Slide 1: Leading light: Full year results to 30 September 2014
Leading light Full year results to 30 September 2014 27 November 2014 1
Slide 2: Disclaimer
Leading light Disclaimer This presentation has been prepared by TOWER Limited to provide shareholders with information Neither TOWER nor any of its advisers or any of their on TOWER’s business. This document is part of, and should be read in conjunction with an oral respective affiliates, related bo
Slide 3: Michael Stiassny, Chairman
Michael Stiassny Chairman “Deliver attractive shareholder returns by being the leading light in New Zealand and Pacific general insurance.” 3
Slide 4: Delivering shareholder returns
Delivering shareholder returns Underlying General Insurance full year net profit after tax up strongly Further progress on Canterbury claims and RBNZ annual review allows for $30 million solvency release Sale of TOWER Life (N.Z.) Limited completed, releasing capital Additional reinsurance programme
Slide 5: David Hancock, CEO: What we are covering today
David Hancock CEO What we are covering today + Performance and financial highlights + Strategy update + Group and general insurance performance + Management of risk and capital + Outlook 5
Slide 6: Performance highlights
Performance Solid result and lead highlights indicators up 6
Slide 7: Financial highlights
Financial delivering financial highlights performance • Premium growth from rate increases driven by industry reinsurance costs • General Insurance underwriting profit was impacted by increase in large claim events (2014: $14.4m, 2013: $9.6m). New reinsurance cover now in place to reduce earnings vo
Slide 8: Performance indicators
revenue Performance indicators improving • GWP and NEP growing strongly • Reinsurance cost pressures moderating • Despite adverse weather, claims ratio maintained at 50.8% for full year, an excellent result • Underlying combined ratio and claims impacted by weather events 8
Slide 9: A New Zealand and Pacific insurer
A New Zealand Platform for growth and Pacific insurer 9 1. Excludes impact of the Canterbury earthquakes and the discontinuation of the Australian business. 2. One customer can be comprised of multiple clients 3. Movement since September 2013
Slide 10: Strategic Priorities
execution on Strategic Priorities priorities 10
Slide 11: Customer retention and growth
Customer retention customer and growth focus • Customer focus – service, value, retention • Net promoter score (NPS) is a benchmark for customer loyalty • "Promoters" will generally: – hold more policies with us – hold higher value policies – stay with us longer • Significant improvement in last 12
Slide 12: Customer focus to unlock brand potential
Customer focus to brand awareness unlock brand potential • Campaign to position TOWER as trusted New Zealand based insurance. • Also positioning as leader in customer benefit innovation: – launch of SmartDriver in April 2014 – launch of “Full replacement for fire” house insurance in Oct 2014 – winne
Slide 13: Staff engagement and efficiency
Staff engagement Customer focused and efficiency staff culture Staff engagement metric – the AON Hewitt Survey Engaged staff build a high performance culture • Increasing 22.4% from and employee efficiency 49 to 60 in FY14 • Working hard to reach our next milestone of 65 Focus on • Significant Custo
Slide 14: Leadership in Pacific markets
Leadership in Strong growth Pacific markets • Pacific markets offer attractive margins and growth opportunities • GWP 18.1% and underlying NPAT 32.6% of General Insurance • GWP increased across the region in local currency, decreased 1.3% in NZ$ to $53.9m • Policy growth of 6.6% highlights attractiv
Slide 15: Industry consolidation opportunity
Industry consolidation Alliance opportunity opportunities progressing Recent merger and industry consolidation highlights the value of our general insurance business • Competitor distraction – The merging of businesses can be a complex and difficult process that can distract competitors, creating op
Slide 16: Michael Boggs, CFO
Michael Boggs CFO + Financial Performance + Management of risk and capital 16
Slide 17: TOWER Group Profit summary
TOWER Group A compelling path for Profit summary general insurance • General insurance underlying profit up strongly • FY14 remains a transition year - transformation of TOWER to a pure general insurance company • Reduction in financing costs and corporate expenses 17 1. Life includes profits from s
Slide 18: Underlying performance General Insurance
Underlying performance Strong underlying General Insurance results • Reinsurance costs stabilised allowing for net premium growth • Higher claims expenses due to a increase in large claim events • Group overheads allocated to General Insurance rather than historical business units • We continue to i
Slide 19: Weather events impact on claims
Weather events Increased protection impact on claims going forward • Total claims expense increased 8.6% to $120.5 million in 2014, impacted by severe weather conditions • Large claims of $14.4 million in 2014, $9.6 million in 2013 • The Insurance Council of New Zealand noted that “2014 is heading t
Slide 20: Strong Balance sheet
Debt Strong Balance sheet free • Significant movements represent sale of TOWER Life (N.Z.) Limited during the year • Simplification of corporate structure to realise value for shareholders and focus on general insurance • Debt free with strong cash balances • Provides ability to manage risk, invest
Slide 21: Canterbury update
On track for Canterbury update 2015 • TOWER continues to be an industry leader in the settlement of Canterbury earthquake claims, with 88% by number and 78% by value, of all claims settled and closed (as at September 2014) • RBNZ annual review allowed for the release of $30 million of minimum solven
Slide 22: Reinsurance – Capital and earnings protection
Reinsurance – Reduced earnings Capital and earnings protection volatility • Reinsurance ratio improved from 17.2% to 16.2% in 2014 (full year) as GWP growth exceeded growth in reinsurance costs • Maximum retention per individual risk is NZ$1m 2 • TOWER purchased an additional catastrophe cover, now
Slide 23: Capital and solvency – General Insurance
Capital and solvency – Strong General Insurance solvency 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. In August 2014, as part of its annual review, the
Slide 24: Capital management for greater shareholder returns
Capital management for Greater Shareholder greater shareholder returns returns Achievements in FY14 Moving forward • Total Shareholder Return of 18.1% for • Capital management remains a priority and FY2014 shareholder returns a key strategic outcome • $56.7 million of capital returned to • New on-ma
Slide 25: David Hancock, CEO: Strategy and outlook
David Hancock CEO + Our strategy going forward + Outlook 25
Slide 26: Strategic Scorecard
Strategic Scorecard improved returns Staff engagement $56.7m capital up 22.4% to 60 returns FY14 TSR 18.1% Pacific NPAT General Insurance up 79.1% Underlying NPAT up 32.3% NPS up to 29 New alliance opportunities 26
Slide 27: Outlook
Driving Shareholder Outlook returns Strategic theme Forward actions Improve AON Hewitt score to 65 by September 2015 Staff engagement and efficiency Improved cost ratios over the medium term Lift NPS to 35 by September 2015 Customer focus to unlock brand potential Product innovation Shareholder capi
Slide 28: Thank you
Thank you + Questions 28
Slide 29: Appendix
Appendix + NZ Performance + General insurance + Balance Sheet detail + TOWER history 29
Slide 30: New Zealand performance
New Zealand performance • New Zealand GWP grew 8.5% to $243.7 million • New Zealand General Insurance Underlying Net Profit After Tax grew 17.5% to $16.9 million 30
Slide 31: Underlying performance General Insurance
Underlying performance General Insurance 1. Net incurred claims includes $1.8m of suspected arson fires in Cook Islands in the March 2014 period. 31 2. Claims events > $1m 3. The impacts of the Canterbury earthquakes and the discontinuation of the Australian business are classified differently in th
Slide 32: Reported profit General Insurance
Reported profit General Insurance 1. Net incurred claims includes $1.8m of suspected arson fires in Cook Islands in the March 2014 period. 32 2. Claims events > $1m 3. Management and sales expenses includes $1.9 million of foreign exchange losses relating to release of Australian liabilities in the
Slide 33: Group Balance Sheet
Group Balance Sheet 33 1. A number of assets or liabilities of disposed groups classified as held for sale in the financial statements.
Slide 34: New operating model implemented over two years
New operating model company Implemented over two years transformed Renewed General Insurance focus November 2012 April 2013 August 2013 August 2014 Sale of TOWER Medical Sale of TOWER Managed funds Sale of majority of Life business Sale of remaining Life Insurance Limited to nib limited to Fisher to