Slide 1: 2018 half year results
2018 half year results Tower Limited investor presentation 29 May 2018
Slide 2: Introduction
Introduction Michael Stiassny Chairman
Slide 3: Transformation is driving growth
Transformation is driving growth Strong underlying performance through GWP growth and cost discipline • Significant improvements achieved in policy and premium growth, claims control and management expense ratio • Half year result impacted by one-offs: Peak Re settlement and severe weather events Tr
Slide 4: Overview of Tower: First half performance overview
Overview of Tower First half performance overview Richard Harding Chief Executive Officer
Slide 5: Delivering strong underlying performance
Delivering strong underlying performance Strong growth offset by unprecedented frequency and severity of weather events Key metrics H1 18 H1 17 ACHIEVEMENTS Total GWP $161.0m $145.8m Strong GWP growth of 15.6% achieved in GWP growth in core NZ portfolio1 15.6% 2.4% core NZ portfolio Growth in poli
Slide 6: Focus on customers leads to growth
Focus on customers leads to growth Core book growing as a result of digital growth and strong retention ACHIEVEMENTS CORE1 NEW ZEALAND GWP GROWTH 15.6% 8.7% 160.0 Strong GWP growth of 15.6% in core book, due to a 140.0 combination of pricing (10.0%) and volume growth (5.6%) 1.6% 2.1% 2.4% 120.0
Slide 7: Digital: a stand-out performer
Digital: a stand-out performer Continued focus on digital capability and partnerships sees growth above industry norms achieved ACHIEVEMENTS QUARTERLY NEW BUSINESS GWP - DIGITAL CHANNELS 39% of new business sales online in March 2018, compared to 24% in March 2017 $4.9m Tailored, targeted insura
Slide 8: Claims and underwriting update
Claims and underwriting update Improvements in pricing and underwriting is controlling claims costs despite industry wide inflation and severe weather ACHIEVEMENTS TOWER CLAIMS EXPENSES ($m) New approach to weather events helps set things right for 60% customers faster and more efficiently 95.0 55
Slide 9: Severe weather and storm events
Severe weather and storm events Unprecedented frequency and severity of large weather events have resulted in impacts that already exceed full 2017 financial year WEATHER EVENTS Estimated Ultimate Estimated • FY17 was the worst year for weather impacts in 25 years and Incurred Impact Net Event Date
Slide 10: Underwriting profit growing
Underwriting profit growing Transformation is driving improved underwriting profit NZ UNDERLYING PROFIT TREND (NZ$m) • Underwriting profit increased 2.9 $2.3m vs. H1 17, before tax and 1.9 2.6 2.5 excluding large loss events 3.2 12.7 • Improvements reflect: 9.3 10.4 10.2 5.4 • new approach to pricin
Slide 11: Focus on costs
Focus on costs Cost saving initiatives delivering sustainable cost base ACHIEVEMENTS Maintained focus on efficiency and productivity MANAGEMENT EXPENSE 42.2% Investment made to deliver ongoing and sustainable cost 41.6% 59.0 40.8% 42.0% management 57.0 38.9% 38.9% 40.0% Continued review of exi
Slide 12: Financial performance
Financial performance Jeff Wright Chief Financial Officer
Slide 13: Financial performance
Financial performance Business turnaround well underway, as evidenced by strong growth and contained expenses GROUP PROFIT SUMMARY (NZ$m) $ million H1 18 H1 17 • Significant growth in GWP of $15.2m Gross written premium 161.0 145.8 Gross earned premium 159.6 150.5 • Underlying profit of $7.3m after
Slide 14: Movement in underlying profit
Movement in underlying profit Growth in premiums and stable management expenses offset by weather events and large claims in the Pacific MOVEMENT IN UNDERLYING PROFIT BEFORE TAX (NZ$m) • Net earned premium higher due to 0.3 0.4 growth in core book and new 1.4 1.5 approach to pricing 7.4 • Improved i
Slide 15: Premium remains stable across Pacific
Premium remains stable across Pacific Pacific business impacted by large commercial claims and Cyclone Gita PACIFIC PROFIT SUMMARY (NZ$m) MIX OF PACIFIC REVENUE – TOP FOUR $ million H1 18 H1 17 COUNTRIES Gross written premium H1 FY18 27.8 28.3 Gross earned premium 28.1 28.4 H1 FY17 34% Reinsurance c
Slide 16: Canterbury update
Canterbury update Solid progress continues to be made towards finalising Canterbury earthquake legacy MOVEMENT IN PROPERTIES 23 • Gross ultimate claims increased $0.7m 66 159 • Case estimates almost halved and risk margin significantly 323 increased since September 2016 253 • Number of open Canterbu
Slide 17: EQC receivables
EQC receivables Tower continues to progress recovery programme and remains confident in its position • EQC receivables are fundamentally different to Peak Re, which was a single issue with a binary outcome and recorded at 100% in financial LAND $13.5M BUILDING $53.4M statements COMPONENTS COMPONENTS
Slide 18: Strong capital and solvency position
Strong capital and solvency position Capital base allows investment in transformation TOWER INSURANCE LIMITED SOLVENCY POSITION CAPITAL RAISE COMPLETED PLUS CORPORATE CASH ($m) • Capital raise successfully completed with over 88% of shareholders taking up rights Net cash held in corporate 300% • Str
Slide 19: FY18 outlook: Strategy and outlook
FY18 outlook Strategy and outlook Richard Harding Chief Executive Officer
Slide 20: Clear strategic plan to grow Tower as the leading digital challenger brand
Clear strategic plan to grow Tower as the leading digital challenger brand Challenger Customer Digital brand experience Traditional distribution Personalised price, insurance Setting it right at the moment of truth cover, and service Digital self-service and engagement tools Power to choose when and
Slide 21: Transformation is accelerating momentum
Transformation is accelerating momentum Transforming all aspects of our business is delivering improved results and creating a unique offering for customers SIGNIFICANT BENEFITS MEDIUM TERM TARGETS Simple, customer focussed products Easy product experimentation and development Challenger brand d
Slide 22: IT simplification enables transformation
IT simplification enables transformation Decision made to invest $33.5m to accelerate transformation, with amortisation in line with current levels 1 NEW CORE PLATFORM – APPROXIMATELY $24m Flexible, modern, integrated core insurance platform that will deliver the capability to drive and accelerate
Slide 23: Implementation plan
Implementation plan Staged implementation to protect and enhance value FY18 FY19 Getting ready to Scoping launch Roadmap Mobilisation Delivering the Configuration of platform New business on sale new platform Digital integration and development Product rationalisation Realising Customer migration (1
Slide 24: Driving growth and quality in the Pacific
Driving growth and quality in the Pacific A new operating model to better meet the needs of our customers, drive sales growth and realise potential • NZ based manufacturer to leverage underwriting, data and pricing capability and experience • Local distribution teams to maximise individual relations
Slide 25: Tower outlook for FY18
Tower outlook for FY18 • Ongoing development and delivery of unique customer value proposition Accelerate brand transformation • Brand transformation activity to enable Tower’s transition into challenger brand territory and develop unique customer experience • Continued improvement of digital channe
Slide 26: Appendices
Appendices
Slide 27: New Zealand business improving
New Zealand business improving Improvements in key focus areas offset by storm activity and large events NEW ZEALAND PROFIT SUMMARY (NZ$m) $ million H1 18 H1 17 Gross written premium 133.2 117.5 • Improvements in underlying Gross earned premium 131.5 122.2 business offset by natural events Reinsuran
Slide 28: Balance sheet Tower Group
Balance sheet Tower Group $ million 31 March 18 30 September 17 Movement $ Movement % Cash & call deposits 142.6 102.9 39.8 38.6% Investment assets 157.3 167.9 (10.7) (6.4%) Deferred acquisition costs 21.2 21.0 0.2 1.1% Intangible assets 31.6 31.3 0.2 0.8% Other operational assets 310.3 334.1 (23.8)
Slide 29: Reconciliation between underlying profit after tax and net profit after tax
Reconciliation between underlying profit after tax and net profit after tax 1. Non-underlying items are shown separately in Tower’s management reporting, yet included within ‘net claims expense’, ‘management and sales expenses’ and ‘tax expense’ (depending on the nature of the item) in the financial
Slide 30: Reinsurance structure overview
Reinsurance structure overview The excess on the aggregate cover has increased to $7m and the limit on catastrophe cover increased to $790m STRUCTURE OVERVIEW (per event) AGGREGATE COVER OVERVIEW FOR FY18 • Minimum event size of $1m to qualify, max of $5m per event coverage • $10m cover once $7m exc
Slide 31: 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 the webcast of the briefing is available at http://www.tower