Tower Limited Annual Report 2020

Tower Limited
Annual Report 2020

UPDATE FROM THE CHAIR AND CEO4
2020 YEAR IN REVIEW6
• Consistent growth and profitability7
• Growth in customers and premiums8
• Disciplined claims management9
• Product, pricing and underwriting enhanced through data12
• Management expenses fall, while investment continues13
• Strong capital and solvency position14
• Resilience through Covid-1915
LOOKING FORWARD — AN EXCITING FUTURE16
• Strategic priorities18
BOARD OF DIRECTORS24
CONSOLIDATED FINANCIAL STATEMENTS26
• Financial Statements28
• Notes to the consolidated financial statements32
INDEPENDENT AUDITOR'S REPORT69
APPOINTED ACTUARY'S REPORT76
CORPORATE GOVERNANCE AT TOWER LIMITED78
• Tower Directory87
• Registrar88
TOWER LIMITED
ANNUAL REPORT 2020
TOWER LIMITED ANNUAL REPORT 2020 CONTENTS

Tower’s 2020 result shows
a strong, healthy business
that continues to perform.
We reported a profit of
$12.3 million, including
the $9.5 million impact
of the EQC settlement.
TOWER aIiITED Akk¶Aa RE—ORT 2020 2TOWER LIMITED ANNUAL REPORT 2020 3UPDATE FROM CHAIR & CEOUPDATE FROM CHAIR & CEO

Tower emerged from the initial
response to the pandemic strong
and resilient, demonstrated by
our consistent performance and
profitability growth.
Tower’s 2020 result shows a strong,
healthy business that continues to
perform. We reported a profit of $12.3
million, including the $9.5 million
impact of the EQC settlement.
When we exclude large, one-off
events, our underlying business is
up 23% on the previous year at $34.7
million. Our underlying net profit after
tax of $28.4 million was just above the
top end of our guidance.
Our relentless focus on customers
and driving our digital and data
programme forward remains vital.
We now have a digital strategy that
lays the groundwork to reshape the
way we deliver insurance in New
Zealand and the Pacific.
Tower’s core insurance business
remains robust. We have used more
effective and efficient marketing
to increase the number of people
visiting our website. This is combined
with more competitive pricing, plain
language products and an easy to
use digital self-service platform.
These initiatives contributed to an
11% rise in customer numbers to
300,000. That, in turn, has fed through
to an 8% rise in gross written premiums
UPDATE FROM CHAIR & CEO
to $385m
1
. It has also increased our
market share in the personal insurance
segment from 8.3% to 9.1%.
Our settlement with the EQC means
Tower will receive $42.1m after
disbursement to reinsurers and costs.
The write off of the residual amount
resulted in an impact of approximately
$9.5m on our reported net profit for 2020.
The agreement is a significant step
for us. It means we are able to draw
a line under the issue and that
management can move forward
with our growth plan.
The transformation we embarked
on five years ago has seen the Tower
business turn around and deliver
continued profit growth. We have
modernised our many legacy
systems and simplified complex
product offerings.
To help accelerate our digital and
data progress, we’ve entered new
partnerships with the likes of the
University of Auckland’s Science
Faculty, Ushur in the US, and Amodo
in Croatia. We are also deepening
our data relationships with existing
partners such as RMS and Corelogic.
Digital and data allows us to reduce
our operating ratios, by giving us the
tools and insights we need to manage
our claims expenses closely. Tower
improved its loss ratio from 48% to
46% in FY20, which demonstrates
our ability to grow the business while
managing claims effectively and without
a significant increase in our cost base.
When the Covid-19 pandemic disrupted
the economy earlier this year, the
Reserve Bank of New Zealand advised
companies in the financial sector to take
conservative solvency positions and
preserve capital.
The RBNZ has since updated this
advice, and we plan to resume dividend
payments in the next financial year,
subject to market conditions and
consideration of growth opportunities.
With legacy challenges behind us,
we look forward to an exciting year
ahead. The whole Tower team is now
free to focus entirely on our strategy
of accelerated growth and pushing
forward with innovation.
In an uncertain world, where many businesses
are now having to pivot, our digital-first strategy
positioned Tower well this financial year.
BLAIR
TURNBULL
CEO
MICHAEL
STIASSNY
Chairman
1 References to GWP in the annual report exclude the $7.2m being refunded to customers.
TOWER LIMITED ANNUAL REPORT 2020 4TOWER LIMITED ANNUAL REPORT 2020 5UPDATE FROM CHAIR & CEOUPDATE FROM CHAIR & CEO

2020 YEAR IN REVIEW —
A YEAR OF GOOD RESULTS
The EQC settlement
puts a line under a
significant outstanding risk.
The settlement enables us to
pour all our energy into giving
the business momentum
and accelerating our
growth plans.
Digital and data
continues to play an ever
more important role in every
part of our business. We
are using it to build deeper,
better quality relationships
with customers.
Continued
customer and premium
growth was a key driver of
this year’s solid result, which
remains consistent with the
last three years. Our business
has shown a double-digit
increase in underlying
profit for each of the
last three years.
Consistent growth
& profitability
Continued growth was a key driver of this year’s solid result,
which remains consistent with the last three years. Our business
has shown a double-digit increase in underlying profit for each
of the last three years. Our underlying profit was up 23% on the
previous year excluding large events.
Our claims ratio improved 2% on the prior year, excluding large
events, and now sits at 46%. As a result of these improving
figures, the underlying profit after tax (NPAT) including
large events was up slightly at $28.4 million.
This year’s NPAT came in higher than the top end of our
guidance. The business’ operating ratio remains steady at
88.5%, which shows the strength of Tower’s core insurance
fundamentals.
The settlement agreement with the Earthquake Commission
marks a turning point for the business. Under the terms of the
agreement, Tower will receive $42.1m after disbursements.
That leaves a write off of $9.5m, which reduces the reported
net profit in the 2020 financial year to $12.3 million.
In recent years we have worked to remove legacy risks. The
EQC settlement puts a line under a significant outstanding risk.
The settlement enables us to pour all of our energy into giving
the business momentum and accelerating our growth plans.
FY19
FY20FY18
$28.4m
$6.3m
$27.4m
$0.8m
$28.3m
$34.7m
$13.6m
$7.8m
$21.4m
FY19
FY20
FY18
$12.3m
$9.5m
$16.8m
$-6.7m
UNDERLYING NPAT
Tower’s underlying business continues to move
from strength to strength. We are growing the
business while keeping costs under control.
$12.3m
REPORTED PROFIT
Large events
Impact of EQC $9.5m
Underlying NPAT($m)
TOWER LIMITED ANNUAL REPORT 2020 6TOWER LIMITED ANNUAL REPORT 2020 72020 YEAR IN REVIEW2020 YEAR IN REVIEW

Growth in customers
& premiums
Disciplined claims
management
The year saw customer numbers grow by 11%, taking the
total to 300,000.
The growth in customer numbers has seen our GWP climb
to $385m. This includes $12.6m of GWP from the Youi NZ
business. The GWP total is up 8% on the previous year.
Fuelling this growth is more effective and efficient marketing.
We have also moved to more competitive pricing, easier-to-
understand plain language products and customer self-
service. We will now build on this progress by using data to
develop deeper customer relationships and provide more
personalised offers.
Our improved online presence, the fruit of our recent
transformation along with our digital and data strategy, plays
a key role in our growth. We understand the need to give
customers easy, online access and confidence in our systems.
Many are already comfortable transacting with us, buying
insurance and making claims through My Tower, our online
self-service portal. A measure of our success is that 50,000
customers registered with My Tower over the past year.
Our market share of New Zealand’s personal lines insurance
has climbed steadily in recent years from 7.9% in 2017 to 9.1%
in the 2020 financial year.
Pacific
We also tightened our claims management processes.
These changes are already showing clear performance gains.
As in previous years, we have continued to focus on claims
leakage and recoveries. Our move to offering plain language
products that are easily understood by customers started
delivering tangible gains in terms of sales growth. This year
we further refined the product descriptions, making them
even clearer. We implemented new data practices to support
risk selection and provide us with a more accurate picture of
our portfolio.
In September 2020, our online claims process handled 45% of
claims, compared with 29% for the year ended 30 September
2019. We are getting further efficiencies from our straight-
through claims process that was launched during the year.
It allows us to process low-value, low-risk claims straight
through our suppliers. This allows us to reduce costs and
cut customer wait times. In the financial year of 2020, 20%
of simple house claims went straight to the builder.
These changes are giving us clear productivity gains.
Together they have led to a 2% improvement in our claims
ratio, excluding large events. This ratio now sits at 46%.
There are signs of inflation having an impact on our motor
insurance business. This year the average claim cost was
$1,600; a 6% increase on the previous year.
One reason for this is that there are now a higher number of
expensive cars on New Zealand’s roads. They tend to have
increased levels of technology in areas such as windscreens
and bumpers.
20
%
45
%
20
%
45
%
During the past 12 months, we have made
significant progress in improving the way
we underwrite insurance.
FY19
FY20
FY18
216
11 0
59
190
107
60
17 4
104
58
$336
$357
$385
FY19
FY20
FY18
52%
48%
46%
FY19
FY20
FY18
9.1%
8.3%
8.0%
FY17
7.9%
300,000
50,000
A commitment to innovation and our continued
focus on delivering compelling customer offers
helped us hit a significant milestone in 2020.
CUSTOMERS +11%onprioryear
CUSTOMERS ON MyTower October2020
GWP GROWTHBYBUSINESSUNIT($M)
TOWERNZPERSONALLINESMARKETSHARE
Partnerships
Direct
$1,600
AVERAGE MOTOR CLAIM COST +6%onprioryear
CLAIMS RATIO EXCL LARGE EVENTS
CLAIMS LODGED
ONLINEINSEPT2020
27%inSept2019
SIMPLE
HOUSECLAIMS
Straighttobuilder
inFY20
TOWER LIMITED ANNUAL REPORT 2020 8TOWER LIMITED ANNUAL REPORT 2020 92020 YEAR IN REVIEW2020 YEAR IN REVIEW

Data continues to
play an ever more
important role in
every part of our
business. We are
using it to build
deeper, better
quality relationships
with customers.
TOWER aIiITED Akk¶Aa RE—ORT 2020 102020 YEAR IN REVIEW11TOWER LIMITED ANNUAL REPORT 2020 2020 YEAR IN REVIEW

Product, pricing &
underwriting enhanced
through data
We are using it to build deeper, better quality relationships
with customers.
One area where data made an important impact in 2020
was in helping us to create a more balanced and profitable
risk portfolio.
Two-thirds of our new business in New Zealand is in motor
insurance. The sector now accounts for around 43% of all
risks. A key priority for us is to build on growth in that area by
deepening our relationship with customers. This gives us an
opportunity to increase the number of policies each customer
has with us. At the moment, on average, each customer holds
two Tower policies.
We are also using data to rationalise our product offering.
There were hundreds of products. We’ve managed to bring
that down to a core set of 12 products, all of which are now
described in plain language. It simplifies our business and
ensures customers get a consistent, simple and rewarding
experience with us.
Complexity adds costs to doing business and slows delivery
down. We are committed to rationalising and simplifying our
business at every opportunity.
Now we are working to do the same simplification in our
Pacific business. To date, we have managed to reduce
product variations in the region by 30%.
FY19
FY20
FY18
$205
$28$30
$28
$194
$182
$139
$120
$1 07
$19
$15
$11
Data continues to play an ever more
important role in every part of our business.
43
%
30
%
43
%
30
%
632,000
RISKSINSUREDAverageof2riskspercustomer
GWP PRODUCTMIX($M)
BALANCED
PRODUCT MIX
%of NZriskportfolio
inmotor
PACIFIC PRODUCT
VARIANTS ON SALE
REDUCEDBY
MotorOther
Home & contents
Commercial
FY20MANAGEMENTEXPENSERATIOS
Direct











Partnerships











Pacific











Tower Group
Management expenses
fall, while investment
continues
Our Tower Direct business unit operates a management
expense ratio of 34%.
The difference is that almost all the work in Tower Direct
takes place on our cloud platform. It delivers significant
efficiencies and underlines what is possible as more of
our business functions take place online.
Elsewhere our digital and data strategy has increased
the effectiveness of our marketing. We have reduced
the cost of acquiring a new customer to 13% of the net
earned premium. That’s 2% less than in the previous year.
Although our business is growing, we have managed to
reduce staff numbers to 601 full-time employees. Our
focus is now on building new skill sets in strategic areas
such as digital data.
45
%
51
%
39
%
34
%
45
%
51
%
39
%
34
%
45
%
51
%
39
%
34
%
45
%
51
%
39
%
34
%
TOWER LIMITED ANNUAL REPORT 2020 12TOWER LIMITED ANNUAL REPORT 2020 13CONSOLIDATED STATEMENT OF CASH FLOWS2020 YEAR IN REVIEW

Resilience
through Covid-19
When New Zealand first went into lockdown,
we moved fast to make sure everyone in our
workforce was able to do their job from home.
The capability remains, so we can respond
quickly to any future events.
Tower was the first general insurer to refund
car insurance customers after seeing a
significant reduction in claims. We knew the
right thing to do was pass these lower costs
on and gave back $7.2m to customers.
Tower also worked to respond to changing
customer needs during the pandemic. We
now have a dedicated hardship team working
to help customers who need support.
The Tower team has achieved this
strong result against the backdrop
of the Covid-19 pandemic.
$7.2m
Givenbacktocustomers
Strong capital &
solvency position
TIL NZ as at
30 Sept 2019
Capital raise
proceeds
injected into TIL
Remove EQC
from solvency
calculations
Purchase
of Youi
Other FY20
solvency
movements
TL NZ as at
30 Sept 2020
50
56.6
13.0
15.5
49.3
50
52.3
48.1
45.0
53.0
ASC = 155.9
ASC = 150.4
The business’s solvency margin sat at 287% before
taking the EQC settlement into account. As at
30 September 2020, Tower Limited NZ had
$98m of solvency margin, $48m above the RBNZ
licence condition.
The EQC settlement further strengthens that
position and removes a legacy risk from the
business. We have settled circa 15,000 Canterbury
earthquake claims. At the end of September
2020, a total of 59 remained open. We continue
to make good progress in achieving fair and
efficient settlements.
This year we amalgamated several business units
in order to simplify the business. These changes had
no effect on our financial strength rating, it remains
at A- (excellent).
Tower remains in a
strong capital position.
ACTUALSOLVENCYCAPITAL(ASC)($M)
Solvency marginLicence condition
MSC
During the past six months, we have also repaid
and closed our $15 million BNZ credit line. As a
result, we now have no outstanding borrowings.
This year’s Covid-19 pandemic caused serious
disruption to the economy. As an early response to
the uncertain economic outlook, the Reserve Bank
of New Zealand advised companies in the financial
sector to protect solvency positions and preserve
capital. Since that time the economy has stabilised
and the RBNZ has updated its guidance.
There will be no dividend paid for the 2020 financial
year. However, we intend to resume dividend
payments in the 2021 year. Our strong position
means we are well placed to do so, but this remains
subject to prevailing market conditions and growth
opportunities which may arise.
TOWER LIMITED ANNUAL REPORT 2020 14TOWER LIMITED ANNUAL REPORT 2020 15CONSOLIDATED STATEMENT OF CASH FLOWS2020 YEAR IN REVIEW

LOOKING FORWARD —
AN EXCITING FUTURE
As we start to move into a new
era of Tower, the business will look
and behave differently.
We are relentlessly
focused on delivering
beautifully simple and
rewarding experiences
for our customers.
Having a cloud-based
platform enables us to
be agile and adapt to our
rapidly changing world.
At Tower, we are choosing a direction that leads to higher
growth through a relentless focus on our customers. We are
more determined than ever, more energised than ever, and
over the coming months we will be demonstrating that we
are far more dynamic than ever before.
We have proven ourselves to be resilient and robust in a
difficult time for the New Zealand economy and have an
exciting, profitable future ahead of us. We have plotted a
course that will lead us to higher, faster growth.
We are relentlessly focused on delivering beautifully
simple and rewarding experiences for our customers.
To get there we have set out five clear strategic priorities.
These will enable us to grow and innovate, as well as to
build financial strength and capability as a company.
TOWER LIMITED ANNUAL REPORT 2020 17TOWER LIMITED ANNUAL REPORT 2020 16LOOKING FORWARD — AN EXCITING FUTURELOOKING FORWARD — AN EXCITING FUTURE

Strategic
priorities
CUSTOMER FOCUS
A relentless focus on customer relationships.
We will deliver beautifully simple and rewarding
experiences through new rewards, products and
offerings that make sense and drive value.
DIGITAL AND DATA
We will leverage digital and data everywhere.
Our significant investment in cloud-based
information technology allows us to use digital
and data to deepen our relationships with our
customers. At the same time, we will use our digital
and data strengths to attract new customers.
TALENT AND AGILE
Tower will embrace agile and talent. We need the
best people to grow our business capability and to
keep up the pace of innovation. This means making
sure Tower remains a great place to work and a
place where talent wants to be. Our move to agile
is already underway and we are seeing benefits in
our delivery cadence.
CAPITAL STRENGTH
We will maintain a strong capital and solvency
structure. Tower is committed to being a financially
robust business that delivers value to customers
and shareholders. Our solvency margin is strong
and higher than required by the Reserve Bank of
New Zealand.

PARTNEREVERYWHERE
Wherever possible Tower will work with partners.
We will nurture and develop partnerships with the
best organisations. They will help us to continue to
innovate and improve our delivery.
1





2









3






4






5
1
2
3
4
5
TOWER LIMITED ANNUAL REPORT 2020 18TOWER LIMITED ANNUAL REPORT 2020 19LOOKING FORWARD — AN EXCITING FUTURELOOKING FORWARD — AN EXCITING FUTURE

Our three business units: Direct, Partnership and
Pacific, each have end-to-end accountability for
driving new growth and reducing costs.
Tower Direct is already operating on our new
technology platform. As a result, it leads the way
in managing expenses and delivering operational
efficiencies. It points the way to where the rest of
the business is heading.
Tower Direct uses digital technology and
innovation to attract and engage with customers.
We continue to encourage customers to use My
Tower, our online sales and service portal.
Customers see a simplified, easy-to-understand
insurance buying process. Following our
strategic priorities, we have partnered with data
providers so customers only need to answer a
few straightforward questions. Customers get
automatic notification of insurance-related matters
such as severe weather warnings and when their
vehicle’s warrant of fitness is due.
Tower Partnerships is well-positioned to grow in
the coming years. Our platform gives our partners
the support they need to improve their customer
experience, drive growth and reduce costs.
We are already underway moving TradeMe
and TSB customers to the platform.
Our Pacific operation remains an important
part of Tower, contributing 15% of gross written
premiums (GWP).
In the past, it has suffered from complexity
and remediation issues. The new digital and
data platform will transform this business and
make it more like Tower Direct. We are already
rationalising the product set and our remediation
work is almost complete.
We recently began selling a new motor product
for the Fiji market using our MyTower cloud-based
system. Our other Pacific product lines will follow.
Tower’s Suva office also provides capacity overflow
and business continuity options for the New
Zealand business. We process NZ customer claims
in Suva.
Our technology platform means we can expand
our risk-adjusted pricing. This means we can tailor
every quote to the customer and pricing is an
accurate reflection of individual risk. In the first half
of 2021 we will extend this to include flood risk.
To leverage our data and digital resources even
further we have formed a partnership with the
University of Auckland’s Science faculty. This
partnership aligns academic research capabilities
with real world industry needs.
As well as streamlining processes in areas of
importance for Tower today, the collaboration will
lay the groundwork for the data-driven future of the
New Zealand insurance industry.
Our commitment to sustainability is also a key part
of our future. Tower is a member of the Sustainable
Business Council and this year we will develop
and report on a carbon action plan. From next
year we will be able to show the steps we have
taken to reduce our carbon footprint and develop
transparent climate reporting.
The last year has been a difficult time for many
New Zealand businesses and individuals. Tower’s
strategy, put in place over recent years, has given
the business the resilience needed to deal with the
challenges.
We’re in good shape with a strong balance sheet
and healthy solvency margins. Our strategic
priorities now focus us for growth and innovation,
as well as to building more financial strength and
capability as a company.
The business is poised for further growth and at
the heart of everything is our relentless focus on
solving customers problem and delivering them
rewarding experiences.
Having a cloud-based
digital and data platform
in place allows us to
reorganise Tower into
three distinct, focused
businesses each targeting
a key customer group.
Through My Tower
customers see all their
policies in one place
and in plain English.
Customers get
automatic notification
of insurance-related
matters such as severe
weather warnings and
when their vehicle’s
warrant of fitness
is due.
TOWER LIMITED ANNUAL REPORT 2020 21TOWER LIMITED ANNUAL REPORT 2020 20LOOKING FORWARD — AN EXCITING FUTURELOOKING FORWARD — AN EXCITING FUTURE

We recently began selling a new motor product
for the Fiji market using our My Tower cloud-based
system. Our other Pacific product lines will follow.
Tower’s Suva office also provides capacity
overflow and business continuity options for the
New Zealand business. We process NZ customer
claims in Suva.
Our technology platform means we can expand
our risk-adjusted pricing. This means we can tailor
every quote to the customer and pricing is an
accurate reflection of individual risk. In the first half
of 2021 we will extend this to include flood risk.
To leverage our data and digital resources even
further we have formed a partnership with the
University of Auckland’s Science faculty. This
partnership aligns academic research capabilities
with real world industry needs.
As well as streamlining processes in areas of
importance for Tower today, the collaboration will
lay the groundwork for the data-driven future of the
New Zealand insurance industry.
Our commitment to sustainability is also a key part
of our future. Tower is a member of the Sustainable
Business Council and this year we will develop
and report on a carbon action plan. From next
year we will be able to show the steps we have
taken to reduce our carbon footprint and develop
transparent climate reporting.
The last year has been a difficult time for many
New Zealand businesses and individuals. Tower’s
strategy, put in place over recent years, has given
the business the resilience needed to deal with
the challenges.
We are in good shape with a strong balance
sheet and healthy solvency margins. Our strategic
priorities now focus us for growth and innovation,
as well as towards building more financial strength
and capability as a company.
The business is poised for further growth and at the
heart of everything is our relentless focus on the
customer and delivering them beautifully simple
and rewarding experiences.
Our commitment to
sustainability is also a key
part of our future. Tower is a
member of the Sustainable
Business Council and this
year we will develop and
report on a carbon
action plan.
To leverage our data
and digital resources even
further we have formed a
partnership with the University
of Auckland’s Science faculty.
This partnership aligns
academic research
capabilities with real-world
industry needs.
TOWER LIMITED ANNUAL REPORT 2020 23TOWER LIMITED ANNUAL REPORT 2020 22LOOKING FORWARD — AN EXCITING FUTURELOOKING FORWARD — AN EXCITING FUTURE

STEVE SMITH
BCom,CA,DipBus(Finance),CFInstD

Non-ExecutiveDirector
Independent
AppointedDirector:24May2012
Steve has been a professional
Director since 2004. He has over
35 years of business experience,
including being a specialist corporate
finance partner at a leading New
Zealand accountancy firm. He has a
Bachelor of Commerce and Diploma
in Business from the University of
Auckland, is a member of Chartered
Accountants Australia and New
Zealand and a Chartered Fellow
of the Institute of Directors in New
Zealand (Inc). Steve is Chairman
of Pascaro Investments Ltd, and a
Director of Rimu S.A. (Chile) and the
National Foundation for the Deaf Inc.
Steve resides in Auckland,
New Zealand.
WARREN LEE
BCom,CA

Non-ExecutiveDirector
Independent
AppointedDirector:26May2015
Warren has extensive experience in
the international financial services
industry. Warren's two most recent
executive positions were Chief
Executive Officer of the Victorian
Funds Management Corporation and
Chief Executive Officer, Australia and
New Zealand for AXA Asia Pacific
Holdings Limited. Warren is currently
a non-executive director of MetLife
Limited, MyState Limited and Go
Hold Limited. He has a Bachelor
of Commerce from the University
of Melbourne and is a member of
Chartered Accountants Australia and
New Zealand.
Warren resides in Melbourne,
Australia.
WENDY THORPE
BA (French),BBus(Accounting),GradDip,
AppliedFin&Inv,HarvardAMP,FFin,GAICD
Non-ExecutiveDirector
Independent
AppointedDirector:1March2018
Wendy has had an extensive
executive career in Financial Services
leading technology and operations in
insurance and wealth management.
Her most recent executive role was
as Group Executive, Operations for
AMP Ltd, and she was previously
Chief Operations Officer and Chief
Information Officer for AXA in Australia.
Wendy is also Chair of Online
Education Services, and a Non-
Executive Director of Ausgrid,
Peoples’ Choice Credit Union,
Epworth Healthcare and Very Special
Kids. Wendy has a Bachelor of Arts
from LaTrobe University, a Bachelor of
Business from Swinburne University
and a Graduate Diploma in Applied
Finance and Investment from the
Securities Institute of Australia.
She completed the Advanced
Management Program at Harvard
Business School, is a Fellow of
the Financial Services Institute
of Australasia and a Graduate
member of the Australian Institute
of Company Directors.
Wendy resides in Melbourne,
Australia.
MARCUS NAGEL
MBA (InternationalManagement),
MBA (BankingandFinance)
Non-ExecutiveDirector
NotIndependent
AppointedDirector:14January2019
Marcus has significant insurance
industry experience.
For a decade he has performed senior
leadership roles for Zurich in Europe
and globally. In his last role at Zurich,
he served as the Chief Executive
Officer of Zurich Germany managing
both life insurance and general
insurance businesses. He has also
held the position of Vice Chairman
of the joint venture with ADAC,
Germany’s largest Automotive Club,
Chairman of the direct insurer DA
Direct and Chairman of the life insurer,
Zurich Deutscher Herold. Prior to that,
he also managed the independent
financial adviser/broker business for
Zurich Global Life.
Marcus holds a Master’s Degree in
Banking and Finance from Goethe
University in Frankfurt, Germany and
Master of International Management
from the Arizona State University
Thunderbird School of Global
Management in Arizona, United States
of America. Marcus was nominated by
Bain Capital Credit LP (Bain Capital) to
represent Bain Capital’s stake in Tower
(Bain Capital hold 19.99% of Tower’s
ordinary shares) and his appointment
was supported by the Tower Board.
Marcus resides in Schindellegi,
Switzerland.
GRAHAM STUART
BCom(Hons),MS,FCA

Non-ExecutiveDirector
Independent
AppointedDirector:24May2012
With over 30 years of senior
management experience, Graham
has held senior leadership roles with
several major corporates, in New
Zealand and overseas. The latest
being the Sealord Group of which
he was Chief Executive Officer for
seven years.
Graham has a Bachelor of Commerce
(First Class Hons) from the University
of Otago, a Master of Science
from Massachusetts Institute of
Technology and is a Fellow of
Chartered Accountants Australia
and New Zealand. Graham has
served on a number of government
bodies including the Food & Beverge
Taskforce and the Māori Economic
Development Panel.
Graham resides in Auckland,
New Zealand.
MICHAEL STIASSNY
LLB,BCom,FCA,CFInstD
Chairman
Non-ExecutiveDirector
Independent
AppointedDirector:12October2012
Michael is a Fellow of Chartered
Accountants Australia and New
Zealand. He has both a Commerce
and Law degree from the University
of Auckland. He is Chairman of Ngāti
Whātua Ōrākei Whai Rawa Limited
and is a director of a number of other
companies.
Michael resides in Auckland,
New Zealand.
BOARD
OF DIRECTORS
TOWER LIMITED ANNUAL REPORT 2020 24TOWER LIMITED ANNUAL REPORT 2020 25BOARD OF DIRECTORSBOARD OF DIRECTORS

Notes to the consolidated financial statements
1Overview32
1.1About this report32
1.2Consolidation32
1.3Critical accounting judgements and estimates35
1.4Segmental reporting35
2Underwritingactivities37
2.1Underwriting revenue37
2.2Net claims expense38
2.3Underwriting expense38
2.4Net outstanding claims39
2.5Unearned premium liability43
2.6Deferred insurance costs44
2.7Receivables45
2.8Payables46
2.9Provisions46
2.10Assets backing insurance liabilities46
3Investments47
3.1Investment income47
3.2Investments47
3.3Fair value hierarchy47
4Riskmanagement48
4.1Risk management overview48
4.2Strategic risk49
4.3Insurance risk49
4.4Credit risk50
4.5Market risk51
4.6Liquidity risk53
4.7Capital management risk53
4.8Operational risk54
4.9Regulatory and compliance risk54
4.10Conduct risk54
4.11Cyber risk55
5Capitalstructure55
5.1Borrowings55
5.2Contributed equity55
5.3Reserves56
5.4Net tangible assets per share56
5.5Earnings per share56
6Otherbalancesheetitems57
6.1Property, plant and equipment57
6.2Intangible assets58
6.3Leases60
7Tax62
7.1Tax expense62
7.2Current tax62
7.3Deferred tax63
7.4Imputation credits64
8Otherinformation65
8.1Notes to the consolidated cash flow statement65
8.2Entity amalgamation65
8.3Related party disclosures66
8.4Auditor's remuneration66
8.5Contingent liabilities66
8.6Subsequent events66
8.7Capital commitments67
8.8Impact of new accounting standards67
8.9Change in comparatives68
Independent Auditor's report
Independent Auditor's report69
Appointed Actuary's report
Appointed Actuary's report76
Financial Statements
Consolidated statement of comprehensive income28
Consolidated balance sheet29
Consolidated statement of changes in equity30
Consolidated statement of cash flows31
CONSOLIDATED
FINANCIAL
STATEMENTS
TOWER LIMITED ANNUAL REPORT 2020 27TOWER LIMITED ANNUAL REPORT 2020 26CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of comprehensive income
FOR THE YEAR ENDED 30 SEPTEMBER 2020
Consolidated balance sheet
AS AT 30 SEPTEMBER 2020
NOTE
2020
$000
2019
$000
Gross written premium 377,159 356,767
Unearned premium movement(4,607)(11,772)
Gross earned premium 2.1 372,552 344,995
Outward reinsurance premium(58,030)(55,054)
Movement in deferred reinsurance premium810 79
Outward reinsurance premium expense(57,220)(54,975)
Netearnedpremium315,332 290,020
Claims expense(206,767)(190,699)
Less: Reinsurance and other recoveries revenue2.125,711 14,985
Net claims expense2.2(181,056)(175,714)
Gross commission expense(20,947)(20,252)
Commission revenue2.1 6,457 3,771
Net commission expense(14,490)(16,481)
Underwriting expense2.3(87,949)(77,185)
Underwritingprofit31,837 20,640
Investment income3.1 5,810 7,519
Investment expense(466)(418)
Corporate and other income288 2,074
Corporate and other expense(2,967)(3,508)
Impairment of EQC receivable2.7(13,126) –
Financing and other costs(1,125)(312)
Profitbeforetaxation20,251 25,995
Tax expense7.1(7,910)(9,190)
Profitaftertaxation12,34116,805
Items that may be reclassified to profit or loss
Currency translation differences(1,374)793
Items that will not be reclassified to profit or loss
Gain on asset revaluation5.341 305
Deferred income tax relating to asset revaluation5.38 (32)
Othercomprehensive(loss)/profitnetoftax(1,325)1,066
Total comprehensiveprofitforthe year11,01617,871
Earningspershare:
Basic and diluted earnings per share (cents)2.85 4.73
Profitaftertaxationattributedto:
Shareholders11,892 16,565
Non-controlling interests449 240
12,341 16,805
Total comprehensiveprofitattributedto:
Shareholders 10,653 17,538
Non-controlling interests363 333
11,016 17,871
The above statement should be read in conjunction with the accompanying notes.
NOTE
2020
$000
2019
$000
Assets
Cash and cash equivalents8.180,108 62,018
Investments3.2237,904 234,172
Receivables 2.7250,746 247,501
Current tax asset7.2a12,892 13,589
Deferred tax asset7.3a26,832 30,308
Deferred insurance costs2.634,667 32,530
Right-of-use assets6.3a(i)7,211 –
Property, plant and equipment 6.110,041 9,104
Intangible assets6.284,954 74,211
Total assets745,355703,433
Liabilities
Payables2.866,600 75,907
Unearned premiums2.5203,452 187,855
Outstanding claims2.4107,747 124,060
Lease liabilities6.3a(ii)8,695 –
Provisions2.99,531 6,802
Current tax liabilities7.2b821 229
Deferred tax liabilities7.3b1,346 991
Borrowings5.1 – 14,931
Total liabilities398,192410,775
Netassets347,163292,658
Equity
Contributed equity5.2492,424 209,990
(Accumulated losses) / Retained earnings(42,990)71,059
Reserves5.3(104,431)9,808
Total equity attributedtoshareholders345,003290,857
Non-controlling interests2,160 1,801
Total equity347,163292,658
The above statement should be read in conjunction with the accompanying notes.
ThefinancialstatementswereapprovedforissuebytheBoardon25November2020.

Michael P Stiassny Graham R Stuart
ChairmanDirector
TOWER LIMITED ANNUAL REPORT 2020 28TOWER LIMITED ANNUAL REPORT 2020 29CONSOLIDATED BALANCE SHEETCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Consolidated statement of changes in equity
YEAR ENDED 30 SEPTEMBER 2020
ATTRIBUTED TO SHAREHOLDERS
CONTRIBUTED
EQUITY
$000
RETAINED
EARNINGS
$000
RESERVES
$000
NON-CONTROLLING
INTEREST
$000
TOTAL EQUITY
$000
Year Ended 30 September 2020
Balanceasat30September2019209,990(36,101)9,8081,801185,498
Impact of amalgamation
– 107,160 – – 107,160
Balance post amalgamation 209,990 71,059 9,808 1,801 292,658
Adjustment on initial application of NZ IFRS 16 – (1,333) – (4)(1,337)
Restatedbalanceatbeginningofthe year209,99069,7269,8081,797291,321
Comprehensive income
Profit for the year – 11,892 – 449 12,341
Currency translation differences – – (1,288)(86)(1,374)
Gain on asset revaluation – – 41 – 41
Deferred income tax relating to asset revaluation – – 8 – 8
Total comprehensiveincome – 11,892(1,239)36311,016
Transactions with shareholders
Net proceeds of capital raise45,000 (119) – – 44,881
Dividends written off – (99) – – (99)
Other – 44 – – 44
Cancellation of shares on amalgamation
(254,990)254,990 – – –
Recognition of shares on amalgamation
492,424 (379,424)(113,000) – –
Total transactionswithshareholders282,434(124,608)(113,000) – 44,826
Attheendofthe year492,424(42,990)(104,431)2,160347,163
Year Ended 30 September 2019
Balance as at 30 September 2018 209,990 (53,187)8,835 1,468 167,106
Impact of amalgamation – 107,673 – – 107,673
Restated balance at beginning of the year 209,990 54,486 8,835 1,468 274,779
Comprehensive income
Profit for the year – 16,565 – 240 16,805
Currency translation differences – – 700 93 793
Gain on asset revaluation – – 305 – 305
Deferred income tax relating to asset revaluation – – (32) – (32)
Total comprehensive income – 16,565 973 333 17,871
Transactions with shareholders
Other – 8 – – 8
Total transactions with shareholders – 8 – – 8
At the end of the year209,990 71,059 9,808 1,801 292,658
The above statement should be read in conjunction with the accompanying notes.

Refer to note 8.2 for further information.
Consolidated statement of cash flows
FOR THE YEAR ENDED 30 SEPTEMBER 2020
2020
$000
2019
$000
Cashflowsfromoperatingactivities
Premiums received 366,738 343,411
Interest received 7,328 8,141
Fees and other income received7,345 5,818
Reinsurance and other recoveries received18,035 25,528
Motor premium refund payments(5,849) –
Reinsurance paid(54,867)(55,968)
Claims paid(223,751)(208,770)
Employee and supplier payments(94,783)(91,095)
Income tax paid(1,317)(2,453)
Netcashinflowfromoperatingactivities18,87924,612
Cashflowsfrominvestingactivities
Proceeds from sale of interest-bearing investments112,484 73,479
Payments for purchase of interest-bearing investments(117,734)(115,102)
Payments for purchase of intangible assets (7,361)(35,741)
Payments for purchase of customer relationships
(9,473) –
Payments for purchase of property, plant and equipment(3,122)(1,886)
Netcashoutflowfrominvestingactivities(25,206)(79,250)
Cashflowsfromfinancingactivities
Proceeds from share capital issuance47,300 –
Payments for cost of share capital issuance(2,419) –
Repayment of borrowings(15,000) –
Proceeds from borrowings – 15,000
Facility fees and interest paid(1,115)(352)
Payment relating to principal element of lease liabilities(3,070) –
Netcashinflowfromfinancingactivities25,69614,648
Netincrease(decrease)incashandcashequivalents19,369 (39,990)
Effect of foreign exchange rate changes(1,279)7
Cash and cash equivalents at the beginning of the year 62,018 102,001
Cashandcashequivalentsattheendofthe year 80,10862,018
The above statement should be read in conjunction with the accompanying notes.

This represents the net cashflow associated with the purchase of Youi NZ Pty Ltd.'s insurance portfolio. It constitutes the gross purchase price (and associated costs) as disclosed in note 6.2 less
the net insurance liabilities Tower absorbed as part of this transaction.
TOWER LIMITED ANNUAL REPORT 2020 30TOWER LIMITED ANNUAL REPORT 2020 31CONSOLIDATED STATEMENT OF CASH FLOWSCONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Notes to the consolidated financial statements
FOR THE YEAR ENDED 30 SEPTEMBER 2020
OVERVIEW
This section provides information that is helpful to an overall understanding of the financial statements and the areas of critical accounting
judgements and estimates included in the financial statements. It also includes a summary of Tower's operating segments.
1.1 About this Report
a.Entitiesreporting
The financial statements presented are those of Tower Limited (the Company) and its subsidiaries. The Company and its subsidiaries together are referred
to in this financial report as Tower or the Group. The address of the Company's registered office is 45 Queen Street, Auckland, New Zealand.
During the periods presented, the principal activity of the Group was the provision of general insurance. The Group predominantly operates in New
Zealand with some of its operations based in the Pacific Islands region.
The financial statements were authorised for issue by the Board of Directors on 25 November 2020. The entity’s owners or others do not have the power
to amend the financial statements after issue.
b.Statutorybase
Tower Limited is a company incorporated in New Zealand under the Companies Act 1993 and listed on the NZX Main Board and the Australian Securities
Exchange. The Company is a reporting entity under Part 7 of the Financial Markets Conduct Act 2013.
c.Basisofpreparation
The Company is a for-profit entity and the financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting
Practice (NZ GAAP). They comply with International Financial Reporting Standards (IFRS), New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and other applicable financial reporting standards, as appropriate for Tier 1 for-profit entities.
The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013 and
the NZX Main Board Listing Rules.
The Group financial statements are presented in New Zealand dollars and rounded to the nearest thousand dollars. They have been prepared on a fair
value measurement basis with any exceptions noted in the accounting policies below, or in the notes to the financial statements.
d.Changeincomparatives
Refer to note 8.9 for details of change in comparatives. There is no change to net assets or the 2019 consolidated statement of comprehensive income.
1.2 Consolidation
a.Principlesofconsolidation
The Group financial statements incorporate the assets and liabilities of all subsidiaries of the Company at balance date and the results of all subsidiaries
for the year.
Subsidiaries are those entities over which the consolidated entity has control, being power over the investee; exposure, or rights to variable returns from
its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns.
The results of any subsidiaries acquired during the year are consolidated from the date on which control was transferred to the consolidated entity and
the results of any subsidiaries disposed of during the year are consolidated up to the date control ceased.
The acquisition of controlled entities from external parties is accounted for using the acquisition method of accounting. Non-controlling interests in the
results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of changes in equity and balance sheet
respectively. Acquisition-related costs are expensed as incurred.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change
in carrying amount recognised in profit or loss.
Intercompany transactions and balances between Group entities are eliminated on consolidation.
b.Foreigncurrency
(i) Functional and presentation currencies
The financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates. The
Group financial statements are presented in New Zealand dollars and rounded to the nearest thousand dollars unless stated otherwise.
1.2Consolidation(continued)
(ii) Transactions and balances
In preparing the financial statements of the individual entities, transactions denominated in foreign currencies are translated into New Zealand
dollars using the exchange rates in effect at the transaction dates. Monetary items receivable or payable in a foreign currency are translated at
reporting date at the closing exchange rate.
Translation differences on non-monetary items such as financial assets held at fair value through profit or loss are reported as part of their fair value
gain or loss.
Exchange differences arising on the settlement or retranslation of monetary items at year end exchange rates impact profit after tax in the
consolidated statements of comprehensive income unless the items form part of a net investment in a foreign operation. In this case, exchange
differences are taken to the Foreign Currency Translation Reserve and recognised (as part of comprehensive profit) in the statement of
comprehensive income and the statement of changes in equity.
(iii) Consolidation
For the purpose of preparing consolidated financial statements the assets and liabilities of subsidiaries with a functional currency different to the
Company are translated at the closing rate at the balance date. Income and expense items for each subsidiary are translated at a weighted average
of exchange rates over the period, as a surrogate for the spot rates at transaction dates. Foreign currency translation differences are taken to the
Foreign Currency Translation Reserve and recognised in the statement of comprehensive income and the statement of changes in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and
are translated at the closing rate with movements recorded through the Foreign Currency Translation Reserve in the statement of changes in equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the
statement of comprehensive income.
c.Subsidiaries
The table below lists Tower Limited's principal subsidiary companies and controlled entities. All entities have a balance date of 30 September.
Tower simplified its corporate structure on 30 September 2020 to make Tower Insurance Limited the listed parent. Tower Limited, Tower New Zealand
Limited and Tower Financial Services Group Limited undertook a short-form amalgamation into Tower Insurance Limited. In addition, Tower Insurance
Limited was renamed Tower Limited. The table below and diagram on the following page illustrate this change and further information is provided in
note 8.2.
HOLDINGS
NAME OF COMPANYINCORPORATION20202019
ParentCompany
New Zealand general insurance operations
Tower Limited (formerly named Tower Insurance Limited)NZParent–
New Zealand holding company
Tower LimitedNZ–Parent
Subsidiaries
New Zealand general insurance operations
Tower Insurance LimitedNZ–100%
Overseas general insurance operations
Tower Insurance (Cook Islands) LimitedCook Islands100%100%
Tower Insurance (Fiji) LimitedFiji100%100%
Tower Insurance (PNG) LimitedPNG100%100%
National Pacific Insurance Limited ("NPI")Samoa71%71%
Tower Insurance (Vanuatu) LimitedVanuatu100%100%
Management service operations
Tower Services LimitedNZ100%–
Tower New Zealand LimitedNZ–100%
Tower Financial Services Group LimitedNZ–100%
TOWER LIMITED ANNUAL REPORT 2020 32TOWER LIMITED ANNUAL REPORT 2020 33NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.2Consolidation(continued)
OVERSEAS GENERAL
INSURANCE
OPERATIONS
(SUBSIDIARIES)
TOWER LIMITED
(FORMERLY TOWER
INSURANCE LIMITED)
TOWER SERVICES
LIMITED
AMALGAMATED STRUCTURE
TOWER LIMITED
OVERSEAS GENERAL
INSURANCE
OPERATIONS
(SUBSIDIARIES)
PRE–AMALGAMATION STRUCTURE
TOWER INSURANCE
LIMITED
TOWER FINANCIAL
SERVICES GROUP
LIMITED
TOWER
NEW ZEALAND
LIMITED

1.3 Critical accounting judgements and estimates
In preparing these financial statements, management is required to make estimates and related assumptions about the future. The estimates and related
assumptions are based on experience and other factors that are considered to be reasonable, and are reviewed on an ongoing basis. Revisions to the
estimates are recognised in the period in which they are revised, or future periods if relevant. The key areas in which estimates and related assumptions
are applied are as follows:
— Net outstanding claims note 2.4
— Liability adequacy test note 2.5
— Intangible assets note 6.2
— Deferred taxation note 7.3
Covid-19Pandemic
An assessment of the impact of Covid-19 on Tower's balance sheet is set out below based on information available at the time of preparing these
financial statements.
BALANCE SHEETIMPACT
InvestmentsInvestments are carried at fair value and reflect a lower interest rate environment.
ReceivablesImmaterial impact. Provision for impairment of premium receivables and "other recoveries" has been updated to
include an allowance for increased non-payment.
Right-of-use AssetsImmaterial impact. One minor lease was deemed onerous due to a branch office closure in Fiji and was impaired.
Intangible assets No impact. Tower has assessed that its intangible assets have not been impaired.
Unearned premiumsImmaterial impact. Provision for unearned premium cancellation has been updated to include an allowance for
increased non-payment.
Net outstanding claimsImmaterial impact. A small adjustment has been made for delay in the reporting and progressing of claims in the
valuation of outstanding claims.
ProvisionsProvisions have increased. First, there is a year-on-year increase due to outstanding motor premium refunds.
Second, Tower's employee leave balances have increased due to a reduction in leave taken during the year (which
Tower is actively managing).
RBNZ has been engaged with Tower on its response to Covid-19 and the sufficiency of its capital position. This is part of sector-wide regulatory
engagement in response to Covid-19 focused on financial stability, dividend policy and operational changes/decisions that have customer impacts.
In November 2020, the RBNZ relaxed their guidance for dividend payments for New Zealand-based insurers. The RBNZ expects that insurers will only
make dividend payments if it is prudent for that insurer to do so, having regard to their own stress testing and the elevated risks in the current
environment.
1.4 Segmental reporting
a.Operatingsegments
Tower operates in two geographical segments, New Zealand and the Pacific region. New Zealand comprises the general insurance business
underwritten in New Zealand. Pacific Islands comprises the general insurance business underwritten in the Pacific by Tower subsidiaries and branch
operations. New Zealand Corporate includes head office expenses, financing costs, intercompany eliminations and recharges.
The Group does not derive revenue from any individual or entity that represents 10% or more of the Group's total revenue.
TOWER LIMITED ANNUAL REPORT 2020 34TOWER LIMITED ANNUAL REPORT 2020 35NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.4Segmentalreporting(continued)
b.Financialperformance
NEW ZEALAND
GENERAL INSURANCE
$000
PACIFIC ISLANDS
GENERAL INSURANCE
$000
NEW ZEALAND
CORPORATE
$000
TOTAL
$000
Year Ended30September2020
Gross written premium317,478 59,681 – 377,159
Gross earned premium – external311,671 60,881 – 372,552
Outwards reinsurance expense(38,774)(18,446) – (57,220)
Netearnedpremium272,89742,435 – 315,332
Net claims expense(161,695)(19,361) – (181,056)
Net commission expense(12,027)(2,463) – (14,490)
Underwriting expense(74,752)(13,197) – (87,949)
Underwritingprofit24,423 7,414  – 31,837
Net investment income4,265 769 310 5,344
Impairment of EQC receivable(13,126) – – (13,126)
Other expenses(286)62 (3,580)(3,804)
Profitbeforetax15,276 8,245 (3,270)20,251
Profitaftertax9,907 4,789(2,355)12,341
Year Ended 30 September 2019296,598 60,169 – 356,767
Gross written premium285,677 59,318 – 344,995
Gross earned premium – external(37,816)(17,159) – (54,975)
Outwards reinsurance expense247,861 42,159 – 290,020
Net earned premium(161,071)(14,643) – (175,714)
Net claims expense(13,585)(2,896) – (16,481)
Net commission expense(63,600)(13,585) – (77,185)
Underwriting expense9,605 11,035 – 20,640
Underwriting profit6,574 44 483 7,101
Net investment income(873)1,050 (1,923)(1,746)
Other expenses15,306 12,129 (1,440)25,995
Profit before tax9,749 7,564 (508)16,805
Profit after tax
c.Financialposition
Total assets30September2020534,487105,376105,492745,355
Total assets 30 September 2019480,694 98,454 124,285 703,433
Total liabilities30September2020336,19261,096904398,192
Total liabilities 30 September 2019334,810 58,842 17,123 410,775
Definition
An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are
different to those of other operating segments. Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker (the Chief Executive Officer) who reviews the operating results on a regular basis and makes decisions on resource
allocation and assessing performance.
2. UNDERWRITING ACTIVITIES
This section provides information on Tower's underwriting activities.
Tower collects premiums from customers in exchange for providing insurance coverage. These premiums are recognised as revenue when they
are earned by Tower, with a liability for unearned premiums recognised on the balance sheet.
When customers suffer a loss that is covered by their policy, Tower will make payments to customers or suppliers, which it recognises as claims
expenses. To ensure that Tower’s obligations to customers are properly recorded within the financial statements, Tower recognises provisions for
outstanding claims.
To manage Tower’s risk and optimise its returns, Tower reinsures some of its exposure with reinsurance companies. The premiums paid to
reinsurers are recognised as an expense, while recoveries from reinsurers are recognised as revenue.
2.1 Underwriting Revenue
Composition
2020
$000
2019
$000
Gross written premium 384,359 356,767
Motor premium refund
(7,200) –
Movement in unearned premium liability(4,607)(11,772)
Grossearnedpremium372,552344,995
Reinsuranceandotherrecoveriesrevenue25,71114,985
Reinsurance commission 5,242 2,852
Insurance administration services commission1,215 919
Commissionrevenue6,4573,771 
Underwritingrevenue404,720363,751

Tower received lower motor vehicle claims in New Zealand due to travel restrictions imposed during the time spent in New Zealand government’s Covid-19 alert level 3 and 4. On 21st April 2020
Tower Limited committed to returning the benefit of lower New Zealand motor claims to customers through motor vehicle premium refunds. Total premiums of $7.2m (excluding GST) are being
refunded to motor customers. Gross Written Premiums were reduced accordingly and a provision created (see note 2.9) to recognise this obligation.
Recognition and measurement
Gross earned premium is recognised in the period in which the premiums are earned during the term of the contract, excluding taxes and levies
collected on behalf of third parties. It includes a provision for expected future premium cancellations (which is offset against net premium
receivables, see note 2.7) and customer premium refunds (see note 2.9 for more information). The proportion of premiums not earned in the
consolidated statement of comprehensive income at reporting date is recognised in the balance sheet as unearned premiums.
Reinsurance and other recoveries on paid claims, reported claims not yet paid, claims incurred but not reported and claims incurred but not
enough reported are recognised as revenue. Recoveries are measured as the expected future receipts and recognised when the claim is incurred.
Reinsurance commission revenue includes reimbursements by reinsurers to cover part of Tower's management and sales expense which are
broadly recognised with the reference premium over the term of the reinsurance agreements. Reinsurance commission income can also include a
proportion of expected profitability of business ceded to the reinsurer. The final value of the variable commission is based on the achievement of a
hurdle rate over time. This revenue is recognised on a systematic basis and reassessed at each reporting date.
Insurance administration services commission includes a percentage of levies collected on behalf of third parties and is recognised at the point
the levy was collected.
TOWER LIMITED ANNUAL REPORT 2020 36TOWER LIMITED ANNUAL REPORT 2020 37NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.2 Net claims expense
Composition
EXC. CANTERBURY EARTHQUAKECANTERBURY EARTHQUAKETOTAL
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Gross claims expense201,943 179,649 4,824 11,050 206,767 190,699
Reinsurance and other recoveries revenue(24,698)(12,335)(1,013)(2,650)(25,711)(14,985)
Netclaimsexpense177,245167,314 3,8118,400 181,056175,714
Recognition and measurement
Net claims expense is measured as the difference between net outstanding claims liability at the beginning and end of the financial year plus any
claims payments made net of reinsurance and other recoveries received during the financial year. Please refer to note 2.4 for more information.
Additional disclosures related to the Canterbury earthquake events in 2010 and 2011 are provided in note 2.4.
2.3 Underwriting expense
Composition
2020
$000
2019
$000
People costs73,821 82,098
People costs classified as a claims handling expense(28,931)(24,947)
People costs capitalised during the year(4,187)(19,235)
People costs classified as an underwriting expense40,703 37,916
Technology 16,967 11,871
Amortisation 10,850 6,573
Marketing8,181 8,770
External fees7,137 6,639
Miscellaneous937 4,794
Depreciation
4,590 1,591
Movement in indirect deferred acquisition costs(1,416)(969)
Underwritingexpenses87,949 77,185
Includes $2.6m (2019: nil) of depreciation on right-of-use assets. See note 6.3b for further information.
2.4 Net outstanding claims
a.Composition
EXC. CANTERBURY EARTHQUAKECANTERBURY EARTHQUAKETOTAL
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Central estimate of future cash flows65,475 64,174 21,236 36,300 86,711 100,474
Claims handling expense4,151 4,524 1,908 2,500 6,059 7,024
Risk margin
4,325 3,762 10,652 12,800 14,977 16,562
Grossoutstandingclaims73,95172,460 33,79651,600 107,747124,060
Reinsurance recoveries(9,643)(8,657)(3,246)(4,800)(12,889)(13,457)
Netoutstandingclaims64,30863,803 30,55046,800 94,858110,603
Net claim payments within 12 months56,110 53,084 12,220 35,100 68,330 88,184
Net claim payments after 12 months8,198 10,719 18,330 11,700 26,528 22,419
Netoutstandingclaims64,30863,803 30,55046,800 94,858110,603

Includes additional $5.0m (2019: $5.0m) for the Canterbury earthquake over and above the provision of the Appointed Actuary, which is set at the 75th percentile of sufficiency. The Board will
continue to review this additional risk margin each half year and the $5.0m is expected to be released once the Canterbury outstanding claims liability has sufficiently run off.
b.Reconciliationofmovementsinnetoutstandingclaimsliability
2020
$000
2019
$000
GROSSREINSURANCENETGROSSREINSURANCENET
Balancebroughtforward124,060 (13,457)110,603 148,976 (28,985)119,991
Claims expense – current year209,766 (26,084)183,682 177,786 (9,793)167,993
Claims expense – prior year(2,999)373 (2,626)12,913 (5,192)7,721
Incurredclaimsrecognisedintheconsolidated
statementofcomprehensiveincome
206,767(25,711)181,056190,699 (14,985)175,714
Claims paid and reinsurance and other
recoveries raised
(223,654)26,444 (197,209)(216,104)30,881 (185,223)
Foreign exchange573 (165)408 489 (368)121
Outstandingclaims107,747(12,889)94,858124,060 (13,457)110,603
TOWER LIMITED ANNUAL REPORT 2020 38TOWER LIMITED ANNUAL REPORT 2020 39NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.4.Netoutstandingclaims(continued)
c.Developmentofclaims
The following table shows the development of net outstanding claims relative to the current estimate of ultimate claims costs for the five most recent
years.
ULTIMATE CLAIMS COST ESTIMATE
PRIOR
$000
2016
$000
2017
$000
2018
$000
2019
$000
2020
$000
TOTAL
$000
At end of incident year130,341 139,066 148,684 147,184 158,728
One year later129,098 141,049 146,446 144,271
Two years later131,176 142,424 146,318
Three years later130,928 142,709
Four years later130,571
Ultimate claims cost130,571 142,709 146,318 144,271 158,728
Cumulative payments(129,348)(141,112)(144,536)(138,622)(113,699)
Undiscounted central estimate18,542 1,223 1,597 1,782 5,649 45,029 73,822
Claims handling expense6,059
Risk margin9,977
Additional risk margin – Canterbury5,000
Net outstanding claims liabilities94,858
Reinsurance recoveries12,889
Grossoutstandingclaimsliabilities107,747
Prior year numbers have been restated at current year exchange rates to reflect the underlying development of claims.
d. Actuarialinformation
The estimation of outstanding claims as at 30 September 2020 has been carried out by:
(i) Geoff Atkins, BA (ActuarDc), FIAA, FIAL, FANZIIF, Appointed Actuary – Canterbury earthquake claims; and
(ii) John Feyter, B.Sc., FNZSA – all other outstanding claims
The New Zealand actuarial assessments are undertaken in accordance with the standards of the New Zealand Society of Actuaries, in particular
Professional Standard No. 30 "Valuations of General Insurance Claims". The Actuaries were satisfied as to the nature, sufficiency and accuracy of the data
used to determine the outstanding claims liability. The outstanding claims liability is set by the Actuaries at a level that is appropriate and sustainable to
cover the Group's claims obligations after having regard to the prevailing market environment and prudent industry practice.
2.4.Netoutstandingclaims(continued)
e.Canterburyearthquakes
Cumulative impact of Canterbury earthquakes
As at 30 September 2020, Tower has 59 claims remaining to settle (2019: 109) as a result of the earthquakes impacting the Canterbury region during
2010 and 2011. The following table presents the cumulative impact of the four main Canterbury earthquake events on the consolidated statement of
comprehensive income. This excludes the value of EQC recovery receivable related to Canterbury earthquakes (disclosed in note 2.7).
2020
$000
2019
$000
Earthquake claims estimate(983,409)(981,600)
Reinsurance recoveries741,570 742,199
Claimsexpensenetofreinsurancerecoveries(241,839)(239,401)
Reinsurance expense
(25,045)(25,045)
Additional risk margin
(5,000)(5,000)
CumulativeimpactofCanterburyearthquakesbeforetax(271,884)(269,446)
Income tax76,128 75,445
CumulativeimpactofCanterburyearthquakesaftertax(195,756)(194,001)
Canterbury earthquake impact on profit or loss
2020
$000
2019
$000
Netclaimsexpense 2,4387,139

Excludes any impact from changes in the value of the EQC receivable.
Recognition and measurement
Gross outstanding claims liability comprises a central estimate of future cash outflows and a risk margin for uncertainty. Tower has not applied a
discount given the short tail nature of the portfolio and the low interest rate environment.
The outstanding claims liability is measured at the central estimate of future cash outflows relating to claims incurred prior to the reporting date
including direct and indirect claims handling costs. The liability is measured based on the advice of the Appointed Actuary or on valuations which
have been peer reviewed by the Appointed Actuary. It is intended to include no deliberate or unconscious bias toward over or under-estimation.
Given the uncertainty in establishing the liability, it is likely the final outcome will differ from the original liability established. Changes in the claim
estimates are recognised in profit or loss in the reporting period in which the estimates are changed.
The gross outstanding claim liabilities also include a risk margin that relates to the inherent uncertainty in the central estimate of the future
payments. The risk margin represents the amount by which the liability recognised in the financial statements is greater than the actuarial estimate.
Tower currently applies a 75% probability of adequacy to the outstanding claims liability which means there is a one-in-four chance all future claim
payments will exceed the overall reserve held.
Uncertainties surrounding the liability estimation process include those relating to the available data, actuarial models and assumptions, the
statistical uncertainty associated with the general insurance run-off process and external risks.
Net outstanding claims liability is calculated by deducting reinsurance and other recoveries from gross outstanding claims. Reinsurance and other
recoveries on outstanding claims are recognised as income with the corresponding asset being recognised on the balance sheet.
TOWER LIMITED ANNUAL REPORT 2020 40TOWER LIMITED ANNUAL REPORT 2020 41NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.4.Netoutstandingclaims(continued)
Criticalaccountingestimatesandjudgements
Outstanding claims liability (excluding Canterbury earthquakes)
The estimation of the outstanding claims liability involves a number of key assumptions. Tower's estimation uses company-specific data, relevant industry
data and general economic data for each major class of business. The estimation process factors in a number of considerations including the risks which
the business is exposed to at a point in time, claim frequency and severity, historical trends in the development of claims as well as legal, social and
economic factors that may affect each class of business.
ASSUMPTION
2020
$000
2019
$000
Expected future claims development proportion50.5%41.3%
Claims handling expense ratio7.1%7.3%
Risk margin7.2%7.1%
Expected future claims development proportion
This is the proportion of additional claims cost that is expected to be recognised in the future for BAU claims that have already been reported. The
assumption is expressed as a proportion of current case estimates for open claims and recognised in the balance sheet as an outstanding claims liability.
Claims handling expense ratio
This reflects the expected cost to administer future claims. The ratio is calculated based on historical experience of claims handling costs.
Risk margin
Risk margins are calculated for outstanding claims in each country separately and a diversification benefit is calculated taking into account the
uncorrelated effect of random risk. The total risk margin percentage shown is calculated on a weighted average basis.
Canterbury earthquake outstanding claims liability
Assumptions are made for the estimation of outstanding claims related to the Canterbury earthquakes. The key assumptions are the number of new
overcap or litigated claims and re-opened claims and associated costs. Other elements of judgement include costs (including expected building costs)
for settling open claims, the apportionment of claim costs between the four main earthquake events, future claims management expenses and
assessment of the risk margin.
ASSUMPTION
2020
$000
2019
$000
Number of new overcap and new litigated claims68 88
Average cost of new overcap or new litigated claim$107,000 $106,000
Number of re-opened claims373 169
Average cost of re-opened claim$7,500 $10,100
New overcap and new litigated claims
New overcap claims are typically for properties that have previously been managed by EQC but where damage is now assessed as being more extensive
than previously thought and there is now an insurance claim payable.
New litigated claims are existing or future new claims that are referred to either the Insurance Tribunal or the High Court for resolution.
Number of re-opened claims
Re-opened claims arise where additional liability arises for additional scope not previously identified or where a repair has failed or where another
expense is payable for a claim that is currently closed.
2.4.Netoutstandingclaims(continued)
f.Sensitivityanalysis
The impact on profit or loss of changes in key assumptions used in the calculation of the outstanding claims liabilities is summarised below. Each change
has been calculated in isolation from the other variables before income tax.
Outstanding claims excluding Canterbury earthquake
MOVEMENT IN
ASSUMPTION
IMPACT ON PROFIT OR LOSS
2020
$000
2019
$000
Expected future claims development + 10%1,771 1,522
- 10%(1,771)(1,522)
Claims handling expense ratio + 10%415 448
- 10%(415)(448)
Risk margin + 10%431 370
- 10%(431)(370)
Canterbury earthquake outstanding claims
MOVEMENT IN
ASSUMPTION
IMPACT ON PROFIT OR LOSS
2020
$000
2019
$000
Number of new overcap or new litigated claims + 35%(2,560)(3,260)
-35%2,560 3,260
Change in average cost of a new overcap or new litigated claim+ 20%(1,460)(1,860)
- 20%1,460 1,860
Number of reopened claims + 35%(980)(600)
- 35%980 600
Change in average cost of a reopened claim + 20%(560)(340)
- 20%560 340
2.5 Unearned premium liability
Reconciliation
2020
$000
2019
$000
Openingbalance187,855 175,551
Premiums written during the year 377,159 356,767
Premiums earned during the year(372,552)(344,995)
Unearned premium movement4,60711,772
Unearned premium balance purchased
12,003 –
Foreign exchange movements(1,013) 532
Unearnedpremiumliability203,452 187,855

Unearned premium balance acquired through the purchase of customer relationships (see note 6.2). As at 30 September 2020 this had reduced to $1.2m representing $10.8m premium earned
during the year.
The majority of unearned premiums is a current liability as at 30 September 2020 and is presented net of cancellation provisions.
TOWER LIMITED ANNUAL REPORT 2020 42TOWER LIMITED ANNUAL REPORT 2020 43NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.5Unearnedpremiumliability(continued)
Recognition and measurement
Unearned premium liability is the portion of premiums written that are yet to be earned in the consolidated statement of comprehensive income.
It is calculated based on the term of the risk and in accordance with the expected pattern of the incidence of risk underwritten using an appropriate
pro-rate method.
Adequacyof unearnedpremiumliability
Tower undertakes a liability adequacy test ("LAT") to determine whether the unearned premium liability is sufficient to pay future claims net of
reinsurance recoveries.
If the present value of expected future net claims including a risk margin (central estimate net claims) exceeds the unearned premium liabilities adjusted
for deferred reinsurance premium relating to future business not yet written (adjusted unearned premium), the unearned premium liability is deemed
deficient. This deficiency is immediately recognised in profit or loss. In recognising the deficiency, Tower will first write down any related intangible assets
and then deferred acquisition costs before recognising an unexpired risk liability.
The unearned premium liabilities as at 30 September 2020 were sufficient across all businesses except for Fiji, NPI and Vanuatu (2019: Fiji and NPI) where
small deficits were recognised. The total deficit recognised as a charge against deferred acquisition cost was $440,000 (2019: $331,000).
%
2020
$000
2019
$000
Central estimate net claims as a % of unearned premium liability44.5%42.9%
Risk margin as a % of net claims10.2%10.0%
Critical accounting estimates and judgements
The LAT is conducted using a central estimate of premium liability adjusted for risk margin and it is carried out on an individual country basis. The
test is based on prospective information and so is heavily dependent on assumptions and judgements.
2.6 Deferred insurance costs
Reconciliation
DEFERRED ACQUISITION COSTS
DEFERRED OUTWARDS
REINSURANCE EXPENSEDEFERRED INSURANCE COSTS
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Balancebroughtforward23,73622,5958,7948,47532,53031,070
Costs deferred42,13644,97715,39614,76357,53259,740
Amortisation expense(40,661)(43,805)(14,586)(14,683)(55,247)(58,488)
Foreign exchange movements9(31)(157)239(148)208
Closingbalance25,22023,7369,4478,79434,66732,530
Deferred insurance costs are expected to be amortised within 12 months from reporting date.
Recognition and measurement
Acquisition costs comprises costs incurred in obtaining and recording general insurance contracts such as advertising expenses, sales expenses
and other underwriting expenses. These costs are initially capitalised and then expensed in line with the earning pattern of the related premium.
Deferred acquisition costs at the reporting date represent the acquisition costs related to unearned premium.
Outwards reinsurance expense reflects premiums ceded to reinsurers and is recognised as an expense in accordance with the pattern of
reinsurance service received. Deferred outwards reinsurance expense at the reporting date represents outwards reinsurance expenses related to
unearned premium.
2.7 Receivables
Composition
2020
$000
2019
$000
Gross premium receivables171,041 154,983
Provision for impairment(1,383)(1,100)
Premiumreceivable169,658153,883
BAU reinsurance recoveries 15,105 8,604
Canterbury earthquake reinsurance recoveries3,246 5,615
Other recoveries5,262 5,097
Reinsuranceandotherrecoveries23,61319,316
Canterbury earthquake 52,883 69,900
Kaikoura earthquake – 363
EQCreceivable52,88370,263
Prepayments2,664 2,572
Miscellaneous receivables1,928 1,467
Receivables250,746247,501
Receivable within 12 months250,746 174,873
Receivable in greater than 12 months–72,628
Receivables250,746247,501
Recognition and measurement
Receivables (inclusive of GST) are recognised at fair value and are subsequently measured at amortised cost less any impairment.
Tower's premium receivables and reinsurance and other recoveries arise from insurance contracts. These receivables are impaired if there is
objective evidence that Tower will not be able to collect all amounts due according to the original terms of the receivable.
The remainder of Tower's receivables are assessed for impairment based on expected credit losses. The EQC receivable is the only material item
that falls into this category and is discussed further in the sub-note below.
EQCrecoveryreceivablerelatedtoCanterburyearthquakes
On 24 November 2020, Tower Limited entered into a settlement agreement with EQC regarding the recovery of claims costs related to the 2010 and
2011 Christchurch Earthquakes. Under the settlement agreement Tower will receive $53.6m of the $70.3m gross recovery receivable recognised as of
30 September 2020. This has resulted in a write-off of the residual amount of $16.7m.
The write-off amount has been increased by expected costs to recover the receivable of $0.7m in legal costs and offset by an adjustment to the
EQC-related reinsurance payable of $4.3m (note 2.8). This results in an impairment expense of $13.1m and an EQC receivable carrying value of $52.9m
(2019: $69.9m).
TOWER LIMITED ANNUAL REPORT 2020 44TOWER LIMITED ANNUAL REPORT 2020 45NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.8 Payables
Composition
2020
$000
2019
$000
Trade payables 13,527 12,624
GST payable 20,519 18,395
EQC receivable payable to reinsurers 10,741 16,900
EQC & Fire Service levies payable 11,068 11,332
Reinsurance premium payable 3,414 5,494
Other 7,331 11,162
Payables66,60075,907
Payable within 12 months 66,600 59,007
Payable in greater than 12 months – 16,900
Payables66,60075,907
Recognition and measurement
Payables are stated at the fair value of the consideration to be paid in the future inclusive of GST. GST payable represents the net amount payable
to the respective tax authorities.
2.9 Provisions
Composition
2020
$000
2019
$000
Annual leave and other employee benefits 6,901 6,802
Customer premium refunds 2,422 –
Other 208 –
Provisions9,5316,802
Payable within 12 months 9,157 6,406
Payable in greater than 12 months 374 396
Provisions9,5316,802
Recognition and measurement
Tower recognises a provision when it has a present obligation as a result of a past event and it is more likely than not that an outflow of resources
will be required to settle the obligation. Tower's provision represents the best estimate of the expenditure required to settle the present obligation
at the end of the reporting period.
2.10 Assets backing insurance liabilities
Tower has determined that all assets within its insurance companies are held to back insurance liabilities, with the exception of: (i) property, plant and
equipment; (ii) right-of-use assets, (iii) intangible assets; and (iv) investments in operating subsidiaries. Assets backing insurance liabilities are managed in
accordance with approved investment mandate agreements on a fair value basis and are reported to the board on that basis.
3. INVESTMENTS
Tower invests funds collected as premiums and provided by shareholders to ensure it can meet its obligations to pay claims and expenses and to
generate a return to support its profitability. Tower has a low risk tolerance and therefore the majority of its investments are in investment grade
supranational and government bonds, and term deposits.
3.1 Investment income
2020
$000
2019
$000
Interest income7,328 8,141
Net realised (loss)/gain(1,277)42
Net unrealised loss(241)(664)
Investmentincome5,8107,519
Net realised losses relate to the maturity of fixed interest bonds, with interest coupon rates higher than market rates, purchased at higher than face value.
The corresponding higher interest received is reflected in the interest income amount.
Recognition and measurement
Tower's investment income is primarily made up of interest income on fixed interest investments and fair value gains or losses on its investment
assets. Both are recognised in the period that they are earned through profit or loss.
3.2 Investments
2020
$000
2019
$000
Fixed interest investments237,298 233,527
Equity investment572 611
Property investment34 34
Investments237,904234,172
Recognition and measurement
Tower's investment assets are designated at fair value through profit or loss. Investment assets are initially recognised at fair value and are remeasured to
fair value through profit or loss at each reporting date. Tower's approach to measuring the fair value of these assets is covered in the following note.
Purchases and sales of investments are recognised at the date which Tower commits to buy or sell the assets (i.e. trade date). Investments are
derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and substantially all the risks
and rewards of ownership have transferred.
3.3 Fair value hierarchy
Tower designates its investments at fair value through profit or loss in accordance with its Treasury policy. It categorises its investments into three levels
based on the inputs available to measure fair value:
Level 1 Fair value is calculated using quoted prices in active markets. Tower currently does not have any Level 1 investments.
Level 2 Investment valuations are based on direct or indirect observable data other than quoted prices included in Level 1. Level 2 inputs include: (1)
quoted prices for similar assets or liabilities; (2) quoted prices for assets or liabilities that are not traded in an active market; or (3) other
observable market data that can be used for valuation purposes. Tower investments included in this category include government and
corporate debt where the market is considered to be lacking sufficient depth to be considered active and part ownership of a property that is
rented out to staff.
Level 3 Investment valuation is based on unobservable market data. Tower's equity investment in the unlisted reinsurance company Pacific Re is the
only investment in this category. Tower agreed to sell the investment to a third party in November 2020 at the carrying value reflected above.
TOWER LIMITED ANNUAL REPORT 2020 46TOWER LIMITED ANNUAL REPORT 2020 47NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.3Fair valuehierarchy(continued)
LEVEL 1LEVEL 2LEVEL 3TOTAL
Asat30September2020
Fixed interest investments – 237,298 – 237,298
Equity investment – – 572 572
Property investment – 34 – 34
Investments – 237,332572237,904
As at 30 September 2019
Fixed interest investments – 233,527 – 233,527
Equity investment – – 611 611
Property investment – 34 – 34
Investments – 233,561 611 234,172
There have been no transfers between levels of the fair value hierarchy during the current financial period (30 September 2019: nil).
4. RISK MANAGEMENT
Tower is exposed to multiple risks as it works to set things right for its customers and their communities whilst maximising returns for its
shareholders. Everyone across the organisation is responsible for ensuring that Tower's risks are managed and controlled on a day-to-day basis.
4.1 Risk management overview
Tower’s approach to achieving effective risk management is to embed a risk-aware culture where everyone across the organisation (including contractors
and third parties) is responsible for managing risk.
Tower’s Board expresses its appetite for risk in a Risk Appetite Statement, which:
(i) Gives clear concise guidance to management of parameters for risk taking.
(ii) Embeds risk management into strategic and decision-making processes.
(iii) Facilitates risk to be managed at all levels of the organisation through a structured process to identify risk, and the allocation of clear, personal
responsibility for management of identified risks by assigned risk owners.
The Board then approves and adopts: (i) the Risk Management Strategy (RMS) which is the central document that explains how Tower effectively
manages risk within the business; and (ii) the Reinsurance Management Strategy (ReMS) which describes the systems, structures, and processes which
collectively ensures Tower's reinsurance arrangements and operations are prudently managed. These documents are approved annually by the Board.
The Board has delegated its responsibility to the Risk Committee to provide oversight of risk management practices and provide advice to the Board and
management when required. In addition, the Risk Committee also monitors the effectiveness of Tower’s risk management function which is overseen by
the Chief Risk Officer (CRO). The CRO provides regular reports to the Risk Committee on the operation of the Risk Management Framework (RMF), the
status of material risks, risk and compliance incidents and risk framework changes.
Tower has embedded an RMF with clear accountabilities and risk ownership to ensure that Tower identifies, manages, mitigates and reports on all key
risks and controls through the three lines of defence model.
(i) First line: Operational management has ownership, responsibility and accountability for directly identifying, assessing, controlling and mitigating key
risks which prevent them from achieving business objectives.
(ii) Second line: Tower’s Risk and Compliance Functions are responsible for developing and implementing effective risk and compliance management
processes; providing advisory support to the first line of defence and constructively challenging operational management and risk and obligation
owners to ensure positive assurance.
(iii) Third line: Internal Audit is responsible and accountable for providing an independent and objective view of the adequacy and effectiveness of the
Group’s risk management, governance and internal control framework. Internal audit, along with other groups such as external audit, report
independently to the Board and/or the Audit Committee.
The RMF is supported by a suite of policies that address the risks and compliance obligations covered in this section.
4.2 Strategic risk
Strategic risk is the risk that internal or external factors compromise Tower's ability to execute its strategy or achieve its strategic objectives. Strategic risk
is managed through:
(i) Monitoring and managing performance against Board-approved plan and targets
(ii) Board leading an annual strategy and planning process which considers our performance, competitor positioning and strategic opportunities
(iii) Identifying and managing emerging risks using established governance processes and forums
4.3 Insurance risk
Insurance risk is the risk that for any class of risk insured, the present value of actual claims payable will exceed the present value of actual premium
revenues generated (net of reinsurance). This risk is inherent in Tower's operations and arises and manifests through underwriting, insurance
concentration and reserving risk.
a.Underwritingrisk
Underwriting risk refers to the risk that claims arising are higher (or lower) than assumed in pricing due to bad experience including catastrophes,
weakness in controls over underwriting or portfolio management, or claims management issues. Tower has established the following key controls to
mitigate this risk:
(i) Use of comprehensive management information systems and actuarial models to price products based on historical claims frequencies and claims
severity averages, adjusted for inflation and modelled catastrophes, trended forward to recognise anticipated changes in claims patterns after
making allowance for other costs incurred by the Group.
(ii) Passing elements of insurance risk to reinsurers. Tower's Board determines a maximum level of risk to be retained by the Group as a whole.
Tower's reinsurance programme is structured to adequately protect the solvency and capital positions of the insurance business. The adequacy of
reinsurance cover is modelled by assessing Tower's exposure under a range of scenarios. The plausible scenario that has the most financial
significance for Tower is a major Wellington earthquake. Each year, as part of setting the coming year's reinsurance cover, comprehensive modelling
of the event probability and amount of the Group's exposure is undertaken.
(iii) Underwriting limits are in place to enforce appropriate risk selection criteria and pricing with specific underwriting authorities that set clear
parameters for the business acceptance.
b.Concentrationrisk
Concentration risk refers to the risk of underwriting a number of like risks, where the same or similar loss events have the potential to produce claims
from many of Tower's customers at the same time. Tower is particularly subject to concentration risks in the following variety of forms:
(i) Geographic concentration risk – Tower purchases a catastrophe reinsurance programme to protect against a modelled 1-in-1000 years whole of
portfolio catastrophe loss. In addition it takes out additional aggregate reinsurance cover for large events which fall outside the catastrophe
reinsurance programme and tends to cover weather events in New Zealand and across the Pacific.
(ii) Product concentration risk – Tower's business is weighted towards the NZ general insurance market where its risks are concentrated in house
insurance (Home & Contents) and motor insurance. Tower limits its exposure through proportionate reinsurance arrangements. The table below
illustrates the diversity of Tower's operations.
GROSS WRITTEN PREMIUM (%)
20202019
NZPACIFICTOTALNZPACIFICTOTAL
Home51%4%55%51%4%55%
Motor30%5%35%29%5%34%
Commercial1%6%7%2%5%7%
Liability1%0%1%1%0%1%
Workers compensation0%1%1%0%1%1%
Other0%1%1%1%1%2%
Total83%17%100%83%17%100%
Tower has limited exposure to long-tail classes (which comprises part of "liability" and "workers compensation"). Long-tail classes have increased
uncertainty of the ultimate cost of claims due to the additional period of time to settlement.
TOWER LIMITED ANNUAL REPORT 2020 48TOWER LIMITED ANNUAL REPORT 2020 49NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.3Insurancerisk(continued)
c.Reservingrisk
Reserving risk is managed through the actuarial valuation of insurance liabilities and monitoring of the probability of adequacy booked reserves. The
valuation of the net central estimate is performed by qualified and experienced actuaries. The central estimate is subject to a comprehensive review at
least annually.
4.4 Credit risk
Credit risk is the risk of loss that arises when a counterparty fails to meet their financial obligations to Tower in accordance with the agreed terms. Tower's
exposure to credit risk primarily results from transactions with security issuers, reinsurers and policyholders.
a.Investmentandtreasury
Tower manages its investment and treasury credit risks in line with limits set by the Board:
(i) New Zealand cash deposits that are internally managed are limited to banks with a minimum Standard & Poor's (S&P) AA- credit rating.
(ii) Cash deposits and investments that are managed by external investment managers are limited to counterparties with a minimum S&P A- credit rating.
(iii) Tower Insurance holds deposits and invests in Pacific regional investment markets through its Pacific Island operations to comply with local statutory
requirements and in accordance with Tower Insurance investment policies. These deposits and investments generally have low credit ratings
representing the majority of the value included in the 'Below BBB' and unrated categories in the table below. This includes deposits and investments
with Australian bank subsidiaries that comprise 83% (2019: 66%) of "not rated" category.
CASH AND CASH EQUIVALENTSFIXED INTEREST INVESTMENTSTOTAL
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
AAA – – 106,805 111,950 106,805 111,950
AA 55,478 47,585 90,859 89,735 146,337 137,320
A – – 29,737 8,027 29,737 8,027
BBB – – – – – –
Below BBB 5,409 2,898 3,456 11,892 8,865 14,790
Not rated 19,221 11,535 6,441 11,923 25,662 23,458
Total80,108 62,018 237,298 233,527 317,406 295,545
b.Reinsurance
Tower manages its reinsurance programme in line with the ReMS. Tower seeks to manage the quantum and volatility of insurance risk in order to reduce
exposure and overall cost.
Tower's policy is to only deal with reinsurers with a credit rating of S&P "A-" or better unless local statutory requirements dictate otherwise. Additional
requirements of the policy are for no individual reinsurer to have more than 25% share of the overall programme and Tower is prohibited from offering
inwards reinsurance to external entities. The following table provides details on Tower's exposure to reinsurance recoveries:
REINSURANCE ON:
OUTSTANDING CLAIMSPAID CLAIMSTOTAL
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
AAA – – – – – –
AA 6,738 5,052 3,490 185 10,228 5,237
A 6,106 8,215 1,986 572 8,092 8,787
BBB – – – – – –
Below BBB – – – – – –
Not rated 29 190 2 6 31 196
Total12,873 13,457 5,478 763 18,351 14,220
4.4Creditrisk(continued)
The following table provides further information regarding the ageing of reinsurance recoveries on paid claims at the balance date.
PAST DUE
NOT DUE
$000
1 MONTH
$000
1 TO 2 MONTHS
$000
2 TO 3 MONTHS
$000
OVER 3 MONTHS
$000
TOTAL
$000
Asat30September2020
Reinsurance recoveries on paid claims 5,379 – – – 99 5,478
As at 30 September 2019
Reinsurance recoveries on paid claims 685 – – 78 – 763
c.Premiumreceivable
Tower's premium receivable balance primarily relates to policies which are paid on either a fortnightly or monthly basis. Payment default or policy
cancellation – subject to the terms of the policyholder's contract – will result in the termination of the insurance contract eliminating both the credit risk
and insurance risk.
PAST DUE
NOT DUE
$000
1 MONTH
$000
1 TO 2 MONTHS
$000
2 TO 3 MONTHS
$000
OVER 3 MONTHS
$000
TOTAL
$000
Asat30September2020
Net premium receivable 162,935 3,705 1,992 986 40 169,658
As at 30 September 2019
Net premium receivable 143,331 5,552 3,371 991 638 153,883

this includes premiums that are less than 30 days outstanding (which are owed but not past due) of $7.1m (2019: $5.6m).
4.5 Market risk
Market risk is the risk of adverse impacts on investment earnings resulting from changes in market factors. Tower's market risk is predominately as a
result of changes in the value of the New Zealand dollar (currency risk) and interest rate movements. Tower's approach to managing market risk is
underpinned by its Treasury Policy as approved by the Board.
a.Currencyrisk
Tower's currency exposure arises from the translation of foreign operations into Tower's functional currency (currency translation risk) or due to
transactions denominated in a currency other than the functional currency of a controlled entity (operational currency risk). The currencies giving rise to
this risk are primarily the US dollar, Fijian dollar and PNG kina.
Tower's principal currency risk is currency translation (where movement impacts equity). Tower generally elects not to hedge this risk as it is difficult given
the size and nature of the currency markets in the Pacific. Tower seeks to minimise its net exposure to foreign operational risk by actively seeking to
return surplus cash and capital to the parent company.
Operational currency risk impacts profit and generally arises from:
(i) Procurement of goods and services denominated in foreign currencies. Tower may enter into hedges for future transactions, using authorised
instruments, provided that the timing and amount of those future transactions can be estimated with a reasonable degree of certainty.
(ii) Investment assets managed by the external investment manager that are denominated in foreign currencies. Tower's Board sets limits for the
management of currency risk based on prudent asset management practice. Regular reviews are conducted to ensure that these limits are
adhered to.
TOWER LIMITED ANNUAL REPORT 2020 50TOWER LIMITED ANNUAL REPORT 2020 51NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.5Marketrisk(continued)
The following table demonstrates the impact of the New Zealand dollar weakening or strengthening against the most significant currencies for which
Tower has foreign exchange exposure holding all other variables constant.
DIRECT IMPACT ON EQUITYIMPACT ON PROFIT OR LOSS
2020
$000
2019
$000
2020
$000
2019
$000
New ZealandDollar–USD
Currency strengthens by 10%(407)(271)1730
Currency weakens by 10%497331(20)(37)
New ZealandDollar–FijianDollar
Currency strengthens by 10%(1,350)(1,229)(73)(74)
Currency weakens by 10%1,6501,5029090
New ZealandDollar–PNGKina
Currency strengthens by 10%(1,078)(965)5739
Currency weakens by 10%1,3181,180(70)(48)
b.Interestraterisk
Tower is exposed to interest rate risk through its holdings in interest-bearing assets. Interest-bearing assets with a floating interest rate expose Tower to
cash flow interest rate risk, whereas fixed-interest investments expose Tower to fair value interest rate risk.
Tower's interest rate risk primarily arises from fluctuations in the valuation of fixed-interest investments recognised at fair value and from the underwriting
of general insurance contracts, which creates exposure to the risk that interest rate movements materially impact the fair value of the insurance liabilities.
Interest rate risk arises to the extent that there is a mismatch which arises between the two.
Fixed-interest investments are measured at fair value through profit or loss. Movements in interest rates impact the fair value of interest-bearing financial
assets and therefore impact profit or loss (there is no direct impact on equity). The impact of a 0.5% increase or decrease in interest rates on fixed interest
investments is shown below (holding everything else constant). The assumption made for 0.5% decrease in interest rates is that the lower bound is
capped at 0% as negative rates on fixed interest investments are highly unlikely.
IMPACT ON PROFIT OR LOSS
2020
$000
2019
$000
Interest rates increase by 0.5%(921)(690)
Interest rates decrease by 0.5%750765
Tower manages its interest rate risk through Board-approved investment management guidelines that have regard to policyholder expectations and risks
and to target surplus for solvency as advised by the Appointed Actuary.
4.6 Liquidity risk
Liquidity risk arises where liabilities cannot be met as they fall due as a result of insufficient funds and/or illiquid asset portfolios. Tower mitigates this risk
through maintaining sufficient liquid assets to ensure that it can meet all obligations on a timely basis.
Tower is primarily exposed to liquidity risk through its obligations to make payment for claims of unknown amounts on unknown dates. Fixed-interest
investments can generally be readily sold or exchanged for cash to settle claims and are managed in accordance with the policy of broadly matching the
overall maturity profile to the estimated pattern of claim payments. This is illustrated in the table below.
NET OUTSTANDING CLAIMS LIABILITYCASH AND INVESTMENTS
2020
$000
2019
$000
2020
$000
2019
$000
Floating interest rate (at call) – – 80,108 62,018
Within 3 months 32,943 46,797 36,982 16,306
3 to 6 months 15,140 24,430 53,797 48,467
6 to 12 months 20,246 16,957 55,352 50,266
After 12 months 26,529 22,419 91,167 118,488
Total94,858 110,603 317,406 295,545
4.7 Capital management risk
Capital risk is the risk that capital is insufficient or not of the best form to provide a buffer against losses arising from unanticipated events, while also
maximising the efficient use of capital with a view to enhancing growth and returns and adding long-term value to Tower's shareholders.
Tower has a documented description of its capital management process which sets out Tower's principles, approaches, and processes in relation to
capital management that enables it to operate at an appropriate level of target solvency capital which is within the bounds of Tower's risk appetite.
The capital management process allows the Board, management, rating agencies and the regulator to understand Tower's approach to capital
management, including requirements for formulating capital targets, and monitoring, reporting and remediating capital as required.
The operation of the capital management process is reported annually to the Board together with a forward-looking estimate of expected capital
utilisation and capital resilience. In addition, Tower carries out stress, reverse stress and scenario testing to ensure the level of capital is appropriate given
its risk appetite.
a.Regulatorysolvencycapital
The Reserve Bank of New Zealand (RBNZ) is the prudential regulator and supervisor of all insurers carrying on insurance business in New Zealand, and is
responsible for administering the Insurance (Prudential Supervision) Act 2010. Tower measures the adequacy of capital against the Solvency Standards
for Non-life Insurance Business published by the RBNZ alongside additional capital held to meet RBNZ minimum requirements and any further capital as
determined by the Board.
Foreign operations are subject to regulatory oversight in the relevant jurisdiction. It is Tower's policy to ensure that each of the licenced insurers in the
Group maintain an adequate capital position within the requirements of the relevant regulator.
During the year ended 30 September 2020 the Group complied with all externally imposed capital requirements (2019: complied).
The RBNZ requires that Tower maintains a minimum solvency margin of at least $50.0m (2019: $50.0m). Tower Limited's group and parent solvency
margin are illustrated in the table below.
2020
$000
2019
$000
PARENTGROUPPARENTGROUP
Actual solvency capital 150,451 181,214 155,894 182,197
Minimum solvency capital 52,342 65,728 56,598 73,276
Solvencymargin98,110115,485 99,296 108,921
Solvencyratio287%276%275%249%

The solvency figures presented above for 2020 are based on the new amalgamated structure that came into effect 30 September 2020 whereas those for 2019 represent those of Tower
Insurance Limited . The solvency margin reduced by $2.5m at 30 September 2020 for the Parent and Group as a result of the amlagamation.
TOWER LIMITED ANNUAL REPORT 2020 52TOWER LIMITED ANNUAL REPORT 2020 53NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.7Capitalmanagementrisk(continued)
Tower's license condition was amended during the year (effective 31 October 2019) where the net EQC receivable (2020: $42.1m; 2019: $53.0m) is
specifically excluded from the calculation of solvency. As a result Tower issued $45m of ordinary share capital on 31 October 2019. If the change to the
license condition and the share issue had both applied at 30 September 2019, the net impact would have been a reduction in Tower Insurance Limited’s
solvency margin by $7.6m.
The solvency presented as of 30 September 2020 does not reflect any possible change to the license condition as a result of the commercial settlement
of the EQC receivable on 24 November 2020.
b.Capitalcomposition
The balance sheet capital mix at reporting date is shown in the table below:
2020
$000
2019
$000
Total shareholder equity 345,003 290,857
Standby credit (facility)– 15,000
Total345,003 305,857
c.Financialstrengthrating
Tower Limited has an insurer financial strength rating of 'A-' (Excellent) and a long-term issuer credit rating of 'A-' as affirmed by international rating agency
AM Best Company Inc. with an effective date of 2 October 2020. This rating has been calculated for the amalgamated entity.
4.8 Operational risk
Operational risk is the risk of loss due to inadequate or failed internal processes or systems, human error or from external events.
Tower's approach is to proactively manage our operational risks to mitigate potential customer detriment, regulatory or legal censure, financial and
reputational impacts.
Tower has in place appropriate operational processes and systems, including prevention and detection measures. These include processes which seek
to ensure Tower can absorb and/or adapt to internal or external occurrences that could disrupt business operations.
Management and staff are responsible for identifying, assessing and managing operational risks in accordance with their roles and responsibilities.
Failures in controls are recorded and then actively monitored and managed. Incidents are managed by the first line of defence and overseen by the
second line of defence, with ongoing reporting to management and the Risk Committee.
4.9 Regulatory and compliance risk
Regulatory and compliance risk is defined as the risk of legal, regulatory or reputational impacts arising from failure to manage compliance obligations, or
failure to anticipate and prepare for changes in the regulatory environment.
Tower engages with regulators and regularly monitors developments in regulatory requirements to support ongoing compliance.
4.10 Conduct risk
Conduct risk is defined as the risk that conduct may contribute to poor outcomes for customers.
Tower manages conduct risk through a number of measures including undertaking ongoing product reviews to ensure products are delivering good
customer outcomes, reviewing customer feedback to identify conduct trends or issues, managing vulnerable customers, holding workshops with
frontline staff to identify potential conduct issues and embedding and monitoring controls across the business to deliver good customer outcomes.
There is robust governance in place to oversee Tower's conduct risk management programme including reporting to the Board, Executive Committees
and monthly conduct working groups with representatives from across Tower.
4.11 Cyber risk
Cyber risk is any risk associated with financial loss, disruption or damage to the reputation of Tower resulting from either the failure, or unauthorised or
erroneous use of its information systems.
Tower’s approach to cyber risk is to proactively identify, protect against, monitor for and respond to those cyber threats seen to be targeting the
organisation. Tower has identified the top cyber risks facing it and there is a programme of work in place to deliver risk reduction initiatives to bring those
risks within Tower’s risk appetite. A dedicated security function is responsible for providing ongoing management of security technical controls,
operational tasks and processes across the organisation.
An Information Security Governance Forum meets on a quarterly basis to set the security policy direction, to review security programme risk reduction
progress and overall security function effectiveness.
5. CAPITAL STRUCTURE
This section provides information about how Tower finances its operations through equity. Tower's capital position provides financial security to its
customers, employees and other stakeholders whilst operating within the capital requirements set by regulators.
5.1 Borrowings
During September 2020 Tower repaid the total amount drawn down under the cash advance facility agreement of $15.0m. At the same time, it reached
agreement with Bank of New Zealand to bring forward the expiry date of the agreement to 30 September 2020 (2019: 27 March 2023).
Total borrowing costs for the year were $0.8m (2019: $0.3m), none of which were capitalised.
5.2 Contributed equity
2020
$000
2019
$000
Opening balance209,990 209,990
Issue of share capital
45,000 –
Cancellation of shares on amalgamation
(254,990) –
Recognition of shares on amalgamation
492,424 –
Total contributedequity492,424209,990
Represented by:
Opening balance211,107,758 211,107,758
Issued shares
45,000,000 –
Cancellation of shares on amalgamation
(256,107,758) –
Recognition of shares on amalgamation
421,647,258 –
Total sharesonissue421,647,258211,107,758
(i) On 24 September 2019 the prior Tower Limited invited its eligible shareholders to subscribe to a rights issue of 1 new share for every 4 existing shares
held at the record date on 2 October 2019 at a price of NZD0.56 (or AUD0.54) for each new share. The issue was fully subscribed on 23 October 2019.
Subsequent to this, on 31 October 2019 the Company issued $45m of new capital to its immediate shareholder, Tower Financial Services Group
Limited.
(ii) On 30 September 2020, Tower Insurance Limited was renamed Tower Limited (the Company) and was amalgamated by way of a short-form
amalgamation under the Companies Act 1993 with its ultimate parent, Tower Limited (the prior Tower Limited); its parent, Tower Financial Services
Group Limited; and another subsidiary of Tower Limited, Tower New Zealand Limited. At this date the Company's existing share capital of $255m
(including the issue of $45m new share capital) was cancelled without payment or other consideration, and instead the shares of the prior Tower
Limited (of $492m) became the shares of the Company, so that the shareholders of the prior Tower Limited became shareholders of the Company.
Ordinary shares issued by the Company are classified as equity and are recognised at fair value less direct issue costs. All shares rank equally with one
vote attached to each share. There is no par value for each share.
TOWER LIMITED ANNUAL REPORT 2020 54TOWER LIMITED ANNUAL REPORT 2020 55NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.3 Reserves
2020
$000
2019
$000
Opening balance(3,697)(4,397)
Currency translation differences arising during the year(1,288)700
Foreigncurrencytranslationreserve(4,985)(3,697)
Opening balance1,515 1,242
Gain on revaluation41305
Deferred tax on revaluation8 (32)
Assetrevaluationreserve1,5641,515
Capitalreserve11,99011,990
Opening balance – –
Impact of amalgamation(113,000) –
Separationreserve(113,000) –
Reserves(104,431)9,808
Recognition and measurement
The assets and liabilities of entities whose functional currency is not the New Zealand dollar are translated at the exchange rates ruling at balance
date. Revenue and expense items are translated at a rate approximating the spot rate at the transaction date. Exchange rate differences are taken
to the foreign currency translation reserve.
Tower's land and buildings are valued at fair value less accumulated depreciation. Any surplus on revaluation of these items is transferred directly
to the asset revaluation reserve unless it offsets a previous decrease in value recognised in profit or loss in which case it is recognised in the
consolidated statement of comprehensive income.
On 30 September 2020, the Company was amalgamated with other Tower entities, as described in note 8.2. On this date, the separation reserve
was recognised. The separation reserve was originally created in the prior Tower Limited in 2007 at the time of the demerger of the New Zealand
and Australian businesses in accordance with a ruling provided by the Australian Tax Office (ATO). It will be carried forward indefinitely to meet the
requirements of the ATO.
5.4 Net tangible assets per share
2020
$000
2019
$000
Net tangible assets per share0.560.56
Net tangible assets per share has been calculated using the net assets as per the balance sheet adjusted for intangible assets (including goodwill) and
deferred tax assets divided by total shares on issue. Net tangible assets per share as at 30 September 2019 has been calculated using the number of
ordinary shares of the prior Tower Limited as at that date.
5.5 Earnings per share
2020
$000
2019
$000
Profit attributable to shareholders ($ thousands)11,89216,565
Weighted average number of ordinary shares for basic and diluted earnings per share (number of shares)417,172,654350,442,688
Basicanddilutedearningspershare(cents)2.85 4.73
5.5Earningspershare(continued)
The Group has used the ordinary shares of the prior Tower Limited up to 30 September 2020, and of the Company from that date, for the purposes of
calculating the weighted average number of ordinary shares. The prior Tower Limited issued an additional 84,322,958 shares as per its 1-for-4 rights offer
(refer to Note 5.2). The shares were issued at NZ$0.56 which represented a 19% discount to the share price of NZ$0.69 as at 15 October 2019 (the date
immediately prior to the exercise of rights). As a result, 13,118,388 shares issued as part of the rights offer are treated as a bonus issue. The weighted
average number of ordinary shares on issue in both 2020 and 2019 have been adjusted in accordance with NZ IAS 33
Earnings per share.
6. OTHER BALANCE SHEET ITEMS
This section provides information about assets and liabilities not included elsewhere.
6.1 Property, plant and equipment
Composition:
30September2020
LAND AND
BUILDINGS
$000
OFFICE
EQUIPMENT &
FURNITURE
$000
MOTOR
VEHICLES
$000
COMPUTER
EQUIPMENT
$000
TOTAL
$000
Composition:
Cost4,035 8,599 1,748 15,622 30,004
Accumulated depreciation – (5,610)(665)(13,688)(19,963)
Property,plantandequipment4,0352,9891,0831,93410,041
Reconciliation:
Opening balance4,082 4,002 205 815 9,104
Depreciation – (1,048)(205)(751)(2,004)
Additions – 31 1,211 2,004 3,246 
Revaluations41 – – – 41
Disposals – 21 (125)(130)(234)
Foreign exchange movements(88)(17)(3)(4)(112)
Closingbalance4,0352,9891,0831,93410,041
30 September 2019
Composition:
Cost4,082 9,257 1,157 13,640 28,136
Accumulated depreciation – (5,255)(952)(12,825)(19,032)
Property, plant and equipment4,082 4,002 205 815 9,104
Reconciliation:
Opening balance3,404 4,438 239 429 8,510
Depreciation – (1,018)(112)(461)(1,591)
Additions337562978621,858
Revaluations305 – – – 305
Disposals – (3)(4)(1)(8)
Foreign exchange movements36 23 (15)(14)30
Closing balance4,082 4,002 205 815 9,104
TOWER LIMITED ANNUAL REPORT 2020 56TOWER LIMITED ANNUAL REPORT 2020 57NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.1Property,plantandequipment(continued)
Recognition and measurement
Property, plant and equipment is initially recorded at cost including transaction costs and subsequently measured at cost less any accumulated
depreciation and impairment losses.
Depreciation is calculated using the straight line method to allocate the asset's cost or revalued amounts, net of any residual amounts, over their
useful lives. The assets' useful lives are reviewed and adjusted if appropriate at each balance date. An asset's carrying amount is written down
immediately to its recoverable amount if it is considered that the carrying amount is greater than its recoverable amount.
Furniture & fittings 5-9 years
Leasehold property improvements 3-12 years
Motor vehicles 5 years
Computer equipment 3-5 years
Land and buildings are shown at fair value, based on periodic valuations by external independent appraisers less subsequent depreciation for
buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount
is restated to the revalued amount of the asset.
6.2 Intangible assets
a. Amountsrecognisedinthebalancesheet
30September2020
GOODWILL
$000
SOFTWARE
$000
CUSTOMER
RELATIONSHIPS

$000
TOTAL
$000
Composition:
Cost17,744 98,351 14,222 130,317
Accumulated amortisation – (43,379)(1,984)(45,363)
Intangibleassets17,744 54,97212,23884,954
Reconciliation:
Opening balance17,744 56,467 – 74,211 
Amortisation – (8,866)(1,984)(10,850)
Additions – 7,534 14,222 21,756 
Disposals – (43) – (43)
Transfers – (120) – (120)
Closingbalance17,744 54,97212,23884,954
30 September 2019
Composition:
Cost17,744 90,981 – 108,725
Accumulated amortisation – (34,514) – (34,514)
Intangible assets17,744 56,467 –74,211
Reconciliation:
Opening balance17,744 27,298 – 45,042
Amortisation – (6,527) – (6,527)
Additions – 36,343 – 36,343
Disposals – – – –
Transfers – (647) – (647)
Closing balance17,74456,467–74,211

Tower purchased Youi NZ Pty Ltd.'s insurance portfolio in December 2019. The transaction is treated as an intangible asset as Tower purchased the customer relationships (and associated assets
and liabilities) and not Youi NZ's business systems or processes. The amount capitalised includes the price paid for the portfolio and associated acquisition costs.
6.2a. Amountsrecognisedinthebalancesheet(continued)
Recognition and measurement
Intangible assets are assets without physical substance. They are recognised as an asset if it is probable that expected future economic benefits
attributable to the asset will flow to Tower and that costs can be measured reliably.
Application software and customer relationships are recorded at cost less accumulated amortisation and impairment. Application software is
amortised on a straight line basis over the estimated useful life of the software. Customer relationships are amortised over the estimated useful life
in accordance with the pattern of economic benefit consumption.
Internally generated intangible assets are recorded at cost which comprise all directly attributable costs necessary to create, produce and prepare
the asset to be capable of operating in the manner intended by management. Amortisation of internally generated intangible assets begins when
the asset is available for use and is amortised on a straight line basis over the estimated useful life.
The useful lives for each category of intangible assets with a finite life are as follows:
— capitalised software: 3-5 years for general use computer software and 3-10 years for core operating system software
— customer relationships: 10 years
Goodwill (i.e. assets with an indefinite useful life) generated as a result of business acquisition is initially measured as the excess of the purchase
consideration over the fair value of the net identifiable assets and liabilities acquired. Goodwill is not subject to amortisation but is tested for
impairment annually or more frequently where there are indicators of impairment.
b.Impairmenttesting
An impairment charge is recognised in profit or loss when the carrying value of the asset, or cash-generating unit (CGU), exceeds the calculated
recoverable amount.
(i) Software and customer relationships
Software and customer relationships are reviewed at each reporting date by determining whether there is an indication that the carrying values may
be impaired. If an indication exists, the asset is tested for impairment. A loss is recognised for the amount by which the carrying value exceeds the
asset's recoverable value.
There were no indications of impairment during the year and therefore these assets were not tested for impairment (2019: no indications).
Critical accounting estimates and judgements
The recoverable amount for software and customer relationships has been determined by reference to a value-in-use calculation based on (i) cash
flow forecasts that combine past experience with future expectations based on prevailing and anticipated market factors; and (ii) a discount rate
that appropriately reflects the time value of money and the specific risks associated with the assets.
Value-in-use calculations involve the use of accounting estimates and assumptions to determine the projected net cash flows, which are
discounted using an appropriate discount rate to reflect current market assessment of the risks associated with the assets. An impairment charge
for capitalised software is incurred where there is evidence that the economic performance of the asset is not as intended by management.
Customer relationships represent the present value of future benefits expected to arise from existing customer relationships. The assumptions for
the useful life are based on historical information.
(ii) Goodwill
Goodwill is deemed to have an indefinite useful life and is tested annually for impairment or more frequently where there is an indication that the
carrying value may not be recoverable.
Goodwill is allocated to cash generating units (CGUs) expected from synergies arising from the acquisition giving rise to goodwill. Tower's goodwill is
allocated to the general insurance CGU.
Tower undertook an annual impairment review and no loss has been recognised in 2020 as a result (2019: nil). Covid-19 impacts were taken into
account when performing the review.
TOWER LIMITED ANNUAL REPORT 2020 58TOWER LIMITED ANNUAL REPORT 2020 59NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.2Intangibleassets(continued)
Critical accounting estimates and judgements
The recoverable amount of the general insurance business is assessed with reference to its appraisal value, which is a common practice for
insurance companies. A base discount rate of 10.5% was used in the calculation (2019: 12.5%). The cash flows are in line with the FY21 – FY23
operational plan (2019: FY20 – FY22) and longer-term profitability is assumed to continue at 2% per annum. The projected cash flows are
determined based on past performance and management's expectations for market developments with a terminal growth rate of 2% (2019: 2%).
The overall valuation is sensitive to a range of assumptions including the forecast combined operating ratio used in terminal value calculation,
discount rate, and terminal value long-term growth rate. Reasonable changes to these assumptions will not result in an impairment.
6.3 Leases
a. AmountsrecognisedintheBalanceSheet
(i) Right-of-use assets
OFFICE SPACE
$000
MOTOR
VEHICLES
$000
2020
$000
Composition:
Cost9,619 53 9,672
Accumulated depreciation(2,430)(31)(2,461)
Right-of-useassets7,189 227,211 
Reconciliation:
Opening balance10,097 86 10,183
Depreciation(2,518)(68)(2,586)
Additions961 4 965
Disposals(1,249) – (1,249)
Revaluations(96) – (96)
Impairment(27) – (27)
Net foreign exchange movements21 – 21
Right-of-useassets7,189 227,211 
Recognition and measurement
Right-of-use assets are recognised when Tower has the right to use the assets. Right-of-use assets are measured at cost comprising the initial
measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received;
and indirect costs; and restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term
on a straight line basis.
6.3a. AmountsrecognisedintheBalanceSheet(continued)
(ii) Lease liabilities
2020
$000
Composition:
Current2,721
Non-current5,974
Leaseliabilities8,695
Due within 1 year2,721
Due within 1 to 2 years2,584
Due within 2 to 5 years3,534
Due after 5 years418
Discount(562)
Leaseliabilities8,695
Recognition and measurement
Lease liabilities are recognised at the date Tower has the right to use the corresponding asset. Lease liabilities are initially measured as the present
value of expected lease payments under lease arrangements. Lease liability will include any option to extend where it is reasonably certain that the
option will be exercised. The lease payments are discounted using the incremental borrowing rate as the interest rate in the lease cannot be readily
determined. Incremental borrowing rates used during the year ranged between 2.3% and 3.6%.
Subsequent repayments are split between principal and interest cost where the finance cost represents the time value of money and is charged to
the profit or loss over the lease period. The discount rate applied is unchanged from the applied at the initial recognition of the lease, unless there
are material changes to that lease.
b. Amountsrecognisedintheconsolidatedstatementofcomprehensiveincome
CLASSIFICATION
2020
$000
Depreciation and impairmentUnderwriting expense & corporate and other expenses(2,598)
Interest expenseFinance costs(369)
Gain on disposalUnderwriting expense167
Leaseexpense(2,800)
c. Amountsrecognisedintheconsolidatedstatementofcashflows
2020
$000
Total cash outflow for lease principal payments(3,070)
TOWERLIMITEDANNUALREPORT202060TOWER LIMITED ANNUAL REPORT 2020 61NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. TAX
This section provides information on Tower's tax expense during the year and its position at balance date.
7.1 Tax expense
Composition
2020
$000
2019
$000
Current tax 3,621 2,757
Deferred tax4,340 6,407
Adjustments in respect of prior years(51)26
Taxexpense7,910 9,190
Reconciliation of prima facie tax to income tax expense
2020
$000
2019
$000
Netprofitbeforetax20,251 25,995
Primafacietaxexpenseat28% (2019: 28%)5,670 7,279
Adjustments in respect of prior years(51)26
Tax effect of non-deductible expenses and non-taxable income788 (522)
Foreign tax credits written off1,127 2,149
Other376 258
Taxexpense7,910 9,190
Recognition and measurement
Tax expense is calculated on the basis of the applicable tax rates that have been enacted or substantively enacted at the end of the reporting
period in the jurisdictions Tower operates in. There have been no tax rate changes during the year in these jurisdictions. Current tax expense relates
to tax payable for the current financial reporting period while deferred tax will be payable in future periods.
7.2 Current tax
a.Currenttaxasset
2020
$000
2019
$000
Excess tax payments related to prior periods 12,038 12,038
Excess tax payments/tax payable related to current period
854 1,551
Currenttaxassets12,89213,589

Expected to be recovered from 2022 as per the Board-approved operational plan for 2021 to 2024.
Excess tax payment made in the Pacific Islands during the reporting period.
b.Currenttaxliability
The current tax liability balance of $821k (2019: $229k) relates to taxes payable to offshore tax authorities in the Pacific Islands.
7.2Currenttax(continued)
Recognition and measurement
Overpayment of tax in the current and prior periods is recognised as a current tax asset. Current tax assets are measured at the amount expected
to be recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period.
7.3 Deferred tax
a.Deferredtaxasset
Composition
2020
$000
2019
$000
Tax losses recognised25,720 24,527
Property, plant and equipment3,304 7,684
Provisions and accruals3,882 4,149
Recognisedinprofitorloss32,90636,360
Right-of-use impact501 –
Recognisedincomprehensiveprofitorloss33,407 36,360
Set-off of deferred tax liabilities pursuant to NZ IAS 12(6,575)(6,052)
Deferredtaxasset26,83230,308
Reconciliation of movements
2020
$000
2019
$000
Opening balance36,360 42,115
IFRS 16 adoption501 –
Movements recognised in consolidated statement of comprehensive income(3,454)(5,755)
DeferredtaxassetpreNZIAS12setoff33,407 36,360
b.Deferredtaxliability
Composition
2020
$000
2019
$000
Deferred acquisition costs(6,588)(6,045)
Other
(911)(560)
Recognisedinprofitorloss(7,499)(6,605)
Asset revaluation(422)(438)
Recognisedincomprehensiveprofitorloss(7,921)(7,043)
Set-off of deferred tax liabilities pursuant to NZ IAS 126,575 6,052
Deferredtaxliability(1,346)(991)
Primarily relates to withholding tax on undistributed profit from the Pacific Islands.
TOWER LIMITED ANNUAL REPORT 2020 62TOWER LIMITED ANNUAL REPORT 2020 63NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7.3Deferredtax(continued)
Reconciliation of movements
2020
$000
2019
$000
Opening balance(7,043)(6,328)
Movements recognised in consolidated statement of comprehensive income (886)(683)
Movements recognised in equity8 (32)
DeferredtaxliabilitypreNZIAS12setoff(7,921)(7,043)
7.4 Imputation credits
The Group imputation credit account reflects the imputation credits held by the Company as the representative member of the Group.
2020
$000
2019
$000
Imputation credits available for use in subsequent reporting periods271271
Recognition and measurement
Deferred tax is income tax which is expected to be payable or recoverable in the future as a result of the unwinding of temporary differences.
These arise from differences in the recognition of assets and liabilities for financial reporting and from the filing of income tax returns. Deferred tax
is recognised on all temporary differences, other than those arising from (i) goodwill or (ii) from the initial recognition of assets and liabilities in a
transaction (other than in a business combination) that affects neither the accounting nor taxable profit or loss.
At the reporting date, the Group has recognised a deferred tax asset in respect of its unused tax losses of $92.2m (2019: $87.6m).
Deferred tax is calculated at the tax rates that are expected to apply to the year when the liability is settled or the asset realised, based on tax rates
and tax laws that have been enacted or substantively enacted at balance date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net
basis.
Critical accounting judgements and estimates
Deferred tax assets are recognised for all unused tax losses to the extent it is probable that taxable profits will be available against which the losses
can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based on
the likely timing and quantum of future taxable profits.
This assessment is completed on the basis of the approved strategic plans of Tower Limited and subsidiaries. If future profits do not occur as
expected, or there is a significant change in ownership, Tower may not be able to utilise all of these tax losses.
8. OTHER INFORMATION
This section includes additional disclosures which are required by financial reporting standards.
8.1 Notes to the Consolidated Cash Flow Statement
Composition
2020
$000
2019
$000
Cash at bank61,89234,563
Deposits at call18,071 26,428
Restricted cash1451,027
Cashandcashequivalents80,10862,018
The average interest rate at 30 September 2020 for deposits at call is 0.47% (2019: 1.44%).
Reconciliation of profit for the year to cash flows from operating activities
2020
$000
2019
$000
Profitforthe year12,34116,805
Adjustedfornon-cashitems
Depreciation of property, plant and equipment2,004 1,598
Depreciation, impairment and disposals of right-of-use assets2,432 –
Amortisation of intangible assets10,850 6,573
Fair value losses on financial assets1,518 622
Change in deferred tax8,005 6,439
Adjustedformovementsinworkingcapital
Change in receivables(2,659)(2,012)
Change in payables(15,313)(6,061)
Change in taxation(1,414)297
Adjustedforfinancingactivities
Facility fees and interest paid1,115 352
Netcashinflowsfromoperatingactivities18,87924,612
8.2 Entity amalgamation
The financial statements presented are the consolidated financial statements comprising Tower Limited previously Tower Insurance Limited (the
Company) and its subsidiaries (together, Tower, or the Group).
On 30 September 2020, Tower Insurance Limited was amalgamated by way of a short-form amalgamation under the Companies Act 1993 with its
ultimate parent, Tower Limited (the prior Tower Limited); its parent, Tower Financial Services Group Limited; and another subsidiary of Tower Limited,
Tower New Zealand Limited. Tower Insurance Limited has continued as the amalgamated company, and changed its name to Tower Limited as part of
the amalgamation.
As a result of the amalgamation, all of Tower Limited's subsidiaries and operations which were previously sitting outside of Tower Insurance Limited were
brought into the Group.
The Company and Group have accounted for the amalgamation using the predecessor value method, which they have applied retrospectively.
Consequently, unless otherwise stated the comparatives presented are for what was, in the prior year, the Tower Limited consolidated group, except for
equity and reserves, which are of Tower Insurance Limited.
TOWER LIMITED ANNUAL REPORT 2020 64TOWER LIMITED ANNUAL REPORT 2020 65NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8.3 Related party disclosures
Tower considers key management personnel to consist of the Board of Directors, Chief Executive Officer and executive leadership team. Information
regarding individual director and executive compensation is provided in the Corporate Governance section of the annual report.
2020
$000
2019
$000
Salaries and other short term employee benefits paid4,7365,720
Independent director fees624584
Relatedpartyremuneration5,3606,304
Tower insurance products are available to all key management personnel on the same terms as available to other employees. In addition, Tower
purchases indemnity insurance for all directors both past and present covering liabilities and legal expenses incurred whilst in office.
Definition
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise) of that entity.
8.4 Auditor's remuneration
2020
$000
2019
$000
Audit of financial statements
(1)
550528
Other assurance services
(2)
4646
Non-assurance agreed procedures
(3)
1212
Total feespaidtoGroup'sauditors608586
Feespaidtosubsidiaries'auditorsdifferenttoGroupauditors:
Audit of financial statements
(4)
1514
Auditorsremuneration623600
(1) Audit of financial statements includes fees for both the audit of annual financial statements and the review of the interim financial statements. This also includes the fees for the audits of
subsidiaries. PwC Fiji and PwC PNG provide audit opinions on the financial statements of Tower Insurance (Fiji) Limited and Tower Insurance (PNG) Limited, where the majority of the work is
performed by the group auditor.
(2) Other assurance services includes annual solvency return assurance and Pacific Island regulatory return audits.
(3) Agreed procedures on Pacific Island regulatory return and Annual Shareholders' Meeting procedures.
(4) The audit of Tower Insurance (Vanuatu) Limited was performed by Law Partners (2019: Law Partners).
8.5 Contingent liabilities
The Group is occasionally subject to claims and disputes as a commercial outcome of conducting insurance business. Provisions are recorded for these
claims or disputes when it is probable that an outflow of resources will be required to settle any obligations. Best estimates are included within claims
reserves for any litigation that has arisen in the usual course of business.
The Group has no other contingent liabilities.
8.6 Subsequent events
EQC Receivable (adjusting event)
On 24 November 2020 Tower Limited entered into a commercial agreement with EQC, for a settlement value of $53.6m relating to the EQC receivable.
The commercial settlement agreement provides Tower Limited evidence of the EQC receivable’s recoverable value as at the end of the reporting period,
and therefore Tower Limited has adjusted the amounts recognised in the FY20 financial statements, along with updating the relevant disclosures in the
financial statements to reflect the commercial settlement agreement.
8.6Subsequentevents(continued)
The adjustment for the EQC receivable’s recoverable value for the commercial settlement agreement is primarily reflected as an impairment expense
within the Statement of comprehensive income, and a reduction to the EQC receivable’s carrying value on the Balance sheet. Tower holds an associated
reinsurance payable, which is directly related to the amount of EQC costs recovered. The reinsurance payable has been adjusted to reflect the decrease
in reinsurance payable as a result of the settlement agreement.
The result of the commercial settlement is a reduction in net profit after tax to Tower of $9.5m.
Large events (non-adjusting event)
Tower limited has had two large events subsequent to the balance date: (i) Lake Ōhau fires ($6.0m provided); and (ii) Napier floods ($3.0m – $4.0m
preliminary estimate). The impacts of both events will be reflected in FY21 reporting.
8.7 Capital commitments
As at 30 September 2020, Tower has capital commitments of $0.4m (2019: $0.2m) related to the implementation and delivery of a new ERP system,
$0.1m (2019: $0.1m) relating to a new automated reinsurance system, and $0.2m (2019: nil) relating to general use computer software. Total capital
commitments for 2020 are $0.7m (2019: $1.7m).
8.8 Impact of new accounting standards
a.Issuedandeffective
Context
The Group adopted NZ IFRS 16 Leases during the period. NZ IFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases. The standard replaced the guidance in NZ IAS17 Leases, and was effective from 1 October 2019 for Tower.
NZ IFRS 16 requires lessees to recognise a right-of-use asset and a corresponding lease liability reflecting future lease payments for most lease
contracts. The standard allows exemptions for short-term leases (less than 12 months) and for leases on low value assets. The main impact of the new
standard was on leases which were previously classified as operating leases, being predominantly office building and motor vehicle related leases.
Accounting policy change
As a result of the adoption of NZ IFRS 16, Tower has recognised depreciation expense on right-of-use assets, on a straight line basis over the lease term,
and interest expense on lease liabilities.
Tower applied the standard using the modified retrospective approach. The cumulative effect of adopting NZ IFRS 16 was recognised as an adjustment
to the opening balance of retained earnings on October 1 2019, with no restatement of comparative information.
The modified retrospective approach allows entities to use a number of practical expedients on adoption of the new standard, of which Tower elected to
use the following:
(i) Not to apply NZ IFRS 16 for short-term leases;
(ii) apply a single discount rate to the portfolio of leases with reasonably similar characteristics;
(iii) use hindsight in determining the lease term where the contract contains options to extend or terminate a lease; and
(iv) rely on an assessment of whether leases are onerous under IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the
date of initial application.
Impact of accounting policy change
The impact of the adoption of NZ IFRS 16 Tower’s balance sheet as at 1 October 2019 is shown in the table below. There was also an immaterial impact
on the pattern of expense recognition.
2020
$000
Right-of-use assets10,183
Lease liabilities(11,982)
Deferred tax asset462
Retained earnings(1,337)
Tower's weighted average incremental borrowing rate at the transition date was 3.60%.
TOWER LIMITED ANNUAL REPORT 2020 66TOWER LIMITED ANNUAL REPORT 2020 67NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8.8 Impactofnew accountingstandards(continued)
The table below presents a reconciliation of the operating lease commitments as disclosed in the Group's 30 September 2019 financial statements, to
the lease liability recognised on transition date:
2020
$000
Operating lease commitment – 30 September 20199,802
Impact of reassessment of lease terms under NZ IFRS 163,281
Impact of discounting future lease payments at the weighted average incremental borrowing rate(997)
Other (including short-term leases not recognised as a lease liability)(104)
Lease liability recognised on transition date – 1 October 201911,982
b.Issuedandnotyeteffective
NZ IFRS 17 Insurance Contracts is effective for periods beginning on or after 1 January 2023 (subject to approval of proposed one year delay). Tower will
apply the standard for the year ending 30 September 2024. The standard replaces the current guidance in NZ IFRS 4 Insurance Contracts, and
establishes the principles for recognition, measurement, presentation and disclosure of insurance contracts. Tower has started a programme with
dedicated resource to assess the impact of adopting NZ IFRS 17 and to project manage the transition to the new standard. It is expected that the majority
of Tower's insurance contracts will meet the requirements of the simplified approach. However, there are expected to be significant changes in the
presentation of the financial standards and disclosures. Due to the complexity of the requirements within the standard the final impact may not be
determined until global interpretations and regulatory responses to the new standard are developed.
8.9 Change in comparatives
Tower has reclassified certain items from prior years' financial statements to conform to the current year's presentation basis. The key changes are listed
below.
a.Consolidatedstatementofcomprehensiveincome–presentationchanges
The Income statement and statement of comprehensive income have been merged into a combined consolidated statement of comprehensive income
to simplify financial performance presentation. In addition, the consolidated statement of comprehensive income has been redesigned to disclose the
underwriting result for the reporting period. This has resulted in some classification changes. There was no impact to 2019 profit as a result of these
changes.
b.Consolidatedstatementofcashflows–presentationchanges
A number of changes have been made to the presentation of the consolidated statement of cash flows. First, cash flows related to the sale and purchase
of interest-bearing investments are now shown on a gross basis (previously it was disclosed on a net basis). Second, cash flows from the purchase of
intangible assets and property, plant and equipment are shown separately (previously combined). Third, cash received from non-reinsurance recoveries
has been included with reinsurance recoveries received as opposed to being netted off in claims paid – as a result, claims paid and reinsurance and other
recoveries have both increased by $7.1m in 2019. Finally, net realised investment gains was moved from operating activities cash flows (reducing by
$42,000 in 2019) to investment cash flows (increasing by $42,000 in 2019).
c.Consolidatedbalancesheet–presentationchanges
Deferred outwards reinsurance costs have been combined with deferred acquisition costs to show a combined deferred insurance cost. Previously,
deferred reinsurance costs were grouped with receivables (which reduced by $8.8m in 2019 to reflect the change in classification).
d.Creditrisk(note4.4)InvestmentandTreasurycreditratings–Reclassification
Some cash and investments balances in 2019's credit exposure by credit rating table were incorrectly classified and have been reclassified in the current
year. The reclassification has resulted in a $0.1m decrease in balances categorised under "AA" credit rating, $17.0m decrease in balances categorised
under "A" credit rating, $0.3m decrease in balances categorised under "Below BBB" credit rating and $17.4m increase in balances categorised under
"Not rated". The net impact resulting from these reclassifications is nil.
e.Consolidatedbalancesheet–Reclassificationbetweencashandcashequivalentsandinvestments
Within the consolidated balance sheet, $5.0m of term deposits with maturity dates greater than three months from the date of acquisition have been
reclassified from cash and cash equivalents to investments per NZ IAS 7 Statement of Cash Flows.
Changes for internal consistency have also been made to the consolidated cash flow statement, Note 3.2 Investments, Note 3.3 Fair value hierarchy,
Note 4.4(a) Investment and treasury credit risk, Note 4.5(b) Market risk – interest risk, Note 4.6 Liquidity risk and Note 8.1 Notes to the consolidated cash
flow statement.
INDEPENDENT
AUDITOR'S
REPORT
TOWER LIMITED ANNUAL REPORT 2020 68TOWER LIMITED ANNUAL REPORT 2020 69NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSINDEPENDENT AUDITOR'S REPORT

PricewaterhouseCoopers, 15 Customs Street West, 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 2020;
● 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 significant
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 2020, 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
International Code of Ethics for Assurance Practitioners (including International Independence
Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards
Board and the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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.


PwC 60

Description of the key audit matter
How our audit addressed the key audit
matter
(1) Valuation of outstanding claims
(2020: $107,747,000, 2019: $124,060,000)
We considered the valuation of outstanding
claims a key audit matter because this involves
an estimation process combined with
significant judgements and assumptions made
by management to estimate future claims cash
outflows.
The outstanding claims liability includes a
central estimate of the future cash outflows
relating to claims incurred, as at and prior to
the reporting date, and the expected costs of
handling those claims. There is uncertainty
over the amount that reported claims and
claims incurred at the reporting date but not
yet reported to the Group will ultimately be
settled at. The estimation process relies on the
quality of underlying claims data and the use
of informed estimates to determine the
quantum of the ultimate loss.
Key actuarial assumptions applied in the
valuation of outstanding claims (excluding
Canterbury earthquakes) include:
● expected future claims development
proportion; and
● claims handling expense ratios.
Outstanding claims in relation to the
Canterbury earthquakes have a greater degree
of uncertainty and judgement. This mainly
arises due to the Earthquake Commission
(EQC) reporting new claims to the Group
which have gone over the $100,000 statutory
liability cap (over cap claims), new litigation
claims, reopening of closed claims, expected
claims costs for open claims and estimates of
future claims management expenses.
Changes in assumptions can lead to significant
movements in the outstanding claims.
The outstanding claims liability includes a risk
margin that allows for the inherent uncertainty
in the central estimate of future claim cash
outflows. 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



Claims data is a key input to the actuarial
estimates. Accordingly, we:
● evaluated the design effectiveness and
tested controls over claims processing;
● assessed a sample of claim case estimates
at the year end to check that they were
supported by appropriate management
assessment and documentation;
● assessed on a sample basis the accuracy of
the previous claim case estimates by
comparing
to the actual amount settled
during the year and analysed any
escalation in the claim case estimate to
determine whether such escalation was

based on new information available
during the year;
● 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

● tested the integrity of data used in the
actuarial models by agreeing the relevant
model inputs, such as claims data, to
source.
Together with our actuarial experts, we:
● considered the work and findings of the
actuaries engaged by the Group;
● evaluated the actuarial models and
methodologies used, and any changes to
them, by comparing with generally
accepted models and methodologies
applied in the sector;
● 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 (where applicable), taking
into consideration COVID-19 impacts;
● assessed the risk margin, by comparing
known industry practices. In particular
we focused on the assessed level of
uncertainty in the central estimate; and
TOWER LIMITED ANNUAL REPORT 2020 70TOWER LIMITED ANNUAL REPORT 2020 71INDEPENDENT AUDITOR'S REPORTINDEPENDENT AUDITOR'S REPORT

PwC 61
different geographical locations. The Directors
include an additional $5 million risk margin in
respect of the Christchurch earthquake claims.
Relevant references in the consolidated financial
statements.
Refer to note 2.4, which also describes the
elements that make up this balance.

● considered the Directors’ $5 million
Christchurch earthquake additional risk
margin with reference to the inherent
uncertainty in the remaining
Christchurch earthquake claims and its
consistency with prior periods.

(2) Valuation of EQC recovery receivable
related to the Canterbury earthquakes
(2020: $52,883,000, 2019: $69,900,000)
The EQC recovery receivable relates to
amounts paid by the Group for land and
building damage arising from the Canterbury
earthquake events in respect of EQC’s
statutory liability under the Earthquake
Commission Act 1993. The EQC and the Group
were in disagreement on the quantum of
damage paid by the Group on EQC’s behalf
with the Group having commenced litigation
in respect of this matter.
We considered the valuation of the EQC
recovery receivable to be a key audit matter
because significant management judgement
was required to estimate the expected
recoveries from the EQC in respect of land and
building damage.
However, on 24 November 2020, the Group
and the EQC agreed to settle all amounts
outstanding for $53,600,000 (excluding GST)
resulting in the Group impairing the previously
recorded receivable and reducing the amounts
payable to reinsurers by $13,126,000 (before
tax). The settlement, being agreed after the
end of the financial reporting period, but
before the financial statements were
authorised for issue, provides evidence of
conditions that existed at the end of the
reporting period and therefore is an adjusting
event under the accounting standards. The
financial statements have been adjusted to
reflect the agreed settlement.



We understood how the Group had determined
their initial estimate of the receivable at 30
September 2020 by:
● reviewing reports of the experts engaged
by the Group and holding discussions
with them to understand the legal and
technical arguments and judgements
considered in the estimation of the
receivable;
● testing on a sample basis the claims detail
used in the experts’ calculations to the
Group’s claim records and with the data
used in previous years to estimate the
receivable; and
● holding discussions with management
and the Directors to understand the
progress of the litigation and of any
discussions with the EQC about possible
settlement.

Following the agreement of a settlement on 24
November 2020 between the Group and the EQC,
we reviewed the signed settlement agreement,
confirmed this was an adjusting event as defined
in the accounting standards and ensured the
financial statements appropriately reflected the
settlement agreed, including the disclosure
thereof.

Relevant references in the consolidated financial
statements
Refer to note 2.7 to the consolidated financial
statements.




PwC 62
(3) Recoverability of the deferred tax asset
arising from tax losses
(2020: $25,720,000 2019: $24,527,000)
The majority of the Group’s deferred tax asset
arises from 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 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 foreseeable future.

Relevant reference in the consolidated financial
statements
Refer to note 7.3 to the consolidated financial
statements.




Together with our tax experts, we:
● understood the progress made by
management in improving the
profitability of the business in recent
periods;
● compared the previous management
budget with actual results to assess the
reliability of management’s forecasts;
● considered the reasonableness of the
assumptions in the FY21 operational plan
on the forecast utilisation of tax losses;
and
● assessed the Group’s ability to maintain
sufficient continuity of the ultimate
shareholders and its entitlement to offset
the tax losses against future taxable
profits.

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: $3.7 million, which represents approximately
1% of gross earned premium.
We chose gross earned premium 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.
As reported above, we have three key audit matters, being:
● Valuation of outstanding claims
● Valuation of EQC recovery receivable related to the Canterbury
earthquakes
● Recoverability of the deferred tax asset arising from tax losses.


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PwC 63
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 mostly focused on the Company, which contributes approximately 84% of the
Group’s gross earned premium. We performed audit procedures over material balances and
transactions of the non-significant subsidiaries and the consolidation of the Group’s subsidiaries.
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, if other information is included
in the annual report, 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.
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.


PwC 64
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 consolidated 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
25 November 2020
TOWER LIMITED ANNUAL REPORT 2020 74TOWER LIMITED ANNUAL REPORT 2020 75INDEPENDENT AUDITOR'S REPORTINDEPENDENT AUDITOR'S REPORT

APPOINTED
ACTUARY'S
REPORT
TOWER LIMITED ANNUAL REPORT 2020 76TOWER LIMITED ANNUAL REPORT 2020 77APPOINTED ACTUARY'S REPORTAPPOINTED ACTUARY'S REPORT

This section of the Annual Report provides an overview of the corporate
governance principles, policies and processes adopted and followed by
Tower’s Board during the year ending 30 September 2020 (FY20)
The Board is committed to achieving the highest
standards of corporate governance, ethical behaviour,
and accountability and has implemented corporate
governance practices that are consistent with best
practice. Where developments arise in corporate
governance, the Board reviews Tower’s practices and
incorporates change where appropriate.
On 30 September 2020, Tower completed
an amalgamation of its New Zealand entities
(Amalgamation). Tower Limited amalgamated down
into Tower Insurance Limited, which then changed its
name to Tower Limited. This annual report covers the
corporate governance practices of Tower prior to the
Amalgamation.
For the reporting period to 30 September 2020, the
Board considers that Tower’s corporate governance
practices have materially adhered to the NZX Corporate
Governance Code (NZX Code). Further information about
the extent to which Tower has complied with each of
the NZX Code recommendations is set out in Tower’s
corporate governance statement, available on Tower’s
website at tower.co.nz/investor-centre.
The following policies and company documentation are
available on Tower’s website (https://www.tower.co.nz/
investor-centre/corporate-governance/policies):
• Tower Limited Constitution
• Board Charter
• Board Protocols
• Audit Committee Terms of Reference
• Risk Committee Terms of Reference
• Remuneration & Appointments Committee Terms of
Reference
• Director and Executive Remuneration Policy
• Insider Trading and Market Manipulation Policy
• Corporate Disclosure Policy
• External Audit Independence Policy
• Health and Safety Policy
• Code of Ethics Policy
• Diversity Policy
During FY20, Tower Limited had a joint audit and risk committee (ARC) and the terms of
reference for the ARC were available on Tower’s website until 30 September 2020. Tower
Limited now has two separate committees, the Audit Committee and the Risk Committee.
The respective terms of reference for each of these committees (which are currently
available on Tower’s website) are on materially the same terms as the terms of reference
for the ARC.
DIVERSITY
The below table provides a quantitative breakdown as to
the gender composition of Tower’s Directors and Officers
2019-20202018-2019
GROUP% GROUPNUMBER% GROUPNUMBER
Board of Directors
Males83%583%5
Females17%117%1
Executive Leadership team
1
Males56%556%5
Females44%444%4
Business Leadership team
2
Males51%1968%19
Females49%1832%9
Employees
Males40%23042%263
Females60%34658%359
Total company
3
Males41%25444%287
Females59%36856%372
Total employees622659
1 ‘Executive Leadership Team’ includes the Chief Executive Officer, and those employees
who report directly to the Chief Executive Officer.
2 ‘Business Leadership Team’ consists of various senior and specialised roles that are
influential in driving the Tower strategy, of which 24 were part of the Senior Leadership
Team. 2018-2019 is based on the previous Senior Leadership Team category.
3 ‘Total Company’ figures do not include the Board of Directors. Both the 2018-2019
and 2019-2020 figures include Tower’s Pacific Island subsidiaries and are inclusive of
Permanent and Fixed Term employees.
CORPORATE GOVERNANCE
AT TOWER LIMITED
(TOWER)
TOWER LIMITED ANNUAL REPORT 2020 78TOWER LIMITED ANNUAL REPORT 2020 79CORPORATE GOVERNANCE AT TOWER LIMITEDCORPORATE GOVERNANCE AT TOWER LIMITED

STATUTORY DISCLOSURES
Remuneration
DirectorRemuneration
The Board’s approach is to remunerate directors at a
similar level to comparable Australasian companies, with a
small premium to reflect the complexity of the insurance
and financial services sector. At the Annual Shareholders’
Meeting in February 2004 shareholders approved an
increase in non-executive director annual remuneration
to the current maximum of NZ$900,000 per annum.
Tower seeks external advice when reviewing Board
remuneration. The Remuneration and Appointments
Committee is responsible for reviewing directors’ fees.
Non-executive directors are also paid additional annual
fees for sitting on certain Board Committees.
TOWER LIMITED
BOARD/COMMITTEE
CHAIR (NZ$)MEMBER (NZ$)
Base fee – Board of directors130,00078,570
Audit and Risk Committee15,0009,000
Remuneration and Appointments
Committee
1
––
1. The Board determined that from 1 December 2012 no fees would be payable for sitting on
the Remuneration and Appointments Committee
Additional fees may be paid to non-executive directors
for one-off tasks and/or additional appointments where
required.
2019/2020directors’remunerationandbenefitsof
Tower anditssubsidiaries
Amounts in the table below reflect fees paid and accrued
for the year ended 30 September 2020.
Fees include base fees and additional fees in the financial
year for one-off tasks and additional appointments.
DIRECTORS OF TOWER LIMITED REMUNERATION AND BENEFITS
FOR THE YEAR TO 30 SEPTEMBER 2020FEE (NZ$)
Michael Stiassny139,000
Graham Stuart93,570
Steve Smith
1
95,903
Warren Lee
2
104,237
Wendy Thorpe87,570
Marcus Nagel
3
87,570
1. During FY20, Steve Smith was a member of the Tower Insurance Limited Risk Sub-
Committee which operated for eight months. Steve received a total of $8,333 as a base fee
for being a member of the Risk Sub-Committee.
2. During FY20, Warren Lee was the chair of the Tower Insurance Limited Risk Sub-
Committee which operated for eight months. Warren received a total of $16,667 as a base
fee for being the chair of the Risk Sub-Committee.
3. NZ$ amount shown is converted to, and paid in, Euros (using conversion rate at time of
monthly invoice).
DIRECTORS OF TOWER LIMITED SUBSIDIARIES REMUNERATION
AND BENEFITS
FOR THE YEAR TO 30 SEPTEMBER 2020FEES ($)
Alden Godinet
1
^
1,875
Rodney Reid
1
7,500
Isikeli Tikoduadua
2
18,000
Barry Whiteside
2
20,000
^ Alden Godinet was a director of National Pacific Insurance Limited for one quarter of FY20.
1. Fees earned in capacity as director of National Pacific Insurance Limited (NPI). NPI fees are
paid in Western Samoan Tala.
2. Fees earned in capacity as director of Tower Insurance (Fiji) Limited. Tower Insurance (Fiji)
Limited fees are paid in Fijian Dollars.
CEOandseniorexecutiveremuneration
The Board’s approach to remunerating the Chief Executive
Officer and other key executives is to provide market-
based remuneration packages comprising a blend of
fixed and variable remuneration, with clear links between
individual and company performance, and reward. The
Remuneration and Appointments Committee reviews
the remuneration packages of the Chief Executive Officer
and other key executives at least annually. This approach
is intended to encourage Tower’s executives to meet
Tower’s short and long term objectives.
The current Chief Executive Officer, Mr Blair Turnbull
(appointed 1 August 2020), is remunerated through a
combination of fixed base pay of $650,000 and variable
performance incentives including Short Term Incentive
(STI) and Long Term Incentive (LTI). The maximum STI is
currently $325,000 per annum based on meeting key
financial and non-financial and operational performance
measures. The maximum LTI per annum is currently
$975,000 based on Tower delivering Total Shareholder
Return performance relative to the performance of
companies within the NZX50 index.
Mr Turnbull is not entitled to any Short Term Incentive or
Long Term Incentive for the year ended 30 September
2020.
The outgoing Chief Executive Officer, Mr Richard Harding
(CEO to 1 August 2020), was remunerated through a
combination of fixed base pay, variable performance
incentives and contractual entitlements to allowances for
travel and accommodation.
• Mr Harding has been awarded an STI payment of
$265,000 for the year ended 30 September 2020 and
was awarded an STI of $260,000 for the year ended
30 September 2019 (52% of achievement criteria).
• Mr Harding is not entitled to any Long Term Incentive
payments.
Evaluation from the Board on Tower’s
performance with respect to its diversity
policy
Tower has a clear diversity policy and clear measurable
diversity and inclusion objectives under the following
categories.
• Gender diversity
• Age and career progression
• Ethnicity and Pacific and Māori inclusion
• LGBTIQ+ inclusion
• Accessibility
The Board considers Tower has implemented key
initiatives over the past 12 months in respect of Tower’s
diversity policy and Tower’s diversity and inclusion
objectives. A number of the initiatives implemented
include re-accreditation of the Rainbow Tick, a focus
on Unconscious Bias and a parental leave offering
(as detailed further in a Tower’s corporate governance
statement).
BOARD COMMITTEES
For FY20, the Tower Board had the following committees:
Audit and Risk Committee
Members: Graham Stuart (Chair), Michael Stiassny,
Steve Smith, Warren Lee, Wendy Thorpe, Marcus Nagel.
Remuneration and Appointments
Committee
Members: Michael Stiassny (Chair), Graham Stuart, Steve
Smith, Warren Lee, Wendy Thorpe, Marcus Nagel.
Other committees
Tower’s Board has the ability to establish additional sub-
committees from time to time.
During FY20, Tower Insurance Limited (the regulated
insurer) had the same Board of Directors as Tower
Limited. Separate board and committee meetings
were held by Tower Insurance Limited, to meet the
requirements of the RBNZ. Tower Insurance Limited had
a joint Audit and Risk Committee for the period 1 October
2019 to 31 May 2020. During that period, the Audit and
Risk Committee had a Risk Sub-Committee (members of
which were Warren Lee (Chair), Steve Smith and external
member John Trowbridge). From 1 June 2020 to 30
September 2020, Tower Insurance Limited separated the
Audit and Risk Committee into two separate committees,
the Audit Committee and the Risk Committee.
Board and Committee meeting attendance
The following numbers of Board and Committee
meetings were held during the year from 1 October 2019
to 30 September 2020:
• Board meetings – 13
• Audit and Risk Committee meetings – 4
• Remuneration and Appointments Committee – 2
The Chief Executive Officer and Chief Financial Officer
(sometimes in part) attend all Board meetings. The Chief
Executive Officer, Chief Financial Officer and Chief Risk
Officer attend all Audit and Risk Committee meetings
(sometimes in part). All meetings are attended by an
appropriately qualified person who is responsible for
taking accurate minutes of each meeting and ensuring
that Board procedures are observed.
Director attendance at these meetings is set out below.
FY20 Tower Limited directors’ attendance record
TOWER
LIMITED
BOARD
AUDIT
AND RISK
COMMITTEE
REMUNERATION
AND
APPOINTMENTS
COMMITTEE
Meetingsheld(to30September2020)
Michael Stiassny 1332
Steve Smith1342
Graham Stuart1342
Warren Lee1342
Wendy Thorpe1342
Marcus Nagel1342
TOWER LIMITED ANNUAL REPORT 2020 80TOWER LIMITED ANNUAL REPORT 2020 81CORPORATE GOVERNANCE AT TOWER LIMITEDCORPORATE GOVERNANCE AT TOWER LIMITED

Substantial product holders
(as at 30 September 2020)
The names and holdings of Tower’s substantial product
holders based on notices filed with Tower under the
Financial Markets Conduct Act 2013 as at 30 September
2020 were:
NAMETOTAL ORDINARY
SHARES
1
Bain Capital Credit LP, Bain Capital Investments
(Europe) Limited and Dent Issuer Designated
Activity Company
67,464,858
Salt Funds Management Limited61,476,815
Accident Compensation Corporation32,621,151
Investment Services Group Limited26,916,217
Westpac Banking Corporation including
Guardian Nominees No.2 Limited and BT Funds
Management Limited
27,437,613
New Zealand Funds Management Limited on
behalf of itself and its wholly owned subsidiary
New Zealand Funds Superannuation Limited
17,690,793
1. Total ordinary shares held by the substantial product holder is the number of shares
disclosed in the latest Substantial Product Holder notice filed with Tower as at 30
September 2020, which may differ from the stated holdings right.
Principal shareholders
(as at 21 October 2020)
The names and holdings of the 20 largest registered
Tower shareholders as at 21 October 2020 were:
NAME
TOTAL
ORDINARY
SHARES%
Dent Issuer Designated Activity Company84,329,38619.99
Accident Compensation Corporation41,859,8979.93
HSBC Nominees (New Zealand) Limited32,588,8617.73
Citibank Nominees (New Zealand) Limited29,447,3506.98
BNP Paribas Nominees (NZ) Limited27,436,0806.51
National Nominees Limited14,454,0663.43
JBWere (NZ) Nominees Limited12,944,7853.07
HSBC Nominees (New Zealand) Limited A/C
State Street
10,058,5112.39
Philip George Lennon10,000,0002.37
HSBC Nominees A/C NZ Superannuation
Fund Nominees Limited
6,171,8461.46
UBS Nominees Pty Limited5,018,9741.19
Public Trust4,150,0000.98
BNP Paribas Nominees (NZ) Limited4,088,5340.97
JP Morgan Chase Bank NA NZ Branch -
Segregated Clients Acct
3,393,3630.80
BNP Paribas Nominees (NZ) Limited
<COGN40>
3,273,0890.78
TEA Custodian Limited Client Property Trust
Account
3,037,1320.72
One Managed Invt Funds Ltd2,500,0000.59
Investment Custodial Services Limited 2,485,0810.59
Leveraged Equities Finance Limited 2,400,0000.57
Forsyth Barr Custodians Limited2,365,6240.56
Directors’ shareholdings
At 30 September 2020, Tower Limited directors held the
following interests in Tower Limited shares:
ORDINARY SHARES
DIRECTOR BENEFICIAL
Michael Stiassny494,330
Graham Stuart125,000
Steve Smith23,075
Wendy Thorpe6,250
Warren Lee45,500
Marcus Nagel62
The table below sets out the remuneration payments
to Mr Turnbull and Mr Harding in the years ended 30
September 2020 and 2019.
2020
$000
2019
$000
Mr Blair Turnbull
Base salary100-
Total Mr Turnbull remuneration
1
100-
Mr Richard Harding
Base salary including annual leave paid out805773
Compensation for changes to contractual terms
2
410-
Short-term incentive payments
3
525-
Total Mr Harding remuneration
1
1,740773
1 In addition to the above, Mr Turnbull received a relocation expense entitlement of
$78,000. Mr Harding had an expense allowance for travel and accommodation of
$145,000 for 2020 (2019: $145,000). The actual amount paid in 2020 was $145,000 (2019:
$217,000). The amount paid in 2019 varies due to timing differences and prepayments.
2 Compensation for changes to contractual terms relates to retention payments to extend
Mr Harding's fixed term contract, from December 2019 to December 2020.
3 STI for the year ended 30 September 2020 was paid in the year ended 30 September
2020, together with the STI payment made in respect of the year ended 30 September
2019. The payment made during the year ended 30 September 2019 related to the year
ended 30 September 2018.
Employeeremuneration
The table on the right sets out the number of employees
or former employees of Tower, excluding directors and
former directors, who received remuneration and other
benefits valued at or exceeding $100,000 for the years
ended 30 September 2020 and 2019. Remuneration
includes base salary, performance payments and
redundancy or other termination payments. The table
does not include company contributions of 3% of
gross earnings for those individuals who are members
of a KiwiSaver scheme. The remuneration bands are
expressed in New Zealand Dollars.
FROMTO20202019
100,000109,9992119
110,000119,9992118
120,000129,9991818
130,000139,9991811
140,000149,9991310
150,000159,999138
160,000169,99966
170,000179,99962
180,000189,99936
190,000199,99935
200,000209,99953
210,000219,99903
220,000229,99936
230,000239,99922
240,000249,99931
250,000259,99922
260,000269,99912
270,000279,99912
280,000289,99922
290,000299,99940
300,000309,99905
310,000319,99911
320,000329,99900
330,000339,99910
350,000359,99901
360,000369,99920
370,000379,99900
380,000389,99900
390,000399,99910
400,000409,99910
410,000419,99900
450,000459,99900
460,000469,99900
470,000479,99901
480,000489,99900
490,000499,99900
500,000509,99911
530,000539,99901
540,000549,99910
570,000579,99900
610,000619,99900
650,000659,99901
780,000789,99910
860,000869,99900
1,590,0001,599,99901
1,880,0001,890,00010
Total155138
TOWER LIMITED ANNUAL REPORT 2020 82TOWER LIMITED ANNUAL REPORT 2020 83CORPORATE GOVERNANCE AT TOWER LIMITEDCORPORATE GOVERNANCE AT TOWER LIMITED

General disclosures of interest
During the financial year, Tower’s directors disclosed
interests, or a cessation of interests (indicated by an
asterisk (*)), in the following entities pursuant to section
140 of the Companies Act 1993.
Any cessation of interest that occurred after 30
September 2020 is indicated by two asterisks (**).
Any disclosure of new interests that occurred after 30
September 2020 is indicated by three asterisks (***).
WarrenLee
MyState Limited
Director
MyState Bank Limited
Director
TPT Wealth Limited
Director
MyState Queensland Limited
1
Director
Go Hold Limited
Director
Go Blank Limited
Director
MetLife Insurance Limited
Director
MetLife General Insurance Limited
Director
SteveSmith
Kinrich Trust
Trustee
Kinrich Holdings Limited
Director
Summerlee Investments Limited
Director
Unison Securities Limited
Director
Unison Capital Advisors Limited
Director
Pascaro Investments Limited
Chair
Trebol Investments Limited and subsidiary companies
Director
Rimu SA (Chile) and subsidiary companies
Director
The National Foundation for the Deaf Incorporated
Board Member
Good Soundz Limited
Board Member
MichaelStiassny
Bengadol Corporation Limited
Director
Emerald Group Limited
Director
Gadol Corporation Limited
Director
Geffen Holdings Limited
Director
Michael Spencer Limited
Director
Ngāti Whātua Ōrākei Housing Trustee Limited
Director
Ngāti Whātua Ōrākei Whai Rawa Limited
Chair
Plan B Limited
2
Director
Poukawa Estate Limited
Director
Queenstown Airport Corporation Limited

3
Director
Sasha Properties Limited
4
Director
Ted Kingsway Limited
Director
The Institute of Directors in New Zealand Limited
5
Director
UCI Holdings Limited
6
Director
Financial Markets Authority
7
Board Member
Whai Rawa GP Limited
Director
Whai Rawa Kainga Development Limited
Director
LPF Group Limited
Director
New Zealand Transport Agency
8

Chairman
MS10 Limited
Director
Morgan HoldCo Limited
Director
Remuera Investments Limited
Director
Te Waenga Ltd
Director
GrahamStuart
Leroy Holdings Limited
Director
EROAD Limited
Chair
VinPro Limited
Director
NorthWest Healthcare Properties Management
Limited
Director
Metro Performance Glass Limited
9

Director
Wendy Thorpe
Online Education Services Pty Limited
Chair
Very Special Kids
Director
Epworth Foundation
Director
Ausgrid Asset Partnership
Director
Ausgrid Operator Partnership
Director
Plus ES Partnership
Director
Australian Central Credit Union Ltd T/A People’s
Choice Credit Union
Director
MarcusNagel
3Arrow AG
10
Director
1. Warren Lee’s directorship of MyState Queensland Limited ceased on 20 February 2020
2. Michael Stiassny’s directorship of Plan B Limited ceased on 3 April 2018
3. Michael Stiassny’s directorship of Queenstown Airport Corporation Limited
ceased on 30 October 2020
4. Michael Stiassny’s directorship of Sasha Properties Limited ceased on 20 August 2020
5. Michael Stiassny’s directorship of The Institute of Directors in New Zealand Limited
ceased on 15 June 2017
6. Michael Stiassny’s directorship of UCI Holdings Limited ceased on 2 February 2018
7. Michael Stiassny’s Board membership of the Financial Markets Authority
ceased on 29 September 2020
8. Michael Stiassny’s chair and directorship of New Zealand Transport Agency
ceased on 26 April 2019
9. Graham Stuart’s directorship of Metro Performance Glass Limited
commenced on 1 December 2019
10. Marcus Nagel’s directorship of 3Arrow AG commenced prior to his appointment
as director of Tower
The following declarations of interest were made by
directors of Tower subsidiaries during the year ended 30
September 2020:
BarryWhiteside
1
Kontiki FinanceDirector
Pacific Catastophe Risk Insurance CompanyDirector
Bayly TrustDirector/Trustee
1. Barry Whiteside is a director of Tower Insurance (Fiji) Limited and Southern Pacific Insurance
Company (Fiji) Limited (appointed on 27 July 2020) and was appointed to the companies
disclosed in the table above prior to his appointment as a director of the Tower subsidiaries.
Specific disclosures of interest
During the financial year, no subsidiary of Tower entered
into any transaction in which directors were interested.
Accordingly, no disclosures of interest were made.
Donations
During the financial year ended 30 September 2020,
donations made by Tower Limited and its subsidiaries
totalled $106,091.60.
Director trading in Tower securities
Directors disclosed the following acquisitions and
disposals of relevant interests in Tower securities during
the financial year ending 30 September 2020 pursuant to
section 148 of the Companies Act 1993.
DIRECTOR
DATE OF
DISCLOSUREINTEREST
NUMBER
ACQUIRED
(DISPOSED)
CONSIDERATION
(NZ$)
Wendy Thorpe23 Oct 2019Beneficial1,250700.00
Michael Stiassny23 Oct 2019 Beneficial98,86655,364.96
Graham Stuart23 Oct 2019Beneficial25,00014,000.00
Steve Smith23 Oct 2019Beneficial4,6152,584.40
Warren Lee23 Oct 2019Beneficial9,1005,096.00
Marcus Nagel23 Oct 2019Beneficial126.72
Shareholder analysis
Tower’s shares are quoted on both the NZSX and ASX.
As at 21 October 2020, 17,630 Tower shareholders
held less than A$500 of Tower shares (i.e. less than a
marketable parcel as defined in the ASX Listing Rules),
amounting to a total of 7,347,114 of the Tower shares on
issue. In comparison, a ‘minimum holding’ under the NZX
Listing Rules means a holding of shares having a value
of at least NZ$1,000. As at 21 October 2020, 20,524
Tower shareholders held less than NZ$1,000 of Tower
Shares (being, a parcel size of 1,852 at $0.54 per share),
amounting to a total of 11,220,393 of the Tower shares on
issue.
Total voting securities
In October 2019, Tower raised additional capital through a
pro rata renounceable entitlement offer. As at 21 October
2020, Tower had 421,647,258 ordinary shares held by
24,984 holders. By comparison, on 28 November 2019
(i.e. the date used for the 2019 Annual Report), Tower
had 421,647,258 ordinary shares held by 25,383 holders.
Tower’s ordinary shares each carry a right to vote on any
resolution on a poll at a meeting of shareholders. Holders
of ordinary shares may vote at a meeting in person, or by
proxy, representative or attorney.
The address and telephone number of the office at which
the register of Tower securities is kept is set out in the
directory at the back of this Annual Report.
Tower Limited shareholder statistics
(as at 21 October 2020)
HOLDING RANGE
HOLDER
COUNT
HOLDER
COUNT
%
HOLDING
QUANTITY
(ORDINARY
SHARES)
HOLDING
QUANTITY
%
1 - 1,00017,71370.907,429,9501.76
1,001 - 5,0004,97419.9110,252,1392.43
5,001 - 10,0008313.335,942,5461.41
10,001 - 100,0001,2575.0339,147,7129.28
100,001 and over2090.84358,874,91185.11
Total24,984100421,647,258100
Credit rating
Global rating organisation A.M. Best Company issued the
following ratings of companies:
Tower Insurance Limited
Financial Strength Rating A- (Excellent)
Issuer Credit Rating A-
Effective 16 March 2020
Tower Limited
Issuer Credit Rating BBB- (Good)
Effective 16 March 2020
Waivers
There were no applications to NZX or ASX for any
waivers, or any waivers relied upon by Tower, in the
financial year ending 30 September 2020.
Interests register
Tower and its subsidiaries are required to maintain an
interests register in which the particulars of certain
transactions and matters involving the directors must
be recorded. The interests register for Tower Limited
is available for inspection on request by shareholders.
Tower’s constitution provides that an ‘interested’ director
may not vote on a matter in which he or she is interested
unless the director is required to sign a certificate in
relation to that vote pursuant to the Companies Act 1993,
or the matter relates to a grant of an indemnity pursuant
to section 162 of the Companies Act 1993.
TOWER LIMITED ANNUAL REPORT 2020 84TOWER LIMITED ANNUAL REPORT 2020 85CORPORATE GOVERNANCE AT TOWER LIMITEDCORPORATE GOVERNANCE AT TOWER LIMITED