Tower Limited · NZX:TWR
Tower — UBS 13th Australian Financial Services Conference 2014
38 slides from Tower's conference presentation, Jun 25, 2014
Slide 1: TOWER Limited - UBS Conference presentation announcement
25 June 2014 For personal use only Market Information Company Announcements Office NZX Limited Australian Stock Exchange Limited Level 2, NZX Centre Exchange Centre 11 Cable Street Level 6, 20 Bridge Street Wellington Sydney NSW 2000 New Zealand Australia TOWER Limited - UBS Conference presentation
Slide 2: TOWER Limited: leading light
For personal use only TOWER Limited leading light UBS – 13th Australian Financial Services Conference Sydney 25 June 2014
Slide 3: Progress on building shareholder value
Progress on building “Deliver attractive shareholder shareholder value For personal use only returns by growing a general insurance business that is a leading light in New Zealand and the Pacific” David Hancock CEO New operating model implemented General insurance first half net profit after tax up
Slide 4: New operating model: company transformed
New operating model company transformed implemented For personal use only Divestments Renewed General November 2012 April 2013 August 2013 Insurance focus • Sale of TOWER Medical • Sale of TOWER Managed • Sale of majority of Life Insurance Limited to nib funds Limited to Fisher Funds business to Fid
Slide 5: TOWER building shareholder value
TOWER improved returns building shareholder value For personal use only Management of Staff engagement risk and capital and efficiency The Vision leading light in New Zealand general insurance Customer satisfaction Staff Net promoter score Leadership in Financial Strategic pillars engagement AonHewi
Slide 6: New Zealand insurance market dynamic backdrop
New Zealand insurance dynamic market back drop For personal use only NEW ZEALAND • Premium growth continues TOWER’S SHARE IN PERSONAL TOTAL GWP • Reinsurance costs stabilising LINES MARKET SHARE1 • Increasing cost of compliance House 10.5% and regulation Contents 10.1% IAG/Lumley 49% • The technolog
Slide 7: A solid New Zealand and Pacific insurer base
A New Zealand solid base and Pacific insurer For personal use only HY14: HY14: As at 31 March 2014: As at 31 March 2014: $139.2m $13.1m 496,167 264,565 GWP (6 MONTHS) UNDERLYING NPAT 1 Inforce policies Clients 2 New Zealand 82% New Zealand 79% New Zealand 87% New Zealand 86% Pacific Islands 18% Paci
Slide 8: HY14 highlights: solid performance despite weather events
solid HY14 performance result despite weather highlights events For personal use only General Insurance profit up strongly, supported Investment in brand, product and service to by rate increases due to rising reinsurance support growth in direct and alliance channels costs Improved customer satisfa
Slide 9: HY14 financial highlights
delivering HY14 financial financial performance highlights For personal use only change on HY14 HY13 pcp • Combined ratio improved General insurance • Underlying General Reported Insurance NPAT up 122% Gross written premium ($m) 139.2 132.5 5% • Adverse weather impacting General insurance NPAT ($m)
Slide 10: Performance indicators and margins improving
revenue Performance indicators and margins improving For personal use only GROSS WRITTEN Gross written premium ($m) NET EARNED Net earned premium ($m) PREMIUM PREMIUM Underlying combined ratio (%) Underlying expense ratio (%) • Stable business with a 160 160 consistent combined ratio 120 120 over ti
Slide 11: Priorities: execution on priorities
Priorities execution on priorities For personal use only The Vision leading light in New Zealand general insurance Customer Our key focus is on the strategic Staff satisfaction Net promoter score pillars of staff engagement, Strategic pillars engagement AonHewitt survey customer satisfaction and Fin
Slide 12: Customer retention and growth focus
Customer retention focus customer and growth For personal use only NET PROMOTER SCORE (NPS) 30 25 • Net promoter score (NPS) is a benchmark for customer loyalty 24 17 20 • Promoters will 15 19 - hold more policies with us 12 - hold higher value policies 10 - stay with us longer • Lower lapse rates s
Slide 13: Customer focus: brand to unlock potential
customer focus Customer focus – brand to unlock brand potential For personal use only Powerful brand and product initiatives • Refreshing our brand with multi- channel lighthouse campaign, building on TOWER’s legacy of more than 140 years of looking out for Kiwis • Response has been strong with impr
Slide 14: Management of risk and capital
For personal use only Management of risk and capital Michael Boggs CFO 13
Slide 15: Balance sheet well capitalised by business segments
well Balance sheet capitalised segments business For personal use only As at March 2014 $ millions GI TLNZ Corp Total Group Cash and call deposits 159.0 8.7 118.9 286.6 Total investment assets 133.4 676.2 - 809.6 Deferred acquisition costs 18.4 - - 18.4 Intangible assets - - 32.3 32.3 Other operatio
Slide 16: Capital protection: easing reinsurance costs
costs Capital protection – easing reinsurance For personal use only REINSURANCE EXPENSE1 • Reinsurance expense easing $m % following large increases as a 30 17.8% 20 result of Canterbury earthquakes 16.2% 16.9% • Current catastrophe cover 25 16.6% 16 (two events) $585m with $10m 15.5% retention 20 •
Slide 17: Adverse weather impacts underlying results
underlying Adverse weather results strong impacts For personal use only NZ LARGE CLAIM EVENTS1 (EXCLUDING EARTHQUAKES) ($M) 10 • Weather events have a significant impact • The last two years has 8 seen a spike in claims Apr-14 for the industry • Continuous 6 improvement in underwriting • Pricing for
Slide 18: Canterbury rebuild on track for end of 2015
on Capital and customer focus – track Canterbury rebuild for end of For personal use only 2015 TOWER continues to lead the industry in settling earthquake claims with 82%1 by number and 74% by value of all claims now settled and closed. TOWER’s construction programme for rebuilds and repairs continu
Slide 19: Capital and solvency: long term solvency surplus
long Capital and solvency term solvency surplus General Insurance For personal use only TOWER has a long term policy GENERAL INSURANCE of retaining within its licensed $43m General Insurance entity 175% Currently holds of the minimum solvency capital (MSC) required under the Insurance (Prudential Pl
Slide 20: Capital management a priority
capital Capital management management a priority For personal use only Achievements to date Moving forward ––– ––– • Buy back offers completed with $171.8m • Ongoing capital management returned to investors recently remains a priority - April 2013 $119.2m • Options with regard to small parcel - Janu
Slide 21: Strategy and outlook
For personal use only Strategy and outlook 20
Slide 22: Strategic growth initiatives driving shareholder returns
driving Strategic shareholder returns growth initiatives For personal use only ▪▪ Continue to drive staff engagement ▪▪ Building a customer focused culture and efficiency and delivering on claims and risk management ▪▪ Utilisation of technology to lower costs and support service and better ▪▪ Grow s
Slide 23: Industry consolidation a key driver
Industry consolidation consolidation a key driver opportunity For personal use only Industry consolidation to remain a key driver of industry shareholder returns. TOWER to manage risks and take advantage of the opportunities. Risks ▪▪ Increased systemic ▪▪ Larger competitors with ▪▪ May accelerate f
Slide 24: Outlook: further progress on strategy
Outlook further progress on For personal use only strategy Industry recap TOWER ––– ––– ▪▪ Reinsurance costs and premiums ▪▪ Revenue growth and cost easing post Canterbury containment focus continues in second half ▪▪ Increasing cost of compliance and ▪▪ New product development regulation ▪▪ On trac
Slide 25: TOWER building shareholder value
TOWER building shareholder value For personal use only Management of Staff engagement risk and capital and efficiency “Deliver attractive Vision The leading light shareholder returns by growing a general in New Zealand general insurance insurance business that Customer satisfaction Staff Net promote
Slide 26: Questions
Deliver attractive shareholder returns by growing a general For personal use only insurance business that is a leading light in New Zealand and the Pacific Questions 25
Slide 27: Appendices
For personal use only 26 Appendices
Slide 28: TOWER Group refocused business: profit summary
TOWER Group refocused business Profit summary For personal use only • Health, Investment and majority of Half year ended Life business sold in prior financial $ millions Mar 2014 Mar 2013 Sep 2013 year General Insurance 13.1 5.9 13.1 • Corporate expenses reduced, with first half reflecting higher Li
Slide 29: General Insurance New Zealand overview
General Insurance New Zealand overview For personal use only HY14 GWP INFORCE HY14 GWP INFORCE HY14 NEW BUSINESS GWP POLICIES BREAKDOWN POLICIES BREAKDOWN BY DISTRIBUTION CHANNEL BY PRODUCT BY DISTRIBUTION CHANNEL Home 40% Direct 59% TOWER and FinTel phone sales 64% Motor 23% Fintel 6% Online 2% Con
Slide 30: Leadership in growth market: Pacific markets
Leadership in growth market Pacific markets For personal use only HY14 GWP BREAKDOWN HY14 GWP BREAKDOWN HY14 GWP BREAKDOWN BY DISTRIBUTION BY CHANNEL BY PRODUCT • Pacific NPAT $2.7m • Long-term businesses: more than 100 years history in some markets • Multi-country alliances with high quality bankin
Slide 31: General Insurance underlying performance
Underlying performance General Insurance For personal use only $ millions Mar-14 Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Gross earned premiums 139.1 136.4 130.8 125.0 113.9 106.2 102.1 Reinsurance (23.5) (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) Net premiums 115.6 112.0 107.3 103.8 93.9 92.9 91.9
Slide 32: General Insurance reported profit
Reported profit General Insurance For personal use only $ millions Mar-14 Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Gross earned premiums 139.1 136.3 130.8 125.0 113.9 106.2 102.1 Reinsurance (23.5) (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) Catastrophe reinsurance reinstatement - (0.7) - - - (14.9)
Slide 33: Balance sheet summary
Balance sheet well capitalised summary For personal use only business Balance as at • Drivers of equity change to pcp: - Capital repayments of $171.8m $ millions Mar 2014 Mar 2013 Sep 2013 - Dividend payments of $22.8m Cash & call deposits 286.6 255.2 350.0 • Significant changes in operational Total
Slide 34: Abnormal items
Abnormal items For personal use only $ millions (net of tax) Half year ended March 2014 Net sale related gains 1 0.6 Australian revaluation and foreign exchange loss2,3 (1.2) Impact of Canterbury earthquakes 2 (0.1) Net impact of one off items (0.7) 1. Adjustments to gains on sale for Health, Life a
Slide 35: Capital protection: easing reinsurance costs
costs Capital protection – easing reinsurance For personal use only REINSURANCE EXPENSE1 REINSURANCE CATASTROPHE COVER • Reinsurance expense easing $m % $m $m 30 20 700 21 following large increases 17.8% 16.9% 585 as a result of Canterbury 16.2% 25 600 525 18 earthquakes 16.6% 16 500 15.5% • Current
Slide 36: Capital and solvency: long term solvency surplus
long Capital and solvency term solvency surplus General Insurance For personal use only 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. Given the miniumum
Slide 37: TOWER Life (N.Z.): focus on shareholder value
focus on TOWER Life (N.Z.) shareholder value Retained life business For personal use only NPAT of $3.7m, well above full year plan expectations of $2.8m due to one-off earning improvements Stable business with a focus on customer service (NPS introduced) and productivity Closed book in run off with
Slide 38: Leading light
Leading light For personal use only This presentation has been prepared by TOWER Limited to provide investors 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 is available at http://www.tower.
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