on priorities For personal use only TOWER roadmap The Vision leading light in New Zealand general insurance Customer satisfaction Strategic pillars Staff Net promoter score engagement AonHewitt survey Financial performance Capital Value-added efficiencies services Key enablers D
Slide 12: Customer retention and growth
Customer retention focus customer and growth For personal use only NET PROMOTER SCORE (NPS) 30 25 • Net promoter score (NPS) is a 24 benchmark for customer loyalty 17 20 19 • Promoters will 15 12 - hold more policies with us - hold higher value policies 10 - stay with us longer • NPS improved from 6
Slide 13: Customer focus – brand to unlock brand potential
customer focus Customer focus – brand to unlock brand potential For personal use only Powerful brand and product initiatives • Refreshing our brand with multi-channel lighthouse campaign, building on TOWER’s legacy of more than 140 years of looking out for Kiwis • Response has been strong with impro
Slide 14: Leadership in Pacific markets
Leadership in Growth opportunity Pacific markets For personal use only HY14 GWP BREAKDOWN HY14 GWP BREAKDOWN HY14 GWP BREAKDOWN BY DISTRIBUTION BY CHANNEL BY PRODUCT • Pacific NPAT $2.7m • Long-term businesses: more than 100 years history in some markets • Multi-country alliances with high quality b
Slide 15: Management of risk and capital
For personal use only Management of risk and capital Michael Boggs CFO 15
Slide 16: TOWER Group refocused business profit summary
TOWER Group refocused business Profit summary For personal use only Half year ended $ millions Mar 2014 Mar 2013 Sep 2013 • Health, Investment and majority of General Insurance 13.1 5.9 13.1 Life business sold in prior financial year Life1 3.7 9.0 3.0 Health - 0.9 - • Corporate expenses reduced, wit
Slide 17: TOWER Life (N.Z.): focus on shareholder value
focus on TOWER Life (N.Z.) shareholder value Retained life business For personal use only NPAT of $3.7m, well above full year plan expectations of $2.8m due to one-off earning improvements Stable business with a focus on customer service (NPS introduced) and productivity Closed book in run off with
Slide 18: Balance sheet summary: well capitalised business
Balance sheet summary well capitalised For personal use only business Balance as at $ millions Mar 2014 Mar 2013 Sep 2013 Cash & call deposits 286.6 255.2 350.0 • Drivers of equity change to pcp: - Capital repayments of $171.8m Total investment assets 809.6 936.4 821.3 - Dividend payments of $22.8m
Slide 19: Adverse weather impacts underlying results
underlying Adverse weather results strong impacts For personal use only NZ LARGE CLAIM EVENTS1 (EXCLUDING EARTHQUAKES) ($m) 10 • Weather events have a significant impact • The last two years has seen a spike in 8 claims for the industry Apr-14 • Continuous improvement in underwriting 6 • Pricing for
Slide 20: Canterbury rebuild on track for end of 2015
on Capital and customer focus – track Canterbury rebuild for end of For personal use only 2015 TOWER continues to lead the industry in settling earthquake claims with 81%1 by number and 71% by value of all claims now settled and closed. TOWER’s construction programme for rebuilds and repairs continu
Slide 21: Capital protection – easing reinsurance costs
costs Capital protection – easing reinsurance For personal use only REINSURANCE EXPENSE1 REINSURANCE CATASTROPHE COVER • Reinsurance expense easing $m % $m $m 30 20 700 21 following large increases 17.8% 16.9% 585 as a result of Canterbury 16.2% 25 600 525 18 earthquakes 16.6% 16 500 15.5% • Current
Slide 22: Capital management a priority
capital Capital management management a priority For personal use only Achievements to date Moving forward ––– ––– • Buy back offers completed with $171.8m • Ongoing capital management returned to investors recently remains a priority - April 2013 $119.2m • Options with regard to small parcel - Janu
Slide 23: Capital and solvency: long term solvency surplus
long Capital and solvency term solvency surplus General Insurance For personal use only TOWER has a long term policy of retaining within its licensed General Insurance entity 175% of the minimum solvency capital (MSC) required under the Insurance (Prudential Supervision) Act 2010. Given the miniumum
Slide 24: Strategy and outlook
For personal use only Strategy and outlook 24
Slide 25: The path to improving shareholder returns
TOWER improved returns leading light For personal use only The path to improving shareholder returns Management of Staff engagement risk and capital and efficiency The Vision leading light in New Zealand general insurance Customer satisfaction Staff Leadership in Financial Net promoter score Strateg
Slide 26: Strategic initiatives driving shareholder returns
driving Strategic initiatives shareholder returns For personal use only ▪▪ Continue to drive staff engagement ▪▪ Building a customer focused culture and efficiency and delivering on claims and risk management ▪▪ Utilisation of technology to lower costs and support service and better ▪▪ Grow share of
Slide 27: Outlook: further progress on strategy
Outlook further progress on For personal use only strategy Industry TOWER ––– ––– ▪▪ Reinsurance costs and premiums ▪▪ Revenue growth and cost easing post Canterbury containment focus continues in second half ▪▪ Increasing cost of compliance and regulation ▪▪ New product development ▪▪ Technology sh
Slide 28: Questions
Deliver attractive shareholder returns by growing a general For personal use only insurance business that is a leading light in New Zealand and the Pacific Questions 28
Slide 29: Appendices
For personal use only 29 Appendices
Slide 30: General Insurance New Zealand overview
General Insurance New Zealand overview For personal use only HY14 GWP INFORCE HY14 GWP INFORCE HY14 NEW BUSINESS GWP POLICIES BREAKDOWN POLICIES BREAKDOWN BY DISTRIBUTION CHANNEL BY PRODUCT BY DISTRIBUTION CHANNEL Home 40% Direct 59% TOWER and FinTel phone sales 64% Motor 23% Fintel 6% Online 2% Con
Slide 31: General Insurance underlying performance
Underlying performance General Insurance For personal use only $ millions Mar-14 Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Gross earned premiums 139.1 136.4 130.8 125.0 113.9 106.2 102.1 Reinsurance (23.5) (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) Net premiums 115.6 112.0 107.3 103.8 93.9 92.9 91.9
Slide 32: General Insurance reported profit
Reported profit General Insurance For personal use only $ millions Mar-14 Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Gross earned premiums 139.1 136.3 130.8 125.0 113.9 106.2 102.1 Reinsurance (23.5) (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) Catastrophe reinsurance reinstatement - (0.7) - - - (14.9)
Slide 33: Balance sheet as at March 2014
Balance sheet For personal use only As at March 2014 $ millions GI TLNZ Corp Total Group Cash and call deposits 159.0 8.7 118.9 286.6 Total investment assets 133.4 676.2 - 809.6 Deferred acquisition costs 18.4 - - 18.4 Intangible assets - - 32.3 32.3 Other operational assets/(liabilities) 322.9 43.0
Slide 34: Abnormal items
Abnormal items For personal use only $ millions (net of tax) Half year ended March 2014 Net sale related gains 1 0.6 Australian revaluation and foreign exchange loss2,3 (1.2) Impact of Canterbury earthquakes 2 (0.1) Net impact of one off items (0.7) 1. Adjustments to gains on sale for Health, Life a