Chairman’s Annual Shareholder Meeting Address

Insurance

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Tower ASM script

SLIDE 1: COVER PAGE
MICHAEL STIASSNY
Good afternoon ladies and gentlemen.

My name is Michael Stiassny. As it’s now 11.00am, as Chairman of
Tower Limited I am pleased to declare open Tower’s Annual Meeting of
shareholders.

On behalf of my fellow Directors, welcome to our shareholders and
guests here at the Ellerslie Event Centre as well as those who have
joined us via webcast. This is your meeting and we appreciate you
making the effort to be here.

With me today are your directors, Warren Lee, Steve Smith, Graham
Stuart, Wendy Thorpe, Marcus Nagel, along with our Chief Executive
Officer, Richard Harding and Chief Financial Officer, Jeff Wright. Also in
attendance today, seated in the front row, is the Tower Executive
Leadership Team and our Auditors.

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SLIDE 2: MEETING AGENDA

Today’s agenda is on the screen behind me.

We will provide you with an update on last year’s performance, our
strategy and the work we have underway to keep transforming Tower,
as well as the progress we’ve made in recent months.

Following Richard’s presentation, we will move to the formal resolutions
set out in the Notice of Meeting.

Shareholders are welcome to ask general questions following the
presentations and to ask specific questions on the resolutions to be
considered as each is put forward.

I remind any media present that, while you are welcome, this is a
meeting for shareholders. Richard and I will be happy to talk to you after
the meeting.

Before we start the presentations, there are a few housekeeping matters
to cover off.
• If you have a cell phone, please switch it off.
• If we need to evacuate this room for any reason, there are exits
through the doors to my right and also the entrance you came
through.
• In the event of an emergency, please listen to the instructions from
the Ellerslie staff.

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• Bathroom facilities are located along the corridor towards the lifts.
• If you are feeling unwell, please advise one of our Tower team who
will assist you
• Finally, we hope that you will join us for refreshments at the
conclusion of the meeting.

Let’s now move on to the formal part of the meeting.

Formalities

Apologies
Are there any apologies?
(If not:) Thank you.
(If yes:) Thank you, I will ask the Secretary to record those in the
minutes.

Quorum
The Company’s constitution specifies a quorum of 25 shareholders. As
you can see, and as confirmed by Computershare, this requirement has
been met.

Proxies
In addition to those attending in person today, 646 shareholders, holding
a total of 224,466,247 shares, have appointed proxies (including proxies
instructed to abstain). The appointed proxies are represented by 10
proxy holders.

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In my capacity as Chairman of the meeting and in my own name I hold
proxies for 517 shareholders, representing 221,755,996 shares.

I intend to vote all undirected proxies I have received in favour of
resolutions 1, 2 and 3.

Annual Report and Notice of Meeting
The annual report was made available on Tower’s website on 20
December 2019. Spare hard copies of the annual report are available in
the registration area.

I propose that we take the Annual Report and Notice of Meeting as read.

SLIDE 3 – CHAIRMAN’S UPDATE

Last year Tower celebrated 150 years of insuring New Zealanders.
Naturally, over those years, the company has changed considerably.

A little over four years ago, Tower embarked on its latest – and arguably
most difficult – transformation to date to reposition itself as a digital
challenger brand. We believed that underpinned by a customer-focused,
digital-first strategy Tower would step up to successfully compete in the
21st century insurance marketplace.

Our belief has not been misplaced. While transformation is never easy
and there have been some bumps along the way, it is extremely
gratifying to see Tower returning to profit in the 2019 financial year.

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Your Board has long held the view that Tower is undervalued and the
return to profit reflects the work done to remove legacy issues, refocus
and grow the business and implement core insurance fundamentals.

Richard and his team have created, and are now driving, an ambitious
plan to have New Zealanders and Pacific Islanders see Tower in a new
light, and set the bar for how insurance “should” be.
As a result, the business has been simplified and is growing strongly,
with more customers now choosing to insure with Tower.
I spoke to you last year about the importance of new technology and
how this will accelerate our growth. Since then, the new IT platform has
been successfully delivered with customers already noticing the
improvements in our digital channel, and the business continuing to
grow.
The significant uplift in customers using our digital channels to engage
with and purchase Tower products is proof that our confidence in user-
friendly technology is well placed.
Digital technology is a vital part of our plan and with this core
infrastructure in place, we are now ready to capitalise on the value that
exists in the Tower brand.
[PAUSE]
The successful completion of the Youi NZ acquisition earlier this year
was an important signal to the market.

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The acquisition adds over 32,000 new policies to our books and
solidifies our position as a market challenger, providing more Kiwi’s with
a better, home-grown offering. As well as adding to our portfolio, the
acquisition leverages our risk-based approach to pricing and investment
in technology which will result in synergies that drive value for you.
Value will be achieved by providing these customers new offerings as
their policies renew over the coming year.
[PAUSE]
The recent Australian Royal Commission and the RBNZ and FMA
conduct and culture review have made it clear that the general public
takes a dim view of the insurance industry and that change is needed.
Tower has taken this to heart and is leading by example – we are
already actively pursuing a platform of insurance the way it “should” be.
This perhaps gives us a jumpstart on the broader industry but there is no
room for complacency.

The Board has already received and endorsed Tower’s own conduct and
culture review. And, while some aspects of our practice need further
investigation, our undertaking is to ensure any shortcomings are
improved.
The Board strongly supports Tower’s challenge to the industry to regain
the trust of the NZ public. We are keen to see all insurers respond to the
conduct and culture review with action, not rhetoric. Collectively we can
– and must – do better.

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Interestingly, the conduct and culture review did not take into
consideration the impact that the Earthquake Commission’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.
If the same standards of customer care and engagement that are being
applied to the private sector were applied to EQC and other agencies
that form part of the Canterbury recovery, it would be found severely
wanting and not at all customer centred.
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 forge an agreement on a sustainable future model for the
agency.
An EQC that delivers fair customer outcomes would have a significant
impact on restoring New Zealanders’ trust in the industry.
However, at its core, Tower’s job – day in and day out – is to continue to
earn and keep the trust of our customers.

[PAUSE]

Tower’s FY19 results demonstrate a continuation and expansion of the
positive trends we’ve spoken about over the past few years. We are
delivering strong growth and value is being achieved through sound
underwriting and investment. As a shareholder, you should have

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confidence that our plan to deliver something better is having a positive
impact.

[PAUSE]

Following the capital raise in 2019, Tower is in an even stronger capital
position with solvency of 268% of the RBNZ minimum.

As we signalled with the capital raise, the ring-fencing of the EQC
receivable and excluding it from Tower Insurance’s solvency calculations
means we are able to pursue litigation to maximise the recovery, which
is looking more and more likely.

Tower’s Board and management team remain strongly committed to
paying dividends and to the efficient management of capital.

In FY16, we made the prudent decision to suspend payment of
dividends as we managed the effects of the Canterbury Earthquake
legacy.

This was only ever intended to be a short-term measure. As previously
advised, in respect to the 2019 financial year, 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.

[PAUSE]

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You may have seen the recent announcement that Richard intends to
step down as CEO at the conclusion of his current contract toward the
end of the calendar year. A recruitment process is already underway
allowing ample time for an appropriate handover period and smooth
transition. We will keep you informed of developments.

However, as this is his last Annual Shareholder Meeting, on behalf of the
Board I’d like to thank Richard for his efforts to date. He has successfully
led Tower’s transition from a traditional insurer to one that is profitable,
nimble and ready to disrupt and challenge the industry. It has been no
small feat.

Richard has built a management team who are committed and have the
skills to complete and leverage the digital transformation. The Board
also wishes to thank them 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, who will take you through the results and
our plans for the business, before we take questions.

RICHARD HARDING
SLIDE 4 – CEO’S ADDRESS TITLE SLIDE
Thank you Michael and good morning everyone.
The 2019 Financial Year saw us return to profit as we continue to drive
our strategy and transformation agenda forward. Last year, our focus

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was on delivering a new IT platform that would underpin our future
success and we successfully delivered this.
As well as delivering this major piece of work, we continued to simplify
and improve all aspects of our business to differentiate ourselves, drive
growth and control costs.
SLIDE 5 – THREE YEARS OF IMPROVING RESULTS
It is immensely pleasing to report that Tower returned to profit in FY19,
delivering a full year, reported result of $16.8m after tax. This is a
significant achievement and a $23.5m improvement on the previous
financial 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 growing the business by
challenging and breaking industry norms. Our 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 continued to achieve solid growth. Gross Written
Premium in the core New Zealand portfolio increased by 9.1% in the
2019 financial year, and total GWP reached $356.8 million across New
Zealand and the Pacific.

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Our efforts to become a digital insurer are paying off, with 51% of new
business coming through our digital channels in September 2019. This
compares to less than 10% during 2016.
Over the year we delivered significant growth, with GWP through digital
channels reaching $20m in the second half. This is evidence that our
belief and investment in digital will deliver value for the business and
shareholders.
Continued implementation of risk-based pricing along with improved
underwriting and a benign weather environment significantly reduced
claims costs.
Over the 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 decreased to
48.4%, a 3.9 percent reduction from 52.3% in 2018.
In the 2019 financial year, our Pacific business returned to historical
norms, with solid and profitable growth, improved underwriting and a
benign weather environment delivering better results.
An increase to Canterbury provisions resulted in a $1.3 million after-tax
expense in the second half, which brought the full year impact to $6m.
This is principally due to the ongoing receipt of EQC over-cap claims
and we continue to closely manage these issues to reduce ongoing risk
and liability.
As I mentioned earlier, we successfully delivered and launched our new
IT platform in 2019. New business is on sale and we are also migrating

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customers to the new system. Operating expenses were slightly higher
than previous years as our IT transformation drew to an end.
The successful delivery of our IT platform was an exciting milestone for
Tower. We are now well positioned to maximise the benefits and
opportunities this system offers.
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 that we are now able to accelerate.
SLIDE 6 – 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.
Having returned to profit, we have a strong base to work from and
implementing our strategy that leverages technology will allow us to truly
challenge the market and 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.

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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 don’t ask tricky, catch-all questions
• 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:
• 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 removed 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

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• You may also be pleased to know that we recently achieved the
Rainbow Tick as recognition of the efforts we are making around
Rainbow diversity. This forms part of our broader diversity agenda
to ensure we reflect the diversity of the community in which we
operate.
All of 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 organisations who are slow to adapt.
We are offering customers something better which will drive growth and
real value for our shareholders.
SLIDE 7 – 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 firmly on delivering shareholder value.
One of our biggest priorities is to migrate our 350,000 customers to our
new platform and our new easy-to-understand products, reducing from a
couple of hundred product variants, to a core set of just 12. This will be
completed by the end of the 2020 calendar year.
We will build on the past seven consecutive halves of growth by
continuing to price more fairly; working hard to deliver amazing claims
experiences; and improving efficiency and profitability.

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Together with our shift to a more agile operating model, Tower will
deliver improvements 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 and a rationalised product set – deliver significant
cost savings and productivity gains.
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 accelerate our customer-centred strategy
and do our bit to raise the bar for the industry, by putting customers first
and leveraging our new technology.
Our strategy and work programme is closely aligned to the outcomes of
the recent conduct and culture reviews. While we know we’re not perfect
and there’s more 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 position us well
for the future and will build trust, drive growth and deliver shareholder
value.

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SLIDE 8 – YOUI TRANSACTION COMPLETED
In September 2019 we announced we had signed a Portfolio Transfer
Agreement for the purchase of Youi NZ Pty Ltd’s insurance portfolio.
Following approval from the RBNZ, the transaction settled earlier this
year for a final purchase price of NZ$12.7 million.
The purchase of Youi’s NZ portfolio will also accelerate our growth and
these customers will migrate progressively to Tower’s new system over
the coming year. The portfolio is well underwritten and utilises a risk-
based pricing approach which aligns well with our own focus on
underwriting excellence. It will also deliver a positive shift in the mix of
our portfolio.
The acquisition drives shareholder value through realisation of scale
benefits with our intention to incorporate the portfolio into Tower’s
existing reinsurance cover, and management expenses at marginal cost.
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.
As Michael mentioned earlier, following the successful completion of the
capital raise and the change in licence condition, Tower Insurance
remains in a strong capital position with Actual Solvency Capital well
above RBNZ minimum requirements.

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We have ring-fenced the EQC receivable and are currently participating
in an alternate dispute resolution process with the EQC. This process is
now nearing its end and it is looking more and more likely that we will
pursue litigation.
As at 31 January 2020, Tower Insurance Limited New Zealand’s
solvency margin is estimated to be $87 million, which is equivalent to a
solvency ratio of 268% of Minimum Solvency Capital.
SLIDE 9 – TRADING UPDATE TO 31 JANUARY
As you have seen, our challenger-brand strategy is driving positive
results and while only four months into this financial year, we are
pleased to see positive momentum continuing.
Our ongoing push to differentiate ourselves from our competitors has
seen continued GWP growth. Core New Zealand GWP is up 11 per
cent, a result of customer growth and pricing improvements. Online
sales remain strong with 55 per cent of sales now coming through our
digital channels.
Customer migration is well underway with over 60,000 policies now
transferred to our new IT system and our new simplified product set.
Customer migration is now at full velocity at a rate of around 30,000 per
month, and this will largely be complete by the end of the 2020 calendar
year.
Once our customers are migrated to the new system, they will have
access to the benefits it offers. Along with being rationalised to simplified
and improved products, customers will be able to manage their policies,

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payments and profiles completely online, lodge and track claims and
easily understand what they’re covered for.
To manage the migration successfully we are investing in our business,
bringing 20 new frontline team members on board and re-organising our
queues and processes to deliver a better experience to customers.
This will help reduce the wait times you may have experienced over the
past few months. We are working hard to reduce this and wait times will
improve as these new people join and our team fully adapt to the new
systems and processes.
A reduction in costs will be achieved in the year after customer migration
is completed and we remain firmly focused on controlling operational
costs.
There is no change to Tower’s previously communicated FY20 guidance
of underlying NPAT of $27 - $30 million.
The Timaru hailstorm, while significant for the industry, had a smaller
impact on Tower due to the fact we do not insure large commercial
operations. The total cost of this weather event is currently $4m pre-tax.
As a result, $4 million remains of the $8 million allowance for large
events in Tower’s guidance for FY20.
Investment income is slightly below forecast due to the unexpected
reduction of the Official Cash Rate by the RBNZ in the second half of
2019.

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And in Canterbury, we continue to make progress closing claims, with
claim numbers reducing from 109 at September 2019 to 81 at 31
January 2020.
[PAUSE]
These results demonstrate that the strategy, plan and team we have in
place is delivering and the future looks bright.
[PAUSE]
Before I hand back to Michael, I want to thank the Tower executive and
wider team. This is my last shareholder meeting as CEO, and it is
bittersweet for me.
I am proud of what we have achieved. The company we have created is
vastly different from what it used to be, and I know that so much
opportunity still exists in this business.
While I am excited to return to my family in Sydney and spend more time
with them, I will be closely following Tower’s progress as its
transformation into a digital insurer continues.
I’d like to thank the Board for their support over the past few years, it has
been critical in our journey to transform Tower and achieve these
positive results.
Thank you for your support as shareholders during my time here, I know
that there have been some challenges, but we are on good footing now.

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And thank you to everyone at Tower for your effort and a relentless
focus on working together to drive change and transform this business.
MICHAEL STIASSNY
SLIDE 11 – QUESTIONS TITLE SLIDE
Thank you, Richard.

Are there any questions or comments anyone would like to make in
regard to the presentation, the Annual Report or the Financial
Statements?

If you wish to speak, please raise your hand, and a microphone will be
brought to you.

We would appreciate it if you could please introduce yourself when you
begin your remarks.

I remind you that this is a shareholders’ meeting, and only shareholders
and proxy holders may speak. Also, a reminder that this meeting is
being webcast, so an audience outside of this room will hear you too.

Are there any questions or comments?

[FOLLOWING ANY QUESTIONS OR DISCUSSION]

If there are no further questions, I now propose that we move to the next
item of business, which is the first resolution before the meeting.

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SLIDE 12 – BOARD RESOLUTIONS TITLE SLIDE
All voting will be by poll to be conducted at the end of the meeting, once
all resolutions have been moved and discussed.
SLIDE 13 – BOARD RESOLUTIONS
RESOLUTION 1 - Appointment and remuneration of auditor
Section 207T of the Companies Act provides that a company’s auditor is
automatically re-appointed unless there is a resolution or other reason
for the auditor not to be re-appointed. The Company wishes
PricewaterhouseCoopers to continue as the company’s auditor and
PricewaterhouseCoopers has indicated its willingness to do so.

Section 207S of the Companies Act provides that the fees and expenses
of the auditors are to be fixed in such manner as the company
determines at the Annual Meeting. The Board proposes that, consistent
with past practice, the auditor’s fees be fixed by the directors.

I therefore:
• Record that the auditors, PricewaterhouseCoopers, are re-
appointed as auditors; and
• Move that the directors be authorised to fix the auditor’s
remuneration for the coming year.

Is there any discussion?
[FOLLOWING ANY QUESTIONS OR DISCUSSION]

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RESOLUTION 2 - Re-elect Michael Stiassny as a director

I now move to the re-election and the election of directors.

As I am standing for re-election, I invite Graham Stuart to introduce and
oversee the vote on resolution 2.

Graham Stuart TAKES OVER

Michael retires by rotation and is offering himself for re-election.

I invite Michael to address this meeting on his proposed re-election.

[MICHAEL STIASSNY ADDRESS]

Thank you Michael.

I will now move that Michael be re-elected as a director of Tower Limited

Is there any discussion?
[FOLLOWING ANY QUESTIONS OR DISCUSSION]

Michael Stiassny TAKES OVER

RESOLUTION 3 – Alteration of the constitution

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Resolution 3 is a special resolution to amend Tower’s constitution. On 1
July 2019, Tower transitioned to the updated listing rules. In order for the
constitution to align with the updated rules, a number of changes are
proposed.

The proposed amendments are explained in the Notice of Annual
Meeting. In principle, the amendments proposed are limited to those
required to conform to the listing rules, including to update the director
rotation and voting requirements.

In accordance with the Companies Act, this resolution is a special
resolution and needs to be passed by a 75% majority of eligible votes
submitted.

I therefore move that Tower Limited’s existing constitution be altered in
accordance with the amendments tabled at this Annual Meeting and
signed by myself for the purpose of identification, with effect from the
close of the Annual Meeting

Are there any questions on this resolution?

[FOLLOWING ANY QUESTIONS OR DISCUSSION]

Voting

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We will now undertake a formal vote on the resolutions. If you wish to
vote you will have either the Voting/Proxy Form sent to you with the
notice of meeting, or a voting form given to you by Computershare when
you entered the meeting.

When you cast your vote please tick one box, either for, against, or to
abstain alongside each resolution. In all cases, please ensure that you
sign the form once your vote has been cast.

If you are here as a proxy on behalf of a shareholder you will need to
cast that shareholder’s votes in order for them to be counted.

If you do not have a voting form please go to the registration desk at the
entrance to this room to ask for help.

So, if you haven’t already done so, please cast your votes. I will then ask
Computershare to collect the voting papers. The votes will then be
counted under the scrutiny of our auditor.

[PAUSE FOR COMPUTERSHARE TO COLLECT PAPERS]

Right, let’s move on. The final item on our agenda is General Business:
SLIDE 14 – GENERAL BUSINESS
Are there any matters of General Business? Or any further questions?

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The Directors will also be happy to answer questions from shareholders
while refreshments are served at the end of the meeting. Any person
wishing to speak should move to the microphone nearest to them and
please introduce yourself.

[Take questions from floor]

[FOLLOWING ANY QUESTIONS OR DISCUSSION]

Thank you.

That brings us to the conclusion of our business today and it remains for
me first, to thank you for your participation in today’s meeting, and
secondly to invite you to join the Board, Executive Leadership Team and
Auditors for refreshments next door.

I declare the meeting closed. Thank you.

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Amazing Claims
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purpose
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it right
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