Slide 1: Tower 2020 full year results
j TOWER Tower 2020 full year results 25 November 2020
Slide 2: Agenda
Agenda Chairman's update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer FY20 financial performance Jeff Wright, Chief Financial Officer Looking forward - Q&A Blair Turnbull, Chief Executive Officer Grower
Slide 3: Chairman's update
Chairman's update Continued growth and momentum New CEO, Blair Turnbull, joined Tower in August 2020 Underlying profit increased on prior year Results at top end of guidance, supported by solid growth Accelerated push into digital and data Leading through COVID-19 Dedicated team and support programm
Slide 4: Business update
Business update Blair Turnbull, Chief Executive Officer
Slide 5: A journey of continued focus and streamlining
A journey of continued focus and streamlining 2010-2014 STREAMLINED 2015-2019 TRANSFORMATION AND RE-PLATFORM Product rationalisation Christchurch recovery 2020 + GROWTH AND INNOVATION Relentless focus on the customer Customer and profit growth Focused businesses Leading digital and data capability I
Slide 6: Delivering consistent growth in profitability
Delivering consistent growth in profitability UNDERLYING NPAT excl, large events $34.7m + 23% on prior year COMBINED RATIO 88.5% In line with prior year UNDERLYING NPAT incl. large events $28.4m + 3% on prior year REPORTED PROFIT $12.3m Impacted by EQC receivable Underlying NPAT $347m $28.3m FY19 FY
Slide 7: $450 $400 $350 $300 $250 $200 $150 $100 $50 $-
$450 $400 $350 $300 $250 $200 $150 $100 $50 $-
Slide 8: Disciplined claims management improved through digitisation
Disciplined claims management improved through digitisation CLAIMS RATIO EXCL CLAIMS LODGED ONLINE IN LARGE EVENTS SEPTEMBER 2020 Claims ratio excl. large events 52% ° ° (ce) (0) 48% 46% 2% better than prior year 27% in September 2019 AVG. MOTOR CLAIM SIMPLE HOUSE CLAIMS COST 1,600 20% s ] (eo) FY18
Slide 9: $11 $15 $19 $139 $120 $107 $194 $205 $182 $28 $28 $30
$11 $15 $19 $139 $120 $107 $194 $205 $182 $28 $28 $30
Slide 10: MER improving while continuing to invest and simplify
MER improving while continuing to invest and simplify FY20 Management Expense Ratios TOWER MANAGEMENT MANAGEMENT EXPENSE EXPENSE RATIO RATIO 7 51% . 30% 397% 34% - ° : a 1% better than prior year In Tower Direct Direct Partnerships Pacific Tower Group ACQUISITION COSTS TOWER PEOPLE Tower people 634
Slide 11: Investing in digital platform for efficiency and scalability
1 Investing in digital platform for efficiency and scalability TECHNOLOGY RELEASES IN FY20 117 2.4 x more than prior year WORKLOADS MOVED TO THE CLOUD 70% Since January 2019 CUSTOMERS MIGRATED TO EIS 90% Tower Direct CORE ADMIN LEGACY SYSTEMS DECOMISSIONED 4 6 remaining, 4 to be decommissioned in FY
Slide 12: Strong capital and solvency position
Strong capital and solvency position TOWER LIMITED SOLVENCY MARGIN (PARENT) 287%" $48m‘ capital above regulatory minimums EQC RECEIVABLE SETTLED $42.1m After disbursement to reinsurers lz “Excludes EQC receivable FINANCIAL STRENGTH RATING RECONFIRMED A- Following amalgamation CHRISTCHURCH EQ CLAIMS
Slide 13: Managing through Covid-19, demonstrated resilience
13 Managing through Covid-19, demonstrated resilience REFUNDING CUSTOMERS $7.2M STAFF ON SAME DESKTOP SYSTEMS 100% REMOTE WORKING CAPABILITY 100% Staff able to work from home KEY OPERATIONS CENTRES 3 Auckland, Rotorua, Suva SUPPORTING OUR PEOPLE + Agile working environment with digital collaboration
Slide 14: FY20 financial performance
FY20 financial performance Jeff Wright, Chief Financial Officer
Slide 15: Group underlying financial performance
15 Group underlying financial performance Reported NPAT of $12.3m, impacted by EQC settlement write off Underlying NPAT before large events of $34.7m is an increase of 23% on FY19 Improvement in key metrics of claims ratio excluding large events and expense ratio + Combined Ratio further improves to
Slide 16: Movement in underlying profit
16 Movement in underlying profit Net earned premium (NEP) higher due to Movement in underlying profit (NZSm) Youi acquisition, and growth in Tower Direct and Tower Partnerships GWP. ae te ms _ Large event claims well above prior year as a result of weather events in NZ and Pacific While net claims e
Slide 17: $800m reinsurance programme increases resilience
7 $800m reinsurance programme increases resilience Tropical Cyclone Harold and the Timaru Hailstorm resulted in FY20 large event claims increasing $8.4m on the prior year to $9.7m Provision for Lake Ohau fires of $6m in FY21 Preliminary estimates for Napier floods to result in $3-$4m impact on FY21
Slide 18: Continued focus on improving claims ratio
18 Continued focus on improving claims ratio Change in claims ratio vs. prior year FY19 claims ratio, Change in product Increase Motor Lower House Pacific BAU Other FY20 claims ratio, Largeevents — FY20 claims ratio, excluding large mix vs FY19 excluding large including large events events events In
Slide 19: Continued discipline on management expenses
19 Continued discipline on management expenses FY20 Management Expense Ratio improved 1% on the Movement in management expenses (NZ$m) prior year, down to 39% FY20 management expenses of $126.6m include the cost of running EIS in addition to existing systems = 1 16 Tower Direct now almost fully on t
Slide 20: Over 15,000 Christchurch EQ claims now settled
20 Over 15,000 Christchurch EQ claims now settled The pace of new overcaps and reopened claims slowed during the second half of 2020 Finalisation of claims also slowed during the second half of 2020, impacted in part by COVID-19 restrictions Settlement of EQC receivable Tower to receive $42.1m after
Slide 21: Solid solvency position and simplified structure
al Solid solvency position and simplified structure At 30 September 2020, Tower Limited New Zealand had $98m of solvency margin, $48m above the RBNZ licence condition Actual solvency capital of $150.4m is equivalent to 287% of minimum solvency capital Tower's financial strength was reconfirmed at A-
Slide 22: Looking forward
Looking forward Blair Turnbull, Chief Executive Officer
Slide 23: A good result and an exciting future
23 A good result and an exciting future Tower's results this year are good and at the top end of expectations. We've achieved this despite some unprecedented headwinds and challenges. As we start to move into a new era of Tower though, the business will look and behave differently. To be clear, we d
Slide 24: Our Southern Star
24 OUR SOUTHERN STAR To deliver beautifully simple and rewarding experiences (that our customers rave about - every time) [ TOWER
Slide 25: Clear and focused strategic priorities
Clear and focused strategic priorities BUILD FINANCIAL STRENGTH GROW AND INNOVATE AND CAPABILITY Hi ‘On wal “2 ee AG (oy) il Relentless focus Leverage digital and Partner wherever Embracing agile Maintain a strong on customer data everywhere possible and talent capital and solvency structure relatio
Slide 26: Three focused businesses: Direct, Partnership & Pacific
26 Three focused businesses: Direct, Partnership & Pacific TOWER DIRECT PARTNERSHIPS PACIFIC + 180k customers + 85k customers + 35k customers + $216m GWP - $110m GWP - $59m GWP + 88% COR : % + 91% COR + 51% MER CLOUD-BASED DIGITAL AND DATA PLATFORM TOWER GROUP 300k customers $385m GWP 88.5% COR 39%
Slide 27: Growing our leading Tower Direct business
27 Growing our leading Tower Direct business + Growing our Direct business where we have leading digital, data and innovative propositions - 58% of new business online, service transactions conducted online 30% of the time - Digital platform supports lower MER at 34%, which will further improve as w
Slide 28: Investing in Partnerships and the Pacific
28 Investing in Partnerships and the Pacific Tower Partnerships well positioned for growth + New platform enables fast and scalable partnership support + TSB & Trade Me customer migration to new cloud EIS platform well underway - $110m GWP, up 3% on prior year + Strong retention at 84% Transforming
Slide 29: Investing in technology, innovation and a sustainable environment
Investing in technology, innovation and a sustainable environment INNOVATIVE PROPOSITIONS + Expanding product range with Marine and Pet to deepen customer relationships - Developing risk-adjusted personalised pricing to include flooding My policies Gy 2014 Lexus RX450h DIGITAL AND DATA PLATFORM car
Slide 30: FY21 guidance
30 FY21 guidance FY21 Guidance FY20 Actual Based on FY20 large events ($9.7m) Underlying NPAT $28.4m Exceeding 5% on FY20 + Two key areas we are focusing on to achieve this guidance are GWP growth of 5% or more, and continued improvement in our management expense ratio Grower
Slide 31: Summary - a good result and an exciting future
31 Summary - a good result and an exciting future QBRQQRke Sound strategy and demonstrated resilience in overcoming challenges of COVID-19 Well capitalised with strong balance sheet and solvency margins Focus remains on accelerating growth and innovation through a relentless focus on customers Conti
Slide 32: Questions
Questions & TOWER
Slide 33: Appendix
Appendix
Slide 34: Underlying and reported profit
Underlying and reported profit: • “Underlying profit” does not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently it may not be comparable to similar measures presented by other reporting entities and is not subject to audit or independent review. • Tower u
Slide 35: Disclaimer
35 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.t