Slides
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Tower Annual Shareholder Meeting 11 February, 2025
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Questions 2 Shareholder & Proxyholder Q&A Participation Written Questions: Questions may be submitted ahead of the meeting. If you have a question to submit during the live meeting, please select the Q&A tab on the right half of your screen at anytime. Type your question into the field and press submit. Your question will be immediately submitted. Help: The Q&A tab can also be used for immediate help. If you need assistance, please submit your query in the same manner as typing a question and a Computershare representative will respond to you directly. Phone numbers: • NZ - 0800-650-034 • Overseas - +64 9 488 7800
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Voting process 3 Shareholder & Proxyholder Voting Once the voting has been opened, the resolutions and voting options will allow voting. To vote, simply click on the Vote tab, and select your voting direction from the options shown on the screen. You can vote for all resolutions at once or by each resolution. Your vote has been cast when the tick appears. To change your vote, select ‘Change Your Vote’.
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4 Chairman’s update Michael Stiassny, Chairman CEO’s address Blair Turnbull, Chief Executive Officer Agenda Shareholder resolutions Questions & general business Michael Stiassny, Chairman Looking forward Paul Johnston, Chief Financial Officer
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5 Chairman’s update Generating value for shareholders • FY24 total dividends 9.5 cents per share • $45m capital return proposed • Tower entered the NZX 50 Portfolio Index and MidCap Index Strategy embedded and delivering results • Improved customer experience and business performance • Risk-based pricing and strengthened underwriting capabilities bolstering market position • Ongoing enhancements in digital and operational efficiencies continue to build resilience Further upside • Strong business performance enables continued investment in further improving processes and risk assessment Strong business performance provides solid platform for further gains
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6 CEO address Blair Turnbull Chief Executive Officer
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8 9.5 cents per share vs no dividend in FY23 Dividend Total FY24 declared dividends 48% vs 55% in FY23 FY24 performance Positive operational and business performance BAU claims ratio (Business as usual) MER (Management expense ratio) 31.4% vs 32.0% in FY23 Large event costs (including reinsurance reinstatement) -$2.3m vs $55.6m in FY23 Reported profit $74.3m vs $1.0m loss in FY23 Prior year metrics have been restated to align to IFRS 17 for consistent comparisons Note 1: Excluding divested portfolios. Prior year customer numbers have been adjusted to exclude sold and held for sale portfolios which include the Solomon Islands business and Vanuatu subsidiary, and the New Zealand commercial rural portfolio Note 2: Large event costs are negative in FY24 due to due to the absence of large events in the financial year and a favourable revision to prior year large events costs Note 3: Definition of underlying profit and a reconciliation to reported profit is included in the appendices GWP growth (Gross written premium) 15% | $595m vs $527m in FY23 $83.5m vs $7.1m in FY23 Underlying profit 305,000 vs 311,000 in FY23 Customers 1 1 2 3
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9 FY24: Continued premium growth Targeted growth • House GWP growth 18%; 72% rate, 28% volume • Motor GWP growth 13%; off-risking of high theft vehicles reduces number of motor policies • Risk-based pricing improving exposure; 91% of policies rated ‘Low’ or ‘Very Low’ flood risk (FY23: 90%) Addressing customer affordability • NZ retention at 77% (FY23: 77%)2 • 53% of customers have multiple policies • 29k customers accessed ‘Ways to Save’ feature G R O S S W R I T T E N P R E M I U M ($m) Note 1: Excluding divested portfolios. Prior year customer numbers have been adjusted to exclude sold and held for sale portfolios which include the Solomon Islands business and Vanuatu subsidiary, and the New Zealand commercial rural portfolio Note 2: Commercial rural policies have not been included because this business has been sold and policies are actively being transferred out of the portfolio Note 3: Other products include Marine, Travel, Pet, Liability, and Workers Compensation 15% underlying GWP growth1 3
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10 FY24: Continued improvement in MER MANAGEMENT EXPENSE RATIO 1 Operational efficiencies • Achieving scale with targeted premium growth • Suva hub answering 55% of NZ sales and service calls (FY23: 16%) Streamlining the business • Sale of Solomon Islands, Vanuatu and NZ commercial rural portfolio • Commission ratio2 at 1.5%; down from 2.1%, partly due to legacy portfolio purchases and transition to referral arrangements Note 1: Calculated as management expenses and net commission expense divided by net insurance revenue Note 2: Commission ratio for the comparative period has been restated due to adoption of IFRS17 which treats a portion of commission revenue as insurance revenue Management expense ratio (MER) improved to 31.4%
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11 FY24: BAU claims ratio significantly improves Effective pricing and underwriting • Targeted rating has reduced high-risk policies • Rating for inflation, reinsurance, high motor theft Faster and more efficient claims management • Digital evolution: new motor assessing tool live, auto allocation of online motor and house claims to repairers • Number of open BAU claims down by 50% • Turn around time decreased by 30% External factors improved performance • Calmer weather, easing inflationary pressures, and lower motor theft frequency BAU CLAIMS RATIO 1 Note 1: BAU claims are defined as those not part of a large event (large events are defined as having a cost to Tower of $2m or more, with lodged claims from two or more policyholders). BAU claims ratio is calculated as BAU claims expense divided by net insurance revenue Business as usual claims ratio improved to 48.1%
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12 FY24: Delivering shareholder returns A- 9.5c CAPITAL RETURN & DIVIDENDS $81m P r o p o s e d t o b e r e t u r n e d t o s h a r e h o l d e r s AM BEST FINANCIAL STRENGTH RATING FY24 FULL YEAR DIVIDEND PAID A f f i r m e d i n A p r i l 2 0 2 4 212% FY24 TOWER PARENT SOLVENCY P o s t d i v i d e n d a n d b e f o r e c a p i t a l r e t u r n T O W E R S O L V E N C Y1 N Z P A R E N T ( $ m ) N o n e p a i d i n F Y 2 3 Note 1:The 30 September 2024 solvency position was prepared in accordance with the RBNZ's Interim Solvency Standard, including the first amendment, which applied from 1 October 2023. The 30 September 2023 comparative was prepared in accordance with the RBNZ's Non-Life Solvency Standard, which was applicable until that date.
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FY25 Q1 trading update For the three months to December 31, 2024
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14 39% vs 57% in Q1 FY24 FY25 Q1 trading update Strong BAU claims performance, operational efficiencies, and targeted growth BAU claims ratio (Business as usual) MER (Management expense ratio) 30% vs 32% in Q1 FY24 Large event costs $3m vs $0m in Q1 FY24 Note 1: Excluding divested portfolios. GWP growth has been adjusted to exclude sold portfolios which include the Solomon Islands business and Vanuatu subsidiary, and the New Zealand commercial rural portfolio Note 2: The solvency position disclosed is based on Tower’s initial interpretation of Interim Solvency Standard (ISS2) and has been reviewed by Tower’s Appointed Actuary. Due to the complexity of the requirements within ISS2 and with insurance industry interpretations of these requirements continuing to develop, the final solvency position determined under ISS2 may be better or worse than that disclosed. Financial information provided on this page is based on Tower’s unaudited management accounts as at 31 December 2024 GWP growth (Gross written premium) 6% | $155m vs $150m in Q1 FY24 310,000 vs 305,000 as at 30 Sep 24 Customers 1 187% vs 176% as at 30 Sep 2024 Solvency ratio 2
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15 Q1: Continued premium growth Note 1: Excluding divested portfolios. GWP growth has been adjusted to exclude sold portfolios which include the Solomon Islands business and Vanuatu subsidiary, and the New Zealand commercial rural portfolio Financial information provided on this page is based on Tower’s unaudited management accounts as at 31 December 2024 GROUP GWP ($m) • 6% 1 GWP growth vs same period prior year • Rate increases have slowed, volume growth increased • 5k customer growth in Q1 to 310k • 12% GWP growth in NZ House portfolio; 6% volume growth • NZ retention at 78% (Q1 FY24: 78%)1 • Risk-based pricing improving exposure; 92% of new business policies rated ‘Low’ or ‘Very Low’ flood risk NET MOVEMENT IN NZ RISKS BY QUARTER (‘000s)
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16 Q1: Customer experience • NPS improved to +41 • Sales & service contact centre abandonment rate reduced to 7% (Q1 FY24: 9%) • Active users of My Tower increased 4% to 170k from Sep-24 • 7% increase in My Tower logins vs Q1 FY24 • Award winning service: 1st place Supreme Award for Retention in the CRM Contact Centre Awards (NZ) in Sep -24 N E T P R O M O T E R S C O R E
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17 Q1: Continued improvement in MER MANAGEMENT EXPENSE RATIO 1 • Management expense ratio at 30%, down from 32% • Achieving scale with targeted premium growth • Suva hub answering 70% of NZ sales and service calls • Digital transactions: 45% service, 60% sales, 66% claims Note 1: Calculated as management expenses and net commission expense divided by net insurance revenue Financial information provided on this page is based on Tower’s unaudited management accounts as at 31 December 2024
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18 Q1: BAU claims ratio significantly improves BAU CLAIMS RATIO 1 Note 1: BAU claims are defined as those not part of a large event (large events are defined as having a cost to Tower of $2m or more, with lodged claims from two or more policyholders). BAU claims ratio is calculated as BAU claims expense divided by net insurance revenue Financial information provided on this page is based on Tower’s unaudited management accounts as at 31 December 2024 • BAU loss ratio reduced to 39% • Targeted rating has reduced high-risk policies • External factors remain favourable with calmer weather and lower inflation • Internal assessing of motor claims increased to 94% reducing assessment cost • Digital journey: 53% of motor claims automatically allocated to repair network BAU CLAIMS RATIO BY QUARTER
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19 Strong capital and solvency position T O W E R S O L V E N C Y1 N Z P A R E N T ( $ m ) • Tower expects to continue to have a solvency margin, after the proposed capital return, that is in excess of both regulatory requirements and internal targets • RBNZ has issued a second amendment to the Interim Solvency Standard (ISS2), effective from 1 March 2025 • ISS2 corrects issues in the previous solvency standard • If ISS2 had been in place at 30 September 2024, the solvency margin would have been $139.6m, rather than the $171.4m that was reported1 • Tower manages its capital position using an internal target solvency margin that is greater than the minimum regulatory solvency margin Previous ISS Pro forma ISS2 Note 1: The solvency position disclosed is based on Tower’s initial interpretation of ISS2 and has been reviewed by Tower’s Appointed Actuary. Due to the complexity of the requirements within ISS2 and with insurance industry interpretations of these requirements continuing to develop, the final solvency position determined under ISS2 may be better or worse than that disclosed.
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Looking forward Paul Johnston
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21 FY25 guidance and future targets FY24 Actual FY25 Guidance FY27 Target GWP growth (excluding operations sold) 15% 7% - 12% 10% - 15% Large events cost/allowance -$2.3m $50m Management expense ratio 31.4% < 29% < 26% Combined operating ratio 79% 84% - 86% < 86% Underlying NPAT (assuming full utilisation of large events allowance) $83.5m $60m - $70m Return on equity1 23% 13% - 17% > 18% Note 1: Return on equity is defined as reported net profit after tax divided by average closing book equity • FY25 assumes full utilisation of $50m large event allowance. Any unused portion of the large events allowance at year end will increase underlying NPAT, and improve the full year result • Large events allowance used so far in FY25 is $3m for Dunedin Flood in October 2024 • The benefit to underlying NPAT from no further large events in FY25 would be an additional $34m ($47m less tax)
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22 Focus on customer experience and targeted growth • Enhancing risk-based pricing – landslide and sea surge applied to renewal book and included in purchase journey • New partnerships for further growth • Motor policy growth through targeted risk approach • Renewal journey uplift to increase retention
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23 Continuous efficiency & process improvements • Targeting 80% of all NZ sales, service, and claim lodgement tasks to be digital by end FY27 (FY24: 45%) • New house assessing system planned, reducing assessment time and repair costs • New contact centre platform planned to deliver frontline efficiencies • Remediation lessons applied to processes and systems • Streamlining the business – exit from NZ commercial rural portfolio completed M A N A G E M E N T E X P E N S E R A T I O ( % N E P ) Targets
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24 Fostering sustainability Climate and community • Parametric partnership with the UNCDF and CelsiusPro, global insurtech • FY24 Scope 1 and 2 emissions 20% below FY20 baseline year • Supporting university scholarships in New Zealand and Fiji Our people • Staff engagement score 8.1 • Gender pay equity gap 0.9%1 • 30% of Tower staff are members of representation groups 2 • Winner 2024 ANZIIF NZ Insurance Industry Awards Excellence in Workplace Diversity, Equity & Inclusion • Winner Fiji Prime Minister’s ‘Employer of the Year’ award Note 1: Comparison of like-for-like roles for women and men at Tower (men are paid 0.9% more than women for the same role) Note 2: Employee representation groups include groups for rainbow, Māori, women, physical & neuro diversity, wellbeing, and cultural diversity
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Continued focus on strategic delivery & strong performance • Continuing to invest in customer experience • Customer remediations, FMA proceedings and implementing lessons • Delivering profitable growth in targeted segments • Continuous efficiency, digitisation and process improvements • Strong capital and solvency • Investing in future resilience and sustainability 25
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Shareholder resolutions Michael Stiassny, Chairman
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27 Shareholder resolutions Resolution 1 • Authorisation for Board to determine auditor remuneration Resolution 2 • Re-election of Marcus Nagel as Director Resolution 3 • Approval of capital return via a scheme of arrangement
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Questions & general business?
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29 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.tower.co.nz/investor-centre/ It contains summary information about Tower as at 30 September 2024 and as at 31 December 2024 which is general in nature, and does not purport to contain all information a prospective investor should consider when evaluating an investment. It is not an offer or invitation to buy Tower shares. Investors must rely on their own enquiries and seek appropriate professional advice in relation to the information and statements in relation to the proposed prospects, business and operations of Tower. The data contained in this document is fo r illustrative purposes only. Past performance is not a guarantee of future performance and must not be relied on as such. The information in this presentation does not constitute financial advice. Forward looking statements This document contains certain forward-looking statements. Such statements relate to events and depend on circumstances that will occur in the future and are subject to risks, uncertainties and assumptions. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements, including, among others: the enactment of legislation or regulation that may impose costs or restrict activities; the re-negotiation of contracts; fluctuations in demand and pricing in the industry; fluctuations in exchange controls; changes in government policy and taxation; industrial disputes; and war and terrorism. These forward-looking statements speak only as at the date of this document. Disclaimer Neither Tower nor any of its advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents (other persons) makes any representation or warranty as to the currency, accuracy, reliability or completeness of information in this presentation. To the maximum extent permitted by law, Tower and the other persons expressly disclaim any liability incurred as a result of the information in this presentation being inaccurate or incomplete in any way. The statements made in this presentation are made only as at the date of this presentation. The accuracy of the information in this presentation remains subject to change without notice.