Slide 1: Richard Harding, Chief Executive Officer
Richard Harding Chief Executive Officer
Slide 2: Chairman's update
Chairman's update Delivering growth and profitability • Customer-centric focus is providing an exciting platform for growth and delivering improved results • Impressive growth in underlying profit demonstrates delivery of strategy • Trajectory will accelerate as we leverage new technology • Youi acq
Slide 3: 2019 financial results
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Slide 4: Three years of improving results and solid growth achieved
Three years of improving results and solid growth achieved Solid growth drives $23.5m improvement Key metrics FY19 FY18 • Continued core NZ growth • Strong digital sales continue Gross written premium (GWP) $356.8m $336.1m Growth in Group GWP 6.1% 7.6% Significant improvement in claims ratio Growt
Slide 5: Customers keep choosing Tower
Customers keep choosing Tower • 9.1% GWP growth in core NZ portfolio • Total NZ GWP has grown 6.8% through higher volumes and improved rating Growth in NZ risks Growth in GWP(NZ$m) 4.8 20,000 8.3 1.8 11.6 5.8 15,000 10,000 356.8 5,000 336.1 - FY17 FY18 FY19 Sep 18 Core NZ Rate Core NZ Non‐core NZ No
Slide 6: Strong digital sales continue
Strong digital sales continue • GWP from digital channels remains strong, showing investment in digital is well placed • Digital sales continue to increase with over half of all new business sold online in September and October 2019 GWP by half year through digital channels (NZ$m) • Significant impr
Slide 7: Underwriting excellence
Underwriting excellence Underwriting excellence driving good customer and business results House claim frequency • Reduction in claims costs due to reduced frequency and change in mix 7.0% of book, along with benign weather 6.5% • New products provide clarity and simplicity for customers at claims t
Slide 8: Building capability while controlling costs
Building capability while controlling costs • Uplift in expenses as IT transformation concludes • Additional spend directed towards growth and reducing risk • Uplift in management expenses due to: • Investment in customer migration process to ensure Group management expense ratio1 maximum retention
Slide 9: IT transformation concluding
IT transformation concluding • New IT platform delivered and launched successfully Incremental benefits already being seen • New business on sale with over 10,000 policies sold through new IT platform since May 2019 • New digital functionality provides unique offering for customers, enabling bundled
Slide 10: IT and digital underpins the future
IT and digital underpins the future IT transformation will drive growth and continued shift to digital delivery • Improved, simpler products and real-time, granular pricing capability will drive growth • Increased digital capability will enable increased sales online and targeting of offers to custo
Slide 11: Jeff Wright, Chief Financial Officer
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Slide 12: Financial performance Consolidated Group
Financial performance Consolidated Group Group profit summary (NZ$m) • Reported after tax profit of $16.8m, a $23.5m improvement on prior year $ million FY 19 FY 18 Change • $13.9m improvement in underlying profit after tax to $27.4m Gross written premium 356.8 336.1 20.7 • Strong improvement in GWP
Slide 13: Movement in underlying profit before tax
Movement in underlying profit before tax Movement in underlying profit before tax (NZ$m) • Net earned premium higher due to NZ 7.7 growth in core book and new pricing NZ (4.7) NZ 6.1 Pacific 5.6 Pacific 2.4 approach Pacific 3.6 Corporate 0.5 NZ 19.3 0.9 Pacific 0.7 10.6 • Growth in risk count has dr
Slide 14: Financial performance New Zealand
Financial performance New Zealand New Zealand profit summary (NZ$m) $ million FY 19 FY 18 Change Gross written premium 296.6 277.7 18.9 • Underlying profit increased by $9.3m on Gross earned premium 285.7 266.8 18.9 prior year to $22.1m Reinsurance expense (37.8) (38.2) 0.4 Net earned premium 247.9
Slide 15: Improved NZ claims ratio
Improved NZ claims ratio • Underwriting and pricing initiatives have delivered significant improvements • Targeting core insurance activity to offset inflation Change in New Zealand claims ratio vs. prior year 0.3% 57.2% 0.7% 2.1% 55.5% 0.1% 2.7% 1.1% 0.3% 52.2% 1 2 3 4 FY18 claims ratio, Change in
Slide 16: Financial performance Pacific
Financial performance Pacific Pacific profit summary (NZ$m) • Underlying profit after tax returns to historic levels, a $5.5m increase on prior year $ million FY 19 FY 18 Change Gross written premium 60.2 58.4 1.8 Gross earned premium • Continued profitable growth due to improved pricing 59.3 56.3 3
Slide 17: Improvements in Pacific
Improvements in Pacific • Improved pricing, underwriting and risk selection is delivering results • Benign weather across Pacific contributed to improvement Change in Pacific claims ratio vs. prior year 51.8% 8.7% 6.8% 0.8% 0.3% 5.0% 1.7% 29.1% 1 2 3 FY18 claims ratio, including Benign large events
Slide 18: Solid solvency position
Solid solvency position • Strong capital position has been maintained and increased • Continued focus on governance, risk, conduct and culture • As at 30 September 2019, Tower Insurance Limited (TIL) had $99.3m of Tower Insurance Limited solvency position, adjusted solvency margin, which was equival
Slide 19: The Youi acquisition
The Youi acquisition • Tower Insurance purchasing Youi’s ~34,000 in-force New Zealand policies • Formal application lodged with RBNZ, completion expected soon Delivers growth • Provides immediate access to customers and GWP growth, solidifies Tower’s challenger position in the market, and offers sig
Slide 20: Improved reinsurance outcomes
Improved reinsurance outcomes • Increased protection on favourable terms • Reinvesting savings to reduce exposure and volatility High-level reinsurance structure overview • Increased catastrophe cover from $738m to $783m Extended Cat $783m, providing additional certainty Cover to $783m $738m • Incre
Slide 21: Richard Harding, Chief Executive Officer
Richard Harding Chief Executive Officer
Slide 22: Challenging the market to grow
Challenging the market to grow • Digital challenger positioning enables achievement of medium-term targets Setting Company it right purpose for customers and their communities Amazing Claims Challenger Experiences Value Proposition Stunningly Simple Great Products Value for Money Underwriting Operat
Slide 23: Setting up for 2021
Setting up for 2021 FY21 FY20 FY19 Decommission legacy systems Migrate customers to new and derive full benefits Complete IT upgrade system development Keep driving growth Keep driving growth Keep driving growth SME and usage based Start deriving benefits from insurance Deliver underwriting and IT u
Slide 24: FY20 financial outlook
FY20 financial outlook • Solid growth and profitability expected to continue • FY20 is a year of transition, as Tower migrates its portfolio to a new IT platform and a suite of simpler products • Guidance for underlying NPAT in FY20 is $27m - $30m, based on the following assumptions: • General insur
Slide 25: Appendices
Slide 26: 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: FY 19 Non- Claims FY 19 • “Underlying profit” does not have a standardised meaning under Corporate Other $ million underlying underlying handling reported Generally Accepted Accounting Pr
Slide 27: New Zealand revenue
New Zealand revenue NZ GWP ($m) FY19 FY18 Change Core 239.0 219.1 9.1% Non-core GROSS WRITTEN PREMIUM BY PRODUCT % 57.6 58.6 -1.7% Total NZ business 296.6 277.7 6.8% FY19 FY18 Risk counts (000s) FY19 FY18 Change 4% 6% Core 408.7 391.0 4.5% Non-core 82.0 91.3 -10.2% Total NZ business 490.7 482.3 1.7%
Slide 28: Pacific revenue by country
Pacific revenue by country FY19 FY18 GROSS WRITTEN PREMIUM (NZ$m) 9% 8% 5% 4% Country FY19 FY18 Change Fiji 22.7 22.1 2.4% 37% 11% 12% 38% Papua New Guinea 11.1 11.5 -2.7% 8% Cook Islands 4.9 4.5 8.2% 4% 6%34% Solomon Islands 5% 14% 2.9 3.4 -16.4% Samoa 3.0 3.4 -12.5% 5% 5% 6% 5% American Samoa 7.2
Slide 29: Canterbury earthquakes update
Canterbury earthquakes update • Continued progress with 117 claims closed in 2019 • 95 open claims remain as at 31 October 2019 MOVEMENT IN PROPERTIES 190 • Tower continues to receive higher than expected new over-cap 170 claims from the EQC as a result of past performance, poor 150 63 130 workmansh
Slide 30: Balance sheet Tower Group
Balance sheet Tower Group 30 September 30 September $ million Movement $ Movement % 2019 2018 Cash & call deposits 67.0 102.0 (35.0) (34.3%) Investment assets 229.2 198.2 30.9 15.6% Deferred acquisition costs 23.7 22.6 1.1 5.1% Intangible assets 74.2 45.0 29.2 64.8% Other operational assets 309.4 31
Slide 31: Reinsurance structure overview
Reinsurance structure overview High-level reinsurance structure overview Aggregate cover overview for FY20 • Minimum event size of $1m to qualify, max of $7.5m per event $783m Extended Cat • $20m cover once $10m excess filled Cover to $783m • No coverage for earthquake in New Zealand $738m • Drop-do
Slide 32: 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