Slide 1: Tower 2022 Half Year Results
Tower 2022 Half Year Results 1 October, 2021 to 31 March, 2022 26 May, 2022
Slide 2: Agenda
Agenda Chairman’s update Michael Stiassny, Chairman Business update Blair Turnbull, Chief Executive Officer HY22 financial performance Paul Johnston, Chief Financial Officer Looking forward Blair Turnbull, Chief Executive Officer 2
Slide 3: Chairman's update
Chairman’s update Sound business performance and delivering dividends TACKLING THE STRONG CAPITAL CONTINUED CHALLENGES POSITION LONG-TERM GROWTH • Proactively managing • Guidance affirmed and 2.5¢ • Solid performance climate change risks dividend announced continuing on core business platform • Robu
Slide 4: Business Update
Business Update Blair Turnbull Chief Executive Officer 4
Slide 5: Our performance
Our performance Good business performance, achieved through growth and efficiencies GWP growth Customer growth BAU claims ratio MER (Gross written premium) (Management expense ratio) 11% | $216m 312,000 48.6% 35.8% vs $194m in HY21 vs 294,000 in HY21 vs 48.2% in HY21 vs 37.1% in HY21 Underlying prof
Slide 6: Climate change and large events
Climate change and large events Managing increasing large event frequency and severity Risk-based pricing ROLLING 12 MONTHS LARGE EVENTS Flood & earthquake (ULTIMATE ESTIMATE) Coastal risks planned for HY23 Reinsurance 1 4 2 4 2 8 2 2 4 7 $20m aggregate cover $862m catastrophe cover 6
Slide 7: Outlook for second half
Outlook for second half Expecting continued business performance, large events impacts mitigated Sound business performance • Expecting continued growth in premium revenue HY dividend announced • Controlling inflationary pressure on claims expenses • Management expenses benefitting from increased sc
Slide 8: Strong core business performance
Strong core business performance UNDERLYING NPAT (EXCL. LARGE EVENTS & NET INVESTMENT INCOME) UNDERLYING NPAT excl. large events & NII $18.9m • Improved business performance vs $16.7m HY21 • Strong growth • Managing inflation & claims costs COMBINED OPERATING RATIO COMBINED OPERATING • Platform deli
Slide 9: Consistent growth in customers and premium
Consistent growth in customers and premium 12 MONTH ROLLING GWP BY BUSINESS UNIT GWP GROWTH CUSTOMERS 11% 312,000 to $216m in HY22 up 6% on HY21 NET PROMOTER SCORE COST TO ACQUIRE CUSTOMER NUMBERS (‘000s) (NPS) 40% 11% of net earned premium vs 34% in HY21 vs 12% HY21 9
Slide 10: Digitisation driving customer engagement and growth
Digitisation driving customer engagement and growth MY TOWER REGISTRATIONS (‘000s) ONLINE QUOTES DIGITAL SALES 41% 63% of Tower Direct sales increase from HY21 are digital. Up from 58% HY21 CROSS SELL MY TOWER CUSTOMERS % OF DIGITAL NEW BUSINESS WITH MULTIPLE SALES - TOWER DIRECT PRODUCTS 42% 55% of
Slide 11: Expanding partnerships, driving scalable growth
Expanding partnerships, driving scalable growth 12 MONTH ROLLING PARTNERSHIP GWP (EXCL ANZ) FLAGSHIP TRADE ME ACCELERATED ADVISOR PARTNERSHIP GROWTH ACCELERATING GROWTH 40,000 1,400 21% increase since risks up 35% vs HY21 Nov ‘21 BUILDING PARTNERSHIP PURCHASE OF LEGACY ECOSYSTEMS BOOKS COMMISSION (%
Slide 12: Pacific digitisation delivering enhanced efficiencies
Pacific digitisation delivering enhanced efficiencies DIGITAL PLATFORM ENABLING NEW BUSINESS • Tower technology platform 88% launched in Fiji, Tonga, Vanuatu and Samoa, plan to complete rollout in of all Fiji new business via EIS in 2022 Mar ‘22 vs 23% in Mar ‘21 • Pacific industry-first online paym
Slide 13: Disciplined, data-driven underwriting improving risk accuracy
Disciplined, data-driven underwriting improving risk accuracy RISK BASED PRICING AUTOMATED HOUSE SUM INSURED 70,000 99.8% % STRAIGHT THROUGH UNDERWRITING NZ NZ customers of NZ customers transitioned to flood updated via CPI or risk pricing Cordell vs 57% HY21 STRAIGHT THROUGH AGILE RATING CAPABILITY
Slide 14: Decisive actions to address claims inflation are delivering
Decisive actions to address claims inflation are delivering CLAIMS LODGED DIGITALLY DIGITAL CLAIMS SUPPLY CHAIN LODGEMENT OPTIMISATION 48% 76% of NZ claims lodged of NZ motor repairs by online in Mar ‘22 preferred suppliers BAU CLAIMS RATIO AUTOMATION TO ENHANCE BAU CLAIMS RATIO EFFICIENCIES AI 48.6
Slide 15: Improving MER through platform efficiency
Improving MER through platform efficiency TASKS COMPLETED DIGITALLY DIGITAL TRANSACTIONS MY TOWER WEEKLY LOG-INS 52% 11,000 up 10% on HY21 80% increase on HY21 MANAGEMENT EXPENSE RATIO (% NEP) DECOMMISSIONING LEGACY MER SYSTEMS 2 35.8% remaining by end of vs 37.1% in HY21 2022 15
Slide 16: Strong capital & solvency, delivering shareholder returns
Strong capital & solvency, delivering shareholder returns CAPITAL RETURN AM BEST FINANCIAL STRENGTH RATING $30.4m A- 2.5¢ half year dividend returned to shareholders in affirmed in March 2022 April 2022 TOWER PARENT SURPLUS CAPITAL ABOVE SOLVENCY MINIMUM SOLVENCY CAPITAL 210% $72.2m after capital re
Slide 17: Financial performance
Financial performance Paul Johnston Chief Financial Officer
Slide 18: Group underlying financial performance
Group underlying financial performance • Strong GWP growth of 11% to $216.1m • Management expense ratio improved 1.3%, reflecting scale platform efficiencies and release of Liability Adequacy Test provision • Lower commission expense through ANZ portfolio acquisition and provision for HY proportiona
Slide 19: Underlying NPAT impacted by large events
Underlying NPAT impacted by large events • Underlying NPAT of $5.4m is $5m below HY21 MOVEMENT IN UNDERLYING NPAT • Additional large events of $8.6m ($6.2m after tax) and reduction in net investment income of $1.4m ($1m after tax) were significant drivers of decrease in earnings • Increase in expens
Slide 20: Steady BAU claims ratio in a challenging environment
Steady BAU claims ratio in a challenging environment NZ MOTOR FREQUENCY & SEVERITY • High inflation period impacting cost of claims (severity) however reduction in BAU claims ratio highlights appropriate rating changes made to manage profit challenges • NZ motor claims frequency down due to lighter
Slide 21: Continued focus on management expenses
Continued focus on management expenses • Management expense ratio (MER) reduced 1.3% to MOVEMENT IN MANAGEMENT EXPENSE RATIO 35.8% • GWP growth contributes a 1.4% reduction in MER • Staff costs increased MER by 0.9% over HY21 • Net commission expenses decreased due to the purchase of the ANZ portfol
Slide 22: Robust reinsurance programme supports resilience
Robust reinsurance programme supports resilience FY22 large events REINSURANCE PROGRAMME OVERVIEW • $17.9m large events incurred in HY22; Tonga volcanic eruption ($7.6m), Cyclone Dovi ($3.6m), and North Island Rainstorms ($6.7m) • Further large events are met by aggregate reinsurance cover once they
Slide 23: Investment strategy limits impact of market volatility
Investment strategy limits impact of market volatility • Increases in interest rates have resulted in losses of $0.9m as the portfolio is revalued to market values - these losses are expected to be recovered through higher yields as the portfolio matures • Tower maintains a conservative investment s
Slide 24: Canterbury earthquake claims a continuing challenge
Canterbury earthquake claims a continuing challenge OPEN CEQ CLAIMS • Continuing to settle open claims with 22 closed over the half • Reduction in open claims slows as Tower continues to receive new and re-opened claims • Several complex open claims have had significant strengthening, driven by both
Slide 25: Strong capital and solvency position
Strong capital and solvency position TOWER SOLVENCY - NZ PARENT ($m) SR = 287% • In the last 12 months Tower has returned to shareholders dividends of $21.1m and a capital return of $30.4m 48.2 SR = 225% SR = 224% • Strong solvency ratio of 210% as at 31 March 2022 7.3 6.4 SR = 210% 18.9 18.9 allowi
Slide 26: Full year guidance unchanged
Full year guidance unchanged 1 FY21 Actual FY22 Guidance Underlying NPAT $29.3m $35.4m to $39.4m excluding large events Large events after tax (before tax) $10m ($13.9m) $14.4m ($20m) Underlying NPAT $19.4m $21m to $25m 2 Dividend 5 cents per share 5.5 cents per share FY22 guidance has assumed Tower
Slide 27: Looking forward
Looking forward Blair Turnbull Chief Executive Officer
Slide 28: Committed to fair and transparent insurance services
Committed to fair and transparent insurance services INSURANCE IS NOT EASY CUSTOMERS VALUE TO UNDERSTAND TRANSPARENCY WHEN SELECTING INSURANCE Only 1/4 Kiwis 74% are confident they of Kiwis say have the right cover transparency is the for all their risks* most important factor* TRANSPARENCY OF TRANS
Slide 29: Tackling labour market challenges via our unique footprint and positive culture
Tackling labour market challenges via our unique footprint and positive culture Leveraging unique footprint • Digital platform enables workflow across multiple countries • Leveraging access to talent in the Pacific and Rotorua, offering high quality roles • Operational diversification enables us to
Slide 30: Supporting communities through climate change
Supporting communities through climate change ENABLING HEALTHY, PRODUCTS TO SUPPORT SUSTAINABLE HOMES PACIFIC RESILIENCE Sustainable Parametric rebuild benefit cover Additional $15K available pilot planned for 2022 for sustainable products Supporting climate change education SUPPORTING ELECTRIC REDU
Slide 31: Investing in efficiency and growth
Investing in efficiency and growth INVESTING IN AGILE TECHNOLOGY TECHNOLOGY DELIVERY INITIATIVE INVESTMENT Pacific EIS, Oracle, FRISS 134 HY22 technology releases, vs 96 prior six months INVESTING IN INVESTING IN AUTOMATED ACQUISITIONS MARKETING ANZ, Youi, 1.5m Westpac personalised messages portfoli
Slide 32: Well positioned to continue delivering dividends and growth
Well positioned to continue delivering dividends and growth • Strong underlying operating performance • Achieving positive customer outcomes and growth through: • deeper customer relationships through digitisation • innovative partnership model • modernising our Pacific business • Continued focus on
Slide 33: Questions?
Slide 34: Reconciliation between underlying profit after tax and reported profit after tax
Reconciliation between underlying profit after tax and reported profit after tax • • • • • 34
Slide 35: 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