Tower Limited HY 19 Results for Announcement to Market

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1. Core NZ portfolio is the NZ business and excludes ANZ & Kiwibank legacy portfolio.

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Notes:
1. IBNR (“Incurred but not reported”) / IBNER (“Incurred but not enough reported”) includes claims handling expenses
2. Ratio of IBNR / IBNER plus risk margin to case estimates

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Results for announcement to the market
Name of issuer Tower Limited
Reporting Period 6 months to 31 March 2019
Previous Reporting Period 6 months to 31 March 2018
Currency NZD

Amount (000s) Percentage change
Revenue from continuing
operations
$175,223 7%
Total Revenue
$175,223 7%
Net profit/(loss) from
continuing operations
$11,594 N/A
Total net profit/(loss)
$11,594 N/A
Interim/Final Dividend
Amount per Quoted Equity
Security
No dividend has been proposed
Imputed amount per Quoted
Equity Security
N/A
Record Date N/A
Dividend Payment Date N/A
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.57 $0.59
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
For the six months ended 31 March 2019, Tower Limited reported a
$23.5m increase in reported profit after tax compared to the six
months ended 31 March 2018. This was primarily due to the absence
of an impairment charge related to the settlement of a reinsurance
claim that occurred in the comparative period, and improved weather
conditions in the current year. Please refer to 2019 half year results
presentation for further information.

Authority for this announcement
Name of person

authorised to
make this announcement
Hannah Snelling, Company Secretary
Contact person for this
announcement
Nicho Nicolas Meseldzija, Head of Corporate Communications
Contact phone number +64 21 531 869
Contact email address nicholas.meseldzija@tower.co.nz
Date of release through MAP

21 May 2019

Unaudited financial statements accompany this announcement.

Tower has returned to profit – transformation progressing well•
Customer-centric focus is transforming Tower, provid
ing an exciting platform
for growth and delivering
improved results
•
Strong growth in underlying profit as overall business improves
•
Delivery of leading technology will
accelerate transformation trajectory
Uncertainty in Canterbury needs to end•
Progressing customer claims remains a priority
•
Existing situation is unsustainable and unacceptable
•
Tower is actively pursuing solutions to address this issue
Focus on consumer trust and confidence continues•
Tower’s high customer trust is driven
by transparent approach to change
•
Tower is a New Zealand listed co
mpany – independent of any Australian owner – with strong ethical
business practices
Chairman's update
2

Tower returns to profit
4
Key metrics
H1 19
H1 18
Gross written premium (GWP)
$169.7m
$161.0m
Growth in GWP
5.4%
10.4%
Growth in GWP in core NZ portfolio
8.9%
16.2%
Increase in risks in core NZ portfolio
9,383
9,613
Claims expenses
$63.3m
$74.4m
Claims expense ratio
44.5%
55.5%
Open Canterbury earthquake claims
132
253
After-tax CEQ provision adjustments
$4.7m
$2.3m
Management expense ratio
38.7%
38.9%
Underlying profit after tax
$19.4m
$7.3m
Reported profit / (loss) after tax
$11.9m
($11.6m)
1. Core NZ portfolio is the NZ business
and excludes ANZ & Kiwibank legacy portfolio
•
Solid core NZ growth
•
Strong digital sales continue
Solid growth drives $23.5m turnaround

•
Underwriting and pricing improvements delivered
•
Pacific claims returned to historic norms
Significant improvement in claims ratio
•
Pacific profit returns to historic levels
•
Major technology upgrade
on schedule and will
launch in coming weeks
•
Management expense ratio maintained
Other achievements

•
Canterbury progressing well, but new over-cap claims continue


More customers choosing Tower
5

GWP growth across all NZ products, compared to prior half:
•
NZ House has grown 7.8%
•
NZ Contents is up 2.9%
•
NZ Motor has grown 12.3%

Continued strong growth in risk numbers, increasing 9,383 this half

Pacific growth continues in line with expectations, returning to historical norms
•
8.9% GWP growth in core NZ portfolio
•
Total GWP has grown 5.4% through higher volumes and improved rating
-5,000
-
5,000
10,000
H1 16
H2 16
H1 17
H2 17
H1 18
H2 18
H2 19
Growth in risks
Change in core risks
Change in total NZ risks

Digital sales up to almost 50%
6

Digital sales increased to
almost 50% of new business
for March 2019, up from 39% in March 2018

Significant improvement in
retention through digital
channels, up 2.7 percentage points on prior half

18% of claims lodged onli
ne in March 2019 further
evidence of digital transformation

Continued investment in digita
l capability by shifting to
agile operating model
Digital offering is attracting more customers with lower cost to acquire. We contin
ue to target an industry
leading goal of 50 - 70%
of all transactions online
•
GWP from digital channels has grown at compound annual growth rate of 114% over past 3 years
GWP BY HALF THROUGH DIGITAL CHANNELS
(NZ$m)
$1.3m
$1.8m
$3.8m
$6.3m
$9.3m
$13.3m
$15.9m
H1
 
16
H2
 
16
H1
 
17
H2
 
17
H1
 
18
H2
 
18
H1
 
19
Trade
 
Me
 
Insurance
Tower
 
Digital
CAGR
 
– 114%

55.8%
54.1%
47.4%
0.6%
1.3%
2.3%
4.5%
2.1%
0.6%
0.9%
H1
 
18
 
claims
ratio,
 
including
large
 
events
Change
 
in
product
 
mix
 
vs
 
H1
18
H1
 
18
 
reserving
changes
H1
 
18
 
adjusted
for
 
claims
reserving
 
and
 
mix
Benign
 
large
events
Lower
 
house Lower
 
contents Higher
 
motor
Lower
commercial
H1
 
19
 
claims
ratio,
 
including
large
 
events
3
Improved NZ claims ratio
7
•
H1 18 results included non-recurring increases to reserves from the prior year (FY17) due to updated reserving methodology.
•
Benign weather environment and no large events in H1 19 has contributed to improved claims ratio.
•
Improvement in NZ House claim ratio a result of continued focus on underwriting, along with benefits from risk based pricing. The impact of large house fires has reduced to more usual levels.
•
Higher NZ Motor claim ratio due to a marginally increased claims frequency. This was driven by higher windscreen claims over the summer period due to traffic volumes and roadworks in certain regions. Ongoing pricing improvements will help to offset inflation.
•
Underwriting and pricing initiatives ha
ve delivered significant improvements
•
Targeting core insurance acti
vity to offset inflation
3
2
1
2
1
Note: Pricing changes include increases for higher risk homes, as
bestos, higher risk drivers, as well as more granular rating fo
r vehicle categories. Ongoing underwriting
improvements include refinements to risk selection
criteria and meth contamination policy limits.
CHANGE IN CLAIMS RATIO VS. PRIOR YEAR
4
4

53.8%
27.8%
5.5%
10.0%
5.0%
2.3%
1.8%
1.5%
H1
 
18
 
claims
ratio,
including
 
large
events
Benign
 
large
events
Fiji,
 
excluding
cyclones
NPI,
 
excluding
cyclones
PNG,
excluding
cyclones
Other
countries
Change
 
in
 
mix H1
 
19
 
claims
ratio,
including
 
large
events
•
Benign weather environment and no large events in H1 19 has contributed to improved claims ratio.
•
Cost control initiatives in the Fiji motor
book have delivered significant benefits. A
better claims experience in house fires has also contributed to a favourable claims ratio.
•
A lower result in Tower’s NPI brand was largely due to a better claims experience in the commercial portfolio, with fewer large commercial fires.
•
A favourable result in settlement of outs
tanding commercial claims has resulted in
a lower claims ratio for PNG.
Improvements in Pacific
8
•
Improved pricing, underwriting and risk selection is delivering results
•
Benign weather across Pacific contributed to improvement
3
2
1
CHANGE IN CLAIMS RATIO VS. PRIOR YEAR
4
Note: Pricing changes include increases fo
r Fiji Motor, and moving under-priced
PNG Commercial Fire to standard rates.
Underwriting improvements include the
establishment of a centralised Pacific Unde
rwriting team and refined underwriting
guidelines for new business and renewals.
1
2
3
4

Pacific GWP growth in targeted markets

Key markets of Papua New Guinea and Fiji returning to profitability following completion of remediation and repricing

Strongest growth achieved in Vanuatu, Tonga and the Cook Islands

Significant improvement in claims ratio

Building capability while controlling costs
9
•
Continued enhancements in lifting workforce capability and capacity
•
Implementing new, agile-led, operating model
•
Ongoing investment in:
•
Addressing and investing in protection from cyber security risks
•
Acquiring new customers and brand partners
•
Essential IT hardware upgrades
•
Management expenses expected to lift slightly in second half as customers are migrated to new platform
•
Management expense ratio stable while investment is made in new platform
•
Additional spend directed towards growth and reducing risk
GROUP MANAGEMENT EXPENSE RATIO
1
1.
For management reporting Towe
r includes claims handling
expenses in Management Expense Ratio
Continued focus on expenses and digital capabi
lity will enable achievement of long term
MER target of <35%
41.9%
39.9%
39.0%
38.7%
FY16
FY17
FY18
H1 19

Tech upgrade set to launch
10
New business will be on sale on new platform in coming weeks•
Phased delivery and implementation approach underway
•
Customers who call Tower will start having access
to our new insurance platform, new products and
telephone system in the coming weeks
•
Ramp-up approach will see new digital interface depl
oyed following initial release of new platform to
phone-based teams
Focus turns to delivery of second phase by end of calendar year•
Second phase will include online claims lodgem
ent portal and digital self-service insurance
•
Customer migration will commence in second half, wi
th customers moving to new platform on policy
renewal
•
Legacy systems to be decommissioned after customer migration
•
Ongoing focus to reduce risk associated with implementation
New platform will drive growth and reduce costs

Financial performanceConsolidated Group
GROUP PROFIT SUMMARY
(NZ$m)
12
•
Reported after tax profit of $11.9m, a $23.5m improvement on prior year
•
$12.1m improvement in underlying profit after tax
•
Strong growth in GWP, of $8.7m, and GEP, of $9.1m, reflects ongoing successful turnaround in New Zealand business
•
Claims costs, excluding large events, reduced $4.8 million
•
Management and sales expenses controlled
•
Canterbury P&L impact of $4.7m after tax
Key ratios
H1 19
H1 18
Change
Reinsurance / gross earned premiums
15.7%
16.0%
0.3%
Claims ratio excluding large events
44.4%
50.6%
6.2%
Claims ratio
44.5%
55.5%
11.0%
Expense ratio
38.7%
38.9%
0.2%
Combined ratio
83.2%
94.4%
11.2%
$ million
H1 19
H1 18
Change
Gross written premium
169.7
161.0
8.7
Gross earned premium
168.7
159.6
9.1
Reinsurance expense
(26.5)
(25.5)
(1.0)
Net earned premium
142.2
134.1
8.1
Net claims expense
(63.1)
(67.9)
4.8
Large events claims expense
(0.2)
(6.5)
6.3
Management and sales expenses
(55.1)
(52.1)
(2.9)
Underwriting profit
23.9
7.6
16.3
Investment and other revenue
3.4
3.8
(0.4)
Financing costs
(0.2)
(0.4)
0.2
Underlying profit before tax
27.1
11.0
16.1
Income tax expense
(7.7)
(3.7)
(4.0)
Underlying profit after tax
19.4
7.3
12.1
PeakRe settlement
0.0
(16.2)
16.2
Canterbury impact
(4.7)
(2.3)
(2.4)
Foreign tax credits write-off
(1.0)
0.0
(1.0)
Simplification programme opex
(0.4)
0.0
(0.4)
Other non-underlying costs
(1.4)
(0.4)
(1.0)
Reported profit/(loss) after tax
11.9
(11.6)
23.5

11.0
27.1
8.1
6.3
4.8
0.2
2.9
H1
 
18
Underlying
profit
 
before
 
tax
Net
 
earned
premium
Large
 
event
claims
Net
 
claims
expense
 
(excl
large
 
events)
Investment
income
 
less
financing
 
costs
Management
expenses
H1
 
19
Underlying
profit
 
before
 
tax
•
Net earned premium higher due to growth in core book and new pricing approach
•
No large events in the half, reducing claims expense
•
Improvements in pricing and underwriting have contributed to lower claims expenses, excluding large events
•
Management expenses increased in line with business growth
Movement in underlying profit before tax
13
MOVEMENT IN UNDERLYING PROFIT BEFORE TAX
(NZ$m)
NZ 8.1
NZ 5.1
Pacific 1.2
NZ 0.6
Pacific 4.2

Financial performanceNew Zealand
NEW ZEALAND PROFIT SUMMARY
(NZ$m)
•
Underlying profit increased by $8.9m on prior year
•
6.3% increase in GWP a result of customer growth, risk-based pricing approach and strong retention
•
Underwriting and pricing improvements, and a benign weather environment led to a 8.4% decrease in claims ratio and 9% decrease in net claims expense
•
Management expenses contained, resulting in a 1.1% decrease in expense ratio on prior year
•
9.5% reduction in NZ combined operating ratio
14
$ million
H1 19
H1 18
Change
Gross written premium
141.6
133.2
8.3
Gross earned premium
139.6
131.5
8.2
Reinsurance expense
(18.1)
(18.0)
(0.1)
Net earned premium
121.6
113.5
8.1
Net claims expense
(57.4)
(58.0)
0.6
Large events claims expense
(0.1)
(5.2)
5.1
Management and sales expenses
(44.5)
(42.8)
(1.8)
Underwriting profit
19.5
7.5
12.0
Investment and other revenue
3.2
2.9
0.2
Underlying profit before tax
22.6
10.4
12.2
Income tax expense
(6.1)
(2.8)
(3.3)
Underlying profit after tax
16.5
7.6
8.9
Key ratios
H1 19
H1 18
Change
Claims ratio excluding large events
47.2%
51.1%
3.9%
Claims ratio
47.4%
55.8%
8.4%
Expense ratio
36.6%
37.7%
1.1%
Combined ratio
84.0%
93.5%
9.5%

Financial performancePacificPACIFIC PROFIT SUMMARY
(NZ$m)
15
•
Underlying profit after tax returns to historic levels, a $4m increase on H1 18
•
Continued profitable growth due to improved pricing and risk selection
•
Revenue growth was strongest in Vanuatu, Tonga and the Cook Islands
•
Significant improvement in net claims expense and claims ratio due to improved pricing and underwriting, a benign weather environment and fewer commercial fires
$ million
H1 19
H1 18
Change
Gross written premium
28.1
27.8
0.3
Gross earned premium
29.1
28.1
1.0
Reinsurance costs
(8.4)
(7.5)
(0.9)
Net earned premium
20.7
20.7
0.0
Net claims expense
(5.7)
(9.8)
4.2
Large events claims expense
(0.1)
(1.3)
1.2
Management and sales expenses
(9.1)
(8.7)
(0.4)
Underwriting profit
5.8
0.9
5.0
Investment revenue
and other revenue
0.5
0.4
0.1
Underlying profit before tax
6.3
1.3
5.0
Income tax expense
(2.1)
(1.0)
(1.1)
Underlying profit after tax
4.2
0.2
4.0
Key ratios
H1 19
H1 18
Change
Claims ratio excluding large events
27.4%
47.6%
20.2%
Claims ratio
27.8%
53.8%
26.0%
Expense ratio
44.0%
42.0%
(2.0%)
Combined ratio
71.8%
95.8%
24.0%

163
132
24
10
65
Open properties
30 September
2018
New properties
Reopened
Closed
Open properties 31
March 2019
•
Outstanding claims redu
ced from 163 to 132
•
Open litigated claims settling favourably
•
Considerable reduction in new litigated claims
•
Non-litigated claims continue to settle in line with expectations
•
Higher than expected over
-cap claims received from
EQC has resulted in strengthening of provisions, resulting in $4.7m after-tax P&L impact
•
In addition to the increase in provision for higher level of future over-cap claims, Tower will be taking action to address this issue
•
Additional uncertainty ma
naged through solvency
capital held by Tower
Canterbury earthquakes update
16
Notes:1. IBNR (“Incurred but not reported”) / IB
NER (“Incurred but not enough reported”)
includes claims handling expenses
2. Ratio of IBNR / IBNER plus ri
sk margin to case estimates
•
Continued progress with 65 claims closed in first half
MOVEMENT IN PROPERTIES
$ million
Mar-19
Sep-18
Mar-18
Case estimates
29.7
37.4
48.0
IBNR/IBNER
1
20.3
21.4
22.0
Risk margin
9.0
9.0
10.8
Additional risk margin
5.0
5.0
10.0
Actuarial provisions
34.3
35.4
42.8
Gross outstanding claims
64.0
72.9
90.8
Ratio of provisions to case estimates
2
115%
95%
89%

Challenging the market to grow
18
Medium-term operating targets:•
GWP growth of 8-10%
•
Combined Operating Ratio < 85%
•
Return on equity of 14 – 16%
•
Digital challenger positioning enables achievement of medium-term targets
Operational
Excellence
Underwriting
Excellence
Amazing
 
Claims
Experiences
Stunningly
 
Simple
 
Products
Great
Value
 
for
 
Money
Challenger
Value
Proposition
Company
purpose
Setting
it
 
right
for
 
customers
and
 
their
communities

2019 second half priorities
19
1. Drive digital transformation
2. Keep driving growth
3. Improve profitability
4. Continue controlling expenses

Uplifted FY19 financial outlook
20
•
Strong business performance and benign weather environment in first half leads Tower to uplift its one-off guidance for underlying NPAT, which is no
w expected to be in excess of $26m* in FY19
•
Key assumptions include:

A $5m allowance for large events

Loss ratios return to more normalised levels in second half

A minor uplift in management expenses as transformation activity culminates
•
In respect to the 2019 financial year, and as previous
ly advised, no dividend will be paid in the first
half of the financial year. The Board’s intention is
to pay between 50% and 70% of second half 2019
NPAT, where prudent to do so.
•
Solid growth expected to continue
•
Claims ratio expected to stabilise
*Some previously disclosed costs relating to Tower’s technology up
grade, such as training and migration, are unable to be capit
alised. Tower estimates that $3-$5m
before tax will be included as non-
underlying expenses in the second
half of the 2019 financial year.

Underlying and reported profit:•
“Underlying profit” does not have a standardised meaning under Generally Accepted Accounting Prac
tice (GAAP). Consequently it
may not be comparable to similar measures presented by other reporting entities and is not subject to audit or independent review.
•
Tower uses underlying profit as an internal reporting measure as management believes it provides a better measure of Tower’s underlying performance than reported
profit, as it excludes large or
non-recurring items that may obscure trends in Tower’s underlying performance, and is useful to investors as it makes it easier to compare the Tower’s financial performance between periods.
•
Tower has applied a consistent a
pproach to measuring underlying
profit in the current and comparative periods.
•
“Reported profit after tax” is calc
ulated and presented in accordance
with GAAP and is taken from Tower Limited’s unaudited interim financial statements for the half-year ended 31 March 2019.
Notes on reconciling items:1.
Non-underlying items are shown separately in Tower’s
management reporting, yet included
within other lines (depending
on the nature of the item) in the financial statements.
2.
In Tower’s manageme
nt reporting, indirect claims handling
expenses are reported within ‘m
anagement and sales expenses’. In
the financial statements, indirect
claims handling expenses are
reclassified to ‘net claims expense’.
3.
Certain items of revenue are netted off ‘management and sales
expenses’ in Tower’s management re
porting, and are reclassified to
‘other revenue’ in the financial st
atements. This primarily relates to
commission received by Tower.
Reconciliation betweenunderlying profit after tax
and
reported profit after tax
22
$ million
H1 19
underlying
profit
Non-
underlying
items (1)
Claims
handling
expenses
(2)
Other
items (3)
H1 19
reported
profit
Gross written premium
169.7
169.7
Gross earned premium
168.7
168.7
Reinsurance expense
(26.5)
(26.5)
Net earned premium
142.2
0.0
0.0
0.0
142.2
Net claims expense
(63.3)
(9.7)
(9.6)
(82.6)
Management and sales expenses
(55.1)
(0.6)
9.6
(2.2)
(48.3)
Underwriting profit
23.9
(10.4)
0.0
(2.2)
11.4
Investment and other revenue
3.4
0.9
2.2
6.5
Financing costs
(0.2)
(0.2)
Underlying profit before tax
27.1
(9.4)
0.0
0.0
17.6
Income tax expense
(7.7)
1.9
(5.7)
Underlying profit after tax
19.4
(7.5)
0.0
0.0
Canterbury impact
(4.7)
4.7
Foreign tax credits write-off
(1.0)
1.0
Simplification programme opex
(0.4)
0.4
Other non-underlying costs
(1.4)
1.4
Reported profit/(loss) after tax
11.9
0.0
0.0
0.0
11.9

New Zealand revenue
23
Notes:1.
Tower’s ‘core’ portfolio refers to the NZ business excluding th
e ANZ Bank and Kiwibank portfolios. The ‘non-core’ segment ref
ers to the ANZ Bank and Kiwibank portfolios.
2.
The term ‘risks’ refers to an item of property insured, such
as a house, motor vehicle, or th
e contents at a specified addres
s. This is distinguishable from ‘policies’, as one
policy might cover several risks, for example, a commercial
motor vehicle policy that covers multiple motor vehicles.
NZ GWP ($m)
H1 19
H1 18
Change
Core
112.5
103.3
8.9%
Non-core
29.1
30.0
-2.9%
Total NZ business
141.6
133.2
6.3%
Risk counts (000s)
H1 19
H1 18
Change
Core
400.4
382.3
4.7%
Non-core
86.6
97.1
-10.8%
Total NZ business
487.0
479.3
1.6%
NZ GWP ($m)
H1 19
H1 18
Change
House
63.0
58.4
7.8%
Contents
25.1
24.4
2.9%
Motor
48.0
42.8
12.3%
Other
5.5
7.6
-28.2%
Total NZ business
141.6
133.2
6.3%
44%
18%
34%
4%
H1 19
44%
18%
32%
6%
H1 18
HouseContentsMotorOther
GROSS WRITTEN PREMIUM BY PRODUCT %

34%
24%
6%
5%
5%
14%
4%
8%
Fiji
Papua New Guinea
Cook Islands
Solomon Islands
Samoa
American Samoa
Tonga
Vanuatu
Pacific revenue by country
24
Country
H1 19
H1 18
Fiji
8.7
9.4
Papua New Guinea
6.3
6.7
Cook Islands
1.9
1.6
Solomon Islands
1.4
1.6
Samoa
1.5
1.4
American Samoa
4.0
3.8
To n g a
1.4
1.1
Vanuatu
3.0
2.2
To t a l
28.1
27.8
GROSS WRITTEN PREMIUM
(NZ$m)
31%
22%
7%
5%
5%
14%
5%
11%
H1 19
34%
24%
6%
5%
5%
14%
4%
8%
H1 18

59
58
56
50
50
50
25
28
45
39
25
5
31-Mar-18 30-Sep-18 31-Mar-19
Net cash held incorporateTIL's solvency marginabove RBNZ minimumTIL's RBNZ minimumsolvency marginTIL's MSC

Tower Insurance Limited (TIL) has $95m of solvency margin, which is equivalent to 271% of minimum solvency capital

TIL’s solvency margin has increased by $17m since 30 September 2018, and is now $45m above RBNZ minimum requirements

At 31 March 2019, Tower Limited also held $5m in net cash in its corporate entities

Tower Limited has negotiated a new cash advance facility, maturing in March 2023, and will utilise this facility to fund remaining IT investment

Tower’s strong capital base supports growth while providing a buffer against legacy risks
Improved solvency position
25
TOWER INSURANCE LIMITED SOLVENCY POSITION
PLUS NET CORPORATE CASH
($m)
200%
180%
100%
•
Strong capital position has been maintained
•
Funding in place to support continuing investment

Balance sheetTo w e r G r o u p
26
$ million
31 March 2019
30 September
2018
Movement $
Movement %
Cash & call deposits
67.0
102.0
(35.0)
(34.3%)
Investment assets
220.5
198.2
22.3
11.2%
Deferred acquisition costs
22.9
22.6
0.3
1.2%
Intangible assets
61.9
45.0
16.8
37.4%
Other operational assets
299.7
318.3
(18.6)
(5.9%)
Total assets
672.0
686.2
(14.3)
(2.1%)
Policy liabilities & insurance provisions
309.9
324.5
(14.6)
(4.5%)
Other operational liabilities
76.4
86.9
(10.6)
(12.1%)
Total liabilities
386.3
411.4
(25.1)
(6.1%)
Total equity
285.7
274.8
10.9
4.0%

4
33
1
7.5
7.5
3
1
2
2.5
2
Event 1
Event 2
Event 3
Event 4
Event 5
Event 6
Event 7
Contribute to excess (Tower cost)
Covered by aggregate reinsurance
Covered by dropdown reinsurance
Above coverage (Tower cost)
Reinsurance structure overview
Our reinsurance structure reduces volatility from large events
27
Max coverage of $7.5m per event,
dropdown cover activates for 2
nd
event over $7.5m
$20m total cover
under aggregate treaty exhausted
First $10m of losses
at Tower cost
Aggregate cover overview for FY19•
Minimum event size of $1m to qualify, max of $7.5m per event
•
$20m cover once $10m excess filled
•
No coverage for earthquake in New Zealand
•
Drop-down cover for 2
nd
and 3
rd
event over $7.5m to bridge gap between aggregate
cover and catastrophe cover (including earthquake)
1
st
event over $7.5m,
cover is limited to $7.5m
High-level reinsurance structure overview
Amount of cover for a single
catastrophe event
Catastrophe
cover
(including
earthquakes)
$735m
$10m
Aggregate cover
($7.5m per event)
Storm and other large event cover
(across multiple events)
First $10m
covered by
Tower
$10m
$30m
Dropdown cover $2.5m
(2
nd
and 3
rd
events only)

This presentation has been prepared by Tower Limited to provide
shareholders with information on
Tower’s business. This documen
t is part of, and should be read in
conjunction with an oral briefing to be given by Tower.
A copy of this webcast of the briefing is available at
http://www.tower.co.nz/investor-centre/
It contains summary
information about Tower as at 31 March 2019, which is general in
nature, and does not purport to contain all information a pros
pective investor should consider when evaluating
an investment. It is not an offer or invitation to buy Tower sh
ares. Investors must rely on th
eir own enquiries and seek approp
riate professional advice in relation to the
information and statements in relation to
the proposed prospects, business and operatio
ns of Tower. The data contained in this
document is for illustrative purposes only. Past
performance is not a guarantee of future performance and must not
be relied on as such. The info
rmation in this presentation do
es not constitute financial advice.
Forward looking statementsThis document contains certain forward-looking statements. Such st
atements relate to events and
depend on circumstances that wi
ll occur in the future and are subject to
risks, uncertainties and assumptions. There are a number of fact
ors which could cause actual results and developments to differ
materially from those expressed or implied by
such forward-looking statements, including,
among others: the enactment of legislation or
regulation that may impose costs or r
estrict activities; the re-negotiation of contracts;
fluctuations in demand and pricing in the industry; fluctuations
in exchange controls; changes in government policy and taxatio
n; industrial disputes; and war and terrorism.
These forward-looking statements speak on
ly as at the date of this document.
DisclaimerNeither Tower nor any of its advisers or any of their respective
affiliates, related bodies corporate, directors, officers, par
tners, employees and agents (other persons) makes any
representation or warranty as to the currenc
y, accuracy, reliability or completeness of
information in this presentation. To th
e maximum extent permitted by law, Tower and the
other persons expressly disclaim any liability incurred as a result
of the information in this Presentation being inaccurate or
incomplete in any way. The statements made in this
presentation are made only as at the date
of this presentation. The accuracy of the
information in this presentation remains su
bject to change without notice.
Disclaimer
28

1
MICHAEL STIASSNY
SLIDE 2: CHAIRMAN’S UPDATE
Good morning and thank you for making the time to join us this morning.
With me in Auckland is our Chief Executive Officer, Richard Harding and
our Chief Financial Officer, Jeff Wright who will take you through the half
year results and answer your questions.
I am pleased to open today’s call with the news that our transformation
strategy has seen Tower return to profit.
Richard joined Tower four years ago and in that time, he and his team
have been relentless in stabilising and transforming this iconic Kiwi
insurer.
We have long held the view that Tower is undervalued. Today’s results
are the culmination of significant work to remove legacy issues, refocus
and grow the business and implement core insurance fundamentals. Our
goal has been to recreate a profitable company that delivers shareholder
value and we are succeeding.
Richard and his team are driving an ambitious plan to transform Tower
and have New Zealanders and Pacific Islanders see us in a new light,
and set the bar for how insurance “should” be.
The company is being repositioned as a contemporary, challenger brand
underpinned by a customer-focused, digital-first strategy to successfully
compete in the 21st century insurance market place.

2
With the number of customers using our digital channels to engage with
and purchase Tower products growing exponentially, we have proof that
our confidence in user-friendly technology is well placed. And, with the
upcoming launch of our new technology platform, Tower will have the
final building block in place to accelerate growth.
Significant progress is being made on the Canterbury portfolio, however
you will note additional provisioning. Despite litigated and non-litigated
claims settling in line with expectations, seven years on and we continue
to receive over-cap claims from EQC.
The latest relate to the reopening of closed claims due to reassessment
of the original scope of works, or the need to remediate poor
workmanship and faulty repairs.
We have worked constructively with the Government – and will continue
to do so – to push for EQC reforms that we are confident will produce
better, fairer results for New Zealanders. However, we now believe the
time has come to take a different tack.
It is not our role – nor our shareholders’ responsibility – to resolve and
pay for situations arising from EQC’s past incompetence, and the
negligence of its repair providers.
So while Tower will continue to treat customers fairly, we will now seek
to recoup any costs incurred from settling over-cap claims from EQC
where past incompetence and negligence has contributed to the claim
going over-cap.

3
The status quo is unacceptable and while the quantum has reduced, we
want to be in a position to provide shareholders with clarity.
One of the most gratifying aspects of today’s result is that it’s
representative of the trust and confidence our customers place in us.
That’s no small ask at a time when financial services have hit a
reputational all-time low, particularly on the back of the findings of the
Australian banking Royal Commission.
Being Kiwi – and independent of the big Australian brands – also helps.
However, Tower’s transformation which is centred on making things
easier and better for customers is the real reason. It’s quite simple –
treating people fairly, openly and honestly engenders trust and loyalty
and makes a strong foundation for any business.
That’s the strength of the Tower brand, and it will continue to propel the
business forward.
On behalf of the Board I’d like to thank Richard and the management
team for their sustained efforts to deliver a strategy that has seen Tower
return to profitability.
I’ll now hand over to Richard and Jeff, who will take you through the
results and outlook before we take questions.

4
RICHARD HARDING
SLIDE 3: 2019 FIRST HALF ACHIEVEMENTS TITLE SLIDE
Thank you Michael and good morning everyone.
SLIDE 4: TOWER RETURNS TO PROFIT
The first half of the 2019 Financial Year has seen Tower return to profit.
I am pleased to let you know our strategy to fix and grow the business is
paying off. Today we have reported a half year profit of $11.9 million
after tax, a $23.5 million improvement on the same period last year.
Underlying profit after tax increased $12.1 million, to $19.4 million, a
result of our relentless focus on improving all aspects of our business,
underwriting excellence and driving growth.
This result is the culmination of four years’ work to turn Tower around by
fixing the foundations and challenging industry norms.
These results demonstrate the inherent strength of the business and the
future potential that exists in the Tower brand.
Our determination to deliver something better to customers has been
noticed and we are growing at above market averages. Gross Written
Premium in the core New Zealand portfolio increased by 8.9%, and total
GWP reached $170 million across New Zealand and the Pacific.

5
Continued implementation of risk-based pricing along with improved
underwriting and a benign weather environment has significantly
reduced claims costs. Over the last half, our claims ratio has reduced to
44.5%, an 11 point reduction from 55.5% in the first half of 2018.
Our Pacific business has returned to historical norms, with a return to
solid growth, improved underwriting and a benign weather environment
delivering better results.
Today’s result includes a $4.7 million after-tax expense for increased
Canterbury provisions, principally due to EQC over-cap claims.
While making necessary and significant investment in our business
we’ve also maintained our expense ratio at 38.7%.
This investment will accelerate our growth and the first phase of our
major technology upgrade will launch in the coming weeks.
This is an exciting milestone for Tower and while projects of this nature
contain risk and complexity, we are managing this with robust
governance controls.
Our business has turned around and our transformation is progressing
well. These results demonstrate the long held belief of the Tower Board
and management team, that Tower offers an exciting platform for
growth.
As I mentioned earlier, this is the result of four years of work where
we’ve significantly reduced legacy risks, fixed the business and built a
solid, future-focussed platform.

6
The next phase of our transformation strategy is to leverage and grow
the business. We are ready to create an exciting proposition that
delivers growth and realises Tower’s full potential.
SLIDE 5: MORE CUSTOMERS CHOOSING TOWER
In a market dominated by overseas-owned and controlled insurers we
are starting to offer customers a genuinely different, better, Kiwi
alternative, and this focus is driving solid growth in our core book.
The growth we have achieved is significant, adding over 9,000 risks to
our core New Zealand portfolio, in stark contrast to 2016 where we were
losing customers.
This positive momentum has driven continued growth with GWP in the
core portfolio growing 8.9% and total GWP growing 5.4%.
Core GWP is growing above industry averages, with GWP in:
 NZ House growing 7.8%, with the majority being attributable to
rating
 NZ Contents growing 2.9% split between rating and volume, and
 NZ Motor growing 12.3%, with the majority being attributable to
volume
This is being achieved through a combination of factors, including:
 a new, fairer risk-based approach to pricing and simpler policy
documents
 constant refinement of underwriting criteria enabling more granular
assessment, and

7
 attracting new, profitable customers with improved and targeted
offerings.
The growth we have achieved is the result of offering customers simpler
insurance at a fair price. Through this approach we are starting to realise
the potential that exists in the Tower brand.
Growth in the Pacific has returned to historical levels and following a
number of years of remediation we are now well placed to grow
sustainably in the region.
Over the coming twelve months we see a positive growth and pricing
environment in New Zealand and the Pacific, which will lead to further
improved profitability.
SLIDE 6: STRONG DIGITAL SALES CONTINUE
In 2016 we began our digital transformation journey and since then I
have consistently said that digital will drive the future growth of Tower.
We have continued to place significant effort into attracting new
customers and improving this channel’s performance.
Our efforts to become a digital insurer continue to pay dividends, with
48% of all new business coming through our digital channels in March.
This compares to less than 10% during 2016.
In the last twelve months we have delivered significant growth, with
GWP through digital channels reaching $15.9 million in the first half, a
compound annual growth rate of 114% since we started in 2016. This is
thanks to continuous improvement of our digital channels.

8
Our recently improved digital claims lodgement process and innovations
like our claims chatbot, Charlie, has resulted in 18% of claims being
lodged online in March 2019, with additional increases since. This is
further proof that our investment in digital channels is well made.
Digital remains one of the most crucial, foundations of our business
moving forward.
It enables differentiation, agility, innovation and growth, and the launch
of our new platform in the coming weeks will accelerate our progress.
SLIDE 7: IMPROVED NZ CLAIMS RATIO
New Zealand claims expenses have decreased significantly in the first
half of the financial year with a number of underwriting and pricing
initiatives helping to offset inflation.
As you can see on this slide, there are four key things that have
contributed to this positive result.
Last year we informed you of an adjustment relating to the 2017 financial
year which increased our base claims ratio, this was a one-off issue for
FY 2018.
While in prior years, we’ve borne the brunt of severe weather, this year
we’ve benefited from improved weather conditions with no large events
to date. This has resulted in a 4.5% decrease in our claims ratio.
Our new, simpler products and fairer, risk-based pricing approach have
contributed to a reduction in NZ House and Contents claim frequency.

9
Following a period in 2017 and 2018 of a higher number of large house
fires, trends have returned to more historic levels.
Good weather also means more people out exploring New Zealand and
as a result, in our motor portfolio, we have seen an increase in claims
frequency.
As anyone driving around New Zealand, especially those in Auckland,
can attest, it sometimes feels like there are more orange traffic cones
than Kiwis. The large number of roadworks currently underway along
with the increased traffic on the road has caused more windscreen
damage which is the main driver of increased motor claims frequency.
While our result is pleasing and we have delivered significant
improvements, we remain focussed on refining our products and pricing
approach to ensure we continue addressing claims costs.
SLIDE 8: IMPROVEMENTS IN PACIFIC
Our Pacific business remains strong and we continue to believe that
there is unrealised potential here.
Having been impacted by a number of severe weather events over the
past few years, contributions from our Pacific business have now
returned to historic levels.
Vanuatu, Tonga, Samoa, American Samoa and the Cook Islands have
returned to growth thanks to additional underwriting, pricing and
marketing support for our local teams.

10
Remediation of the Papua New Guinea portfolio to reduce risk and
exposure is now complete and this portfolio is returning to profitability.
Continued repricing of the Fiji motor book has led to improved
profitability. Although slightly softer growth than we have previously
seen, this was an important step to ensure future growth remains
sustainable.
Improvements in claims costs have been delivered through targeted
underwriting and pricing initiatives across our key markets, and,
combined with a benign weather environment, have resulted in a 26
point decrease in our Pacific claims ratio.
Our recently launched operation centre in the Pacific has helped bring
greater discipline and consistency across the region ensuring we grow
within our risk appetite.
We remain confident that there is strong growth potential in our Pacific
markets and that it will make a significant contribution to Tower in the
coming years.
SLIDE 9: BUILDING CAPABILITY WHILE CONTROLLING COSTS
I’m pleased to report that we have maintained our expense ratio at
38.7%, while continuing to significantly invest.
We are investing in the business to drive long term value, and as we’ve
outlined previously, a major component of this is new technology.

11
Expenses remain steady as we continue to grow the business, as well
as backfilling project roles, and working to mitigate any risks associated
with the implementation of our new technology platform.
While we anticipate a slight uplift in the second half due to the increased
focus on the migration of our customers onto the new platform, once
fully operational, our expenses will reduce significantly.
SLIDE 10: TECH UPGRADE SET TO LAUNCH
Just over twelve months ago we announced our commitment to invest in
a new technology platform that will deliver a step change in results.
We have been working at pace to deliver against aggressive timeframes
and at our recent Annual Shareholder Meeting I advised of the phased
implementation approach we are undertaking.
With the launch of the first phase to occur in the first half of the 2019
calendar year, this approach was designed to minimise business risk
and mitigate any potential negative impacts on our customers.
I am pleased to let you know that we will deliver phase one in the next
few weeks, which will see us selling new business on our new system.
The development and build of this phase is complete and we are in the
final stages of testing. We will be deploying the system through our
phone channels first, followed closely by our digital channels.
Completion of phase one will enable us to sell our new simplified
products to customers and is the core foundation piece of this
programme.

12
Delivery of Phase 2 components will occur in the second half of the 2019
calendar year and includes:
1. Rationalisation of our products
2. Commencing the 12 months migration of our existing customers to
the new platform
3. Launching a customer self-service portal, allowing customers to
manage their insurance online, just like you do with online banking;
and
4. Implementing streamlined claims management modules
The most significant impact will be migrating our customers to our new
platform and our new products over a 12 month period.
Moving hundreds of thousands of customers to a core set of just 12
products will deliver significant benefits to our customers and efficiencies
in our business.
A migration of this size can pose risk if not properly managed. Therefore,
through our phased delivery approach we will increase the focus on
managing and retaining our customers through the change to minimise
this risk.
Delivery of the programme through this phased approach, as well as a
number of additional components will be delivered before the end of the
2019 calendar year.
Costs for the programme are developing in line with previously advised
amounts and at this stage, there are no material changes to the
estimated total cost.

13
We continue to tightly manage the programme through robust
governance controls, with a focus on managing delivery risk and cost
trade-off. We expect benefits to start being realised over the 2020
financial year, with a step change expected as we finalise customer
migration and decommission existing legacy systems.
I will now hand over to Jeff who will take you through our financial results
in more detail.

14
JEFF WRIGHT
SLIDE 11: FINANCIAL PERFORMANCE TITLE SLIDE
Thank you Richard and good morning everyone
SLIDE 12: FINANCIAL PERFORMANCE CONSOLIDATED GROUP
Looking at the consolidated results, we can see that continued growth,
improved claims costs and the removal of legacy issues in prior years
has enabled Tower to return to profit.
We have achieved solid growth this half of $8.7 million in gross written
premium and a $8.1 million increase in net earned premium. Claims
costs have reduced $11.1 million with underlying profit after tax
improving by $12.1 million.
Adjustments to Canterbury provisions has resulted in an $4.7 million
after-tax impact to our reported profit.
Overall, this has resulted in a reported profit of $11.9 million after tax, a
significant improvement, up $23.5 million on the same period last year.
In addition to the strong reported results, our combined ratio has
decreased to 83.2%, 11.2 points lower than the same period last year.
SLIDE 13: MOVEMENT IN UNDERLYING PROFIT
Slide 13 details the key drivers of the increase in underlying profit before
tax from the first half of 2018, to the first half of 2019.

15
The strong growth is reflected in the $8.1m increase in net earned
premiums, a combination of growth in our core and our risk-based
pricing approach.
Risk based pricing has resulted in the growth of our portfolio in Auckland
while also reducing our exposure to high-risk areas by an annualised
figure of 16%.
Premiums are now at the point in Wellington where the unfair cross-
subsidisation will be largely removed over the next 12 months as we roll
out changes following the EQC deductible change.
Our fairer approach to pricing has also allowed us to grow our total
house sum insured exposure by 17% in the low risk areas like Auckland
and Taranaki
It is clear this strategy is working and will continue to deliver growth and
reinsurance efficiency in future.
On this slide you can also see the improvement in both large event
claims and BAU claims costs.
Pricing and underwriting initiatives contributed to a $4.8 million before-
tax improvement in net claims expenses, while benign weather resulted
in a $6.3 million before-tax improvement in large event claims costs.
A small increase in management expenses is attributable to ongoing
investment and increased marketing activity to acquire new customers.

16
So as you can see, this is a strong result, delivered by an ongoing focus
on our strategy.
SLIDE 14: FINANCIAL PERFORMANCE NEW ZEALAND
The majority of growth in Tower’s GWP occurred in our NZ markets, with
$8.3 million growth achieved in gross written premium.
A change in mix and more efficient reinsurance is seeing more gross
earned premium flow through to net earned premium, with an $8.1
million improvement in NEP.
Improvements in claims costs also contributed to our solid results, with a
total reduction of $5.7 million in claims expenses compared to the same
period last year.
We are pleased that our investment in the business is resulting in growth
and underwriting and pricing initiatives are delivering improvements in
our combined operating ratio, decreasing to 84% for the half.
As Richard mentioned earlier, we expect a small increase in
management expenses in the second half as we migrate our customers
to the new core technology platform.
SLIDE 15: FINANCIAL PERFORMANCE PACIFIC
We are satisfied to see contributions from our Pacific business return to
historic levels.
Growth in Pacific was mixed, with good growth in Vanuatu, Tonga and
the Cook Islands, which was offset by the continued deliberate shedding

17
of higher risk commercial lines in Papua New Guinea and remediation of
the Fiji motor portfolio.
Overall, Pacific gross written premium was almost flat at $28.1 million,
but quality of business has improved.
A benign weather environment and less commercial fires across the
islands have resulted in a significant improvement in claims costs. Total
claims costs across the Pacific reduced $5.4 million.
The slight increase in management expenses is primarily due to the
continued investment in the Pacific operations centre.
While the overall result for the Pacific is a return to historic norms, we
are confident that there remains opportunity in the Pacific business and
that it will continue to contribute significantly to group profit.
SLIDE 16: CANTERBURY EARTHQUAKES UPDATE
In most respects, the CEQ portfolio is performing well and in line with
expectations, with the exception of new over-cap claims from the EQC.
Open litigated claims are settling favourably and there has been a
considerable reduction in new litigated claims. Our non-litigated claims
are also settling in line with expectations.
In the past six months we have closed 65 claims, while receiving 24
completely new over-cap claims from the EQC.
While we continue to make progress closing claims in Canterbury, as
Michael has said, the continued receipt of over-cap claims from the EQC

18
is frustrating and has hampered our efforts to close out claims once and
for all.
As a result of new over-cap claims from the EQC, we have increased
provisions for the potential receipt of further over-caps. As you can see,
the further increases to provisions, relative to case estimates now sits at
115%.
Tower provisions to the 75th percentile for all claims which for CEQ,
increases to just above the 80th percentile with the $5m additional risk
margin.
We manage additional uncertainty through the level of solvency capital,
which you can see on slide 25. As at 31 March 2019, Tower Insurance
held $45 million above MSC and the $50 million licence condition, which
the Board notes, leaves Tower well positioned to manage uncertainty.
Thank you and I will now hand over to Richard who will provide an
update on our strategic plan.

19
RICHARD HARDING
SLIDE 17: FUTURE OUTLOOK TITLE SLIDE
SLIDE 18: CHALLENGING THE MARKET TO GROW
Over the past four years we have fixed the business and turned Tower
around, despite the distractions of takeovers, legacy issues and
unprecedented weather events.
We now have a strong and stable base to work from and are moving to
implement our strategy that leverages our technology and allows us to
truly challenge the market.
We now have the clear air necessary to create a company that
challenges the traditional insurance industry norms, and uses this
differentiation and challenger positioning to drive substantial growth.
Our customers have told us that New Zealand insurers are complacent
and that they think we’re all the same. Too hard to deal with and playing
on an un-level playing field.
We believe that people deserve better.
Our strategy is built on this belief and we are now creating a company
that sets the bar for how insurance should be.
But, it’s the right thing to do and it is going to drive industry wide change
and deliver growth for Tower.

20
Our belief that people deserve better means we need to create
stunningly simple products, new systems and simpler processes that
enable amazing claims experiences.
We’re going to turn industry norms on their head,
 We’re getting rid of big words and complex policies
 We’re simplifying pricing and discounts, making it even fairer, and
 And we’re creating an employee culture that always pushes for
better and is there to help set things right when they go wrong.
We will set the bar for how insurance should be.
And you have already seen and heard great evidence of this:
 Our simple policies have won plain English awards, so customers
can now easily understand what they’re covered for
 We implemented a fairer way to price insurance – so you pay fairly
for the specific level of risk your property faces
 We’ve entered into a major new national partnership with
Paralympics New Zealand – aligning ourselves with an
organisation that we aspire to be like, high performance,
empathetic, and proud to be Kiwi
 And internally we’ve seen significant shifts in our culture and
engagement – our people are passionate about doing things
differently and that is delivering these good outcomes
And this is just the start.

21
This time next year, Tower will be radically different because our
priorities all drive us forward in a way that’s significantly better than the
norm.
We will grow the business and deliver shareholder value by challenging
the traditional insurance industry, and we believe that delivering against
our strategy will enable us to achieve our medium-term operating
targets.
SLIDE 19: 2019 SECOND HALF PRIORITIES
Our plan is already driving change and transforming the business. Our
four key priorities for the coming year will see us keep growing and
continue to position ourselves differently.
Our first priority is to complete our IT and digital transformation.
Completion of our technology upgrade and our digital transformation will
accelerate our growth opportunities, improve customer experience, and
combined with our push to move 50 - 70% of all transactions online, will
deliver significant cost savings and productivity gains.
Secondly, we will continue driving growth and our belief that people
deserve better will build on the past six consecutive halves of growth.
We will continue to price more fairly, deliver amazing claims experiences
and improve efficiency and profitability.
In the Pacific, our new operations centre will support local teams through
improved product, pricing and underwriting capability to ensure we grow
sustainably and reduce claims leakage.

22
Third, we will ramp up underwriting and pricing improvements to drive
profitability. One of the most important things we will do is to start the 12
month migration of customers from our existing platforms onto our new,
single core platform. Customers will benefit from new, simpler policies
and amazing claims experiences, which will lead to improved
profitability.
And lastly, we will continue to control expenses and invest in growth. A
focus on automation and grassroots innovation will improve efficiency by
removing duplication and repetitive tasks, allowing our teams to focus on
adding value.
Successful delivery against these priorities will build on the already
strong growth seen in the underlying business.
SLIDE 20: UPLIFTED FY19 FINANCIAL OUTLOOK
As you can see, the work we are doing sets us up well for the future and
the delivery of our new IT platform will accelerate our momentum into a
digital-challenger.
Tower is confident in the strength of its strategy and the performance of
its underlying business and following pleasing performance in the first
half, has increased its one-off guidance for FY19, to an underlying NPAT
in excess of $26 million.

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This includes the following assumptions:
 A $5m allowance for severe weather and large events in the
second half
 Loss ratios will return to more normalised levels in the second half
as we enter the winter storm period
 A minor uplift in management expenses as our transformation
activity culminates.
In respect to the 2019 financial year, and as previously advised, no
dividend will be paid in the first half of the financial year. The Board’s
intention is to pay between 50% and 70% of second half 2019 NPAT,
where prudent to do so.
Today’s reported profit demonstrates the strength and opportunity that
exists in the Tower business. You can be confident that our strategic
plan will create a challenger brand that delivers you significant long-term
value.
Before I ask for questions, I want to thank the Tower Board for their
continued support and the Tower team for the effort they have put in and
the continuous improvement we have seen as a result.
Thank you.
ENDS