Tower Limited FY19 Results Announcement to Market

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TOWER LIMITED
Results for announcement to the market
Name of issuer Tower Limited
Reporting Period 12 months to 30 September 2019
Previous Reporting Period 12 months to 30 September 2018
Currency NZD

Amount (000s) Percentage change
Revenue from continuing
operations
$358,332 7%
Total Revenue $358,332 7%
Net profit/(loss) from
continuing operations
$16,565 N/A
Total net profit/(loss) $16,565 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
$0.56 $0.57
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
For the 12 months ended 30 September 2019, Tower Limited
reported a $23.3m increase in reported profit after tax compared to
the 12 months ended 30 September 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 annual 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
Nicolas Meseldzija, Head of Corporate Affairs and Reputation
Contact phone number +64 21 531 869
Contact email address nicholas.meseldzija@tower.co.nz
Date of release through MAP

20 November 2019

Audited financial statements accompany this announcement.

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

We have audited the consolidated financial statements which comprise:
• the consolidated balance sheet as at 30 September 2019;
• 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 consolidated financial statements, which include a summary of accounting policies.
Our opinion
In our opinion, the accompanying consolidated 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 2019, 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 consolidated 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. These services are assurance services in respect of
solvency and regulatory insurance returns and agreed upon procedures in respect of voting at the
Annual Shareholders Meeting and a regulatory insurance return. In addition, certain partners and
employees of our firm may deal with the Group on normal terms within the ordinary course of trading
activities of the Group. These matters have not impaired our independence as auditor of the Group.

PwC 59
Our audit approach
Overview

An audit is designed to obtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
Overall Group materiality: $3.4 million, 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 a generally accepted benchmark for insurance companies. The 1% is based on
our professional judgement, noting that it is also within the range of commonly
accepted revenue related thresholds.
We have determined that there are three key audit matters:
• Valuation of outstanding claims
• Valuation of Earthquake Commission (EQC) receivable in respect of
Canterbury earthquake claims
• Recoverability of the deferred tax asset arising from tax losses
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 consolidated financial 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 consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated 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 consolidated 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 focused on the most financially significant subsidiary, which contributes
approximately 83% of the Group’s premium revenue. We performed audit procedures over material
balances and transactions of the non-significant subsidiaries and the consolidation of the Group’s
subsidiaries.

PwC 60
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated 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
(2019 $124,060,000, 2018 $148,976,000)
We considered the valuation of outstanding
claims a key audit matter because this involves a
complex estimation process and significant
judgements and assumptions that management
make in estimating future claims payments.
These include the estimate of claims that have
been reported but there is uncertainty over the
amount which will be settled and those incurred
at the reporting date but not yet reported to the
Group. There is generally less information
available in relation to these claims and such
claims require the use of informed estimates of
the quantum of loss. Small changes in
assumptions can lead to significant movements
in claim reserves. Key actuarial assumptions for
non Canterbury claims are inflation rate,
discount rate and claims handling expense ratio.
Outstanding claims in relation to Canterbury
earthquakes have a greater degree of uncertainty
and judgement. This mainly arises due to
Earthquake Commission (EQC) reporting new
claims to the Group which have gone over the
$100,000 statutory liability cap (over cap
claims), how damages are allocated between the
four major earthquake events, expected claims
costs for open claims and estimates of future
claims handling cost.
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.


Historical claims data is a key input to the
actuarial estimates. Accordingly, we:
o evaluated the design effectiveness and tested
controls over claims processing;
o assessed a sample of claim case estimates at
the year end to check that they were
supported by appropriate management
assessment and documentation;
o assessed on a sample basis the accuracy of
the previous claim case estimates by
comparing with actual amount settled during
the year and analysed escalation in the claim
case estimate to determine whether it is
based on new information available during
the year;
o inspected a sample of claims paid during the
year to confirm that they were supported by
appropriate documentation and approved
within delegated authority limits; and
o tested the integrity of data used in the
actuarial models by agreeing the relevant
model inputs to source.
Together with our actuarial experts, we:
o considered the work and findings of the
actuaries engaged by the Group;
o evaluated the actuarial models and
methodologies used by comparing with
generally accepted models and
methodologies applied in the sector and with
the prior year;
o assessed 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; and

PwC 61
Key audit matter
How our audit audit addressed the
key audit matter
Relevant references in the consolidated
financial statements.
Refer to notes B2, B3 and B5 to the consolidated
financial statements, which also describes the
elements that make up this balance.
o assessed the risk margin, by comparing to
known industry practices. In particular we
focused on the assessed level of uncertainty
in the central estimate.
(2) Valuation of Earthquake Commission
(EQC) receivable in respect of
Canterbury earthquake claims (2019
$69,900,000, 2018 $68,400,000)
We considered the valuation of EQC receivable a
key audit matter because significant
management judgement is required to estimate
expected recoveries from EQC in respect of land
and building damage. Management use
independent technical and actuarial experts to
calculate the amount receivable.
This receivable is dependent on the ultimate
contribution by the EQC to the land and building
damage arising from the Canterbury earthquake
events in terms of its statutory liability under the
Earthquake Commission Act 1993. The quantum
is highly dependent on the agreement with EQC
on allocation of liability for damage between
these events, in particular the September 2010
and February 2011 events, the quality of
information available in respect of the damage to
each property, the time taken to settle with EQC
and risk associated with litigation.
Relevant references in the consolidated
financial statements
Refer to notes B3 and E1 to the consolidated
financial statements.




Together with our actuarial expert, we:
o assessed management’s approach to estimate
the EQC receivable;
o reviewed external legal counsel advice and
independent technical experts’ conclusions;
o evaluated the work performed by Tower’s
actuary and understood the assumptions
applied in allocation of cost between the four
major Canterbury earthquake events and the
risk margin setting process. We compared
these assumptions with sector peers and
obtained evidence for any significant
variances; and
o considered the range of expected recoveries
from which the amount recognised as due
from EQC has been determined and assessed
whether in the current circumstances a
different receivable amount would be
appropriate.

PwC 62
Key audit matter
How our audit audit addressed the
key audit matter
(3) Recoverability of the deferred tax
asset arising from tax losses (2019
$24,527,000, 2018 $30,685,000)
The majority of the Group’s deferred tax asset
arises from past tax losses. We considered
recoverability of the deferred tax asset a key
audit matter because utilisation of the asset is
sensitive to the Group’s expected future
profitability and the sufficient continuity of the
ultimate shareholders. Management judgement
is involved in forecasting the timing and
quantum of future taxable profits, which are
inherently uncertain, and whether it is probable
the tax losses will be utilised in the foreseable
future.
Relevant reference in the consolidated financial
statements
Refer to note D5 to the consolidated financial
statements.




Together with our tax experts, we:
o understood 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:
o assessment of the Canterbury
earthquakes claims and related
reinsurance;
o other recoveries (assessment of the
recoverability of the receivables from
EQC); and
o other expense reduction and income
initiatives (in particular the IT
transformation programme).
o compared previous budget results with
actual results to assess the reliability of
managements forecasts;
o considered the reasonableness of the
assumptions in the FY20 strategic plan on
the forecast utilisation of tax losses; and
o assessed whether the Group is entitled to
offset the tax losses against future taxable
profits.

Information other than the consolidated financial statements and
auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not and will
not express any form of assurance conclusion on the other information. At the time of our audit, there
was no other information available to us.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated 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.

PwC 63
Responsibilities of the Directors for the consolidated financial
statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated 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 consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated 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 consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated 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 Karen Shires.

For and on behalf of:






Chartered Accountants Auckland
20 November 2019

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336.1
356.8
11.6
8.3
4.8
1.8
5.8
Sep 18Core NZ RateCore NZ
Volume
Non-core NZ
Rate
Non-core NZ
Volume
Pacific GrowthSep 19
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$1.3m
$1.8m
$3.8m
$6.3m
$9.3m
$13.3m
$15.9m
$21.0m
H1.16H2.16H1.17H2.17H1.18H2.18H1.19H2.19
Trade Me InsuranceTower Digital

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7.0%
6.5%
6.2%
5.9%

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41.9%
39.9%
39.0%
38.6%
40.0%

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57.2%
55.5%
52.2%
0.3%
0.1%

2.1%
2.7%
0.7%
1.1%
0.3%
FY18 claims ratio,
including large
events
Change in product
mix vs FY18
FY18 reserving
changes
FY18 adjusted for
claims reserving
and mix
Benign large
events
Higher houseLower contentsHigher motorLower commercialFY19 claims ratio,
including large
events
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51.8%
29.1%
8.7%
6.8%
0.8%
5.0%
1.7%
0.3%
FY18 claims ratio, including
large events
Benign large eventsFiji, excluding cyclonesNPI, excluding cyclonesPNG, excluding cyclonesOther countriesChange in mixFY19 claims ratio, including
large events
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58.3
56.6
53.0
50.0
50.0
50.0
28.2
49.3
31.9
53.0
13.0
ASC = 136.5
45.0
ASC = 155.9
ASC = 134.9
TIL NZ as at 30
September
2018
TIL NZ as at 30
September
2019
Capital raise
proceeds
injected into
TIL¹
Remove EQC
from solvency
calculations¹
Purchase of
Youi²
TIL NZ pro
forma post
capital raise
and Youi³
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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

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163
74
109
63
89
28
Open properties
30 September
2018
ClosuresProperties open
at start of year
and at 30
September 2019
New/reopenedClosedOpen properties
30 September
2019
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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 our full
year results and answer your questions.
I am pleased to open today’s call with the news that we have reported a
full year profit.
We have long held the view that Tower is undervalued. Today’s result
reflects the work done to remove legacy issues, refocus and grow the
business and implement core insurance fundamentals.
The business has been simplified by identifying a clear strategy and
executing it well. Our goal is to recreate a profitable company that
delivers shareholder value. We are succeeding.
The business is returning to profitability by continuing to successfully
implement its ambitious plan:
 to have New Zealanders and Pacific Islanders see us in a new
light, and
 setting the bar for how insurance “should” be.
How the insurance industry “should be” was also the focus of the recent
Australian Royal Commission and the RBNZ and FMA conduct and
culture review – both of which have made it clear that change is needed.

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Tower has taken this to heart and will lead by example. The Board has
received and endorsed Tower’s conduct and culture review. There are
aspects of practice that need further investigation and will be improved.
However, the Board is also confident Tower is not starting from a
standing stop – a customer-centric approach is embedded in its DNA.
Tower’s strategy is focused on making things easier and better for
customers, which provides the business with a unique platform on which
to rebuild trust.
The Board strongly supports Tower’s challenge to the industry to regain
the trust of the NZ public and is keen to see all insurers respond to the
conduct and culture review with action, not rhetoric.
Interestingly, the conduct and culture review did not take into
consideration the impact the EQC’s response to the Canterbury
earthquakes may have had on public perceptions of the insurance
industry.
One suspects it was – and continues to be – significant.
Tower has made no secret of the fact that we believe the system
remains fundamentally broken, despite some recent improvements.
A true step change in conduct and culture would see the industry join
forces with the Government for an honest and transparent appraisal of
the EQC and agreement on a sustainable future model for the agency.
An EQC that delivers fair customer outcomes would have the single
greatest impact on restoring New Zealanders’ trust in the industry.

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On behalf of the Board I’d like to thank Richard, the management team
and our frontline staff 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.
RICHARD HARDING
SLIDE 3: 2019 FINANCIAL YEAR ACHIEVEMENTS TITLE SLIDE
Thank you Michael and good morning everyone.
SLIDE 4: THREE YEARS OF IMPROVING RESULTS AND SOLID
GROWTH ACHIEVED
Tower has returned to profit, delivering a full year, reported result of
$16.8m. This is a significant achievement and a $23.5m improvement on
last year, proof that our strategy is paying off.
Underlying profit after tax increased $13.8 million, to $27.4 million, a
result of our relentless focus on improving all aspects of our business.
Over the past four years we have worked to completely transform Tower
by fixing the foundations and we are now growing the business by
challenging and breaking 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 continue to deliver solid growth. Gross Written Premium

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in the core New Zealand portfolio increased by 9.1%, and total GWP
reached $356.8 million across New Zealand and the Pacific.
Continued implementation of risk-based pricing along with improved
underwriting and a benign weather environment has significantly
reduced claims costs.
Over the last year, our total claims ratio has reduced to 48.8%, a 7.6
percent reduction from 56.4% in 2018 thanks to benign weather and
improved underwriting. Our claims costs excluding large events has
decreased to 48.4%, a 3.9 percent reduction from 52.3% in 2018 which
demonstrates the strength of our underwriting
Our Pacific business has returned to historical norms, with solid and
profitable growth, improved underwriting and a benign weather
environment delivering better results
In the second half an increase to Canterbury provisions resulted in a
$1.3 million after-tax expense, bringing the full year impact to $6m. This
is principally due to the ongoing receipt of EQC over-cap claims and Jeff
will provide more detail on this shortly.
We have successfully delivered and launched our new IT platform. New
business is on sale on the new system and customers are now migrating
over. As we signalled earlier in the year, operating expenses are slightly
higher than previous years as our IT transformation draws to an end.
The successful delivery of our IT platform is an exciting milestone for
Tower and we are now well positioned to maximise the benefits and
opportunities this system offers.

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Our business has transformed and the company is vastly different to
what it was four years ago. Our results demonstrate the long held belief
of the Tower Board and management team, that Tower offers an exciting
platform for growth and we are now about to accelerate.
SLIDE 5: CUSTOMERS KEEP CHOOSING TOWER
In a market dominated by overseas-owned and controlled insurers we
are now offering customers a genuinely different, better alternative, and
this focus is driving solid growth in our core book.
We have added over 17,000 risks to our core New Zealand portfolio over
the past year. This level of growth is expected to increase now that we
have completed the delivery of our new IT platform.
This continued momentum has driven GWP growth in the core New
Zealand portfolio 9.1%, with total GWP in New Zealand growing 6.8%.
GWP is growing across all NZ products, with GWP in:
 NZ House growing 7.3%, with the majority being attributable to
rating
 NZ Contents growing 4.8% split between rating and volume, and
 NZ Motor growing 12.1%, with the majority being attributable to
volume
This is being achieved through a combination of factors, including:
 Continued execution of risk-based pricing and simpler policies that
customers can understand

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 Constant refinement of underwriting criteria enabling more
granular assessment
 Strong retention through our digital and phone channels, and
 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 growing 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
51% of new business coming through our digital channels in September
2019, which increased to 53% in October. This compares to less than
10% during 2016.

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In the last twelve months we have delivered significant growth, with
GWP through digital channels reaching $20m in the second half. This is
thanks to continuous improvement of our digital channels.
Our recently improved digital claims lodgement process and innovations
like our claims chatbot, Charlie, has resulted in 27% of claims being
lodged online in September 2019.
This has been achieved before our new platforms functionality has been
turned on and is further proof that our investment in digital channels is
well made.
We expect the number of claims lodged online to increase significantly
as our new system with its self-service and improved claims capability
hits its strides.
Digital remains one of the most crucial, foundations of our business
moving forward. It enables differentiation, agility, innovation and growth,
and our new platform will accelerate our progress.
SLIDE 7: UNDERWRITING EXCELLENCE
Underwriting and claims are intrinsically linked and sit at the heart of
what an insurance company is and does for its customers.
The focus on achieving underwriting excellence is a constant for Tower
and continues to play a vital part in the delivery of our strategy.
We have taken significant steps toward achieving our underwriting
excellence goal and have

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 Implemented better risk selection and underwriting processes
 Continued focus on claims leakage and recoveries
 Launched and continued to refine our plain language products that
have won awards and provide clarity to customers and our
employees at claims time; and
 implemented new data practices to enable us to accurately monitor
our portfolio
This relentless focus on underwriting excellence has helped us shift our
portfolio to a more balanced mix and improve claim frequency.
This is particularly noticeable in our NZ house product with sustained
improvements in claims frequency over the past four years, a result of
clear products and benefits for customers.
18 months ago we led the way with risk-based pricing and removing
cross-subsidisation between low and high-risk customers.
Risk based pricing has resulted in the growth of our portfolio in Auckland
while also reducing our exposure to high-risk areas by 16%.
Our fairer approach to pricing has also allowed us to grow our exposure
by 4% in the larger, low risk areas like Auckland, Hamilton and Taranaki.
Through this process we worked closely with our impacted customers to
support them through the change and we have received positive
feedback about our open and transparent approach.

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The reduction of extreme risk policies, combined with already completed
changes in our Wellington portfolio has reduced the amount of
reinsurance cover we require.
This has all been achieved under the constraints of the old technology
system. As customers migrate onto the new IT platform, we will utilise
the improved rating engine, more granular segmentation and pricing
approach to drive further growth and underwriting improvements.
It is clear this strategy is working and will continue to deliver growth and
reinsurance efficiency in future.
SLIDE 8: BUILDING CAPABILITY WHILE CONTROLLING COSTS
At our half year results we signalled a slight uplift in expenses in the
second half as our IT transformation concludes. As you can see, the
finalisation of this piece of work has increased our group management
expense ratio by 1.4%, which includes increased headcount in our
frontline teams, the running of dual systems and the delivery of a tailored
customer migration process.
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 and
moving customers to the new platform.
Managing customers through the migration process is one of the most
important parts of our technology transformation and we have invested
appropriately in our frontline teams, and a tailored customer
management approach to reduce risk, maximise retention and manage
customer impact.

10
These costs will continue over the next 12 months as we migrate
customers to the new platform. Following this, we expect these costs of
between $5m - $7m pre-tax to be removed from our expense base, and
along with other productivity gains, we will be operating at or near our
target MER of less than 35%.
SLIDE 9: IT TRANSFORMATION CONCLUDING
Just under a year and a half 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 I am pleased to advise that we have successfully delivered and
launched our new platform and the IT transformation is now concluding.
In May this year we launched the first phase which enabled us to sell
new business on the new system. It was a core foundation piece of the
programme and continues to run well.
Delivery of Phase 2 has now been completed 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 online claims management modules enabling
customers to lodge and manage their claims online

11
We started migrating customers to the new platform earlier this month.
We are managing risk closely through a ramp-up approach that is
working well and nearing full velocity.
Customer migration will be complete by the end of the 2020 calendar
year.
Moving around 350,000 customers to a core set of 12 products will
deliver significant benefits to our customers and efficiencies in our
business.
Costs for the programme were in line with previously advised amounts
and at this stage, the total cost to deliver the core platform is estimated
to be $47.6m.
We expect benefits to start being realised over the coming financial year,
with full benefits delivered after finalising customer migration and
decommissioning legacy systems.
Post finalisation of the IT transformation this quarter, capital expenditure
for future years will revert to more normalised levels of between $5m
and $7m.
SLIDE 10: IT AND DIGITAL UNDERPINS THE FUTURE
Our IT transformation and the new platform underpin everything we do
moving forward as a digital challenger brand.
It will accelerate our growth opportunities by combining our existing data
with that of our partners to get a full understanding of our customers and

12
actively targeting niche customer segments with compelling and
appropriately priced propositions.
We will improve the customer experience with simpler, improved
products, reduced wait times and fully digital self-service capability.
Our operating model is changing in response to our new technology and
the type of outcomes we are now delivering. We are shifting our
organisation to a more agile way of working that puts customer demand
right at the centre.
We are moving away from traditional hierarchical structures and have
implemented a platform operating model with three distinct layers. The
first layer is the customer one, which interacts with our customers and
generates product and service demand into the business.
This is supported by an insurance layer that builds new products,
systems and processes to deliver on that customer demand, all of which
is underpinned by an efficient business support layer who maintain our
core systems and support our people.
Our people will work in cross-functional teams to test, learn and deliver
outcomes for customers in short sprints.
This test and learn capability will see us look and act like a digital
challenger brand and realise the benefits and opportunity that our new
platform offers.
We will now be able to rapidly test and learn on all aspects of insurance.
What used to take weeks and months, can now be tested and delivered

13
almost instantly. Pricing changes that used to take months of coding can
now be made, delivered and monitored in the same day.
It allows us to quickly build products, test them with customers and
modify them on an ongoing basis. We can now understand what part of
a product customers rely on most and put new, niche offerings into the
market.
We will utilise our new capability and functionality to develop a
commercial and small business offering and trial usage based
insurance. We will be able to do this quickly, by constantly testing and
learning along the way.
These teams will drive our push to move 50 - 70% of all transactions
online which will deliver better customer outcomes and significant cost
savings and productivity gains.
The reduction in number of products from over 400, to just 12 core
products, along with automation and moving low value transactions
online will also drive improved efficiency.
It is pleasing to have delivered this significant piece of work successfully
and with benefits being realised progressively over the coming year, with
the full run rate will be achieved in FY21
I will now hand over to Jeff who will take you through our financial results
in more detail.

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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 a benign weather environment have all
contributed to Tower’s pleasing results.
We have continued to deliver solid growth this year, with gross written
premium increasing $20.7m and net earned premium increasing
$21.9m. At the same time, claims costs have reduced $10.6m with
underlying profit after tax improving by $13.9m to $27.4m.
As a result of new over-cap claims from the EQC, we have increased
provisions for the potential receipt of further over-caps. This second-half
increase resulted in a second-half impact of $1.3m after tax, which
resulted in a full year after-tax impact on reported profit of $6m.
In all other respects, the CEQ portfolio is performing well and in line with
expectations, with the exception of new over-cap claims from the EQC.
You can see more information on page 29, but at a high level, over the
past year we have closed 117 claims, while receiving 45 completely new
over-cap claims from the EQC. As of 31 October 2019, 95 CEQ claims
remain open.

15
While we continue to make progress closing these claims, the continued
receipt of over-caps from the EQC is frustrating and has hampered our
efforts to close out claims once and for all and we continue to push for a
permanent fix.
Overall, our reported profit of $16.8 million after tax is 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 88.8%, 6.6 points lower than last year.
SLIDE 13: MOVEMENT IN UNDERLYING PROFIT BEFORE TAX
Slide 13 details the key drivers of the increase in underlying profit before
tax from financial year 2018, to financial year 2019.
The strong growth is reflected in the $20m increase in net earned
premiums, a combination of growth in our core portfolio and our risk-
based pricing approach.
On this slide you can also see the improvement in both large event
claims and BAU claims costs.
Growth in our risk count has resulted in an increase in our claims
expenses for NZ, but benign weather and remediation across key Pacific
portfolios has delivered an overall decrease in claims costs.
As Richard mentioned earlier, management expenses are higher due to
the completion of our IT transformation and investment in customer
migration.

16
As you can see, this is a strong result, delivered by an ongoing focus on
our strategy.
SLIDE 14: FINANCIAL PERFORMANCE NEW ZEALAND
Our strategy is driving real and strong improvement in our New Zealand
business, with positive results across the board showing the strength of
the core business.
The majority of growth in Tower’s GWP occurred in our NZ markets, with
an increase of $18.9m 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 $19.3m
improvement in NEP.
We have improved and stabilised our loss ratio, reducing it 5 points to
52.2%. This is a result of ongoing underwriting excellence, pricing
improvements and a benign weather environment.
You can see here that our management expense ratio in New Zealand is
flat. This 37.9% includes our additional investment in IT, which highlights
our ongoing focus on reducing management costs.
Underlying profit improved $9.3m, to $22.1m, and along with the
combined ratio of 90.1% demonstrates the success of the strategy we
have in place and the work we are doing.

17
SLIDE 15: IMPROVED NZ CLAIMS RATIO
New Zealand claims expenses have decreased significantly over the
past 12 months with a number of underwriting and pricing initiatives
helping to offset inflation.
As you can see on this slide, there are four key factors 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 which have resulted
in a 2.7% decrease in our claims ratio.
Our new, simpler products have contributed to a reduction in NZ
Contents claim frequency. While our risk-based pricing approach is
delivering benefits in NZ house, this has been offset by a higher
frequency of large house fires in the second half of FY 2019.
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.
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.

18
SLIDE 16: FINANCIAL PERFORMANCE PACIFIC
We are pleased to see contributions from our Pacific business return 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.
This growth was offset by more disciplined growth in Papua New
Guinea, remediation of the Fiji motor portfolio and nationalisation of the
Worker’s Compensation and Comprehensive Third Party schemes in Fiji.
Overall, Pacific gross written premium was slightly up, increasing to
$60.2 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 $9.2 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.

19
SLIDE 17: IMPROVEMENTS IN PACIFIC
Having been impacted by a number of severe weather events over the
past few years, claims ratios and contributions from our Pacific business
have now returned to historic levels.
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 22.7
percent decrease in our Pacific claims ratio.
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 and claims costs were controlled.
Remediation of the Papua New Guinea portfolio to reduce risk and
exposure is now complete and this portfolio has returned to profitability.
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.
SLIDE 18: SOLID SOLVENCY POSITION
In September 2019, Tower announced that additional capital of $47.2m
was needed to facilitate a change in Tower Insurance’s licence condition
and the acquisition of the Youi NZ portfolio.
Tower Insurance consulted with RBNZ to understand likely capital
requirements to support the acquisition and on-going business of Youi

20
NZ, with discussion also covering Tower Insurance’s existing solvency
capital. This included conversations on Tower Insurance’s EQC
receivable, which at the time formed part of Tower Insurance’s solvency
capital
Tower Insurance remains confident in the recovery of the EQC
receivable and is firmly committed to its collection to the maximum
extent possible.
It was agreed that given the likelihood of litigation and associated delay
in receiving funds, the EQC receivable has been excluded from Tower
Insurance’s solvency calculations.
Accordingly, the RBNZ modified Tower Insurance’s licence conditions to
remove the receivable from its solvency calculations with effect from 31
October 2019.
Following the successful completion of the capital raise and this change
in licence condition, Tower Insurance remains in a strong capital position
with Actual Solvency Capital well above RBNZ minimum requirements.
This will reduce by $13m following completion of the Youi purchase.
SLIDE 19: THE YOUI ACQUISITION
In September we announced that Tower Insurance Limited signed a
Portfolio Transfer Agreement for the purchase of Youi NZ Pty Ltd’s
insurance portfolio, subject to regulatory approvals.
Under this agreement, Tower Insurance will acquire Youi NZ’s
approximately 34,000 in-force policies for a total purchase price of
NZ$13 million.

21
We have completed a number of steps in this process and a formal
application has been lodged with the RBNZ. We are hopeful to receive
approval by the end of the year.
The purchase of Youi’s portfolio will accelerate our growth. The portfolio
is well underwritten and utilises a risk-based pricing approach which is in
line with our own underwriting excellence and will also deliver a positive
shift in the mix of our portfolio.
The acquisition drives shareholder value through realisation of scale
benefits with intention to incorporate the portfolio into Tower’s existing
reinsurance cover, and management expenses at marginal cost. Youi
will contribute approximately $2m to Underlying NPAT, $4m pre-
amortisation of goodwill, reflecting the pro rata inclusion of 9 months of
its full year
This firmly positions us as a challenger brand and together with the
successful completion of the IT transformation, will deliver growth, build
scale and leverage our investment in IT
SLIDE 20: IMPROVED REINSURANCE OUTCOMES
As Richard said earlier, managing risk is at the heart of what we do as
an insurer and a continued focus on underwriting excellence has allowed
us to provide increased protection and certainty on favourable terms.
We have taken significant steps to ensure our exposure to large events
and the resulting volatility is reduced by reinvesting savings back into
our reinsurance programme.
We have:

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 Catastrophe cover to $783m, for catastrophic events in excess of 1
in 1000years
 Increased pre-paid catastrophic event coverage from two events to
three
 Added additional dropdown cover to minimise any potential
impacts
 Limited Tower’s exposure to catastrophe to $10m per event
 Capped Tower’s exposure to storm and other events at $10m, up
to a limit of $30m
Savings from the improved efficiency of our reinsurance programme will
continue to be reinvested and we expect ongoing modest improvements
in our reinsurance ratio.
Thank you for listening and I will now hand over to Richard who will
provide an update on our strategic plan.
RICHARD HARDING
SLIDE 21: FUTURE OUTLOOK TITLE SLIDE
SLIDE 22: 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 base to work from and implementing our strategy
that leverages technology and allows us to truly challenge the market.

23
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 lack transparency, which has led to a lack of trust.
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.
It’s the right thing to do and it is going to drive industry wide change and
deliver growth for Tower.
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 increasing transparency around risk and insurance
information and knowledge
 We’re simplifying pricing and confusing discounts
 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:

24
 Our simple policies have won plain English awards, so customers
can now easily understand what they’re covered for
 We implemented risk-based pricing – so you pay fairly for the
specific level of risk your property faces
 We committed to removing the catch-all duty of disclosure
question
 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.
Tower is radically different from the company it was four years ago. We
are now positioned to take on the New Zealand insurance market and
challenge the large incumbent organisation who are slow to adapt.
We are offering customers something better which will drive growth and
real value for our shareholders.
SLIDE 23: SETTING UP FOR 2021
Our plan has driven change and transformed the business. The work we
have completed over the past few years has set us up well for the future
and our focus is now firmly on delivering shareholder value.
The coming 12 months is the transition year that will ensure we deliver
the full benefits of the new IT platform from FY21.

25
As I mentioned earlier, one of our biggest priorities this year is to migrate
our 350,000 customer to our new platform, which will be completed by
the end of the 2020 calendar year.
We will continue driving growth, building on the past seven consecutive
halves of growth by continuing to price more fairly, delivering amazing
claims experiences and improving efficiency and profitability.
Along with our shift to a more agile operating model, we will achieve
benefits progressively over the coming year, but FY21 is where the full
benefits of our investment in technology will be fully realised.
In FY21 we can decommission complex legacy systems that currently
take significant resource to manage and maintain.
We will be able to accelerate growth opportunities, improve customer
experience, and combined with our push to move 50 - 70% of all
transactions online, deliver significant cost savings and productivity
gains.
The new platform enables innovation and rapid response to customer
needs. It will allow us to take new products to market faster to test and
learn and drive growth in new areas.
In the Pacific, our new operations centre will support local teams through
improved product, pricing and underwriting capability to ensure we grow
sustainably.
In short, we will continue to drive our customer centred strategy forward,
trying hard to raise the bar for the industry by putting customers first and
using our new technology.

26
Our strategy and the work we are doing are closely aligned with the
outcomes of the recent conduct and culture reviews. While we know
we’re not perfect and there’s work to do, we are making progress and
working hard to maintain and build trust with our customers and
stakeholders
What we have achieved and the plan we have in place sets us up well
for the future and will build trust, drive growth and deliver shareholder
value.
SLIDE 24: FY20 FINANCIAL OUTLOOK
We are confident in the strength of our strategy and the performance of
the underlying business. While FY20 is a year of transition, we expect
solid growth and profitability to continue and are providing a guidance for
FY20.
Guidance for Tower’s underlying NPAT in FY20 is a range of between
$27m to $30m, based on the following assumptions:
 General insurance market conditions remain positive for growth
and pricing, allowing GWP growth consistent with FY19, in addition
to growth generated by the acquisition of the Youi portfolio
 Return to long run average large event costs of $8m per annum
pre-tax, compared with FY19 $1.3m pre-tax.
 Youi will contribute approximately $2m to Underlying NPAT ($4m
pre-amortisation of goodwill) reflecting the pro rata inclusion of 9
months of its full year

27
FY20 guidance also includes a heightened level of management
expenses of $5m - $7m pre-tax due to the transition to the new IT
platform, including:
 Additional costs of operating an additional IT platform in parallel
during the period of transitioning of policies to the new EIS
platform and subsequent decommissioning of the old platform
 Additional resources to ensure effective transitioning of policies to
the new EIS platform and to handle the more manual processes on
the old platform
In addition to other productivity gains, the Board expect these costs to
be removed from Tower’s expense base in the year after migration is
completed and, by early FY21, Tower will be operating at or near its
target MER of less than 35%
In respect to the 2019 financial year, and as previously advised, no
dividend will be paid. Tower’s Board has determined that in FY20, Tower
will pay a dividend of 50% to 70% of reported 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 is solidifying our position as
a digital challenger and will deliver 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.

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Thank you.
ENDS