Tower Limited · NZX:TWR
Tower — Merger or Acquisition (September 2006)
38 slides from Tower's merger presentation, Sep 20, 2006
Slide 1: Geographic Separation of TOWER Limited
Geographic Separation of TOWER Limited Jim Minto John de Zwart Group Managing Director Group Chief Financial Officer 20 September 2006
Slide 2: Disclaimer
Disclaimer z The information in this presentation is a summary only z Full information on the proposal to separate TOWER Australia via a geographic demerger is contained in the Scheme Book (which includes the Australian Prospectuses and a New Zealand Investment Statement). The Scheme Book was lodged
Slide 3: Agenda
Agenda A. Transaction Overview B. Overview of TOWER Australia Group Limited (“TAL”) C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit Forecasts F. Timetable Jim Minto Group Managing Director 3
Slide 4: Rationale for Separation
Rationale for Separation z The rationale for demerger is driven by the potential to unlock future value for TOWER shareholders z Geographically separated Australian and New Zealand operations are expected to grow faster with focused strategies, simpler and easier to value businesses, and stronger ba
Slide 5: Transaction Summary
Transaction Summary • TOWER shareholders to receive an allocation of TAL shares based on existing their TOWER shareholding (total issued capital of TAL of 234.3 million shares)(1) • In return for TAL shares received, a proportion of TOWER shares will be cancelled Separation (leaving a total issued c
Slide 6: The Proposal
The Proposal z TOWER to transfer 0.6511 TAL shares to TOWER shareholders for every TOWER share held z In return, TOWER will cancel 0.4760 TOWER shares for every TOWER share held z TAL shareholders to receive 0.4269 Entitlements for every TAL share then held CURRENT PROPOSED Shareholders Shareholders
Slide 7: Agenda
Agenda A. Transaction Overview B. Overview of TOWER Australia C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit Forecasts F. Timetable 7
Slide 8: TOWER Australia Market Position
TOWER Australia (TAL) Market Position z TAL is a leading independent specialist life insurer in Australia – Inforce premium income in excess of A$600 million – 12% market share z TAL is the market leader in the group sector with 17.4% share of in-force premiums – No. 6 in the retail market with 9.5%
Slide 9: TOWER Australia Overview of Performance
TOWER Australia Overview of Performance z TAL has steadily improved operating earnings since 2004 through: – cost reductions – improved lapse rates – increased sales – product repricing, and – exiting unprofitable lines z Further earnings improvements are expected through realising PrefSure synergie
Slide 10: TOWER Australia Management/Organisational Structure
TOWER Australia Management/Organisational Structure Existing Shareholders (ASX Listing) TOWER Australia Chairman – Keith Barton CEO – Jim Minto CFO – John de Zwart Retail Life Alliances & Group Life Investments CEO – David Callander CEO – Geoff Black CEO – TBD 10
Slide 11: TOWER Australia Vision
TOWER Australia Vision z Our vision is to be the leading specialist life risk business in Australia, offering complementary investment products sold through our chosen distribution partners z The vision is driven through our strategic objectives: – Enhancing the quality of our earnings by developing
Slide 12: TOWER Australia Strategic Objectives – Life Risk
TOWER Australia Strategic Objectives – Life Risk z Leverage current sales channels strategies with Business-to-Business partnering – Specialisation will be a factor in driving outperformance over bank assurers z Good lapse management will continue to be a strong value driver supported by alignment o
Slide 13: TOWER Australia Strategic Objectives - Investments
TOWER Australia Strategic Objectives - Investments z Niche strategy based around existing Life distribution capability – Increased focus on smaller groups and Licence holders z Some platform capability is outsourced and the investment business Beacon provides an opportunity to leverage further sales
Slide 14: TOWER Australia 2007 Outlook
TOWER Australia 2007 Outlook z In 2007, the businesses will focus on: – Increasing sales through IFAs – Maintaining mastertrust growth and margins through enhanced services – Completing the integration of PrefSure – Developing existing and new alliances to close the under-insurance gap – Launching n
Slide 15: TOWER Australia Summary
TOWER Australia Summary z Leading independent life insurer in Australia z Niche investment business z Well positioned in high growth and high margin segments z Broad based and rapidly expanding distribution capability z Experienced and focused board and management team z Strong balance sheet and low
Slide 16: Agenda
Agenda A. Overview B. Overview of TOWER Australia C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit Forecasts F. Timetable 16
Slide 17: TOWER Limited (NZ businesses) Market Position
TOWER Limited (NZ businesses) Market Position z TOWER is a well known brand in New Zealand and participates in the general insurance, health insurance, life insurance and investment markets z TOWER also operates in the commercial insurance market in the Pacific Islands z TOWER General Insurance is a
Slide 18: TOWER Limited (NZ businesses) Overview of Performance
TOWER Limited (NZ businesses) Overview of Performance z NZ businesses have undergone a major transformation over the past 18 months following initiatives undertaken by a new management team z TOWER Health & Life have made good progress in restoring health margins, lifting service capability and rebu
Slide 19: TOWER Limited (NZ businesses) Management / Organisation Structure
TOWER Limited (NZ businesses) Management / Organisation Structure Existing Shareholders (Dual Listing) TOWER Limited New Zealand busnesses Chairman – Tony Gibbs CEO – Rob Flannagan Health & Life General Insurance Investments CEO – Steve Boomert CEO – Pieter Lindhout CEO – Tony Hildyard 19
Slide 20: TOWER Limited (NZ businesses) Vision
TOWER Limited (NZ businesses) Vision z Our vision is to be a leading provider in the risk business lines conducted in New Zealand z We will be a leading wholesale asset manager and provider of investment products to retail and employee benefits markets z The vision is driven through our strategic ob
Slide 21: Strategic Objectives – General Insurance
TOWER Limited (NZ businesses) Strategic Objectives – General Insurance z Investing further in Business-to-Business partnering skills to underpin alliance partner business base – A core of strong alliance partners is already in place z Redevelopment of direct sales distribution strategy and brand com
Slide 22: Strategic Objectives – Health & Life
TOWER Limited (NZ businesses) Strategic Objectives – Health & Life z Positioned with intermediaries as a specialist Health insurer with No. 2 market position and product extension in Life z Health Insurance sales are running slightly above in-force market share z Market and distribution development
Slide 23: Strategic Objectives – Investments
TOWER Limited (NZ businesses) Strategic Objectives – Investments z Productivity improvement through continued simplification of business model and system z Leverage TOWER's position as a market-leading wholesale asset manager z Growth in wholesale mandates and workplace savings will increase funds u
Slide 24: TOWER Limited (NZ businesses) 2007 Outlook
TOWER Limited (NZ businesses) 2007 Outlook z TOWER in NZ will continue to focus on improving profit margins and growing market share of new business z TOWER Health & Life will continue developing aligned and new distribution channels and improving customer retention z TOWER General Insurance will co
Slide 25: TOWER Limited (NZ businesses) Summary
TOWER Limited (NZ businesses) Summary z A leading non bank financial services provider in NZ z Strengthening operating margins driven by price increases, good claims management and cost management z Strongly improving business to business alliance capability z Well positioned to take advantage of fu
Slide 26: Agenda
Agenda A. Overview B. Overview of TOWER Australia C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit Forecasts F. Timetable John de Zwart Group Chief Financial Officer 26
Slide 27: Current Proforma Debt Structure
Current Proforma Debt Structure (as at 31 March 2006) z All figures are proforma as at 31 March 2006 unless otherwise stated z Pre separation the group maintained significant intra group funding arrangements that will be settled as part of the Proposal TAL (NZ$m)(1) TOWER Limited (NZ$m) Group Liquid
Slide 28: Target Proforma Debt Structure
Target Proforma Debt Structure (as at 31 March 2006) z The post separation debt positions have been optimised to lower gearing, eliminate intragroup funding, provide working capital for the separate businesses and to provide flexibility for future growth and capital management initiatives NEW SOURCE
Slide 29: Proforma Capital Position
Proforma Capital Position (as at 31 March 2006) z Post separation and recapitalisation, TAL and TOWER Limited will have strong balance sheets and lower gearing TOWER Ltd TAL TOWER Ltd Pre Separation Post separation (NZ$m) (A$m) (NZ$m) Shareholders’ Equity 610 479 215 Group Liquid Assets 56 60 50 Tot
Slide 30: Proforma Solvency – TOWER Australia
Proforma Solvency (as at 31 March 2006) TOWER Australia z No change to Australian life company positions z Updated solvency position post demerger excluding A$135m external debt. Assets Solvency Solvency available to Requirement Coverage meet Solvency (times) (A$m) (A$m) TOWER Australia - Risk and 2
Slide 31: Proforma Solvency – TOWER Limited (NZ businesses)
Proforma Solvency (as at 31 March 2006) TOWER Limited (NZ businesses) z No material change to subsidiary businesses – minor improvements in life company from DAC and GI preference share repayment and retention of current year profits Assets available Solvency Solvency to meet Coverage (NZ$m) Require
Slide 32: Transaction Costs
Transaction Costs z While additional costs will be incurred in the form of one-off transaction costs and additional corporate costs, TOWER believes that the benefits of the transaction will allow shareholder value to be enhanced over time AFTER TAX TRANSACTION COSTS (ONE-OFF) NZ$ AFTER TAX RECURRING
Slide 33: Agenda
Agenda A. Transaction Overview B. Overview of TOWER Australia C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit Forecasts F. Timetable 33
Slide 34: TOWER Group Pre Separation 2006 Full Year Forecast
TOWER Group Pre Separation 2006 Full Year Forecast 6 Months ended FY06 (NZ$m) Mar 06A Sep 06F F’cast FY05 TOWER Australia 21.5 26.4 47.9 33.7 TOWER Limited - TOWER Health & Life 11.1 8.6 19.7 13.0 - TOWER General Insurance 5.2 3.4 8.6 6.9 - TOWER Investments 2.8 3.9 6.7 4.9 Operating Earnings Net of
Slide 35: Proforma Financial Forecasts TOWER Australia
Proforma Financial Forecasts TOWER Australia 6 Months ended FY06 (A$m) Mar06A Sep06F F’cast FY05 TOWER Australia Business Unit 20.7 18.6 39.3(2) 32.8 Amortisation - (1.9) (1.9) - 20.7 16.7(1) 37.4(3) 32.8 Proforma Adjustments - NZ/Australia restructure 0.5 0.4 0.9 0.7 - Change to financing costs (0.
Slide 36: Proforma Financial Forecasts TOWER Limited (NZ businesses)
Proforma Financial Forecasts TOWER Limited (NZ businesses) 6 Months ended FY06 (NZ$m) Mar06A Sep06F F’cast FY05(1) TOWER Group NPAT Pre Separation 32.5 29.2 61.7 40.9 Less: TOWER Australia (22.7) (19.3) (42.0) (38.2) Sub-total 9.8 9.9 19.7 2.7 Proforma adjustments - NZ/Australia restructure (0.5) (0
Slide 37: Agenda
Agenda A. Transaction Overview B. Overview of TOWER Australia C. Overview of TOWER Limited (NZ businesses) D. Capital Raising E. Profit forecasts F. Timetable 37
Slide 38: Timetable
Timetable z Separation – By mid October 2006 Scheme Book despatched – 6 November 2006 Shareholder meeting – 13 November 2006 TOWER trades ex entitlements to TAL shares – 17 November 2006 Record date for TAL shares – 21 November 2006 TAL shares trade on ASX z Entitlements Offer – 21 November 2006 TAL