Slide 1: Tower 2022 Full Year Results
Tower 2022 Full Year Results 1 October, 2021 to 30 September, 2022 23 November, 2022
Slide 2: Agenda
Agenda Chairman’s update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer FY22 financial performance Paul Johnston, Chief Financial Officer Looking forward Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman's update
Chairman’s update Positive growth and strong underlying business performance, delivering dividends STRONG & RESILIENT TO CONTINUED WELL CAPITALISED CHALLENGES LONG-TERM GROWTH • 6.5¢ FY22 dividend • Managing • Strong performance on core inflationary pressures business platform • $30.6m capital retur
Slide 4: Business update
Business update Blair Turnbull Chief Executive Officer 4
Slide 5: Our performance
Our performance Solid growth and increased efficiencies underpin strong underlying business performance GWP growth Customer growth BAU claims ratio MER (Gross written premium) (Management expense ratio) 13% | $457m 319,000 48.9% 36.0% vs $404m in FY21 vs 304,000 in FY21 vs 50.2% in FY21 vs 37.0% in
Slide 6: Strong core business performance
Strong core business performance UNDERLYING NPAT • Double digit growth excl. large events UNDERLYING NPAT EXCL. LARGE EVENTS • Effective management of $41m inflation & claims costs • Platform delivering scale vs $30.8m FY21 & efficiencies, reducing MER • Investment income substantially below UNDERLY
Slide 7: Strong growth in customers and premium
Strong growth in customers and premium GWP BY BUSINESS UNIT ($m) GWP GROWTH CUSTOMER GROWTH 13% 319,000 to $457m in FY22 up 5% on FY21 1 TOWER DIRECT COST TO ACQUIRE MULTIPLE PRODUCT DIGITAL QUOTES & SALES HOLDING 12% 50% of NZ customers have Down from 12.6% in two or more policies FY21 (50% in FY21
Slide 8: Growth and improvements across all three businesses
Growth and improvements across all three businesses TOWER DIRECT PARTNERSHIPS PACIFIC • 17% growth to $320m • 38% Trade Me growth to $25m GWP • Pacific migrated to Tower platform • 200k My Tower registrations, up 51% • Advisor network grew 35% to 1,500 • Industry-first online payments • Over 500k lo
Slide 9: Enhanced underwriting accuracy, and expanded product range
Enhanced underwriting accuracy, and expanded product range NEW PRODUCTS LAUNCHED RISK BASED PRICING AUTOMATED HOUSE SUM INSURED 145k 97% NZ house customers of NZ customers Pet Cyclone Renovation Travel transitioned to flood updated via CPI or risk pricing Cordell vs 77% in FY21 EVs UNDERWRITTEN AGIL
Slide 10: Improving claims ratio while managing inflation and weather events
Improving claims ratio while managing inflation and weather events BAU CLAIMS RATIO BAU CLAIMS RATIO NZ WEATHER EVENTS (incl large and other events) 48.9% $18m vs 50.2% in FY21 vs five-year average of $11m NZ CLAIM VOLUMES SUPPLY CHAIN DIGITAL IMPROVING OPTIMISATION CLAIMS EFFICIENCY 77% 48% of NZ m
Slide 11: Improving MER through simplification & platform efficiency
Improving MER through simplification & platform efficiency MANAGEMENT EXPENSE RATIO (% NEP) MER NZ SERVICE TASKS 1 COMPLETED DIGITALLY 36% 50% vs 37% in FY21 vs 46% in FY21 COMMISSION (% GEP) $26m LEGACY LEGACY SYSTEMS BACKBOOK ACQUISITIONS REMAINING COMPLETE $11m 2 2 Commissions saved Down from 4 i
Slide 12: Financial performance
Financial performance Paul Johnston Chief Financial Officer
Slide 13: Group underlying financial performance
Group underlying financial performance • Strong GWP growth of 13% to $457.3m $ million FY22 FY21 Change • Management expense ratio improved 1%, reflecting Gross written premium 457.3 404.1 53.2 scale platform efficiencies Unearned premium (26.6) (9.2) (17.5) Gross earned premium (GE
Slide 14: Business growth drives strong underlying NPAT
Business growth drives strong underlying NPAT MOVEMENT IN NPAT • Underlying NPAT of $27.3m is $6.5m above FY21, reported NPAT • Increase in expenses includes legacy back book purchase $0.4m below FY21 amortisation and increase in staffing levels • Business growth underpinned by 13% GWP growth • CEQ
Slide 15: Steady BAU claims ratio in a challenging environment
Steady BAU claims ratio in a challenging environment 1 2 NZ MOTOR SEVERITY & FREQUENCY • Improving BAU loss ratio despite high inflation period and increasing weather events • Leveraging targeted rating changes and supply chain optimisation to manage economic challenges • Covid reduced the frequency
Slide 16: Continued improvement in management expense ratio
Continued improvement in management expense ratio 1 • Management expense ratio (MER) reduced 1% to MOVEMENT IN MANAGEMENT EXPENSE RATIO 36% • GWP growth contributes a 2.9% reduction in MER • Net commission expenses decreased due to the purchase of legacy back books • Unwind of prior year’s Liability
Slide 17: Investment strategy limits impact of market volatility
Investment strategy limits impact of market volatility 1 • Net investment income was $1.2m vs $0.2m in FY21 CORE INVESTMENT PORTFOLIO RUNNING YIELD • Increasing interest rates resulted in subdued investment income as the portfolio was revalued to market values • Maintaining conservative investment s
Slide 18: Increasing reserves to support Canterbury earthquake claims
Increasing reserves to support Canterbury earthquake claims • FY22 has seen an adverse CEQ charge of $7.5m ($5.5m after tax) in non-underlying items 1 OPEN & NEW CEQ CLAIMS • $5.4m new overcaps (including allowance for future new overcaps) • $4.3m increase in existing open claims • $2.2m reduction f
Slide 19: Robust reinsurance programme provides protection
Robust reinsurance programme provides protection HISTORICAL LARGE EVENTS REINSURANCE PROGRAMME OVERVIEW $16m $13m FY22 large events FY23 reinsurance cover • $21.1m large events incurred in FY22; Tonga volcanic eruption • Catastrophe cover: $934m limit with retention of $11.9m ($6.8m), Cyclone Dovi (
Slide 20: Strong capital & solvency, delivering shareholder returns
Strong capital & solvency, delivering shareholder returns CAPITAL RETURN & AM BEST T O W E R S O L V ETower N C Limited Y - N Z PARENT ($m) Parent Solvency DIVIDENDS FINANCIAL STRENGTH RATING $55.3m A- 7.3 2.3 18.9 15.8 19.7 returned to 31.5 31.4 shareholders from affirmed in 32.9 FY22 April 2022 Su
Slide 21: FY23 guidance
FY23 guidance FY22 Actual FY23 Guidance GWP growth 13% 10% - 15% (excluding Tower PNG) Large events allowance $19m $30m (net of reinsurance) Underlying NPAT (including large events) $27.3m $27-32m 1 Dividend 6.5 cents per share 6.5 cents per share Note 1: Tower’s ordinary dividend policy is to pay a
Slide 22: Looking forward
Looking forward Blair Turnbull Chief Executive Officer
Slide 23: Leveraging scalable platform to continue growth and efficiencies
Leveraging scalable platform to continue growth and efficiencies SERVICE EFFICIENCIES CLAIMS EFFICIENCIES PLANNED FOR FY23 PLANNED FOR FY23 INITIATIVE INVESTMENT 16% 3% reduction in cost to Saving in total claims serve (down to $8) costs MY TOWER CAPABILITY AUTOMATED MARKETING Car replacement journe
Slide 24: Tackling resourcing gap via digital service and unique footprint
Tackling resourcing gap via digital service and unique footprint FY23 NPS PATHWAY Fiji hub My Tower Automate post expansion features added call work RESOURCING HAS DIGITAL INVESTMENT IMPACTED NPS 1 FY22 FY23 20% 30% Career pathway launched Frontline user improvements Straight through claims processi
Slide 25: Protecting the future for our customers & communities
Protecting the future for our customers & communities OUR ENVIRONMENT, SOCIAL AND GOVERNANCE STRATEGY PROPERTY RISK RATINGS SUPPORTING COMMUNITIES THROUGH CLIMATE CHANGE Coastal erosion Parametric & inundation cyclone cover Planned for FY23 Pilot launched in Fiji SUSTAINABLE PRODUCT 2025 EMISSIONS D
Slide 26: Continuing to deliver dividends and growth
CONTINUING TO ✓ Strong underlying operating performance DELIVER ✓ Positive customer outcomes and growth DIVIDENDS AND ✓ Mitigating inflation headwinds and GROWTH implementing process enhancements ✓ Driving efficiencies through scalable platform and focus on expenses ✓ Delivering positive shareholder
Slide 27: Questions?
2 | Questions?
Slide 28: 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: • “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 othe
Slide 29: Canterbury earthquake reserving and open claims
Canterbury earthquake reserving and open claims CEQ RESERVING OPEN CEQ CLAIMS Note 1: IBNR = Incurred but not reported; IBNER = Incurred but not enough reported. 29
Slide 30: 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