Tower Limited Amended 2018 Annual Report

2018
Tower Limited
Annual Report

2
Looking back on a year
of transformation, strong
growth and customer
confidence.
Tower has a history spanning nearly 150 years.
What started as a conversation to provide fairer,
local insurance to those who called New Zealand
home is now the Tower Insurance of today.
As we transform into a challenger brand, we
once again find ourselves in a position where
we’re challenging the market and offering Kiwis
a genuinely different choice for insurance.
Tower Snapshot
2

Over the past year...
• Added over 18,000 risks to our core New Zealand portfolio
• Grew GWP in our core New Zealand portfolio by 11.9%
• Launched risk based pricing, resulting in 4% growth in larger,
low risk areas like Auckland and Taranaki, while reducing our
exposure in extreme risk areas by an annualised figure of 17%
• Increased sales through digital channels to 45% of new
business in September 2018, up from less than 10% in FY16
• Hit the half way point of our major technology upgrade with
new business to be on sale on the new platform midway
through the 2019 calendar year
3

4
Our ambitious plan is all about
New Zealanders and Pacific
Islanders being able to see

Tower in a new light, and for
Tower to set the bar for how

insurance ‘should’ be.
Tower Limited annual report 20184

For almost 150 years
Tower has been insuring
New Zealanders, and over
the course of those years,
has transformed and
changed considerably.
A little over two years ago, we embarked
on our latest – and arguably most difficult –
transformation to date, to reposition the
business as a contemporary, challenger
brand, underpinned by a customer-focused,
digital-first strategy to successfully compete
in the 21st century.
We recognised that we hold a unique position in the
New Zealand insurance market. We have a solid existing
customer base, yet plenty of room to continue growing and
acquiring market share from the two large incumbents.
Over the past 18 months, research has shown us that
customers are unhappy with insurers. Our goal is to challenge
industry norms to change this because we believe this
customer dissatisfaction provides us with opportunity.
Our ambitious plan is all about New Zealanders and Pacific
Islanders being able to see Tower in a new light, and for Tower
to set the bar for how insurance “should” be. We believe that
delivering unique customer value through amazing claims
experiences will be our key differentiator and will build strength
and long-term value in our business.
Our focus on customers and the creation of new products and
processes will enable amazing claims experiences and allow
us to reach our challenger brand aspiration faster. This will be
supported with continued refinement of our underwriting,
enhanced operational efficiency and the replacement of our
core IT platform.
Over the past year we have delivered a number of proof
points that demonstrate our transformation is well underway.
New technology is accelerating growth with work already
completed resulting in a significant uplift in customers. In the
past year we added over 18,000 risks to our core New Zealand
portfolio, grew GWP in the core New Zealand portfolio by 11.9%
and saw total GWP reach $336 million across New Zealand
and the Pacific. Online sales comprised 45% of new business
in September 2018, up from less than 10% in 2016.
This uptake from our customers is proof that our confidence
in user-friendly technology is well placed.
Throughout the year we continued investing in our business,
building capability to enable growth and we achieved this
while reducing our expense ratio almost 1%, to 39%.
We are also well progressed on our technology upgrade,
recently moving through the half way point, where costs are
within tolerances, however like all projects of this nature there
remains risk and complexity in the delivery. We are managing
this with robust governance controls at all levels.
It is unfortunate that this growth and good progress has
been offset by increased claims costs and the settlement of
the Peak Re dispute earlier in the year. Weather in the Pacific
was the most significant impact on claims costs along with
some prior year development in New Zealand and other costs.
Each of these is well understood with pricing and underwriting
responses either already implemented or in train to improve
performance through the coming year.
Achieving settlement with Peak Re marked an important
step towards finalising this legacy issue and resulted in a
$16.2 million after-tax impact on profit.
These results show that we are removing legacy risks and
at the same time, realising the potential in the underlying
Tower business.
We are proud of the vision for Tower and the commitment
and passion of the team that is working to see our
transformation come to life. It is gratifying to see Tower’s
approach really resonating with our customers and as a
result, delivering the substantial growth seen in 2018.
Shareholders can be confident that the work we are doing
will deliver significant long-term value.
Update from the Chair and CEO
on behalf of the directors
Richard Harding
Chief Executive Officer
Michael Stiassny
Chairman
5

Features of full year 2018.
• Transformation of core business well underway and driving
strong GWP growth in the core New Zealand book of 11.9%
on the prior year, and strong volume growth, with 18,192
risks added to the core New Zealand book
1
• Claims costs increased due to severe weather in the Pacific
along with some prior year development in New Zealand
and other cost impacts. Each of these is well understood
and pricing and underwriting responses either already
implemented or in train to improve performance through
the coming year
• Major technology upgrade progressing well, with
replacement of core platform with leading technology
tracking well
• Reported full year loss of $6.7 million impacted by
-$16.2 million after-tax impact from Peak Re settlement
-$11 million before-tax impact from weather and
large events
-Minor adjustment to Canterbury provisions,
resulting in a $3.6 million after-tax impact
• Continued positive progress closing Canterbury
earthquake claims, with open claims almost halved,
down to 163, from 323 on October 1 2017
Tower management review
Full year to 30 September 2018
Tower Limited annual report 20186

7
GWP Growth in core
NZ book on prior year
11.9%
7

Full year
summary
Tower has strong
underlying New Zealand
and Pacific businesses
and the 2018 Financial
Year has seen the
continued delivery
against its strategy
to transform.
With a focus clearly on simplifying and
improving all aspects of our business to
differentiate the company, strong growth
in GWP and customer numbers, contained
expenses and a major technology upgrade
progressing well, all demonstrate that
transformation is well underway.
The implementation of risk-based pricing and continued
improvements in digital channels added 18,192 new risks
2
to
Tower’s core New Zealand portfolio, seeing core NZ GWP for
the year grow 11.9% contributing to total GWP of $336 million.
Tower reported a loss after tax of $6.7 million for the year
ended 30 September 2018 (FY18), narrowing from a loss of
$8 million for the year ended 30 September 2017 (FY17).
The strong growth of $23.7m in gross written premium and
$13.1m in net earned premium has been offset by storm
activity, higher claims costs, the resolution of the Peak Re
dispute as well as an increase in ultimate incurred claims
for Canterbury.
Severe storm activity in New Zealand and the Pacific resulted
in an $11 million before-tax impact to underlying profit, seeing
it decline to $13.6 million, from $18 million in the year prior.
Tower Limited annual report 20188

1. Following the end to Tower’s distribution relationship with Kiwibank on 4 April 2018,
the ‘core’ portfolio now refers to the NZ business excluding the ANZ Bank and
Kiwibank portfolios. The FY17 comparative has been restated to be consistent
with this approach.
2. In prior years Tower has reported volumes using policy numbers as the relevant
metric. Tower has changed to using risk numbers as the key metric in FY18 to align
with internal management reporting and to better illustrate risk exposures, e.g.,
where one policy might cover several risks.
9
Claims costs increased over the 2018 financial year, with
weather in the Pacific the most significant impact along
with some prior year development in New Zealand and
other cost impacts. Each of these is well understood
and pricing and underwriting responses either already
implemented or in train to improve performance through
the coming year.
Severe weather across the Pacific increased claims
costs significantly in FY18. Cyclone Gita impacted
Tonga heavily, while Cyclones Keni and Josie impacted
Fiji, resulting in a 10.4 percentage point uplift on the
Pacific FY17 claims ratio. Reinsurance is being utilised
to minimise impacts of weather along with ongoing
refinement of products and underwriting criteria.
New Zealand claims expenses also increased over the
2018 financial year due to a number of claims challenges,
however, these are being countered with pricing and
underwriting responses to improve performance.
A continued focus on non-personnel costs saw the
management expense ratio decrease almost 1% to 39%,
while still allowing further investment in the business.
Tower’s Pacific premium remains stable and in line with
the same period in the prior year, however, underlying
profit of $2.2 million has been impacted by Cyclones Gita,
Josie and Keni and a small number of commercial fires.
Tower continues to make solid progress settling claims in
Canterbury, reducing open claims by 160. On October 1 2017,
Tower had 323 open claims remaining. In the intervening 12
months, the number of open Canterbury Earthquake claims was
reduced to 163, with 318 claims closed, however, 115 new claims
from the EQC were received and 43 claims were reopened.
Group Profit Summary (NZ$m)
1
$ MILLIONFY18FY17Change
Gross written premium336.1 312.4 23.7
Gross earned premium323.1 306.1 17.0
Reinsurance expense(53.1)(49.2)(3.9)
Net earned premium270.0256.9 13.1
Net claims expense(141.2)(124.2)(17.1)
Large events claims expense(11.0)(7.4)(3.6)
Management and sales expenses(105.4)(102.4)(3.0)
Underwriting profit12.422.9 10.5
Investment revenue and other revenue7.2 6.1 1.1
Financing costs(0.6)(0.8)0.3
Underlying profit before tax19.1 28.2 (9.2)
Income tax expense(5.5)(10.2)4.7
Underlying profit after tax13.6 18.0 (4.5)
Peak Re settlement(16.2)0.0(16.2)
Christchurch impact(3.6)(18.6)15.1
Kaikoura impact0.3(4.1)4.5
Corporate transaction costs(0.2)(3.1)2.9
Foreign tax credit write-offs(1.2) (1.9) 0.7
Business in runoff(0.0)1.7(1.7)
Other non-underlying items0.60.00.6
Reported loss after tax(6.7)(8.0)(1.3)
9

Transformation momentum
is accelerating
Tower holds a
unique position in the
New Zealand insurance
market, with a solid
existing customer base,
yet plenty of room
to grow.
A clear strategic plan to continue
transforming and growing the business
by delivering a compelling, challenger
proposition to the market will see Tower
turn industry norms upside down and
revolutionise the way customers interact
with us.
The achievements seen to date show that there is a powerful
platform for future growth with progress in crucial areas:
• Focus on customers has delivered strong growth
• Management expenses ratio has reduced,
while continuing to invest
• Major technology upgrade progressing well
• Increases to claim costs well understood with
action taken to offset inflation
Tower Limited annual report 201810

11
Overview
• Strong GWP growth of 11.9% in core book with total
GWP growing strongly at 7.6%
• Growth in risks in core New Zealand book increased
significantly by 18,192
• 45% of new business sales online in September 2018,
up from less than 10% during FY16
• New approach to pricing combined with simple and
easy products driving impressive customer growth
and improved mix
Tower’s focus on customers has seen continued growth in
its core New Zealand portfolio in FY18, with 18,192 risks
added to the core book and GWP increasing 11.9%.
With Tower’s new product suite fully available online, and
continued refinement and optimisation of the digital sales
channels, more customers are choosing Tower, delivering
a significant uplift in new business sales, with 45% of new
business sales online in September 2018, up from less
than 10% in FY16.
In the Pacific, Samoa, American Samoa and the Solomon
and Cook Islands have returned to growth thanks to additional
underwriting, pricing and marketing support for local teams.
However, this growth has been offset by the continued
remediation of the Papua New Guinea portfolio to reduce
risk and exposure which will lead to improved profitability.
This positive result across Tower’s businesses is being
achieved through a combination of:
• Ongoing pricing improvements in New Zealand motor, house
and contents portfolios to offset increased claims costs
• Constant refinement of underwriting criteria enabling more
granular assessment to improve profitability of portfolio
• Attracting new, profitable customers with improved and
targeted offerings;
• Building and refining Tower’s digital offering and online
sales process
• The creation of the Pacific operations centre, centralising back
office functions, ensuring that the pricing and underwriting
approach is consistent and minimises claims leakage
Growth in GWP (NZ$m)
FY17 GWPNZ RateNZ VolumePacific GrowthRemediation
in PNG
FY18 GWP
312.4
336.2
15.3
8.2
2.4
2.1
Focus on customers driving growth
11

New Zealand and Pacific
claims expenses
Overview
• Claims costs increased across New Zealand and Pacific
• Inflation is well understood and has been addressed through
pricing and underwriting responses already implemented or
in train to improve performance through the coming year
• Strengthened underwriting and risk selection in the Pacific
to improve profitability
New Zealand claims expenses increased in FY18 due to a
number of claims challenges, however, these challenges are
well understood and swift action has been taken to address
each of them.
Throughout the year an increase in the development of open
FY17 claims was experienced. The reserving model used didn’t
respond well during the claims backlog experienced due to
storms, understating expected development of claims in FY17.
This resulted in a 1.2 percentage point increase in the claims
ratio and the reserving methodology has now been updated
accordingly.
Tower’s new, simpler products have resulted in a decrease in
NZ House claim frequency, however, this positive result has
been offset by an increase in severity, driven by a number of
large house fires and the increased costs relating to increasing
Health & Safety costs and asbestos testing requirements
which are both industry-wide issues driven by regulatory
change. In response to these issues Tower has strengthened
pricing and improved its underwriting criteria and expects to
see improved outcomes in the coming year.
Supply chain constraints and inflation continues to impact the
industry with increasingly advanced technology in cars seeing
the cost of repair rise. Tower is addressing motor claims inflation
through pricing and more granular underwriting.
A higher cost per claim in Tower’s NZ Contents book is also
linked to the increase in house fires and work has been
completed to actively address this through improved pricing
and underwriting.
In the Pacific, severe weather increased claims costs significantly
in FY18. Cyclone Gita impacted Tonga heavily, while Cyclones
Keni and Josie impacted Fiji, resulting in a 10.4 percentage point
uplift on Tower’s FY17 Pacific claims ratio.
In Fiji, an increase in claims expenses mostly relates to motor
claims inflation and in Tower’s National Pacific Insurance
business, a small number of large commercial fires have driven
the claims ratio higher.
Reinsurance is being utilised to minimise impacts of weather
and constant refinement of Tower’s pricing, product offering
and underwriting criteria in response to weather events and
claims inflation means that Tower expects to see its claims
ratio excluding large events revert to prior year levels.
Tower Limited annual report 201812

13
FY17 claims ratio,
including large
events
0.8%
1.2%
-1.3%
Year on year change in the claims ratio – New Zealand
1.1%
0.6%
0.6%
Change in
products mix
vs FY17
Increases to prior
year claims
FY17 adjusted for
claims re serving
and mix
Improved claim
frequency on
NZ House
Higher cost
per claim on
NZ House
Higher cost
per claim on
NZ Motor
Higher cost
per claim on
NZ Contents
FY18 claims ratio,
including large
events
57.2%
56.2%
54.2%
FY17 claims
ratio, including
large events
0.3%
9.2%
Year on year change in the claims ratio – Pacific
-1.5%
3.6%
4.0%
Change in
products mix
vs FY17
Cyclone
Gita
Cyclones
Josie and
Keni
FY17 adjusted
for storms and
country mix
Papua New
Guinea
Fiji,
excluding
cyclones
NPI,
excluding
cyclones
Other
countries
FY18 claims
ratio, including
large events
-1.2%
51.8%
1.2%
36.2%
46.9%
13

Severe weather events and
reducing volatility
Overview
• Severe and unprecedented weather drove increased
claims expenses in both FY17 and FY18
• Losses for these two years are significantly
above long-term trends
• Gross impact of weather events in FY18,
before reinsurance $20.1 million
• Reinsurance structure will reduce volatility from
exposure to large events with FY19 reinsurance
secured on favourable terms
The past two years have seen a number of unprecedented and
severe weather events that have impacted communities and
the business beyond expectations. Impacts to Tower in FY17
totalled $15.5 million before reinsurance, and this year reached
a gross amount of $20.1 million, well above both Tower’s 10 year
average of $7.6 million, and its five year average of $11.3 million.
This is not unique to Tower, with industry wide losses in
New Zealand from weather in the 2018 calendar year
totalling over $200 million so far.
In response to these increased impacts Tower has adjusted
pricing and strengthened its reinsurance programme to
increase cover and reduce volatility from large events in FY19
Tower has:
• Doubled its aggregate cover from $10 million to $20 million
and increased the excess from $7 million to $10 million
• Increased cover for single large events from $5 million
to $7.5 million, once its excess of $10 million is used
• Purchased drop-down cover to bridge the gap between
aggregate and catastrophe cover
• Secured FY19 reinsurance on favourable terms
Tower is putting in considerable effort and taking all appropriate
steps to preserve capital and reduce any volatility from these
short-term weather abnormalities.
Building capability while
controlling costs
Achievements
• Management expense ratio continues to improve
• Investment made to build capability and deliver growth
Tower has maintained its focus on non-personnel related
costs, reducing the management expense ratio to 39% in FY18,
compared to 39.9% FY17.
Tower has achieved a significant capability lift with a lower
expense ratio thanks to close management of costs. Tower has
increased capability in the pricing and underwriting, technology
and digital, data lake, data science, claims management,
procurement and customer insights areas.
In addition, the management expense ratio of 39.0%, includes
incremental investment of:
• $1.0m to reduce cyber security risks
• $1.2m on acquisition, including partnerships and marketing
• $0.7m on ancillary IT system refresh
Tower expects expenses will continue to stabilise as simplification
programme initiatives are embedded, with a step change in
productivity gains to be realised after the implementation of its
new IT platform.
Tower Limited annual report 201814

1515

Major technology
upgrade underway
Overview
The key to accelerating Tower’s transformation is a new IT
platform that enables the simplification of products and
processes. This will remove complexity for frontline teams
and enable the delivery of a unique and revolutionary
customer experience.
Combined with Tower’s push to move 50 - 70% of all
transactions online, removing complexity from the business
will deliver significant cost savings and productivity gains.
Tower is now approaching the half way mark of this programme
and progress to date is in line with expections. This programme
is complex and includes legacy replacement, digital
enhancement and product rationalisation. The programme
remains on track to deliver in the first half of the 2019
calendar year.
At the half way point costs are within tolerances, however like
all projects of this nature there remains risk and complexity in
the delivery. Tower’s robust governance controls include a
focus on managing delivery risk and cost trade-off.
Key benefits to be seen from Tower’s new IT platform include
the ability to:
• Create and deliver a unique customer experience
• Quickly deliver simple, customer focussed products
• Target specific, profitable customer segments through
granular, and automated pricing and underwriting
• Charge fairer and more accurate premiums through improved
access to, and use of, internal and external data
• Easily trial new products and pricing
• Rationalise products and reduce claims costs by improving
the customer claims journey and overall claims management
• Significantly reduce our cost base and realise large
productivity gains by moving low value transactions online
• Add value through improved employee engagement
Tower’s approach to implementing this new IT platform
is designed to deliver on a dual purpose – accelerate
transformation and protect and realise shareholder value.
Tower’s robust governance approach and clear roadmap
forward will enable Tower to commence selling new business
on the new platform in the first half of the 2019 calendar year.
Once new business is live, migration of the existing book
can start.
Canterbury update
Tower continues to make solid progress settling claims in
Canterbury, reducing open claims by 160. On October 1 2017,
Tower had 323 open claims remaining. In the intervening 12
months, the number of open Canterbury Earthquake claims was
reduced by 318. However, 115 new claims from the EQC were
received and 43 claims were reopened.
Tower’s gross outstanding claims have more than halved since
September 2016. This demonstrates that solid progress is being
made. In addition, the amount of IBNR / IBNER and risk margin
has increased from 60% to 95% of case estimates.
Tower also welcomes the recent government announcement of
an enquiry into EQC as an important step toward ensuring that
mistakes of the past are learnt from and not repeated in future.
EQC Act reform will assist in ensuring past experience is not
repeated and that the pitfalls and problems associated with the
EQC set up and the 2010 model can be avoided. Tower strongly
believes that the Kaikoura model is successful and that any
reform of the EQC must include these changes.
Tower Limited annual report 201816

17
$ MILLIONSep 18Mar 18Sep 17Mar 17Sep 16
Case estimates37.548.0 58.973.993.2
IBNR/IBNER
1
21.4 22.0 34.4 47.4 44.0
Risk margin9.010.813.918.211.9
Additional risk margin5.010.010.0--
Actuarial provisions35.442.858.365.655.9
Gross outstanding claims72.990.8 117.2139.5149.1
Ratio of provisions to case estimates
2
95%89%99%89%60%
1. IBNR / IBNER includes claims handling expenses
2. Ratio of IBNR / IBNER plus risk margin to case estimates
17

Solvency position
Overview
Tower holds significant capital over and above the minimum
regulatory requirement.
As at 30 September 2018, following the Peak re settlement and
the weather events earlier this year, Tower Insurance Limited
held approximately $78 million of solvency margin, $28 million
above RBNZ requirements and equivalent to 234% of minimum
solvency capital.
An additional $25 million in corporate cash is also held
by Tower Limited.
Tower retains access to undrawn debt facilities and has
a preference to fund remaining IT investment from debt.
Net cash held in corporate
TIL's solvency margin above RBNZ minimum
TIL's RBNZ minimum solvency margin
TIL's MSC
BNZ facility (drawndown)
25
39
50
59
28
25
50
58
38
50
61
-30
1
200%
180%
100%
Tower Insurance Limited solvency
position plus corporate cash ($m)
30 Sep 17 31 Mar 1830 Sep 18
Tower Limited annual report 201818

19
Overview
Tower is transforming, and is focussed on progressing initiatives
that will continue accelerating momentum and deliver long-
term shareholder value.
Tower has provided a one-off guidance for FY19 to demonstrate
its confidence in the strategy and performance of its underlying
business. Tower’s guidance for underlying NPAT in FY19 is in
excess of $22m.
This includes the following assumptions:
• Continued momentum in revenue growth and sales through
improved digital channels
• Underwriting and pricing changes will be implemented,
continuing to drive improvement in mix of risk, as well as
addressing inflation
• Pacific contribution will return to normal levels
• The management expenses ratio will be maintained at a
steady level
• The Aggregate excess will be fully utilised for weather events
Accordingly, Tower’s Board has determined that in FY19,
Tower will pay a dividend of 50% to 70% of reported NPAT
where prudent to do so.
Tower is being transformed and the work underway will
deliver significant long-term value
Outlook
19

Over the past two years
we’ve spoken about the
significant opportunity
that exists in the Tower
business. Our clear
strategic plan is seeing
us realise this potential
with our transformation
into a digital challenger
brand well underway.
Our desire to step outside the confines of
a traditional insurer to challenge industry
norms, along with our dynamic size means
that we can make decisions faster and
capitalise on opportunities quicker and
more efficiently than our competitors.
There are many similarities between the New Zealand and
Australian insurance industries where two large multi-nationals
hold a high percentage of the market. In Australia, challenger
brands entered and achieved significant growth thanks to
their ability to quickly deliver something unique and targeted
to customers.
Over the past 18 months, research has shown us that customers
are unhappy with insurers. Our goal is to challenge industry
norms to change this because we believe this customer
dissatisfaction provides us with opportunity.
We believe that delivering unique customer value through
amazing claims experiences will be our key differentiator and
will build strength and long-term value in our business.
Our focus on customers and the creation of new products and
processes will enable amazing claims experiences and allow
us to reach our challenger brand aspiration faster. This will
be supported with continued refinement of our underwriting,
enhanced operational efficiency and the replacement of our
core IT platform.
With this work already delivering benefits and we are now
accelerating our progress to deliver a step change in results
and long-term shareholder value.
Delivering against our challenger strategy will enable us to
achieve our uplifted, medium-term operating targets of:
• GWP growth of 8-10%
• Combined Operating Ratio < 85%
• Return on equity of 14–16%
Transformation
Tower Limited annual report 201820

Customer and community
Our transformation is
driven by our purpose
to set things right for
our customers and
communities.
Over the past 18 months we’ve spent time
working with our customers to understand
their frustrations and what they think a
Tower of the future could look like.
As a result of this work, we’ve come to a firm belief that
customers deserve better and we have refined our customer
proposition to start offering customers a truly different choice
for insurance.
We are removing jargon filled policies and making our award
winning policies even simpler. Not only does this benefit our
customers, it reduces the complexity and leakage that comes
from having over 400 different products.
We will continue with our push for fairer pricing which will
allow us to grow in the large low risk areas, like Auckland and
Taranaki, that had previously been subsidising those in high-
risk areas. We have communicated this change openly and
honestly, receiving positive feedback about our approach and
we will continue operating and educating the community in
this way – transparently.
Our key differentiator will see us deliver amazing claims
experiences. Our new platform, combined with a number
of other ancillary systems, will increase automation. This will
improve the customer experience, reduce claim turn-around-
times and reduce leakage, resulting in improved efficiency
and profitability.
In September we launched our first community partnership
and Tower became staunch supporters of the New Zealand
Paralympic Team. This partnership signals a change for our
brand and a shift to closer connections with the communities
within which we operate. We will continue increasing our
presence and engagement with the community to improve
these connections and build a brand that is known for being a
part of local communities.
In the Pacific, our new operations centre will support local
teams through improved product, pricing and underwriting
capability to ensure we grow within our risk appetite. Complex
claims management will improve customer experience and
reduce leakage.
What we’re building will be unique and will continue to attract
more customers to Tower and drive strong growth.
21

The positive results
we’ve delivered in the
underlying business
are being driven by our
people and a noticeable
change in our culture.
We actively encourage our people to do
things differently and challenge the traditions
and norms of the industry in which we
operate. Pleasingly, we are seeing positive
shifts in our culture measures as well as
steady increases in employee engagement
measures over the past two years.
This passion to do things differently has seen our people
initiate and drive a number of projects that have improved
our performance thanks to improving customer experience.
We have reduced the amount of duplication occurring in
our back offices and implemented a number of diversity
and inclusion initiatives.
In 2018 we held our first annual Buddy Up day, where employees
from across the business buddied up with our frontline teams
to understand our current customer experience and the steps
we’re taking to improve this. Activities like this signal a shift in our
culture toward one that is more customer centric and focussed
on delivering on our strategy.
Throughout 2018 our employees also helped us celebrate
International Women’s Day, Diwali, the Paralympics
New Zealand Spirit of Gold Day, Chinese New Year,
Christmas, Matariki, Eid Mubarak, Te Wiki O Te Reo Maori,
Tongan Language Week, the Auckland Pride Parade and
launched a women’s networking and development initiative,
Lean-In.
In the coming year, our focus on diversity and inclusion
and improving culture and engagement will increase with
a continued drive to make Tower recognised as an employer
of choice.
Being an employer of choice is an important strategic decision
for us as it enables us to attract and retain employees who
continuously improve and reinvigorate the business and what
we do for our customers.
Our people
Tower Limited annual report 201822

23

Graham Stuart
BCom (Hons), MS, FCA
Non-Executive Director
Independent
Appointed Director: 24 May 2012
With over 30 years of senior
management experience, Graham has
held senior leadership roles with several
major corporates, in New Zealand and
overseas, the latest being the Sealord
Group of which he was Chief Executive
Officer for 7 years. Prior to that he held
a number of diverse leadership roles
including CEO of Mainland Products,
Managing Director of Lion Nathan
International, and Chief Financial Officer
and Director of Strategy for the Fonterra
Co-operative Group. Graham has a
Bachelor of Commerce (First Class
Hons) from the University of Otago, a
Master of Science from Massachusetts
Institute of Technology and is a Fellow
of Chartered Accountants Australia and
New Zealand. Graham has served on a
number of Government bodies including
the Food & Beverage Taskforce and the
Maori Economic Development Panel.
Graham resides in Auckland,
New Zealand.
Michael Stiassny
LLB, BCom, FCA, CFInstD
Chairman
Non-Executive Director
Independent
Appointed Director: 12 October 2012
Michael is a Fellow of Chartered
Accountants Australia and New Zealand.
He has both a Commerce and Law
degree from the University of Auckland.
He is Chairman of Ngati Whatua Orakei
Whai Rawa Limited, New Zealand
Transport Agency and is a director of a
number of other companies. Michael
is the immediate past President and
a Chartered Fellow of the Institute of
Directors in New Zealand (Inc).
Michael resides in Auckland,
New Zealand.
Board of Directors
Tower Limited annual report 201824

Steve Smith
BCom, CA, Dip Bus (Finance),
CFInstD
Non-Executive Director
Independent
Appointed Director: 24 May 2012
Steve has been a professional Director
since 2004. He has over 35 years'
business experience, including being a
specialist corporate finance partner at a
leading New Zealand accountancy firm.
He has a Bachelor of Commerce and
Diploma in Business from the University
of Auckland, is a member of Chartered
Accountants Australia and New
Zealand and a Chartered Fellow of the
Institute of Directors in New Zealand
(Inc). Steve is Chairman of Pascaro
Investments Ltd, and a Director of Rimu
S.A. (Chile) and the National Foundation
for the Deaf Inc.
Steve resides in Auckland,
New Zealand.
Warren Lee
BCom, CA
Non-Executive Director
Independent
Appointed Director: 26 May 2015
Warren has extensive experience
and a long record of leadership in
the international insurance industry,
including 15 years at AXA in senior
management positions within the
company’s Australian and Asian
businesses. Warren's two most
recent executive positions were Chief
Executive Officer of the Victorian Funds
Management Corporation and Chief
Executive Officer, Australia and New
Zealand for AXA Asia Pacific Holdings
Limited. Warren is a non executive
director of MyState Limited, a listed
Australian Financial Services Group
and the Go Hold Limited Group. He
has a Bachelor of Commerce from
the University of Melbourne and is a
member of Chartered Accountants
Australia and New Zealand.
Warren resides in Melbourne,
Australia.
Wendy Thorpe
BA (French), BBus (Accounting),
Grad Dip, Applied Fin & Inv,
Harvard AMP, FFin, GAICD
Non-Executive Director
Independent
Appointed Director: 1 March 2018
Wendy is an experienced financial
services leader and for the past 15 years
her executive career has focused on
leading technology and operations in
insurance and wealth management. Her
most recent executive role was as Group
Executive, Operations for AMP Ltd, and
she was previously Chief Operations
Officer and Chief Information Officer for
AXA Asia Pacific Holdings Ltd. Wendy
is also a Director of AMP Bank Limited,
Chair of Online Education Services Pty
Ltd, and a Director of Very Special Kids,
an Australian Not for Profit. Wendy has a
Bachelor of Arts from LaTrobe University,
a Bachelor of Business from Swinburne
University and a Graduate Diploma in
Applied Finance and Investment from
the Securities Institute of Australia. She
completed the Advanced Management
Program at Harvard Business School, is a
Fellow of the Financial Services Institute
of Australasia and a Graduate member
of the Australian Institute of Company
Directors.
Wendy resides in Melbourne,
Australia.
25

Contents
Independent
Auditor’s Report 27
Consolidated
Income Statement 33
Consolidated Statement of
Comprehensive Income 34
Consolidated
Balance Sheet 35
Consolidated Statement of
Changes in Equity 36
Consolidated Statement of
Cash Flows 37
Notes to the
Financial Statements 38-78
TOWER Limited
Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201826

27
The above statement should be read in conjunction 1ith the accompanying notes.
Tower Limited
Independent Auditor’s Report
For the year ended 30 September 2018
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Tower Limited
The financial statements comprise:
the consolidated balance sheet as at 30 September 2018;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of general accounting policies.
Our opinion
In our opinion, the financial statements of Tower Limited (the Company), including its subsidiaries
(the Group), present fairly, in all material respects, the financial position of the Group as at 30
September 2018, its financial performance and its cash flows for the year then ended in accordance
with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and
International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of solvency return assurance and agreed
upon procedures. The provision of these other services has not impaired our independence as auditor
of the Group.

Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall group materiality: $3,241,000, which represents approximately 1% of
premium revenue.
We chose premium revenue as the benchmark because, in our view, it is a key
financial statement metric used in assessing the performance of the Group and
is not as volatile as other profit and loss measures, and is a generally accepted
benchmark. The 1% is based on our professional judgement, noting that it is
also within the range of commonly accepted revenue related thresholds.
The following have been determined as key audit matters:
Valuation of outstanding claims
Valuation of EQC recovery receivables
Recoverability of the deferred tax asset
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the fi nancial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
Our Group audit scope focused on the most financially significant subsidiary, which contributes
approximately 83% of the Group’s premium revenue. We performed further audit procedures over the
balances and transactions of the non-significant subsidiaries and the consolidation of the Group’s
subsidiaries.
Tower Limited annual report 201828

29
The above statement should be read in conjunction 1ith the accompanying notes.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current year. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter How our audit addressed the key audit matter
(1) Valuation of outstanding claims (2018
$148 ,976,000, 2017 $181,156,000)
We considered the valuation of outstanding claims
a key audit matter because of the complexity
involved in the estimation process and the
significant judgements that management make in
determining the balance.
The valuation of outstanding claims relies on the
quality of underlying data and involves significant
judgements and assumptions given the inherent
uncertainty in estimating the expected present
value of future payments for claims incurred.
In particular, judgement arises over the estimation
of payments for claims that have been incurred at
the reporting date but have not yet been reported to
the Group, as there is generally less information
available in relation to these claims, and claims that
have been reported but there is uncertainty over the
amount which will be settled.
Outstanding claims include a risk margin that
allows for the inherent uncertainty in the central
estimate of the future claim payments. In
determining the risk margin, the Group makes
judgements about the volatility of each class of
business written and the correlation between each
division and between different geographical
locations.
Relevant references in the financial statements
Refer to notes B2, B3, B4 and B5 to the financial
statements, which also describes the elements that
make up the balance.
Our audit procedures included obtaining an
understanding of key controls, including key data
reconciliations and management review of the
estimates.
Historical claims data is a key input to the actuarial
estimates. Accordingly, we:
oEvaluated the design effectiveness and tested
controls over claims processing;
oRe-performed claims data reconciliations;
oAssessed a sample of claim case estimates at
the year end to check that they were
supported by appropriate documentation;
and
oInspected a sample of claims paid during the
year to confirm that they were supported by
appropriate documentation and approved
within delegated authority limits.
Together with PwC actuarial experts we:
oEvaluated the actuarial models and
methodologies used by comparing with
generally accepted models and
methodologies applied in the sector and with
the prior year;
oAssessed key actuarial judgements and
assumptions and challenged them by
comparing with our expectations based on
the Group’s experience, our own sector
knowledge and independently observable
industry trends;
oConsidered the work and findings of the
external independent actuaries engaged by
the Group; and
oAssessed the risk margin, by comparing to
known industry practices and the Actuaries
Institute recommended framework. In
particular we focused on the assessed level of
uncertainty in the central estimate.
We have no matters to report from the procedures
performed.

(2) Valuation of Earthquake Commission
(EQC) recovery receivables (2018
68,400,000, 2017 $65,100,000)
We considered EQC recovery receivables a key audit
matter because significant management judgement
is required t o value expected recoveries from EQC
in respect of land damage and building costs, as
these recoveries are subject to agreement with EQC.
The expected recoveries from EQC are related to the
Canterbury earthquakes which requires judgement
and actuarial expertise to evaluate the attribution of
claims cost between the major earthquake events, in
particular the September 2010 and February 2011
events.
Relevant references in the financial statements
Refer to notes B3 and E1 to the financial
statements.
We assessed management’s approach to estimate the
EQC recovery receivables. We reviewed
correspondence with EQC and held discussions with
management, lawyers, external advisors and external
independent actuaries to understand assumptions,
including the attribution of losses to the different
Canterbury earthquake events, used to establish the
right to recovery. We compared these assumptions
with sector peers and obtained evidence for any
significant variances.
We considered the range from which the amount
recognised has been determined and assessed whether
the current circumstances could support a different
recovery receivable amount.
We have no matters to report from the procedures
performed.
(3) Recoverability of the deferred tax asset
on tax losses (2018 36,376,000, 2017
37,782,000)
The Group has a deferred tax asset balance of
$36,376,000, of which $30,685,000 relates to
deferred tax assets arising from past tax losses.
We considered recoverability of the deferred tax
asset a key audit matter because it is sensitive to the
Group’s expected future profitability and its
entitlement to offset these losses against future
profits. Significant management judgement is
involved in forecasting future taxable profits which
are inherently uncertain.
Relevant reference in the financial statements
Refer to note D6 to the financial statements.
We evaluated management’s assessment of the
recoverability of the deferred tax asset, including
understanding the progress made by management in
improving the profitability of the business in recent
periods, which includes the remediation of the causes
of past losses through, amongst other things,
assessment of the Canterbury earthquakes claims and
related reinsurance and other recoveries (assessment
of the recoverability of the receivables from EQC) and
other expense reduction and income initiatives.
We assessed the operational plan used in the deferred
tax asset recoverability assessment by comparing
previous operational plans with actual results and
assessed the appropriateness of the assumptions used
in the operational plan. We used our tax specialist to
assess whether the Group is entitled to offset the tax
losses against future profits.
We have no matters to report from the procedures
performed.
Tower Limited annual report 201830

31
The above statement should be read in conjunction 1ith the accompanying notes.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the financial statements does not
cover the other information included in the annual report and we do not express any form of assurance
conclusion on the other information.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard, except that
not all other information was available to us at the date of our signing.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs NZ and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Karl Deutschle.
For and on behalf of:
Chartered Accountants Auckland
28 November 2018

Tower Limited annual report 201832

33
The above statement should be read in conjunction 1ith the accompanying notes.
TOWER Limited
Consolidated Income Statement
For the year ended 30 September 2018
NOTE
2018
$000
2017
$000
Revenue
Premium revenueB1323,093 306,079
Less: Outwards reinsurance expense(54,251)(49,164)
Net premium revenue 268,842 256,915
Investment revenueC17,125 7,643
Fee and other revenue5,755 3,040
Net operating revenue281,722 267,598
Expenses
Claims expense200,467 225,384
Less: Reinsurance and other recoveries revenue(23,835)(37,833)
Net claims expenseB2176,632 187,551
Management and sales expenses D189,728 81,744
Impairment of reinsurance receivablesD222,511 –
Acquisition proposal expensesD3302 3,467
Financing expenses570 835
Total expenses289,743 273,597
Profit (Loss) attributed to shareholders before tax(8,021)(5,999)
Tax (expense) benefit attributed to shareholders’ profitsD61,295 (2,001)
Profit (Loss) for the year(6,726)(8,000)
Profit (Loss) attributed to:
Shareholders(6,773)(8,461)
Non-controlling interest47 461
(6,726)(8,000)
CENTSCENTS
Basic and diluted profit (loss) per shareF5(2.20)(4.12)

TOWER Limited
Consolidated Statement of
Comprehensive Income
For the year ended 30 September 2018
NOTE
2018
$000
2017
$000
Loss for the year(6,726)(8,000)
Other comprehensive income
Currency translation differences42 105
Gain on asset revaluationE3434 247
Deferred income tax relating to asset revaluationD6(81)(29)
Other comprehensive income net of tax395 323
Total comprehensive loss for the year(6,331)(7,677)
Total comprehensive (loss) income attributed to:
Shareholders (6,474)(8,143)
Non-controlling interest143 466
(6,331)(7,677)
Tower Limited annual report 201834

35
The above statement should be read in conjunction 1ith the accompanying notes.
TOWER Limited
Consolidated Balance Sheet
As at 30 September 2018
NOTE
2018
$000
2017
$000
Assets
Cash and cash equivalentsC2102,001 83,876
Receivables E1259,607 286,569
InvestmentsC3198,000 186,702
Derivative financial assetsC5271 231
Deferred acquisition costsD422,595 20,961
Property, plant and equipment E38,510 8,780
Intangible assetsE245,042 31,334
Current tax assetsD613,831 13,462
Deferred tax assetsD636,376 32,745
Total assets686,233 664,660
Liabilities
PayablesE580,375 68,824
ProvisionsE65,789 5,773
Insurance liabilitiesB4324,527 343,498
BorrowingsC4 – 29,921
Current tax liabilitiesD6174 560
Deferred tax liabilitiesD6589 340
Total liabilities411,454 448,916
Net assets274,779 215,744
Equity
Contributed equityF1447,543 382,172
Accumulated (losses) profit(58,077)(51,299)
ReservesF2(116,155)(116,454)
Total equity attributed to shareholders273,311 214,419
Non-controlling interest1,468 1,325
Total equity274,779 215,744
The consolidated financial statements were approved for issue by the Board on 28 November 2018.
Michael P Stiassny Graham R Stuart
Chairman Director

ATTRIBUTED TO SHAREHOLDERS
NON-
CONTROLLING
INTEREST
$000
TOTAL
EQUITY
$000NOTE
CONTRIBUTED
EQUITY
$000
ACCUMULATED
(LOSSES)
PROFIT
$000
RESERVES
$000
TOTAL
$000
Year Ended 30 September 2018
At the beginning of the year 382,172 (51,299)(116,454) 214,419 1,325 215,744
Total comprehensive income (loss)–(6,773)299 (6,474)143 (6,331)
Transactions with shareholders
Net proceeds of capital raiseF165,371 – – 65,371 – 65,371
Other – (5) – (5) – (5)
Total transactions with shareholders65,371 (5) – 65,366 – 65,366
At the end of the year447,543 (58,077)(116,155)273,311 1,468 274,779
Year Ended 30 September 2017
At the beginning of the year 382,172 (42,822)(116,772) 222,578 1,374 223,952
Total comprehensive income (loss) – (8,461)318 (8,143)466 (7,677)
Transactions with shareholders
Dividends paidF1 – – – – (515)(515)
Other – (16) – (16) – (16)
Total transactions with shareholders – (16) – (16)(515)(531)
At the end of the year382,172 (51,299)(116,454)214,419 1,325 215,744
TOWER Limited
Consolidated Statement of Changes in Equity
For the year ended 30 September 2018
Tower Limited annual report 201836

37
The above statement should be read in conjunction 1ith the accompanying notes.
TOWER Limited
Consolidated Statement of Cash Flows
For the year ended 30 September 2018
NOTE
2018
$000
2017
$000
Cash flows from operating activities
Premiums received 319,329 309,147
Interest received 8,010 7,734
Net realised investment gain (loss)(605)(1,928)
Fee and other income received5,285 3,040
Reinsurance received45,780 28,962
Reinsurance paid(52,327)(50,228)
Claims paid(231,843)(248,183)
Payments to suppliers and employees (80,614)(76,408)
Income tax paid(2,831)(4,908)
Net cash inflow (outflow) from operating activities C610,184 (32,772)
Cash flows from investing activities
Net proceeds from financial assets(6,815)2,852
Purchase of property, plant and equipment and intangible assets(19,802)(6,883)
Disposal of property, plant and equipment and intangible assets73 136
Net cash inflow (outflow) from investing activities (26,544)(3,895)
Cash flows from financing activities
Net proceeds of share issue65,371 –
Facility fees and interest paid(734)(778)
Repayment of borrowings(30,000) –
Proceeds of borrowings – 30,000
Payment of non-controlling interest dividends – (515)
Net cash inflow (outflow) from financing activities 34,637 28,707
Net increase (decrease) in cash and cash equivalents18,277 (7,960)
Foreign exchange movement in cash(152)(392)
Cash and cash equivalents at the beginning of year 83,876 92,228
Cash and cash equivalents at the end of year C2 102,001 83,876
Accounting policy
The consolidated statement of cash flows presents the net changes in cash flow for financial assets. Tower considers that knowledge of gross
receipts and payments is not essential to understanding certain activities of Tower based on either: the turnover of these items is quick, the
amounts are large, and the maturities are short or the value of the sales are immaterial.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201838
| Part A – Introduction
This section provides introductory information that is helpful to an overall understanding of the financial statements, including an explanation of
Tower’s group structure and the areas of critical accounting judgements and estimates included in the financial statements. It also includes a
summary of Tower’s financial performance by operating segment.
| A1 Reporting Entity and Basis of Preparation
Entities reporting
The financial statements presented are those of Tower Limited (the Company) and its subsidiaries. The Company and its subsidiaries together are
referred to in this financial report as Tower or the Group. The address of the Company’s registered office is 45 Queen Street, Auckland, New Zealand.
Statutory base
Tower Limited is a company incorporated in New Zealand under the Companies Act 1993 and listed on the NZX Main Board and the Australian
Securities Exchange. The Company is a reporting entity under Part 7 of the Financial Markets Conduct Act 2013.
Basis of preparation
The financial statements of the Group have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They
comply with International Financial Reporting Standards (IFRS) and also New Zealand Equivalents to International Financial Reporting Standards (NZ
IFRS) and other applicable financial reporting standards, as appropriate for Tier 1 for-profit entities.
The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013 and
the NZX Main Board Listing Rules.
The Group financial statements are presented in New Zealand dollars and rounded to the nearest thousand dollars. They have been prepared on a fair
value measurement basis with any exceptions noted in the accounting policies below, or in the notes to the financial statements.
Changes in comparatives
Refer to Note G5 for details of change in comparatives. Changes relate to income statement reclassification, balance sheet reclassification
and presentation of notes. There is no change to net assets or the 2017 income statement.
| A2 Consolidation
Principles of consolidation
The Group financial statements incorporate the assets and liabilities of all subsidiaries of the Company at balance date and the results of all subsidiaries
for the year.
Subsidiaries are those entities over which the consolidated entity has control, being power over the investee; exposure, or rights to variable returns
from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns.
The results of any subsidiaries acquired during the year are consolidated from the date on which control was transferred to the consolidated entity and
the results of any subsidiaries disposed of during the year are consolidated up to the date control ceased.
The acquisition of controlled entities from external parties is accounted for using the acquisition method of accounting. Non-controlling interests in the
results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of
changes in equity and balance sheet respectively. Acquisition related costs are expensed as incurred.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the
change in carrying amount recognised in profit or loss.
Intercompany transactions and balances between Group entities are eliminated on consolidation.
Foreign currency
(i) Functional and presentation currencies
The financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates. The
Group financial statements are presented in New Zealand dollars and rounded to the nearest thousand dollars unless stated otherwise.
(ii) Transactions and balances
In preparing the financial statements of the individual entities, transactions denominated in foreign currencies are translated into New Zealand
dollars using the exchange rates in effect at the transaction dates. Monetary items receivable or payable in a foreign currency are translated at
reporting date at the closing exchange rate.

39
Translation differences on non-monetary items such as financial assets held at fair value through profit or loss are reported as part of their fair value
gain or loss.
Exchange differences arising on the settlement or retranslation of monetary items at year end exchange rates are recognised in the income
statements unless the items form part of a net investment in a foreign operation. In this case, exchange differences are taken to the Foreign Currency
Translation Reserve and recognised in the statements of comprehensive income and the statements of changes in equity.
(iii) Consolidation
For the purpose of preparing consolidated financial statements the assets and liabilities of subsidiaries with a functional currency different to the
Company are translated at the closing rate at the balance date. Income and expense items for each subsidiary are translated at a weighted
average of exchange rates over the period, as a surrogate for the spot rates at transaction dates. Foreign currency translation differences are taken
to the Foreign Currency Translation Reserve and recognised in the statements of comprehensive income and the statements of changes in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and
are translated at the closing rate with movements recorded through the Foreign Currency Translation Reserve in the statements of changes in
equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the
income statement.
Subsidiaries
The table below lists Tower Limited’s principal subsidiary companies and controlled entities. All entities have a balance date of 30 September.
NAME OF COMPANY
COUNTRY
INCORPORATED IN
HOLDINGS
NATURE OF BUSINESS20182017
Incorporated in New Zealand
Tower Financial Services Group LimitedNZ100%100%Holding company
Tower Insurance LimitedNZ100%100%General insurance
Tower New Zealand LimitedNZ100%100%Management services
Incorporated Overseas
Tower Insurance (Cook Islands) LimitedCook Islands100%100%General insurance
Tower Insurance (Fiji) LimitedFiji100%100%General insurance
Tower Insurance (PNG) LimitedPNG100%100%General insurance
National Pacific Insurance LimitedSamoa71%71%General insurance
Tower Insurance (Vanuatu) LimitedVanuatu100%100%General insurance

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201840
| A3 Critical Accounting Judgements and Estimates
The Group makes estimates and judgements in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Key areas where critical accounting estimates and judgements have been applied are noted below.
Canterbury earthquake claims estimation
The valuation of net outstanding claims is an area of significant judgement and estimation. Key elements of judgement included within claims
estimations are: the rate of claims closure; the quantum of closed claims reopening; the level of future increases in building and other claims costs;
future claim management expenses; assessments of risk margin; apportionment of claims costs between the four main earthquake events; and the
quantum of new claims being received from EQC and the average cost of these claims.
Key elements of judgement included within recoveries estimations are: the collectability of reinsurance recoveries; recoveries from EQC in respect of
land damage and building costs; and the assessments of risk margin. The nature of estimation uncertainties, including from those factors listed above,
mean that actual claims experience may deviate from reported results.
Refer to Note B3 for further detail on the Canterbury Earthquakes.
EQC recoveries
Valuation of additional EQC recoveries in respect of building costs and land damage is an area of significant judgement and estimation. Areas
of judgement and subjectivity exist in assessments of: claim file review of earthquake event allocation; the quality of assessment information; litigation
risk factors; and portfolio conservatism. Tower has filed a statement of claim against EQC in respect of land damage recoveries.
Refer to Note B3 and Note E1 for further detail on EQC recoveries for Canterbury earthquakes.
Tax provisions
The Group is subject to income taxes in New Zealand and jurisdictions where it has foreign operations. Significant management judgement is required
in determining the worldwide provision for income taxes. There are some transactions and calculations undertaken during the ordinary course of
business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on its understanding of tax law in each
relevant jurisdiction. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact
the current and deferred income tax assets and liabilities in the period in which such determination is made.
Deferred taxation
Deferred tax assets are recognised for all unused tax losses to the extent it is probable that taxable profits will be available against which the losses can
be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based on the likely
timing and quantum of future taxable profits.
This assessment is completed on the basis of the approved strategic plans of Tower Insurance Limited and subsidiaries. If future profits do not occur as
expected, or there is a significant change in ownership, Tower may not be able to utilise all of these tax losses.
Capitalised IT development costs
Capitalisation of IT development costs is an area of judgement and estimation. The application of NZ IAS 38 Intangible Assets includes accounting
considerations required for capitalisation of IT projects. When applying NZ IAS 38, areas of judgement include consideration of impairment indicators,
economic useful life, and previous Board impairment decisions.
Goodwill
Goodwill is an area of significant judgement and estimation. Areas of judgement and subjectivity exist in the assessment of cash generating units and
assumptions underlying goodwill impairment testing. Refer to Note E2 for further details of key assumptions used.

41
| A4 Segmental Reporting
NEW ZEALAND
GENERAL
INSURANCE
$000
PACIFIC ISLANDS
GENERAL
INSURANCE
$000
OTHER (HOLDING
COMPANIES &
ELIMINATIONS)
$000
TOTAL
$000
Year Ended 30 September 2018
Revenue
Net operating revenue235,335 43,174 3,213 281,722
Total revenue 235,335 43,174 3,213 281,722
Earnings before interest, tax, depreciation and amortisation(10,590)3,964 5,870 (756)
Interest expense – – (570)(570)
Depreciation and amortisation(1,027)(482)(5,186)(6,695)
Profit (Loss) before income tax(11,617)3,482 114 (8,021)
Income tax credit (expense)2,751 (2,016)560 1,295
Profit (Loss) for the year(8,866)1,466 674 (6,726)
Total assets 30 September 2018480,664 95,072 110,497 686,233
Total liabilities 30 September 2018345,406 63,224 2,824 411,454
Acquisition of property, plant and equipment and intangibles173 603 19,026 19,802
Year Ended 30 September 2017
Revenue
Net operating revenue222,117 44,816 665 267,598
Total revenue 222,117 44,816 665 267,598
Earnings before interest, tax, depreciation and amortisation(15,648)12,688 6,223 3,263
Interest expense – – (835)(835)
Depreciation and amortisation(1,529)(521)(6,377)(8,427)
Profit (Loss) before income tax(17,177)12,167 (989)(5,999)
Income tax credit (expense)2,470 (4,958)487 (2,001)
Profit (Loss) for the year(14,707)7,209 (502)(8,000)
Total assets 30 September 2017501,299 88,091 75,270 664,660
Total liabilities 30 September 2017355,369 59,910 33,637 448,916
Acquisition of property plant and equipment and intangibles819 295 12,059 13,173
Accounting policy
An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that
are different to those of other operating segments. Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision-maker who reviews the operating results on a regular basis and makes decisions on resource allocation and
assessing performance.
Tower operates predominantly in two geographical segments, New Zealand and the Pacific region. New Zealand segment comprised general
insurance business written in New Zealand. Pacific Islands segment includes general insurance business with customers in Pacific Islands written
by Tower subsidiaries and branch operations. Other includes head office expenses, financing costs and eliminations.
The Group does not derive revenue from any individual or entity that represents 10% or more of the Group’s total revenue.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201842
| Part B – Revenue and Claims
This section provides information about Tower’s insurance related financial performance. Tower operates as a general insurance company and its
insurance operations drive its performance and financial position.
Tower collects premiums from customers in exchange for providing insurance coverage over their assets and activities. These premiums are
recognised as revenue when they are earned by Tower, with a liability for unearned premiums recognised on the balance sheet.
When customers suffer a loss that is covered by their policy, Tower will make payments to customers or suppliers, which it recognises as claims
expenses. To ensure that Tower’s obligations to customers are properly recorded within the financial statements, Tower recognises provisions for
outstanding claims.
To manage Tower’s risk and optimise its returns, Tower reinsures some of its exposure with reinsurance companies. The premiums paid to reinsurers
are recognised as an expense, while recoveries from reinsurers are recognised as revenue.
| B1 Premium Revenue
2018
$000
2017
$000
Gross written premiums336,109 312,396
Less: Gross unearned premiums(13,016)(6,317)
Premium revenue323,093 306,079

Accounting policy
Premium revenue is recognised in the period in which the premiums are earned during the term of the contract. The proportion of premiums not
earned in the income statement at reporting date is recognised in the balance sheet as unearned premiums.
Premiums ceded to reinsurers under reinsurance contracts are recorded as outwards reinsurance expense and are recognised over the period of
the reinsurance contract. Accordingly, a portion of outwards reinsurance premium is treated at balance date as a prepayment.
| B2 Net Claims Expense
NOTE
2018
$000
2017
$000
Canterbury earthquake claims (4 key events)B310,100 15,916
Additional risk marginB3(5,000)10,000
Kaikoura earthquake claims(579)5,739
Other claims172,111 155,896
Total net claims expense176,632 187,551

43
Accounting policy
Claims expense is recognised when claims are notified. Provision is made for the estimated cost of claims incurred but not settled at balance date,
including the cost of claims incurred but not yet reported (IBNR) to the Group.
The estimated cost of claims includes direct expenses incurred in settling claims net of any expected salvage value and other recoveries. The Group
takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing
claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified
to the Group, where more information about the claim event is generally available. IBNR claims may not be apparent to the insured until many years
after the events giving rise to the claims have happened. In calculating the estimated cost of unpaid claims the Group uses a variety of estimation
techniques, generally based on statistical analyses of historical experience, which assumes that the development pattern of current claims will be
consistent with past experience. Allowance is made for changes or uncertainties which may create distortions in underlying statistics or which may
cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
—changes in Group processes which might accelerate or slow down the development and (or) recording of paid or incurred claims, compared with
statistics from previous periods;
—the effects of inflation; and
—the impact of large losses.
A component of these estimation techniques is the estimation of the cost of notified but not paid claims. In estimating the cost of these, the Group
has regard to the claim circumstances reported, any information available from loss adjusters and information on the cost of settling claims with
similar characteristics in previous periods.
Provisions are calculated net of any reinsurance recoveries. Gross provisions are estimated by adding the expected reinsurance recovery to the
net provisions. Details of specific assumptions used in deriving the outstanding claims liability at year end are detailed in Note B5.
Reinsurance and other recoveries on claims expense are recognised as revenue. Recoveries are measured as the present value of expected
future receipts.
| B3 Canterbury Earthquakes
As at 30 September 2018 Tower has 163 claims remaining to settle (2017: 323 claims) out of a total number of 16,152 claims received as a result of
earthquakes impacting the Canterbury region during 2010 and 2011 (2017: 16,106 claims). To date, Tower has paid out more than $869 million to
customers (2017: $825 million) in respect of the four main earthquakes that occurred on 4 September 2010; 22 February 2011; 13 June 2011 and
23 December 2011.
Outstanding claims comprises case estimates, claims incurred but not reported (IBNR) and risk margins. In the year ended 30 September 2018,
case estimates have reduced as claims have been settled and paid. There have been increased costs on remaining open claims; new over-cap
claims being received from EQC; and litigation on claims.
As at 30 September 2018, Tower has estimated gross ultimate incurred claims of $905.8 million in respect of the four main Canterbury earthquake
events (2017: $897.4 million).
The financial cost to Tower of the Canterbury earthquakes is reduced through reinsurance and is reflected within net outstanding claims.
Tower continues to work closely with its catastrophe reinsurance partners as it works through its Canterbury claims settlement programme.
Catastrophe reinsurance partners are required to have a financial strength rating of at least A- issued by a recognised international rating agency.
The table below presents a financial representation of Tower’s net outstanding claims provision at 30 September 2018 in relation to the four main
earthquake events.
Canterbury earthquake provisions
2018
$000
2017
$000
Insurance liabilities
Gross outstanding claims(67,900)(107,200)
Additional risk margin(5,000)(10,000)
(72,900)(117,200)
Receivables
Reinsurance recovery receivables7,800 13,600
EQC related to open claims4,500 5,800
Less: EQC payable to reinsurers(1,000)(1,700)
11,300 17,700
Net outstanding claims(61,600)(99,500)

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201844
B3 Canterbury Earthquakes (continued)
EQC recovery receivables
Tower has one significant receivable amount related to closed Canterbury earthquake claims, being $68.4 million from EQC (2017: $65.1 million).
$16.4 million of this EQC amount is payable to reinsurers which has been allowed for in payables (2017: $17.7 million). The amount payable to
reinsurers may vary depending on the balance collected from EQC. A risk margin of $10.1 million has been allowed for on the receivable from EQC
(2017: $10.7 million).
Tower estimates the gross amount receivable due from EQC is significantly higher than the $68.4 million, but has adopted this amount, which is the
actuarial valuation of the Appointed Actuary. The method by which the actuarial valuation is completed recognises the inherent risk and uncertainty
with recovery of the full gross amount.
Tower acknowledges that the EQC recoveries relating to Canterbury earthquakes are an area of significant accounting estimation and judgement,
including earthquake event allocation, litigation risk factors and other actuarial assumptions.
Additional risk margin
At 30 September 2017, the Board elected to create an additional risk margin of $10.0 million over and above the provision of the Appointed Actuary,
which is set at the 75th percentile probability of sufficiency. This provision has been reviewed by the Board and has been reduced to $5.0 million as
at 30 September 2018. The Board will continue to review this additional risk margin each half year and the remaining $5.0 million is expected to be
released once the Canterbury Outstanding Claims Liability has sufficiently run off.
The following table presents the cumulative impact of the four main Canterbury earthquake events on the income statement.
NOTE
2018
$000
2017
$000
Cumulative expenses associated with Canterbury earthquakes:
Earthquake claims estimate(905,840)(897,440)
Reinsurance recoveries723,173 746,623
Claim expense net of reinsurance recoveries(182,667)(150,817)
Reinsurance expense(25,045)(25,045)
Additional risk margin(5,000)(10,000)
Cumulative impact of Canterbury earthquakes before tax(212,712)(185,862)
Income tax60,228 52,710
Cumulative impact of Canterbury earthquakes after tax(152,484)(133,152)
Recognised in current period (net of tax)
Net claims expenseB2(7,272)(11,460)
Additional risk marginB23,600 (7,200)
Impairment of receivablesD2(15,660) –
(19,332)(18,660)
The Board are actively engaged in monitoring Canterbury earthquake developments. Board process relies on the Appointed Actuary’s determination of
earthquake ultimate incurred claims estimates and the derivation of estimated outcomes. Recognising relative complexities which exist within remaining
open claims, the Appointed Actuary has reviewed each remaining property file with Tower claims staff. This individual claim methodology included
review of the latest specialist assessment reports and scope of works to repair or rebuild properties to determine the propensity for future costs to vary.
In addition, further provision was made for claims re-opening; claims moving over the EQC cap of $100,000; claims in litigation and other claim categories.
The actuarial reviews performed during the year ended 30 September 2018 identified the following as key contributors to the increase in expected
earthquake claims costs:
—Greater than anticipated new over-cap claims received from EQC;
—Continued growth in the level of litigated claims received;
—Continued development of claim costs as they progress through the claims life cycle; and
—Increase in the level of claims handling expenses;

45
The key elements of judgement within the claims estimation are as follows:
Claims
—the level of future increases in building and other claims costs
—the number of claims subject to litigation and the average cost of these claims
—the number of new claims expected from EQC and the average cost of these claims
—the rate of closed claims reopening
—risk margin
—future claim management expenses, and
Recoveries
—recoveries from EQC (including litigation risks) in respect of land damage and building costs
—risk margin.
Given the nature of estimation uncertainties (including those listed above) actual claims experience may still deviate, perhaps substantially, from the
gross outstanding claims liabilities recorded as at 30 September 2018. Any further changes to estimates will be recorded in the accounting period when
they become known.
The catastrophe reinsurance cover headroom remaining is included in the table below.
CATASTROPHE REINSURANCE
COVER REMAINING
DATE OF EVENT
2018
$000
2017
$000
June 2011255,700 254,200
December 2011486,900 486,500
Tower has exceeded its catastrophe reinsurance limit in relation to the September 2010 and February 2011 events.
Sensitivity analysis – impact of changes in key variables
Net outstanding claims are comprised of several key elements, as described earlier in this note. Sensitivity of net outstanding claims is therefore driven
by changes to the assumptions underpinning each of these elements. The impact of changes in significant assumptions on the net outstanding claims
liabilities, and hence on Tower’s profit, are shown in the table below. Each change in assumption has been calculated in isolation of any other changes
in assumptions.
The impact of a change to claims costs is offset by reinsurance where there is reinsurance capacity remaining. The impact will be nil where the change
in claims costs is less than the remaining reinsurance capacity. However, if the change in claims costs exceeds the reinsurance capacity then Tower’s
profit will be impacted by the amount of claims costs in excess of the reinsurance capacity.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201846
The changes in the table below reflect the impact on Tower’s profits should that event occur.
CHANGE
VARIABLE
SPLIT BETWEEN EVENTSFOUR MAIN EARTHQUAKES
SEP 2010
$M
FEB 2011
$M
JUN 2011
$M
DEC 2011
$M
30-SEP-18
$M
30-SEP-17
$M
Outstanding claims:
(i)Change to costs and quantity of expected
claim estimates including building costs and
other impacts.
+ 5%
- 5%
(0.9)
0.9
(1.9)
1.9
–
–
–
–
(2.8)
2.8
(4.3)
4.3
(ii)Change in apportionment of claim costs
to / from February 2011 event.
+ 1%
- 1%
6.4
(6.9)
(8.8)
8.8
–
–
–
–
(2.4)
1.9
(4.1)
2.0
Receivables:
Reinsurance recovery receivables
(iii)Recoveries from EQC in respect of land
damage
+ 10%
- 10%
0.1
(0.1)
0.7
(0.7)
–
–
–
–
0.8
(0.8)
0.8
(0.8)
(iv)Recoveries from EQC in respect of building
costs
+ 10%
- 10%
3.4
(3.4)
1.0
(1.0)
–
–
–
–
4.4
(4.4)
4.1
(4.1)
(i)Calculated as the change in case estimates (net of EQC contributions) plus IBNR/IBNER and the impact on Tower’s profit quantified. Changes in
case estimates include over-cap claims, closed claims re-opening and risk margin.
(ii)Calculated as 1% of total reported costs (net of EQC contributions) plus IBNR/IBNER moved to/from Feb 2011 event and the impact on Tower’s
profit quantified.
| B4 Insurance Liabilities
2018
$000
2017
$000
Unearned premiums175,551 162,342
Outstanding claims143,976 171,156
Additional risk margin5,000 10,000
Total insurance liabilities324,527 343,498
Analysed as
Current 291,711 300,064
Non current32,816 43,434
Total insurance liabilities324,527 343,498
The table below includes the reconciliation of the unearned premiums as at the reporting date:
Opening balance162,342 157,620
Premiums written336,109 296,855
Premiums earned(323,093)(291,472)
Foreign exchange movements193 (661)
Closing balance175,551 162,342
B3 Canterbury Earthquakes (continued)

47
Accounting policy
Outstanding claims are measured at the central estimate of the present value of expected future payments after allowing for inflation and
discounted at the risk free rate. In addition a risk margin is added to the claims provision to recognise the inherent uncertainty of the central estimate
and to ensure provision is at least at 75% probability of sufficiency.
The expected future payments include those in relation to claims reported but not yet paid, claims incurred but not yet reported (IBNR), claims
incurred but not enough reported (IBNER) and anticipated claims handling costs. Claims handling costs include costs that can be associated directly
with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as
claims administration costs.
Provision has been made for the estimate of claim recoveries from third parties.
Liability adequacy testing is performed in order to recognise any deficiencies in the income statement arising from the carrying amount of the
unearned premium liability less any related deferred acquisition costs and intangible assets not meeting the estimated future claims under current
insurance conditions. Liability adequacy testing is performed at a portfolio level of contracts that are subject to broadly similar risks and are managed
together as a single portfolio.
Refer to Note B3 for further details on the additional risk margin.
| B5 Other Insurance Disclosures
B5.1 Net claims expense
20182017
RISKS BORNE IN
CURRENT YEAR
$000
RISKS BORNE IN
PRIOR YEARS
$000
TOTAL
$000
RISKS BORNE IN
CURRENT YEAR
$000
RISKS BORNE IN
PRIOR YEARS
$000
TOTAL
$000
Gross claims expense
Direct claims – undiscounted188,452 12,035 200,487 175,078 50,235 225,313
Movement in discount(60)40 (20)43 28 71
Total gross claims expense188,392 12,075 200,467 175,121 50,263 225,384
Reinsurance and other recoveries
Reinsurance and other recoveries
– undiscounted(20,073)(3,762)(23,835)(20,559)(17,272)(37,831)
Movement in discount – – – (1)(1)(2)
Total reinsurance recoveries(20,073)(3,762)(23,835)(20,560)(17,273)(37,833)
Net claims expense168,319 8,313 176,632 154,561 32,990 187,551
Current year amounts relate to risks borne in the current financial year. Prior period amounts relate to a reassessment of the risks borne in all previous
financial years including those arising due to the Canterbury earthquakes. Refer to Notes B2 and B3.
B5.2 Outstanding claims
(a) Assumptions adopted in calculation of insurance liabilities
The estimation of outstanding claims as at 30 September 2018 has been carried out by the following Actuaries:
Rick Shaw, B.Sc. (Hons), FIAA, Appointed Actuary; and
John Feyter, B.Sc., FNZSA.
The New Zealand actuarial assessments are undertaken in accordance with the standards of the New Zealand Society of Actuaries, in particular
Professional Standard No. 30 “Valuations of General Insurance Claims”. The Actuaries were satisfied as to the nature, sufficiency and accuracy of the data
used to determine the outstanding claims liability. The outstanding claims liability is set by the Actuaries at a level that is appropriate and sustainable to
cover the Group’s claims obligations after having regard to the prevailing market environment and prudent industry practice.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201848
B5 Other Insurance Disclosures (continued)
The following assumptions have been made in determining net outstanding claims liabilities:
20182017
Inflation rates varied from0.0%0.0% – 3.8%
Inflation rates for succeeding year0.0%0.0% – 3.8%
Inflation rates for following years 0.0%0.0% – 3.8%
Discount rates varied from 0.0% – 2.5%0.0% – 6.3%
Discount rates for succeeding year0.0% – 2.5%0.0% – 6.3%
Discount rates for following years0.0% – 2.5%0.0% – 6.3%
Claims handling expense ratio3.5% – 32.3%3.1% – 39.1%
Risk margin6.5% – 31.5%4.9% – 23.1%
In addition to the risk margin range shown above, the total risk margin also includes $14,000,000, gross of reinsurance (2017: $23,900,000) associated
with the Canterbury earthquakes.
The weighted average expected term to settlement of outstanding claims (except for Canterbury earthquake claims) based on historical trends is:
20182017
Short tail claims within 1 yearwithin 1 yearwithin 1 year
Long tail claims in the Pacific Islands1.0 to 1.8 years1.0 to 1.8 years
Inflation and discount rate
Insurance costs are subject to inflationary pressures. The valuation implicitly assumes that future inflation will be similar to that experienced in recent
years. For the Pacific countries it is assumed that additional superimposed inflation is offset by the discount effect and 0% has, therefore, been assumed
for both the inflation rate and discount rate.
For New Zealand business all liabilities are short-tail. Nil additional inflation has been assumed. Outstanding claim liabilities are discounted to present
value using a short-term discount rate.
EQC recoveries
For each claim to which additional EQC recoveries relate, Tower has allocated recoverable amounts according to the quality of information and
evidence available. Claims with primary evidence (e.g. independent expert documentation) have been assessed as having a strong position for recovery.
Claims with non-primary evidence (e.g. general documentation like post code analysis or adjacent locations) will have a lower likelihood of recovery.
Apportionment
Tower assesses claims and apportions damage between Canterbury earthquake events on an individual property basis. The allocation process uses a
hierarchical approach based on the relative quality and number of claim assessments completed after each of the four main earthquakes. Results from
the hierarchical approach are used as an input to the actuarial valuations which estimate the ultimate claims costs.
Claims handling expense
The estimate of outstanding claim liabilities incorporates an allowance for the future cost of administering the claims. This allowance is determined
after analysing historical claim related expenses incurred by the classes of business.
Risk margin
The outstanding claim liabilities also include a risk margin that relates to the inherent uncertainty in the central estimate of the future payments.
Risk margins are determined on a basis that reflects the business. Regard is given to the robustness of the valuation models, the reliability and volume
of available data, past experience of the insurer and the industry, and the characteristics of the classes of business written.
Uncertainty in claims is represented as a volatility measure in relation to the central estimate. The volatility measure is derived after consideration of
statistical modelling and benchmarking to industry analysis. The measure of the volatility is referred to as the coefficient of variation (CoV), defined as
the standard deviation of the distribution of future cash flows divided by the mean.
Risk margins are calculated by jurisdiction. The risk margin for all classes when aggregated is less than the sum of the individual risk margins. This reflects
the benefit of diversification. The measure of the parameter used to derive the diversification benefit is referred to as correlation, which is adopted with
regard to industry analysis, historical experience and actuarial judgement.
The risk margins applied to future claims payments are determined with the objective of achieving 75% probability of sufficiency for both the outstanding
claims liability and the unexpired risk liability.

49
The following analysis is in respect of the insurance liabilities:
2018
$000
2017
$000
Central estimate of expected present value of future payments for claims incurred95,425 110,398
Risk margin17,936 27,885
Claims handling costs6,901 9,714
120,262 147,997
Discount(271)(270)
Net outstanding claims119,991 147,727
Reconciliation of movements in discounted outstanding claim liabilities
20182017
GROSS
$000
REINSURANCE
$000
NET
$000
GROSS
$000
REINSURANCE
$000
NET
$000
Balance brought forward181,156 (33,429)147,727 210,202 (83,205)126,997
Effect of change in foreign exchange rates71 (99)(28)(553)98 (455)
Incurred claims recognised in the income
statement200,467 (23,835)176,632 225,384 (37,833)187,551
Claims paid and reinsurance recoveries raised(232,718)28,378 (204,340)(253,877)87,511 (166,366)
Total outstanding claims148,976 (28,985)119,991 181,156 (33,429)147,727
Reconciliation of movements in undiscounted claims to outstanding claim liabilities
20182017
GROSS
$000
REINSURANCE
$000
NET
$000
GROSS
$000
REINSURANCE
$000
NET
$000
Outstanding claims undiscounted3,461 (80)3,381 1,968 (367)1,601
Discount – – – 60 – 60
Outstanding claims3,461 (80)3,381 2,028 (367)1,661
Short tail outstanding claims116,610 146,066
Total outstanding claims119,991 147,727
(b) Sensitivity analysis
The Group’s insurance business is generally short tail in nature. Key sensitivities relate to the volume of claims, in particular for significant events
such as earthquakes or extreme weather.
The Group has exposure to historical inwards reinsurance business which is in run off. While this business is not material, it is sensitive to claims
experience, timing of claims and changes in assumptions. Movement in these variables does not have a material impact on the performance and equity
of the Group.
(c) Future net cash out flows
The following table shows the expected run-off pattern of net outstanding claims:
2018
$000
2017
$000
Expected claim payments
Within 3 months50,771 45,205
3 to 6 months25,762 28,699
6 to 12 months17,955 38,456
After 12 months25,503 35,367
Total outstanding claim liabilities119,991 147,727

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201850
B5.3 Development of claims
The following table shows the development of net outstanding claims relative to the current estimate of ultimate claims costs for the five most
recent years:
ULTIMATE CLAIMS COST ESTIMATE
PRIOR
$000
2014
$000
2015
$000
2016
$000
2017
$000
2018
$000
TOTAL
$000
At end of incident year116,297 125,054 133,776 138,647 149,260
One year later114,810 126,231 132,388 141,378
Two years later117,108 126,067 134,640
Three years later117,629 127,552
Four years later116,131
Current estimate of ultimate claims cost116,131 127,552 134,640 141,378 149,260
Cumulative payments(115,833)(127,092)(131,941)(136,344)(109,517)
Undiscounted central estimate47,192 298 460 2,699 5,034 39,743 95,426
Discount to present value(271)
Discounted central estimate95,155
Claims handling expense6,901
Risk margin17,936
Net outstanding claim liabilities119,991
Reinsurance recoveries on outstanding claim
liabilities and other recoveries28,985
Gross outstanding claim liabilities148,976
B5.4 Liability adequacy test
Liability adequacy tests are performed to determine whether the unearned premium liability is sufficient to cover the present value of the expected
cash flows arising from rights and obligations under current insurance contracts, plus an additional risk margin to reflect the inherent uncertainty in
the central estimate. The future cash flows are future claims, associated claims handling costs and other administration costs relating to the business.
If the unearned premium liability less related deferred acquisition costs exceeds the present value of expected future cash flows plus additional risk
margin then the unearned premium liability is deemed to be adequate. The risk margins applied to future claims were determined with the objective of
achieving at least 75% probability of sufficiency of the unexpired risk liability using the methodology described above. The unearned premium liabilities
as at 30 September 2018 were sufficient (2017: sufficient).
2018
%
2017
%
Central estimate claim % of premium44.9%41.2%
Risk margin11.3%12.0%
B5.5 Insurer financial strength rating
Tower Insurance Limited has an insurer financial strength rating of ‘A-’ (Excellent) issued by international rating agency AM Best Company Inc. with an
effective date of 9 March 2018.
B5.6 Reinsurance programme
Reinsurance programmes are structured to adequately protect the solvency and capital positions of the insurance business. The adequacy of
reinsurance cover is modelled by assessing Tower’s exposure under a range of scenarios. The plausible scenario that has the most financial significance
for Tower is a major Wellington earthquake. Each year, as part of setting the coming year’s reinsurance cover, comprehensive modelling of the event
probability and amount of the Group’s exposure is undertaken.
B5.7 Assets backing insurance business
The Group has determined that all assets within its insurance companies are held to back insurance liabilities, with the exception of property, plant and
equipment and investments in operating subsidiaries.
Assets backing insurance liabilities are managed in accordance with approved investment mandate agreements on a fair value basis and are reported
to the Board on this basis.
B5 Other Insurance Disclosures (continued)

51
| Part C – Financial Instruments and Liquidity
Funds provided by shareholders and collected as premiums are invested by Tower, providing a financial return and also ensuring that Tower’s
obligations to pay claims and expenses can be met.
This section provides information about Tower’s financial instruments, including information about the cash and investments that Tower holds, its
approach to managing risk for these financial instruments, and its cash flows.
| C1 Investment Revenue
2018
$000
2017
$000
Fixed interest securities
Interest income8,010 7,734
Net realised gain (loss)146 (631)
Net unrealised gain (loss)596 913
Total fixed interest securities8,752 8,016
Equity securities
Net unrealised gain (loss)(745)(3)
Total equity securities(745)(3)
Other
Net realised gain (loss)(751)(1,297)
Net unrealised gain (loss)(131)927
Total other(882)(370)
Total investment revenue8,010 7,734
Total net realised gain (loss)(605)(1,928)
Total net unrealised gain (loss)(280)1,837
Total investment revenue7,125 7,643
Accounting policy
Investment revenue is recognised as follows:
(i) Interest income on fixed interest securities
Interest income is recognised using the effective interest method.
(ii) Fair value gains and losses
Fair value gains and losses on investments are recognised through the income statement in the period in which they arise. The gains and losses
from fixed interest, equity and property securities have been generated by financial assets designated on initial recognition at fair value through
profit or loss. Other investment gains and losses have been generated by derivative financial assets and financial liabilities classified as held for
trading at fair value through profit or loss.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201852
| C2 Cash and Cash Equivalents
2018
$000
2017
$000
Cash at bank and in hand45,986 21,981
Deposits at call55,561 57,689
Restricted cash454 4,206
Total cash and cash equivalents102,001 83,876
Accounting policy
Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions, other short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
The effective interest rate at 30 September 2018 for deposits at call is 2.25% (2017: 2.60%). There was no offsetting within cash and cash equivalents
(2017: nil).
Restricted cash
Tower is a party to the Canterbury Earthquake Shared Property Process – Insurer Contract (SPP) which sets out obligations for insurers and appoints
a lead insurer to act on behalf of other insurers with respect to the repair and rebuild of shared properties (known as multi-units). As lead insurer on
Canterbury multi-unit repairs or rebuilds, Tower receives cash from other insurance companies as settlement of their obligations under building contracts
covered within the SPP. Tower separately holds this cash on behalf of other insurers in a segregated bank account.
At 30 September, Tower was holding $0.5 million (2017: $4.2 million) cash in respect of multi-unit claims as lead insurer on Canterbury claims. This is
recognised within Cash and cash equivalents on the balance sheet. Related to this are corresponding amounts being $0.2 million (2017: $1.6 million)
recorded within Insurance liabilities for Tower’s portion of multi-unit outstanding claims; and $0.3 million (2017: $2.6 million) recorded within Payables
as held on behalf of other insurers in respect of SPP claims.
| C3 Investment Assets
2018
$000
2017
$000
Fixed interest securities197,367 185,256
Equity securities599 1,412
Property securities34 34
Total Investments198,000 186,702

53
| C4 Borrowings
CURRENCY
INTEREST
RATE
ROLLOVER DATE
(DRAWN) /
MATURITY DATE
(UNDRAWN)
FACE
VALUE
$000
UNAMORTISED
COSTS
$000
CARRYING
VALUE
$000
FAIR
VALUE
$000
As at 30 September 2018
Bank facilities (undrawn)NZDVariable9-Sep-1950,000 – – –
Total borrowings – – –
As at 30 September 2017
Bank facilities (drawn)NZD4.505%13-Nov-1730,000 (79)29,921 29,921
Bank facilities (undrawn)NZDVariable9-Sep-1920,000 – – –
Total borrowings(79)29,921 29,921
2018
$000
2017
$000
Analysed as
Current – 29,921
Non current – –
Total borrowings – 29,921
Accounting policy
Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, borrowings are measured at
amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the income statement over
the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the
facility will be drawn down. The fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
The following table represents the change in borrowings:
2018
$000
2017
$000
Opening balance30,000 –
Drawdown of credit facility – 30,000
Repayment of credit facility(30,000) –
Closing balance – 30,000
Standby credit facility
The Company entered into a cash advance facility with Bank of New Zealand on 7 September 2016. The facility provides for an amount of up to
$50.0 million that can be drawn for general corporate purposes over a three year term and is subject to normal terms and conditions for a facility
of this nature, including financial covenants.
In May 2017, the Company utilised the cash advance facility agreement. An amount of $30.0 million was drawn (from the available $50.0 million).
Funds were used for new share capital within Tower Insurance Limited.
In December 2017, the Company repaid the drawn cash advance facility using funds obtained from the capital raise.
All borrowings are unsecured and are subject to various financial covenants. The Company has fully complied with all covenants during the year ended
30 September 2018.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201854
| C5 Financial Instruments
C5.1 Financial instrument categories
Accounting policy
Financial assets and liabilities are classified in the following categories: at fair value through profit or loss; loans and receivables; and liabilities at
amortised cost. The classification depends on the purpose for which the financial assets and liabilities were acquired. Management determines the
classification of its financial assets and liabilities at initial recognition.
(i) Loans and receivables
Loans and receivables are measured initially at fair value plus transaction costs and subsequently at amortised cost using the effective interest
method less any impairment.
(ii) Financial liabilities at amortised cost
Financial liabilities at amortised cost are measured initially at fair value plus transaction costs and subsequently at amortised cost less any impairment.
(iii) Financial assets and liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in the income statements. The net
gain or loss recognised in the income statements includes any dividend or interest earned on the financial assets.
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
(v) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. The Group’s
loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.
(ii) Financial liabilities at amortised cost
Financial liabilities at amortised cost are non-derivative financial liabilities with fixed or determinable payments that are not quoted on an active market.
The Group’s financial liabilities comprise trade, reinsurance and other payables in the balance sheet.
(iii) Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss comprise of financial assets that are either held for trading or designated on initial
recognition at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the
short-term or if so designated by management. Designation by management takes place when it is necessary to eliminate or significantly reduce
measurement or recognition inconsistencies or if related financial assets or liabilities are managed and evaluated on a fair value basis.
Derivatives are categorised as held for trading unless they are designated as hedges. All derivatives entered into by the Group are classified as held for
trading.
The analysis of financial assets and liabilities into their categories and classes is set out in the following tables:
AT AMORTISED COST
AT FAIR VALUE
THROUGH PROFIT OR LOSS
TOTAL
$000
LOANS AND
RECEIVABLES
$000
FINANCIAL
LIABILITIES
$000
DESIGNATED
$000
HELD FOR
TRADING
$000
As at 30 September 2018
Assets
Cash and cash equivalents102,001 102,001 – – –
Trade and other receivables255,779 255,779 – – –
Investments198,000 – – 198,000 –
Derivative financial assets271 – – – 271
Total financial assets556,051 357,780 – 198,000 271
Liabilities
Trade and other payables50,590 – 50,590 – –
Total financial liabilities50,590 – 50,590 – –

55
AT AMORTISED COST
AT FAIR VALUE
THROUGH PROFIT OR LOSS
TOTAL
$000
LOANS AND
RECEIVABLES
$000
FINANCIAL
LIABILITIES
$000
DESIGNATED
$000
HELD FOR
TRADING
$000
As at 30 September 2017
Assets
Cash and cash equivalents83,876 83,876 – – –
Trade and other receivables283,158 283,158 – – –
Investments186,702 – – 186,702 –
Derivative financial assets231 – – – 231
Total financial assets553,967 367,034 – 186,702 231
Liabilities
Trade and other payables43,514 – 43,514 – –
Borrowings29,921 – 29,921 – –
Total financial liabilities73,435 – 73,435 – –
C5.2 Fair value of financial assets and liabilities
Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the
measurement date. Refer below for details of valuation methods and assumptions used for each category of financial assets and liabilities.
(i) Cash and cash equivalents
The carrying amount of cash and cash equivalents reasonably approximates its fair value.
(ii) Financial assets at fair value through profit or loss and held for trading
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as
active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and
those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets
held by the Group is the current bid price. These instruments are included in Level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using
valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on
entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The following
fair value measurements are used:
—The fair value of fixed interest securities is based on the maturity profile and price/yield.
—The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value
discounted back to present value.
—Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
(iii) Loans and receivables and other financial liabilities held at amortised cost
Carrying values of loans and receivables, adjusted for impairment values, and carrying values of other financial liabilities held at amortised cost
reasonably approximate their fair values.
(iv) Derivative financial liabilities and assets
The fair value of derivative financial liabilities and assets is determined by reference to market accepted valuation techniques using observable market
inputs.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201856
The following tables present the Group’s assets and liabilities categorised by fair value measurement hierarchy levels.
TOTAL
$000
LEVEL 1
$000
LEVEL 2
$000
LEVEL 3
$000
As at 30 September 2018
Assets
Investment in equity securities599 – – 599
Investments in fixed interest securities197,367 – 197,367 –
Investments in property securities34 – 34 –
Investments198,000 – 197,401 599
Derivative financial assets271 – 271 –
Total financial assets198,271 – 197,672 599
As at 30 September 2017
Assets
Investment in equity securities1,412 – – 1,412
Investments in fixed interest securities185,256 – 185,256 –
Investments in property securities34 – 34 –
Investments186,702 – 185,290 1,412
Derivative financial assets 231 – 231 –
Total financial assets186,933 – 185,521 1,412
Liabilities
Borrowings29,921 – 29,921 –
Total financial liabilities29,921 – 29,921 –
The Level 3 category includes investment in equity securities of $599,000 (2017: $1,412,000). This investment is in unlisted shares of a company which
provides reinsurance to Tower. The fair value is calculated based on the net assets of the company from the most recently available financial information,
adjusted for market conditions. The following table represents the changes in Level 3 instruments:
INVESTMENT IN
EQUITY SECURITIES
2018
$000
2017
$000
Opening balance1,412 1,406
Total gains and losses recognised in profit or loss(745)(3)
Foreign currency movement(46)9
Disposals(22) –
Closing balance599 1,412
The following table shows the impact of increasing or decreasing the combined inputs used to determine the fair value of the investment by 10%:
CARRYING
AMOUNT
$000
FAVOURABLE
CHANGES OF 10%
UNFAVOURABLE
CHANGES OF 10%
As at 30 September 2018
Investment in equity securities599 60 (60)
As at 30 September 2017
Investment in equity securities1,412 141 (141)
C5 Financial Instruments (continued)

57
C5.3 Impairment of financial assets
Accounting policy
Financial assets, with the exception of those measured at fair value through profit or loss, are assessed for indicators of impairment at each reporting
date. Financial assets are impaired when there is objective evidence that the estimated future cash flows of the asset have been impacted as a result
of one or more events that occurred after the initial recognition of the financial asset.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate.
For all financial assets, other than trade receivables, the carrying amount is reduced by the impairment loss directly. For trade receivables the
carrying amount is reduced via an allowance account, against which an uncollectible trade receivable is written off.
A trade receivable is deemed to be uncollectible upon receipt of evidence that the Group will be unable to collect the amount. Changes in the
carrying amount of the allowance account are recognised in the income statement.
A previously recognised impairment loss is reversed when, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment loss was initially recognised.
In respect of financial assets carried at amortised cost, with the exception of trade receivables, the impairment loss is reversed through the income
statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised. Subsequent recoveries of trade receivables previously written off are credited against
the allowance for credit losses and impairment.
| C6 Reconciliation of Loss for the Period to Net Cash Flows From Operating Activities
2018
$000
2017
$000
Loss for the year(6,726)(8,000)
Adjusted for non-cash items
Depreciation of property, plant and equipment1,499 2,032
Amortisation of software5,195 6,395
Impairment of reinsurance receivables21,750 –
Unrealised (gain) loss on financial assets280 (1,837)
Movement on disposal of property, plant and equipment(50)(42)
Change in deferred tax(3,404)(3,024)
25,270 3,524
Adjusted for movements in working capital (excluding the effects of exchange differences on consolidation)
Change in receivables4,907 (7,653)
Change in payables(13,279)(21,537)
Change in taxation(722)116
(9,094)(29,074)
Adjusted for other items classified as investing / financing activities
Facility fees and interest paid734 778
734 778
Net cash inflows (outflows) from operating activities10,184 (32,772)

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201858
| Part D – Management Expenses and Taxation
To grow and operate its business, Tower incurs management expenses, including payments to employees, suppliers and commission payments to
third parties.
This section includes information about Tower’s management expenses and taxation.
| D1 Management and Sales Expenses
2018
$000
2017
$000
Employee benefits expense (1) 59,610 56,581
Net change in deferred acquisition costs (1,634) (988)
Bad debts written off 232 176
Change in provision for doubtful debts(159) (945)
Amortisation of software5,1956,395
Depreciation 1,499 2,032
Directors’ fees 515 509
(Gain) on disposal of property, plant and equipment (50) (42)
Claims related management expenses reclassified to claims expense (2) (23,151) (28,979)
Auditors fees 603 576
Commission expense 19,488 18,927
Lease expenses3,393 3,256
Other expenses24,187 24,246
Total management and sales expenses89,728 81,744
(1) Personnel costs are net of capitalised labour costs in relation to internally generated software assets.
(2) Claims handling expenses do not include costs in relation to Kaikoura earthquake or Canterbury earthquake related claims, as these are charged to
provisions created in previous years.
| D2 Impairment of Reinsurance Receivable
On 28 February 2018, Tower Limited announced it had entered into a settlement agreement with Peak Re regarding an adverse development cover
policy entered into in 2015. Under the settlement agreement Tower received $22.0 million of the $43.75 million claimed under the reinsurance contract
and all sums claimed in the arbitration proceeding. This has resulted in a write off of the residual amount of $21.75 million. This amount along with
associated professional fees of $0.76 million have been recorded in the Consolidated Income Statement as Impairment of reinsurance receivables.
| D3 Acquisition Proposal Expenses
The Company has worked with various legal, financial and Board advisers to assist with the acquisition proposals from Suncorp Group Limited/Vero
Insurance New Zealand Limited and Fairfax Financial Holdings Limited. At 30 September 2018, Tower has provided for all costs incurred to date in
respect of the acquisition activity. These have been recorded in the Consolidated Income Statement as a separate line item (Acquisition proposal
expenses).

59
| D4 Deferred Acquisition Costs
2018
$000
2017
$000
Balance at the beginning of year20,961 19,973
Acquisition costs during the year39,555 38,385
Current period amortisation(37,921)(37,397)
Total deferred acquisition costs22,595 20,961
Analysed as:
Current22,595 20,961
Non-current – –
Total deferred acquisition costs22,595 20,961
Accounting Policy
Acquisition costs incurred in obtaining general insurance contracts are deferred and recognised as assets where they can be reliably measured and
where it is probable that they will give rise to premium revenue that will be recognised in subsequent reporting periods.
Deferred acquisition costs are amortised systematically in accordance with the expected pattern of the incidence of risk under the general insurance
contracts to which they relate. This pattern of amortisation corresponds to the earning pattern of the corresponding premium revenue.
| D5 Operating Leases
2018
$000
2017
$000
As lessee
Rent payable to the end of the lease terms are:
Not later than one year3,286 2,806
Later than one year and not later than five years7,701 7,444
Later than five years – 2,010
10,987 12,260
Accounting policy
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating
lease payments are recognised as an expense in the periods the services are received over the period of the lease. Operating lease payments
represent future rentals payable for office space under current leases. Initial leases were for an average of four years with rental rates reviewed
every one to three years.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201860
| D6 Tax
Accounting Policy
Current tax
Current tax is the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates
and laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or
liabilities settled, based on the tax rates enacted or substantively enacted for each jurisdiction. Deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences or unused tax losses can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
the other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Income tax expense
The income tax expense is the tax payable on taxable income for the current period, based on the income tax rate for each jurisdiction and adjusted
for changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
GST
All revenues, expenses and certain assets are recognised net of goods and services taxes (GST) except where the GST is not recoverable. In these
circumstances the GST is included in the related asset or expense. Receivables and payables are reported inclusive of GST. The net GST payable to
or recoverable from the tax authorities as at balance date is included as a receivable or payable in the balance sheet.
Tax consolidation
Tower Limited and its subsidiaries are part of a single consolidated group for New Zealand tax purposes, with the exception of Tower Insurance Limited.
Tax cash flows
Tax cash flows are included in the statements of cash flows on a net basis other than to the extent that the GST is not recoverable and has been
included in the expense or asset.
Imputation credit account
The balance of the imputation account at the end of the year is determined having adjusted for imputation credits that will arise from the payment
of income tax provided; dividends recognised as a liability; and the receipt of dividends recognised as receivables at the reporting date.

61
D6.1 Tax expense
2018
$000
2017
$000
Current tax2,714 4,468
Deferred tax(3,463)(3,064)
Under (over) provided in prior years(546)597
Total tax (benefit) expense (1,295)2,001
The tax (benefit) expense can be reconciled to the accounting profit as follows:
Loss before tax from continuing operations(8,021)(5,999)
Income tax at the current rate of 28%(2,246)(1,680)
Tax effect of:
Prior period adjustments(546)597
Non-deductible expenditure/non-assessable income120 967
Foreign tax credits written off1,372 1,874
Other5 243
Total tax (benefit) expense (1,295)2,001
D6.2 Current tax assets
2018
$000
2017
$000
Current1,575 1,206
Non-current12,256 12,256
Total current tax assets13,831 13,462
A non-current tax asset of $12,256,000 is recognised in the financial statements of the Group as at 30 September 2018 in relation to excess tax payments
made in previous years (2017: $12,256,000). Non-current tax assets are expected to be recovered from 2022, as determined by the Board approved
operational plan for financial years 2019 to 2022. A current tax asset of $1,575,000 is recognised in relation to excess tax payments made in the Pacific
Islands over and above the estimated tax liabilities for the year (2017: $1,206,000).
D6.3 Current tax liabilities
Current tax liabilities of $174,000 relate to taxes payable to off shore tax authorities in the Pacific Islands (2017: $560,000).
D6.4 Imputation credits
The Group imputation credit account reflects the imputation credits held by the Company as the representative member of the Group.
2018
$000
2017
$000
Imputation credits available for use in subsequent reporting periods489 489

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201862
D6.5 Deferred tax assets and liabilities

OPENING
BALANCE AT
1 OCTOBER
$000
(CHARGED)
CREDITED
TO INCOME
STATEMENT
$000
(CHARGED)
CREDITED TO
COMPREHENSIVE
INCOME
$000
CLOSING
BALANCE AT
30 SEPTEMBER
$000
For the Year Ended 30 September 2018
Movement in deferred tax assets
Provisions and accruals2,265 576 – 2,841
Property, plant and equipment7,781 45 – 7,826
Tax losses26,958 3,727 – 30,685
Other778 (15) – 763
Total deferred tax assets37,782 4,333 – 42,115
Set-off of deferred tax liabilities pursuant to NZ IAS 12(5,739)
Net deferred tax assets 36,376
Movement in deferred tax liabilities
Deferred acquisition costs(5,078)(661) – (5,739)
Other(299)(209)(81)(589)
Total deferred tax liabilities(5,377)(870)(81)(6,328)
Set-off of deferred tax liabilities pursuant to NZ IAS 125,739
Net deferred tax liabilities(589)
For the Year Ended 30 September 2017
Movement in deferred tax assets
Provisions and accruals3,141 (876) – 2,265
Property, plant and equipment3,288 4,493 – 7,781
Tax losses29,086 (2,128) – 26,958
Other – 778 – 778
Total deferred tax assets35,515 2,267 – 37,782
Set-off of deferred tax liabilities pursuant to NZ IAS 12(5,037)
Net deferred tax assets 32,745
Movement in deferred tax liabilities
Deferred acquisition costs(4,851)(227) – (5,078)
Other(1,294)1,024 (29)(299)
Total deferred tax liabilities(6,145)797 (29)(5,377)
Set-off of deferred tax liabilities pursuant to NZ IAS 125,037
Net deferred tax liabilities(340)
Recognition of deferred tax assets is a key area of judgement. Management expects to utilise the tax losses against future profits over the next four
years. Management had expected to utilise the tax losses against future profits over the following four years as at 30 September 2017.
Deferred tax liabilities of nil have not been recognised in respect of temporary differences associated with investments in subsidiaries (2017: liabilities
of $946,000).
D6 Tax (continued)

63
| Part E – Other Balance Sheet Items
This section includes information about assets and liabilities not included elsewhere, including receivables, non-current assets, payables
and provisions.
| E1 Receivables
2018
$000
2017
$000
Premium receivables141,578 124,030
Reinsurance recovery receivables32,600 81,647
Claim recoveries and unearned reinsurance premiums11,616 10,783
Trade receivables185,794 216,460
EQC receivables69,272 66,437
Other4,541 3,672
Total receivables259,607 286,569
Premium receivables represent net amounts owed to Tower (including GST) by policyholders. The majority of the amounts outstanding are not due.
Accounting policy
Receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. Premium receivables
and other trade receivables are presented net of allowance for credit losses and impairment.
The table below shows the reconciliation of the allowance for credit losses and impairment at the reporting date.
2018
$000
2017
$000
Opening balance(805)(1,750)
Provisions added during the year(208)(41)
Provisions released during the year362 978
Foreign exchange movements5 8
Closing balance(646)(805)
Trade and other receivables, including EQC reinsurance recoveries, are included in current assets except for those with maturities greater than
12 months after the reporting date, which are classified as non-current assets.
2018
$000
2017
$000
Analysed as
Current 185,133 199,960
Non current74,474 87,005
Total receivables259,607 286,569
Collectability of trade receivables
Collectability of trade receivables is reviewed on an on-going basis. The allowance for credit losses and impairment in relation to trade receivables
is provided for based on estimated recoverable amounts determined by reference to current customer circumstances and past default experience.
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date the
credit was initially granted up to the reporting date. The Group has provided fully for receivables over 120 days past due. Trade receivables between
60 and 120 days past due are provided for based on estimated irrecoverable amounts.
Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also determined using the above methods. In addition, the recoverability of these assets is assessed
on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as
counterparty and credit risk. Impairment is recognised where there is objective evidence that the Group may not receive amounts due to it and these
amounts can be reliably measured.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201864
Earthquake Commission receivables
Kaikoura Region earthquake
At 30 September 2018, the amount due from EQC for reimbursement of claims handling expenses and claims paid in relation to the Kaikoura event
is $0.9 million (2017: $1.3 million).
Canterbury earthquakes
Other receivables include an amount of $68.4 million due from EQC for land damage and building costs relating to the Canterbury earthquake
provisions as disclosed in Note B3 (2017: $65.1 million).
| E2 Intangible Assets
SOFTWARE
GOODWILLACQUIRED
INTERNALLY
DEVELOPED
UNDER
DEVELOPMENTTOTAL
Year Ended 30 September 2018
Cost:
Opening balance17,744 5,097 37,045 4,484 64,370
Additions – – – 19,026 19,026
Disposals – – – (74)(74)
Transfers – 285 600 (885) –
Transfers to Property, plant and equipment – – – (49)(49)
Closing balance17,744 5,382 37,645 22,502 83,273
Accumulated amortisation:
Opening balance – (4,501)(28,535) – (33,036)
Amortisation charge – (197)(4,998) – (5,195)
Closing balance – (4,698)(33,533) – (38,231)
Net book value
At cost17,744 5,382 37,645 22,502 83,273
Accumulated amortisation – (4,698)(33,533) – (38,231)
Closing net book value17,744 684 4,112 22,502 45,042
Year Ended 30 September 2017
Cost:
Opening balance17,744 5,020 31,305 4,554 58,623
Additions – – – 6,237 6,237
Disposals – (6) – (17)(23)
Transfers – 82 5,740 (5,822) –
Transfers to Property, plant and equipment – – – (468)(468)
Foreign exchange movements – 1 – – 1
Closing balance17,744 5,097 37,045 4,484 64,370
Accumulated amortisation:
Opening balance – (4,265)(22,376) – (26,641)
Amortisation charge – (235)(6,160) – (6,395)
Foreign exchange movements – (1)1 – –
Closing balance – (4,501)(28,535) – (33,036)
Net book value
At cost17,744 5,097 37,045 4,484 64,370
Accumulated amortisation – (4,501)(28,535) – (33,036)
Closing net book value17,744 596 8,510 4,484 31,334
E1 Receivables (continued)

65
Software
Accounting policy
Application software is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over the
estimated useful life of the software.
Internally generated intangible assets are recorded at cost which includes all the directly attributable costs necessary to create, produce and
prepare the asset capable of operating in the manner intended by management. Amortisation of internally generated intangible assets begins when
the asset is available for use and is amortised on a straight line basis over the estimated useful life.
General use computer software 3 – 5 years
Core operating system software 3 – 10 years
Impairment testing for software under development
Software under development includes expenditure relating to the development of a new core IT platform, digital enhancements, communications
technology and work to extend the useful life of other IT assets. Software under development is subject to impairment testing and no impairment loss
has been recognised in 2018 (2017: Nil). In assessing the recoverable amount for software under development, Management has based its assumptions
on the five year projections covered by Tower’s 2019-2023 operating plans, including an assessment of additional revenue and expense savings expected
to be generated by each asset. These assumptions are determined from a variety of sources, including Management’s past experience, comparison of
key metrics to industry baselines, sensitivity of revenues to changes in drivers and analysis of current expenditure that can be reduced. Management
has not put any value on projected cash flows beyond a five year period. A discount rate of 12% has been used in the valuation (2017: 12%).
Goodwill
Accounting policy
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s
interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the entity acquired, at the date of acquisition. Following initial
recognition, goodwill on acquisition of a business combination is not amortised but is tested for impairment bi-annually or more frequently if events
or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s
cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units or groups of units.
Any impairment is recognised immediately in the income statement.
Impairment testing for goodwill
Goodwill is allocated to the New Zealand general insurance cash generating unit. The carrying amount of goodwill allocated to the cash generating
unit is shown below:
2018
$000
2017
$000
Carrying amount of goodwill17,744 17,744
Goodwill is subject to impairment testing at the cash-generating unit level and no impairment loss has been recognised in 2018 as a result of the
impairment review (2017: Nil). The recoverable amount of the general insurance business has been assessed with reference to its appraisal value to
determine its value in use. A base discount rate of 13% was used in the calculation (2017: 14%). Other assumptions used are consistent with the actuarial
assumptions in Note B5 in respect of Tower Insurance. The cash flows were projected over the expected life of the policies. The projected cash flows
are determined based on past performance and management’s expectations for market developments with a terminal growth rate of 2% (2017: 2%).
Management considers that the recoverable amount from the general insurance business, as determined by the appraisal value, will exceed the
carrying value under a reasonable range of adverse scenarios.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201866
| E3 Property, Plant and Equipment
LAND AND
BUILDINGS
$000
OFFICE
EQUIPMENT AND
FURNITURE
$000
MOTOR
VEHICLES
$000
COMPUTER
EQUIPMENT
$000
TOTAL
$000
For the Year Ended 30 September 2018
Cost
Opening balance2,959 7,715 1,122 14,764 26,560
Additions – 513 65 198 776
Revaluations434 – – – 434
Disposals – (14)(165)(9)(188)
Foreign exchange movements22 7 (3)17 43
Closing balance3,415 8,221 1,019 14,970 27,625
Accumulated depreciation
Opening balance – (2,880)(837)(14,063)(17,780)
Depreciation – (958)(38)(503)(1,499)
Disposals – 15 176 2 193
Foreign exchange movements – 35 (84)20 (29)
Closing balance–(3,788)(783)(14,544)(19,115)
Closing balance
Cost / revaluation3,415 8,221 1,019 14,970 27,625
Accumulated depreciation – (3,788)(783)(14,544)(19,115)
Net book value3,415 4,433 236 426 8,510
For the Year Ended 30 September 2017
Cost
Opening balance2,710 7,481 1,277 14,038 25,506
Additions – 291 69 754 1,114
Revaluations247 – – – 247
Disposals(27)(74)(231)(19)(351)
Foreign exchange movements29 17 7 (9)44
Closing balance2,959 7,715 1,122 14,764 26,560
Accumulated depreciation
Opening balance – (2,004)(930)(13,061)(15,995)
Depreciation – (928)(93)(1,011)(2,032)
Disposals – 57 188 16 261
Foreign exchange movements – (5)(2)(7)(14)
Closing balance–(2,880)(837)(14,063)(17,780)
Closing balance
Cost / revaluation2,959 7,715 1,122 14,764 26,560
Accumulated depreciation – (2,880)(837)(14,063)(17,780)
Net book value2,959 4,835 285 701 8,780

67
Accounting policy
Measurement of property, plant and equipment
Property, plant and equipment is initially recorded at cost including transaction costs and subsequently measured at cost less any accumulated
depreciation and impairment losses.
Depreciation is calculated using the straight line method to allocate the assets’ cost or revalued amounts, net of any residual amounts, over their
useful lives. The assets’ useful lives are reviewed and adjusted if appropriate at each balance date. An asset’s carrying amount is written down
immediately to its recoverable amount if it is considered that the carrying amount is greater than its recoverable amount.
Computer equipment 3 – 5 years
Furniture & fittings 5 – 9 years
Motor Vehicles 5 years
Buildings 50 – 100 years
Leasehold property improvements 3 – 12 years
Measurement of land and buildings
Land and buildings are shown at fair value, based on periodic valuations by external independent appraisers less subsequent depreciation for
buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is
restated to the revalued amount of the asset.
Land and buildings are located in Fiji and are stated at fair value. Fair value is determined using an income approach whereby future rental streams are
capitalised at a rate appropriate for the type of property and lease arrangement. This value is then adjusted to take into account recent market activity.
Valuation was performed as at 14 September 2018 by Rolle Associates, registered valuers in Fiji. There has been no material movement in the valuation
between 14 September 2018 and 30 September 2018. Inputs to the valuation of the Fiji property are considered to be based on non-observable market
data, thus classified as level 3 in the fair value hierarchy. Inputs include gross rentals per square meter of similar property in the Suva area, recent
comparable sales of commercial property in Suva and a capitalisation rate of between 7.5% and 9.5% (2017: 7.0%).
Had land and buildings been recognised under the cost model the carrying amount would have been $1,145,000 (2017: $1,145,000). The revaluation
surplus for the period is recorded in other comprehensive income and has no restrictions on the distribution of the balance to shareholders.
| E4 Capital Commitments
As at the 30 September 2018, the Group has capital commitments of $13.9 million dollars in relation to the implementation and delivery of a new
insurance policy management system (2017: nil).
| E5 Payables
2018
$000
2017
$000
Trade payables16,028 16,479
Reinsurance payables23,388 21,763
Payable to other insurers268 2,590
Investment settlement balances5,099 –
GST payable16,272 12,991
Other payables19,320 15,001
Total payables80,375 68,824
Analysed as:
Current 63,975 51,124
Non current16,400 17,700
Total payables80,375 68,824
Accounting policy
Payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unsettled. Payables are
recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest method.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201868
Payable to other insurers
At 30 September 2018 there was $0.3 million (2017: $2.6 million) recorded within Payables as funds held on behalf of other insurers in respect of SPP
claims. Refer to Note C2 for further details on cash held in respect of multi-unit claims as lead insurer.
| E6 Provisions
2018
$000
2017
$000
Employee benefits5,789 5,773
Total provisions5,789 5,773
Analysed as:
Current 5,402 5,592
Non current387 181
Total provisions5,789 5,773
Accounting policy
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event or decision, and it is more likely
than not that an outflow of resources will be required to settle the obligation. Provisions are recognised as the best estimate of future cash flows
discounted to present value where the effect is material.
Provision is made for employee entitlements for services rendered up to the balance date. This includes salaries, wages, bonuses, annual leave and
long service leave.
| Part F – Capital and Risk Management
This section provides information about Tower’s capital structure and its approaches to managing risk.
| F1 Contributed Equity
2018
$000
2017
$000
Opening balance382,172 382,172
Issue of share capital70,838 –
Costs of capital raise(5,467) –
Total contributed equity447,543 382,172
On 14 November 2017 the Company invited its eligible shareholders to subscribe to a rights issue of 1 new share for every 1 existing share held at the
record date on 22 November 2017 at a price of NZD0.42 (or AUD0.39) for each new share. The issue was fully subscribed on 20 December 2017.
Represented by:
2018
NUMBER
OF SHARES
2017
NUMBER
OF SHARES
Opening balance168,662,150 168,662,150
Issued shares168,662,150 –
Total shares on issue337,324,300 168,662,150
Ordinary shares issued by the Group are classified as equity and are recognised at fair value less direct issue costs. All shares rank equally with one vote
attached to each share. There is no par value for each share.
There were no Tower Limited dividend payments during the year ended 30 September 2018 (2017: nil).

69
| F2 Reserves
2018
$000
2017
$000
Foreign currency translation reserve (FCTR)
Opening balance(4,343)(4,443)
Currency translation differences arising during the year(54)100
Closing balance(4,397)(4,343)
Separation Reserve
Opening balance(113,000)(113,000)
Closing balance(113,000)(113,000)
Asset revaluation reserve
Opening balance889 671
Gain on revaluation, net of deferred tax353 218
Closing balance1,242 889
Total reserves(116,155)(116,454)
Accounting policy
FCTR
Exchange differences arising on translation of foreign controlled entities and net investment of a foreign entity are taken to the foreign currency
translation reserve. The reserve is recognised in profit and loss when the net investment is disposed.
Separation reserve
The separation reserve was created in 2007 at the time of the demerger of the New Zealand and Australian businesses in accordance with a ruling
provided by the Australian Tax Office (ATO). It will be carried forward indefinitely as a non-equity reserve to meet the requirements of the ATO.
Asset revaluation reserve
The asset revaluation reserve is used to recognise unrealised gains on the value of land and buildings above initial cost.
| F3 Capital Risk Management & Solvency
Solvency requirements
The methodology and bases for determining the solvency margin are in accordance with the requirements of the Solvency Standard for Non-life
Insurance Business published by the Reserve Bank of New Zealand. The minimum solvency capital required to meet solvency requirements under
the Insurance (Prudential Supervision) Act 2010 is shown below. Actual solvency capital exceeds the minimum solvency capital requirement for Tower
Insurance Group by $82.4 million (2017: $96.3 million) and Tower Insurance parent by $78.2 million (2017: $87.9 million).
TOWER INSURANCE LIMITEDTOWER INSURANCE LIMITED GROUP
UNAUDITED
2018
$000
UNAUDITED
2017
$000
AUDITED
2018
$000
AUDITED
2017
$000
Actual solvency capital136,476 149,317 156,765 166,823
Minimum solvency capital58,298 61,387 74,344 70,545
Solvency margin78,178 87,930 82,421 96,278
Solvency ratio234%243%211%236%
The Reserve Bank of New Zealand imposed a condition of license requirement for Tower Insurance Limited to maintain a minimum solvency margin of
$50.0 million. This minimum solvency requirement continues to be a requirement for Tower Insurance Limited. The actual solvency capital as determined
under the solvency standards is required to exceed the minimum solvency capital level by at least this amount.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201870
Capital risk management
The Group’s objective when managing capital is to ensure that the level of capital is sufficient to meet the Group’s statutory solvency obligations
including on a look forward basis to enable it to continue as a going concern in order to meet the needs of its policyholders, to provide returns for
shareholders, and to provide benefits for other stakeholders of the Group. The Group’s capital resources include shareholders’ equity.
NOTE
2018
$000
2017
$000
Tower shareholder equity273,311 214,419
Standby credit facility (undrawn)C450,000 20,000
Total capital and liquidity resources323,311 234,419
The Group measures adequacy of capital against the Solvency Standards for Non-life Insurance Business (the solvency standards) published by the
Reserve Bank of New Zealand (RBNZ) alongside additional capital held to meet RBNZ minimum requirements and any further capital as determined
by the Board. During the year ended 30 September 2018 the Group complied with all externally imposed capital requirements.
The Group holds assets in excess of the levels specified by the various solvency requirements to ensure that it continues to meet the minimum
requirements under a reasonable range of adverse scenarios. The Group’s capital management strategy forms part of the Group’s broader strategic
planning process overseen by the Audit and Risk Committee of the Board.
| F4 Net Assets per Share
2018
$
2017
$
Net assets per share0.81 1.28
Net tangible assets per share0.57 0.90
Accounting Policy
Net assets per share represent the value of the Group’s total net assets divided by the number of ordinary shares on issue at the period end. Net
tangible assets per share represent the net assets per share adjusted for the effect of intangible assets and deferred tax balances. Net assets per
share and net tangible assets per share for 30 September 2017 have not been restated to reflect the bonus element of the rights issue.
Reconciliation to net tangible assets is provided below:
2018
$000
2017
$000
Net assets274,779 215,744
Less: deferred tax(35,787)(32,405)
Less: intangible assets(45,042)(31,334)
Net tangible assets193,950 152,005
F3 Capital Risk Management & Solvency (continued)

71
| F5 Earnings per Share
2018
$000
2017
$000
Loss attributable to shareholders(6,773)(8,461)
2018
NUMBER
OF SHARES
2017
NUMBER
OF SHARES
Weighted average number of ordinary shares for basic and diluted earnings per share308,077,348 205,532,480
2018
CENTS
2017
CENTS
Basic and diluted (loss) earnings per share(2.20)(4.12)
Accounting Policy
Basic earnings per share is calculated by dividing the net profit attributed to shareholders of the Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the net profit attributed to shareholders of the Company by the weighted average number of
ordinary shares on issue during the year adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
As a result of the rights issue, the weighted average number of ordinary shares have been adjusted retrospectively for the bonus element of the rights
issue. The basic and diluted (loss) per share for 30 September 2017 has been restated to reflect the change.
There was no dilutive impact on basic earnings per share for 2018 (2017: nil).
| F6 Risk Management
The financial condition and operating results of the Group are affected by a number of key financial and non-financial risks. Financial risks include
market risk, credit risk, financing and liquidity risk. The non-financial risks include insurance risk, compliance risk and operational risk.
Tower Limited’s objective is to satisfactorily manage these risks in line with the Board approved Group Risk and Compliance policy. Various procedures
are put in place to control and mitigate the risks faced by the Group. Business managers are responsible for understanding and managing their risks
including operational and compliance risk. The consolidated entity’s exposure to all high and critical risks is reported monthly to the Board and quarterly
to the Audit and Risk Committee.
The Board has delegated to the Audit and Risk Committee the responsibility to review the effectiveness and efficiency of management processes,
internal audit services, risk management and internal financial controls and systems as part of their duties. The Risk and Compliance team is in place
in an oversight and advisory capacity and to manage the risk and compliance framework.
Financial risks are generally monitored and controlled by selecting appropriate assets to back policy liabilities. The assets are regularly monitored
to ensure that there are no material asset and liability mismatching issues and other risks such as liquidity risk and credit risk are maintained within
acceptable limits.
The Board has responsibility for:
—reviewing investment policies for Tower Limited funds;
—reviewing the Treasury Policy which includes our strategy for investment management and the use of derivatives;
—considering the establishment, adjustment or deletion of limits and counter-party approvals, and the scope of financial instruments to be used
in the management of Tower Limited’s investments;
—reviewing the appointment of external investment managers;
—monitoring investment and fund manager performance; and
—monitoring compliance with investment policies and client mandates.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201872
F6.1 Insurance risk
The financial condition and operations of the insurance business are affected by a number of key risks including insurance risk, interest rate risk,
currency risk, market risk, financial risk, compliance risk, fiscal risk and operational risk. Notes on the policies and procedures employed in managing
these risks are set out below.
(a) Objectives in managing risks arising from insurance contracts and policies for mitigating those risks
The risk management activities include prudent underwriting, pricing, and management of risk, together with claims management, reserving and
investment management. The objective of these disciplines is to enhance the financial performance of the insurance operations and to ensure sound
business practices are in place for underwriting risks and claims management.
The key controls in place to mitigate risks arising from writing insurance contracts include:
—comprehensive management information systems and actuarial models using historical information to calculate premiums and monitor claims;
—monitoring natural disasters such as earthquakes, floods, storms and other catastrophes using models; and
—the use of reinsurance to limit the Group’s exposure to individual catastrophic risks.
(b) Concentration of insurance risk
RISKSOURCE OF CONCENTRATIONRISK MANAGEMENT MEASURES
An accumulation of risks
arising from a natural peril
Insured property concentrations Accumulation risk modelling, reinsurance protection
A large property lossFire or collapse affecting one building
or a group of adjacent buildings
Maximum acceptance limits, property risk grading,
reinsurance protection
F6.2 Market risk
Market risk is the risk of change in the fair value of financial instruments from fluctuations in foreign exchange rates (currency risk), market interest rates
(interest rate risk) and market prices (price risk), whether such change in price is caused by factors specific to an individual financial instrument, or its
issuer or factors affecting all financial instruments traded in a market.
(i) Currency risk
Currency risk is the risk of loss resulting from changes in exchange rates when applied to assets and liabilities or future transactions denominated in a
currency that is not the Group’s functional currency. The exposure is not considered to be material.
The Group’s principal transactions are carried out in New Zealand dollars and its exposure to foreign exchange risk arises primarily with respect to
the Pacific Island insurance business. The Group generally elects to not hedge the capital invested in overseas entities, thereby accepting the foreign
currency translation risk on invested capital.
The Group also has foreign exchange risk on payments to suppliers that are denominated in other currencies. Tower may hedge future payments,
where appropriate, and provided that the timing and amount of those transactions can be estimated with a reasonable degree of certainty.
The Board sets limits for the management of currency risk arising from its investments based on prudent international asset management practice.
Regular reviews are conducted to ensure that these limits are adhered to. In accordance with this policy, Tower Insurance does not hedge the currency
risk arising from translation of the financial statements of foreign operations other than through net investment in foreign operations.
(ii) Interest rate risk
Interest rate risk is the risk that the value or future value cash flows of a financial instrument will fluctuate because of changes in interest rates.
Interest rate and other market risks are managed by the Group through strategic asset allocation and approved investment management guidelines
that have regard to policyholder expectations and risks and to target surplus for solvency as advised by the Appointed Actuary.
Interest rate risk arises to the extent that there is a mismatch between the fixed interest portfolios used to back outstanding claim liabilities and those
outstanding claims. Interest rate risk is managed by matching the duration profiles of investment assets and outstanding claim liabilities.
(iii) Price risk
Price risk is the risk of loss resulting from the decline in prices of equity securities or other assets. The exposure is not considered to be material.
F6.3 Credit risk
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitment in full and on time, or from losses arising from
the change in value of a trading financial instrument as a result in changes in credit risk of that instrument.
The Group’s exposure to credit risk is limited to deposits and investments held with banks and other financial institutions, reinsurance receivables from
reinsurers, as well as credit exposure to customers or other counterparties. Credit exposure in respect of the Group’s cash deposit balances is limited
to banks with minimum AA- credit ratings. Investments held with banks and financial institutions that are managed by investment managers have a
minimum credit rating accepted by the Group of ‘A-’. Overall exposure to credit risk is monitored on a Group basis in accordance with limits set by the
Board. The Group has no significant exposure to credit risk.
F6 Risk Management (continued)

73
(i) Credit risk concentration
Concentration of credit risk exists when the Group enters into contracts or financial instruments with a number of counterparties that are engaged in
similar business activities or exposed to similar economic factors that might affect their ability to meet contractual obligations. Tower Limited manages
concentration of credit risk by credit rating, industry type and individual counterparty.
The significant concentrations of credit risk are outlined by industry type below.
CARRYING VALUE
2018
$000
2017
$000
New Zealand government919 8,184
Other government agencies39,352 18,412
Banks227,180 229,526
Financial institutions32,186 13,241
Other non-investment related receivables255,782 283,158
Total financial assets with credit exposure555,419 552,521
(ii) Maximum exposure to credit risk
The Group’s maximum exposure to credit risk without taking account of any collateral or any other credit enhancements, is as follows:
CARRYING VALUE
2018
$000
2017
$000
Cash and cash equivalents102,001 83,876
Loans and receivables255,780 283,158
Financial assets at fair value through profit or loss197,367 185,256
Derivative financial assets271 231
Total credit risk555,419 552,521
(iii) Credit quality of financial assets that are neither past due nor impaired
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if applicable) or to
historical information about counterparty default rates:
CARRYING VALUE
2018
$000
2017
$000
Credit exposure by credit rating
AAA85,321 67,201
AA183,095 184,233
A16,484 527
BBB – –
Below BBB13,020 15,706
Total counterparties with external credit ratings297,920 267,667
Group 1245,702 230,795
Group 2 – –
Group 31,717 1,696
Total counterparties with no external credit rating247,419 232,491
Total financial assets neither past due nor impaired with credit exposure545,339 500,158
Group 1 _ trade debtors outstanding for less than 6 months
Group 2 – trade debtors outstanding for more than 6 months with no defaults in the past
Group 3 – unrated investments
Tower Insurance invests in Pacific regional investment markets through its Pacific Island operations to comply with local statutory requirements and
in accordance with Tower Insurance investment policies. These investments generally have low credit ratings representing the majority of the value
included in the ‘Below BBB’ and unrated categories in the table above.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201874
(iv) Financial assets that would otherwise be past due whose terms have been renegotiated
No financial assets have been renegotiated in the past year (2017: nil).
(v) Financial assets that are past due but not impaired
The Group considers that financial assets are past due if payments have not been received when contractually due. At the reporting date, the total
carrying value of past due but not impaired assets held are as follows:
LESS THAN
30 DAYS
$000
31 TO 60 DAYS
$000
61 TO 90 DAYS
$000
OVER 90 DAYS
$000
TOTAL
$000
As at 30 September 2018
Reinsurance recoveries receivable – 27 – – 27
Outstanding premiums and trade receivables5,526 1,422 2,641 464 10,053
Total5,526 1,449 2,641 464 10,080
As at 30 September 2017
Reinsurance recoveries receivable3,7352,6801,99935,49143,905
Outstanding premiums and trade receivables5,0261,7541,2684108,458
Total8,7614,4343,26735,90152,363
(vi) Financial assets that are individually impaired
CARRYING VALUE
2018
$000
2017
$000
Outstanding premiums and trade receivables – –
Total – –
F6.4 Financing and liquidity risk
Financing and liquidity risk is the risk that the Group will not be able to meet its cash outflows or refinance debt obligations, as they fall due, because
of lack of liquid assets or access to funding on acceptable terms. To mitigate financing and liquidity risk the Group maintains sufficient liquid assets to
ensure that the Group can meet its debt obligations and other cash outflows on a timely basis.
Financial liabilities and guarantees by contractual maturity
The table below summarises the Group’s financial liabilities and guarantees into relevant maturity groups based on the remaining period to the
contractual maturity date at balance date. All amounts disclosed are contractual undiscounted cash flows that include interest payments and exclude
the impact of netting agreements.
CARRYING VALUE
$000
TOTAL
CONTRACTUAL
CASH FLOWS
$000
LESS THAN
ONE YEAR
$000
GREATER THAN
ONE YEAR
$000
As at 30 September 2018
Financial liabilities
Trade payables16,296 16,296 16,296 –
Reinsurance payables23,388 23,388 6,988 16,400
Other payables10,906 10,906 10,906 –
Total50,590 50,590 34,190 16,400
As at 30 September 2017
Financial liabilities
Trade payables19,069 19,069 19,069 –
Reinsurance payables21,763 21,763 4,063 17,700
Other payables2,682 2,682 2,682 –
Borrowings29,921 29,921 29,921 –
Total73,435 73,435 55,735 17,700
F6 Risk Management (continued)

75
F6.5 Derivative financial instruments
The Group utilises derivative financial instruments to reduce investment risk. Specifically, derivatives are used to achieve cost effective short-term
re-weightings of asset class, sector and security exposures and to hedge portfolios, as an economic hedge, when a market is subject to significant
short-term risk.
Derivative financial instruments used by the Group include interest rate swaps, foreign exchange forward contracts and foreign exchange options.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.
The fair values of interest rate swaps are calculated by discounting estimated future cash flows based on the terms and maturity of each contract
using market interest rates. The average interest rate is based on the outstanding balances at the start of the financial year.
The table below details the notional principal amounts, fair values and remaining terms of derivatives outstanding as at the reporting date:
AVERAGE CONTRACTED
FIXED INTEREST
NOTIONAL
PRINCIPAL AMOUNTFAIR VALUE
2018
%
2017
%
2018
$000
2017
$000
2018
$000
2017
$000
Less than 1 year0%0%23,555 25,249 271 166
1 to 2 years0%0% – – – –
2 to 5 years0%2% – 20,580 – 65
Over 5 years0%0% – – – –
23,555 45,829 271 231
F6.6 Sensitivity analysis
The analysis below demonstrates the impact of changes in interest rates, exchange rates and equity prices on profit after tax and equity on continuing
business. The analysis is based on changes in economic conditions that are considered reasonably possible at the reporting date. The potential impact
is assumed as at the reporting date.
(i) Interest rate
The impact of a 50 basis point change in New Zealand and international interest rates as at the reporting date on profit after tax and equity is included
in the tables below. The sensitivity analysis assumes changes in interest rates only. All other variables are held constant.
2018
IMPACT ON:
2017
IMPACT ON:
PROFIT
AFTER TAX
$000
EQUITY
$000
PROFIT
AFTER TAX
$000
EQUITY
$000
Change in variables
+ 50 basis points(696)(696)(546)(546)
- 50 basis points768 768 474 474
This analysis assumes that the sensitivity applies to the closing market yields of fixed interest investments. A parallel shift in the yield curve is assumed.
The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the reporting
period included in the analysis.
(ii) Foreign currency
The following tables demonstrate the impact of a 10% movement of currency rates against the New Zealand dollar on profit after tax and equity.
The analysis assumes changes in foreign currency rates only, with all other variables held constant. The potential impact on the profit and equity
of the Group is due to the changes in fair value of currency sensitive monetary assets and liabilities as at the reporting date.
2018
IMPACT ON:
2017
IMPACT ON:
PROFIT
AFTER TAX
$000
EQUITY
$000
PROFIT
AFTER TAX
$000
EQUITY
$000
Change in variables
10% appreciation of New Zealand dollar129 (2,641)292 (2,380)
10% depreciation of New Zealand dollar(158)2,905 (357)2,909
The dollar impact of the change in currency movements is determined by applying the sensitivity to the value of the international assets.
The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the reporting
period included in the analysis.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201876
(iii) Other price
Other price sensitivity includes sensitivity to unit price fluctuations. Unit price risk is the risk that the fair value of investments in property fund units and
international equities held in unit trusts will decrease as a result of changes in the value of these units.
The following tables demonstrate the impact of a 10% movement in the value of property funds and other unit trusts on the profit after tax and equity.
The potential impact is assumed as at the reporting date.
2018
IMPACT ON:
2017
IMPACT ON:
PROFIT
AFTER TAX
$000
EQUITY
$000
PROFIT
AFTER TAX
$000
EQUITY
$000
Change in variables
+ 10% property funds and other unit trusts2 2 2 2
- 10% property funds and other unit trusts(2)(2)(2)(2)
The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the two reporting
periods included in the analysis.
| Part G – Other Disclosures
This section includes additional disclosures which are required by financial reporting standards.
| G1 Auditors’ Remuneration
2018
$000
2017
$000
Fees paid to Group’s auditors:
Audit of financial statements
(1)
554 495
Other assurance related services
(2)
30 30
Non-assurance advisory related services
(3)
5 6
Total fees paid to Group’s auditors589 531
Fees paid to subsidiaries’ auditors different to Group auditors:
Audit of financial statements
(1)
14 45
Total fees paid to auditors603 576
(1) Audit of financial statements includes fees for both the audit of annual financial statements and the review of interim financial statements. In 2018
the Group’s auditors were further engaged to perform the audit of National Pacific Insurance Limited (2017: BDO). The audit of Tower Insurance
(Vanuatu) Limited was performed by Law Partners (2017: Law Partners).
(2) Other assurance related services includes annual solvency return assurance and Pacific Island regulatory return audits.
(3) Non-assurance advisory related services related to Annual Shareholders’ Meeting procedures.
| G2 Transactions With Related Parties
The remuneration of key management personnel during the year was as follows:
2018
$000
2017
$000
Salaries and other short term employee benefits paid3,981 4,244
Independent director fees 515 509
4,496 4,753
Accounting policy
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise) of that entity.
Tower considers key management personnel to consist of the Board of Directors, Chief Executive Officer and executive leadership team. Information
regarding individual director and executive compensation is provided in the Corporate Governance section of the annual report.
F6 Risk Management (continued)

77
There have been no loans made to directors of the Company and other key management personnel of the Group, including their personally related
parties (2017: nil).
Key management hold various policies and accounts with Tower Group companies. These are operated in the normal course of business on normal
customer terms.
| G3 Contingent Liabilities
The Group is occasionally subject to claims and disputes as a commercial outcome of conducting insurance business. Provisions are recorded for these
claims or disputes when it is probable that an outflow of resources will be required to settle any obligations. Best estimates are included within claims
reserves for any litigation that has arisen in the usual course of business.
The Group has no other contingent liabilities.
| G4 Subsequent Events
There were no subsequent events after balance date.
| G5 Change in Comparatives
Comparative information has been reclassified to achieve consistency with the current year presentation. Changes relate to income statement
reclassification, balance sheet reclassification and presentation of notes. There is no change to net assets or the 2017 profit.
Income Statement – Gross up of premium revenue and outwards reinsurance expense
Premium revenue and outwards reinsurance expense in the Income Statement have been changed to recognise unearned reinsurance expense as
opposed to being netted off against premium revenue. The 2017 amount for premium revenue has decreased from $306.8 million to $306.1 million
and outwards reinsurance expense has decreased from $49.8 million to $49.2 million. There is no change to net premium revenue.
Changes for internal consistency have also been made to Note B1 Premium revenue.
Income Statement _ Gross up of claims expense and reinsurance recoveries revenue
Claims expense and reinsurance and other recoveries revenue in the Income Statement have been changed to recognise non-reinsurance recoveries
revenue as opposed to being netted off against the claims expense. The 2017 amount for claims expense has increased from $217.5 million to
$225.4 million and reinsurance and other recoveries revenue has increased from $30.0 million to $37.8 million. There is no change to net claims expense.
Balance Sheet – Gross up of reinsurance receivables and reinsurance payables
In 2017 amounts payable to reinsurers on receipt of the amount receivable from EQC for recoveries related to the Canterbury earthquakes were netted
off reinsurance receivables. On the Balance sheet, 2017 receivables increased $17.7 million and 2017 payables increased $17.7 million. Total assets and
total liabilities have increased accordingly. There is no change to net assets.
Changes for internal consistency have also been made to Note A4 Segment reporting, B4 Other insurance business disclosures, C5 Financial
instruments, E1 Receivables, E5 Payables, and F6 Risk management.
Balance Sheet – Gross up of other trade receivables and unearned premium liabilities
In 2017 a portion of unearned reinsurance assets were netted off against unearned premium liabilities. On the Balance sheet, 2017 receivables increased
$7.5 million and 2017 insurance liabilities increased $7.5 million. Total assets and total liabilities have increased accordingly. There is no change to net assets.
Changes for internal consistency have also been made to Note A4 Segment reporting, B4 Insurance liabilities, C5 Financial instruments, E1 Receivables,
and F6 Risk management.
Balance Sheet – Reclassification between cash and cash equivalents and investments
Within the balance sheet $19.0 million of term deposits with maturity dates greater than 3 months but less than 12 months has been reclassified from
cash and cash equivalents to investments.
Changes for internal consistency have also been made to the cash flow statement, Note C2 Cash and cash equivalents, Note C3 Investments, Note C5
Financial Instruments, and F6 Risk management.
Note Disclosure – Reclassification of management expenses
Within Note D1 management and sales expenses, there has been a reclassification between employee benefits expense and claims related to
management expenses reclassified to claims expense. In 2017, internal assessor personnel costs had been netted off against personnel costs.
To achieve consistent presentation with 2018, the employee benefits expense has increased by $3.0 million to $56.6 million and the claims related
management expenses reclassified to claims expense has decreased by $3.0 million to $29.0 million.

Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Tower Limited annual report 201878
Tower Limited
Notes to the Financial Statements
For the year ended 30 September 2018
Note Disclosure – Change in presentation of deferred acquisition costs
Within Note D4 deferred acquisition costs the movements (“acquisition costs during the year” and “current period amortisation”) have been changed
to reflect the gross movement during the year. The 2017 balance for acquisition costs during the year has increased from $21.0 million to $38.4 million.
The 2017 balance for current period amortisation has decreased from $20.0 million to $37.4 million. The overall movement has not changed.
Note Disclosure – Change in presentation of claims handling expense and central estimate of expected present value of future payments
for claims incurred
Within Note B5 other insurance business disclosures the claims handling expenses for the Canterbury earthquake have been reclassified from
IBNR into the general provision for claims handling expense. The 2017 balance for claims handling costs has therefore increased from $3.9 million
to $9.7 million, offset by a movement in the 2017 balance for central estimate of expected present value of future payments for claims incurred.
| G6 Impact of Amendments to NZ IFRS
G6.1 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by
the Group
The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting
periods beginning after 1 October 2018 or later periods, and the Group has not adopted them early. The Group expects to adopt the following new
standards on 1 October after the effective date.
—NZ IFRS 9 Financial instruments is effective for periods beginning on or after 1 January 2018. Tower will apply the standard for the year ending
30 September 2019. The standard replaces the existing accounting standards that relate to the classification and measurement of financial instruments.
Tower’s investments are currently designated as at fair value through profit or loss on initial recognition and are subsequently re-measured to fair
value at each reporting date, and Tower does not designate any financial instruments in hedging relationships. Consequently, NZ IFRS 9 is not
expected to have a material impact on Tower’s financial statements.
—NZ IFRS 15 Revenue from Contracts with Customers is effective for periods beginning on or after 1 January 2018. Tower will apply the standard
for the year ending 30 September 2019. The standard will provide a single source of requirements for accounting for all contracts with customers
and will replace all current accounting pronouncements on revenue. New revenue disclosures are also introduced. NZ IFRS 15 does not apply to
insurance contracts and financial instruments and consequently, as the majority of Tower’s revenue comes from such items, is not expected to have
a material impact on Tower’s financial statements.
—NZ IFRS 16 Leases is effective for periods beginning on or after 1 January 2019. Tower will apply the standard for the year ending 30 September
2020. The standard replaces the current guidance in NZ IAS 17 Leases. Under NZ IAS 17, a lessee was required to make a distinction between a
finance lease, which is recognised on balance sheet, and an operating lease, which is not recognised on the balance sheet. NZ IFRS 16 now requires
a lessee to recognise a lease liability reflecting future lease payments and a right-of-use asset for most lease contracts. Following adoption of
NZ IFRS 17, the treatment of leases for Tower’s office buildings, motor vehicles, and other equipment will change. The expected impact of the
changes on Tower’s financial statements is an increase to assets of approximately $11.0 m, an increase to liabilities of approximately $9.1 m and a
decrease to retained earnings of approximately $1.9 m. There will also be some impact on the pattern of expense recognition for leases, which is
not expected to be material. This is based on lease commitments and discount rates at 30 September 2018.
—NZ IFRS 17 Insurance Contracts is effective for periods beginning on or after 1 January 2021. Tower will apply the standard for the year ending
30 September 2022. The standard replaces the current guidance in NZ IFRS 4, and establishes the principles for recognition, measurement,
presentation and disclosure of insurance contracts. Tower has commenced work to assess the impact of adopting NZ IFRS 17. Due to the complexity
of the requirements within the standard the final impact may not be determined until global interpretations and regulatory responses to the new
standard are developed.
G5 Change in Comparatives (continued)

79
Corporate Governance
at Tower Limited (Tower)

Tower Limited annual report 201880
This section of the Annual Report provides
an overview of the corporate governance
principles, policies and processes
adopted and followed by Tower’s Board.
The Board is committed to achieving the highest standards of
corporate governance, ethical behaviour, and accountability,
and has implemented corporate governance practices that
are consistent with best practice. Where developments arise
in corporate governance, the Board reviews Tower’s practices
and incorporates changes where appropriate.
Governance Framework
Tower Limited is a company incorporated in New Zealand
under the Companies Act 1993 (NZ) (‘Companies Act’), whose
fully paid ordinary shares (‘Shares’) are listed on the NZX Main
Board and Australian stock exchange (‘NZX’ and ‘ASX’). As an
ASX Foreign Exempt Listing, Tower is primarily regulated by
the listing rules of its home exchange (being the NZX Main
Board (NZX)) and is exempt from complying with most of
ASX’s Listing Rules.
Compliance
In addition to compliance with the NZX listing rules, Tower’s
corporate governance framework also requires compliance
with the NZX Corporate Governance Code (NZX Code) and
the Financial Markets Authority's ‘Corporate Governance in
New Zealand: Principles and Guidelines’ handbook (FMA
Handbook).
Tower Insurance Limited, a subsidiary of Tower Limited, is
licensed to undertake general insurance business in New
Zealand under the Insurance (Prudential Supervision) Act
2010 (IPSA). Tower Insurance Limited must comply with the
requirements of IPSA, and is regulated by the Reserve Bank
of New Zealand.
For the reporting period to 30 September 2018, the Board
considers that Tower’s corporate governance practices have
materially adhered to the NZX Code and the FMA Handbook,
other than as outlined in this corporate governance section.
In May 2017, NZX published a new Corporate Governance
Code (new Code), which replaced the existing NZX Code
from 31 December 2017.
Tower fully supports the new Code and is undertaking a
review of its governance practices to ensure alignment with
the new Code. From 2017, Tower amended the structure of
its Corporate Governance section to better align with the new
Code, and the content of reporting will comply with the new
Code upon release of the FY19 annual report.
This statement is current as at 14 November 2018 and has
been approved by Tower’s Board.
More information
Tower’s principal governance policies and practices can
be found on Tower’s website at https://www.tower.co.nz/
investor-centre/corporate-governance.
| Ethical behaviour
Code of Ethics
Tower is committed to acting responsibly and ethically, and
meeting its legal and other obligations to shareholders,
customers, employees and the wider community. Maintaining
Tower’s reputation for honesty and fairness is crucial to its
success as a financial services business. To help achieve these
goals, Tower has a Code of Ethics which sets out minimum
standards of ethical behaviour. The Code of Ethics applies to
Tower’s directors, executives, employees and contractors.
The Code of Ethics is available to Tower’s people on its staff
intranet and website, and training is provided on the Code
through the orientation process. The behavioural expectations
set out in the Code of Ethics include:
• Acting honestly, with personal integrity, and in the best
interests of Tower, its shareholders and stakeholders
• Avoiding situations in which personal interests interfere or
appear to interfere with the interests of Tower, and advising
of any such conflicts
• Proper receipt and use of Tower’s corporate information,
assets and property
• Taking appropriate action when giving and receiving gifts
• Adhering to whistleblowing procedures
The Code of Ethics requires any person who becomes aware
of a breach or suspected breach of the Code to report it
immediately to the Head of Risk and Controls or the People
and Culture Team. Failure to comply with the Code of Ethics
may lead to disciplinary action and, in serious cases, dismissal.
All persons who disclose a breach will be protected in
accordance with Tower’s Whistleblower Policy.
Insider Trading and Market Manipulation Policy
Tower has an Insider Trading and Market Manipulation Policy
which governs dealing in financial products. The policy applies
to directors, employees, consultants and contractors and
helps provide transparency around Tower’s requirements in
relation to financial dealing, in particular protecting Tower’s
people from the risk of breaching Insider Trading laws. The
policy prohibits these people from trading and dealing in

81
Tower shares while they are in possession of information that
has not been released to the public and that is likely to have a
material effect on the price of Tower securities. The policy also
requires directors and designated employees to obtain prior
consent to trade, and specifies blackout periods where all
trading is prohibited.
The policy is available on Tower’s staff intranet and website,
and is circulated to all staff at the beginning of each blackout
period.
| Board composition and performance
Board charter
Tower’s Board operates in accordance with a written charter
which sets out the roles and responsibilities of the Board.
It provides that the primary role of the Board is to effectively
represent and promote the interests of shareholders with
a view to enhancing growth and returns across Tower and
its subsidiaries, adding long-term value to Tower shares.
The Board, when fulfilling its roles and responsibilities, is
required to have appropriate regard to Tower’s values, the
concerns of its shareholders, policy holders, its relationships
with significant stakeholders and the communities and
environment in which it operates.
The Board reserves certain functions to itself. These include:
• approving and overseeing the implementation of the
company's strategic objectives, annual operating plans,
financial targets and capital expenditure plans
• ongoing assessment and monitoring of performance,
including management’s performance against the strategic
objectives, operating plans and financial targets
• approving all changes to the company's corporate
structure, including tax and financial, where these are of
strategic importance
• determining company financial and treasury strategies
and policies, including approving all dividend policies
and distributions to shareholders, lending and borrowing,
charging of assets, tax, and investment and foreign
exchange policies in respect of shareholders’ funds
• approving capital expenditure, operating expenditure,
asset acquisitions and divestments, and settlement of legal
proceedings, in all cases where this is outside the normal
course of business and/or above delegated limits
• approving all transactions relating to major business and
company acquisitions, mergers and divestments
The Charter provides that the day-to-day leadership and
management of the company is undertaken by the Chief
Executive Officer and senior management. The Chief
Executive Officer is solely accountable to the Board for
management performance. The Chief Executive Officer
has also formally delegated decision making to senior
management within their areas of responsibility and subject to
quantitative limits to ensure consistent and efficient decision
making across the company. Senior management has no
power to do anything which the Chief Executive Officer cannot
do pursuant to his delegations. Within this formal delegation
framework those executives who report directly to the Chief
Executive Officer have authority to sub-delegate certain
authorities to their direct reports.
The Board meets regularly with management to provide
strategic guidance for Tower and effective oversight of
management.
Nomination and Appointment of
Directors to the Board
Tower’s procedure for the nomination and appointment of
directors to the Board is set out in Tower’s Remuneration
and Appointments Committee Terms of Reference. The
Remuneration and Appointments Committee will identify and
recommend to the Board suitable candidates for appointment
as directors. The Committee will consider, among other
matters, a candidate’s:
• experience as a director
• skills, expertise and competencies (the Board aims to have
a mix of skilled directors with particular competencies in the
insurance and financial services sector)
• the extent to which those skills complement the skills of
existing directors
• the candidate’s ability to devote sufficient time to the
directorship, and
• the candidate’s reputation and integrity.
To ensure that the Board appoints directors and officers
who have appropriate skills, knowledge, experience and
integrity to perform their duties and to fulfil their roles, Tower
has developed a Fit and Proper Policy benchmarked to the
requirements of the Insurance (Prudential Supervision) Act
2010 and the Fit and Proper Standard for Licensed Insurers,
along with the Fit and Proper Policy Guidelines for Licensed
Insurers issued by the Reserve Bank of New Zealand. All
newly appointed directors and relevant officers are subject
to Fit and Proper assessments prior to appointment. The Fit
and Proper assessment considers a candidate’s character,
experience, education, criminal record, and credit history.

Tower Limited annual report 201882
In the case of a candidate standing for election as a
director for the first time, Tower will provide information to
shareholders about the candidate to enable them to make an
informed decision on whether or not to elect the candidate,
including:
• Material adverse information revealed by any Fit and Proper
checks
• Details of any interest, position, association or relationship
that might influence, or reasonably be perceived to
influence in a material respect the candidate’s capacity to
exercise judgement on board matters or to act in the best
interests of Tower and its shareholders
• The Board’s view on whether the candidate will be
considered to be an independent director; and
• A recommendation by the Board in respect of the
candidate’s election.
Written agreements with directors
All Tower directors have entered into written agreements
establishing the terms of their appointment. These written
agreements include information relating to:
• Tower’s expectations of the director in his or her role
• The director’s expected time commitment to Tower
(including other duties)
• Remuneration entitlements (including any superannuation
included); and
• Indemnity and insurance arrangements.
Director profiles and independence
Profiles of Tower’s directors are available at pages 24 and 25
of this report. Directors’ independence is assessed in
accordance with the requirements for independence set out
in Tower’s Board and Director Protocols. Those independence
requirements are benchmarked against the Reserve Bank of
New Zealand and NZX independence requirements.
At 30 September 2018, the Board comprised of five non-
executive directors, all of whom are independent. Tower’s
constitution currently requires a minimum of five directors
and provides for a maximum of eight.
Diversity policy
Tower has a written diversity policy which embodies Tower’s
commitment to pursuing an inclusive and flexible workplace.
The Board is responsible for overseeing the implementation of
Tower’s Diversity Policy. The Remuneration and Appointments
Committee are delegated responsibility to annually review
and report on policy effectiveness and diversity within Tower.
Tower’s business operations are spread across 11 sites in
9 different countries and Tower recognises the value of
its diverse employee population as an essential driver of
performance culture, brand and shareholder returns. An
inclusive environment improves the quality of decision
making, incentivises productivity, and creates innovation
through collaboration. Tower’s Board is committed to further
developing an inclusive culture that encourages Tower’s
people to perform to their highest potential.
During FY18, Tower celebrated the diversity of its people
through a number of initiatives, including International
Women’s Day, Pride March, Women in Leadership Lean In
Circles, Diwali, Harmony Day, Matariki, Eid Mubarak, Te Wiki O
Te Reo Maori and Tongan Language Week.
Tower is also committed to attracting and retaining quality,
passionate people who are dedicated to helping transform
Tower’s business. Throughout FY18, Tower’s Executive
Leadership Team, Senior Leadership Team and People
Leaders continued participation in a leadership development
programme focussed on developing key leadership skills and
enhancing engagement.
While the Board considers that Tower has addressed the
requirements of its Diversity Policy, the Policy does not
currently require the Board to set measurable objectives for
achieving diversity. Tower’s diversity programme remains
under review and will be finalised in FY19.

83
The table below shows gender representation across Tower
as at 30 September 2018.
2017-20182016-2017
GROUP% BY
GROUP
NUMBER% BY
GROUP
NUMBER
Board of Directors
Male80%4100%5
Female20%10%0
Executive leadership team
1

Male75%663%5
Female25%237%3
Senior leadership team
2

Male58%2166%21
Female42%1534%11
Employees
Male 41%24142%256
Female59%34958%352
Total company
3
Male42%26844%283
Female58%36656%304
1 ‘Executive Leadership Team’ includes the Chief Executive Officer, and
those employees who report directly to the Chief Executive Officer.
2 ‘Senior Leadership Team’ is the second level of employees below the
Chief Executive Officer, who report directly to the Executive Leadership
Team.
3. ‘Total Company’ figures do not include the Board of Directors.
Both the 2016-2017 and 2017-2018 figures include Tower’s
Pacific Island subsidiaries.
Director training
Directors are expected to develop their skills, competencies
and industry knowledge by taking responsibility for their
continuing education. To ensure ongoing education, directors
are regularly informed of developments that affect Tower’s
industry and business environment, as well as company and
legal issues that impact the directors themselves. Directors
receive comprehensive board papers and briefing information
before Board meetings, including reports from the Chief
Executive Officer and senior management.
Directors have unrestricted access to management and any
additional information they consider necessary for informed
decision making. Senior management also attend Board
meetings in order to provide presentations to the Board and
answer any queries directors may have.
Director, Board and Committee performance
The Board recognises that the performance of its directors
and Board Committees is crucial to Tower’s success and to
the interests of its shareholders. The Board regularly reviews
its own composition and performance and that of the Board
Committees in accordance with the terms of the Board Charter.
Independence of Chair and CEO
Tower’s Chair is responsible for leading the board, facilitating
the effective contribution of all directors and promoting
constructive and respectful relations between the board
and management. The Chair of the Board is elected by the
directors.
The Board supports the separation of the roles of Chair and
Chief Executive Officer, and these roles are separate at Tower.
Michael Stiassny was appointed Chair of Tower on 21 March
2013 and is independent.
| Board committees
The Board currently has two standing committees: the Audit
and Risk Committee and the Remuneration and Appointments
Committee. Other committees are established from time to
time to examine specific issues as required by the Board.
The Committees are governed by written terms of reference,
which detail their specific functions and responsibilities.
The terms of reference for each Committee are reviewed
periodically.
The Committees make recommendations to the Board.
They have no decision making ability except where expressly
provided by the Board. The Board is required to annually
confirm the membership and Chair of each of the Committees.
The experience and skills of individual Committee members
are set out in the directors’ profiles on pages 24 and 25.
Member attendance at each Committee meeting is set
out on page 85.

Tower Limited annual report 201884
Audit and Risk Committee
Members: Graham Stuart (Chair), Michael Stiassny, Steve
Smith, Warren Lee and Wendy Thorpe.
The written Terms of Reference of the Audit and Risk
Committee include the following duties and responsibilities:
• Ensure processes are in place so that the Board is regularly
informed about significant financial matters relating to Tower
• Review Tower’s draft half yearly and annual financial
statements and reports
• Obtain reports from management, external audit, legal
counsel or internal audit on any regulatory, accounting or
financial reporting issues of significance.
• Review adequacy of accounting policies and actuarial
methodologies
• Recommend the appointment and removal of, and oversee
the performance of, the external auditor and be satisfied as
to the auditor’s independence
• Review the effectiveness and efficiency of management
processes, risk management and internal financial controls
and control systems
• Monitor and review compliance with regulatory and
statutory requirements and obligations
• Monitor the internal audit function and receive regular
reports from the internal auditors on risks, exposures and
compliance; and
• Maintain unrestricted and direct lines of communication
with the external and internal auditors
The Committee meets with the external auditors at least
twice per year and has regular contact with the internal
audit function.
The Terms of Reference require that the Committee has a
minimum of three non-executive directors, the majority of
whom are independent. At least one must have a financial or
accounting background. The Board appoints the Chair of the
Committee, who cannot also be Chair of the Board, and who
is an independent director.
The Chair is also required to provide an annual report
summarising the Committee’s activities, findings,
recommendations and results for the past year.
Employee attendance at Committee meetings
Tower’s employees may attend Audit and Risk Committee
meetings only at the invitation of Chair of the Committee.
Remuneration and Appointments Committee
Members: Michael Stiassny (Chair), Steve Smith, Graham
Stuart, Warren Lee and Wendy Thorpe.
The Remuneration and Appointments Committee advises the
Board in respect of a number of matters, including:
• performance management and appraisals for individual
Directors’ performance and any training requirements
• performance evaluations of the Board Committees and the
Board as a whole
• review of Directorships in terms of ongoing compliance with
relevant NZX Listing Rule and NZX Corporate Governance
Code requirements
• the Board’s composition, structure and succession
planning; and
• the Chief Executive Officer and senior executive
appointments, termination, performance appraisal
and remuneration.
The written Terms of Reference for the Remuneration and
Appointments Committee require that the Committee
comprises suitably qualified non-executive directors, the
majority of whom are independent. The Board appoints the
Chair of the Committee, who will be an independent, non-
executive director.
Following each meeting the Chair of the Committee provides
a report to the Board. The Chair is also required to provide
an annual report summarising Committee activities, findings,
recommendations and results for the past year.
Management may attend Remuneration and Appointments
Committee meetings only at the invitation of Chair of the
Committee.
The Company’s remuneration policies for directors and senior
executives are set out on page 86 and 87.
Nominations Committee
Tower’s Remuneration and Appointments Committee
carries out the functions of a nominations committee.
The Committee’s authority, duties, responsibilities and
relationship with the Board are set out in the Remuneration
and Appointments Committee’s Terms of Reference.
Tower’s Board considers that due to its size and the nature
of Tower’s business, it is appropriate for its remuneration
and nomination committees to be combined.

85
Other Committees
Tower’s Board has the ability to establish additional
subcommittees from time to time. During FY17, the Board
established a Due Diligence Committee to consider the
merits of undertaking a Capital Raise and to ensure the
Capital Raise adhered to appropriate laws and regulations.
Acquisition proposals
Tower was not subject to any acquisition proposals in FY18.
Board and Committee meeting attendance
The following numbers of Board and Committee meetings
were held during the year from 1 October 2017 to
30 September 2018:
• Board meetings – 15
• Audit and Risk Committee meetings – 6
• Remuneration and Appointments Committee – 3
• Capital Raise Due Diligence Committee – 3
The Chief Executive Officer and Chief Financial Officer attend
all Board and Committee meetings. The Chief Executive
Officer, Chief Financial Officer and Chief Risk Officer attend
all Audit and Risk Committee meetings. All meetings are
attended by an appropriately qualified person who is
responsible for taking accurate minutes of each meeting and
ensuring that Board procedures are observed.
Director attendance at these meetings is set out below.
2017/2018 Tower Limited directors’
attendance record
TO
WER LIMITED BOARD
AUDIT AND RISK
COMMITTEE
REMUNERATION
AND APPOINTMENTS
COMMITTEE
CAPTIAL RAISE DUE
DILIGENCE COMMITTEE
Meetings held (to 30 September 2018)15633
Michael Stiassny15633
Steve Smith14533*
Graham Stuart14423
Warren Lee13633
David Hancock**2111*
Wendy Thorpe***932N /A
*Attended as an observer.
** David Hancock resigned as director from 1 March 2018,
having signalled his intention to retire on 31 August 2017,
and was not eligible to attend meetings after the 1 March
2018 date.
***Wendy Thorpe was appointed on 1 March 2018.
She attended one meeting of the Audit and Risk Committee
meeting and one meeting of the Remuneration and
Appointments Committee as a guest, pending Board
approval of her membership to the respective committees.
| Reporting and disclosure
Continuous disclosure policy
Tower recognises that public confidence in the integrity of
Tower is based on continuous, full and open disclosure of
information about its activities to the market and relevant
stakeholders. Tower’s Corporate Disclosure Policy provides
for a planned, proactive communication programme with
shareholders and the wider investment community to
encourage their participation and interaction with Tower.
Tower believes this communication programme assists in
creating a fully informed market and enhances shareholder
value. The Policy explains the respective roles of directors,
officers and employees in relation to:
• Complying with Tower’s continuous disclosure obligations
• Safeguarding the confidentiality of corporate information to
avoid premature disclosure
• External communications, including analyst briefings
• Responding to or avoiding the emergence of a false market
The policy provides that only authorised spokespersons
can communicate on behalf of Tower with the investment
community, shareholders and the media.
Announcements
Tower makes the following regular announcements to the
market and shareholders:
• Annual results are announced in November
• Annual reports are released in December
• Tower’s Notice of Annual Shareholders' Meeting is generally
sent to shareholders in December or January
• Tower's Annual Shareholders' Meeting is generally held in
February or March
• Half year results are announced in May
• Half year reports are released in June.