For personal use only

For personal use only

TOWER LIMITED ANNUAL REPORT 2021

OUR STRATEGIC PRIORITIES

02

UPDATE FROM THE CHAIR & CEO

04

2021 YEAR IN REVIEW

-GOOD GROWTH IN A CHALLENGING ENVIRONMENT

06

• Results achieved while navigating the challenges

07

• Impact of external factors

08

• Good growth in customers and premium

09

• Sharp focus on claims management

10

• Product, pricing, & underwriting enhanced through data

14

• Investing in digital platform for efficiency & scalability

15

• Management expenses improving while continuing to invest

16

• Strong capital & solvency, delivering shareholder returns

17

LOOKING FORWARD-LONG TERM GROWTH & IMPROVEMENT

18

• Supporting our people & communities

22

• Well positioned to deliver dividends & growth

24

BOARD OF DIRECTORS

26

CONSOLIDATED FINANCIAL STATEMENTS

28

• Financial Statements

30

• Notes to the consolidated financial statements

34

INDEPENDENT AUDITOR'S REPORT

74

APPOINTED ACTUARY'S REPORT

80

CORPORATE GOVERNANCE AT TOWER LIMITED

82

• Tower Directory

91

• Registrar

92

02

TOWER LIMITED ANNUAL REPORT 2021

OUR STRATEGIC PRIORITIES

OUR STRATEGIC PRIORITIES

TOWER LIMITED ANNUAL REPORT 2021

03

use only

OUR VISION- To deliver

1

beautifully simple & rewarding

experiences that our people

& customers rave about

For personal

5

2

OUR STRATEGIC

PRIORITIES

1. 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.

4

3

2. DIGITAL & DATA

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.

3. TALENT & 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.

4. 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.

5. PARTNER EVERYWHERE

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.

04

TOWER LIMITED ANNUAL REPORT 2021

UPDATE FROM CHAIR & CEO

onlyUPDATE FROM CHAIR & CEO

After a challenging year, our unique technology & distribution footprint have positioned Tower well to grow and deliver shareholder value.

Tackling the challenges

Strong and well capitalised

Positioned for long-term growth

The insurance industry has faced an

Above all, Tower remains a resilient,

Tower is delivering on its innovation and

incredibly challenging year. It has been

strong and well capitalised business.

growth strategy. Our flagship Tower

use

Direct business and unique partnership

characterised by a marked increase in

large events and large house claims,

Accordingly, we announced that based

distribution capability continue to go

as well as lower investment income

on Tower's ordinary dividend policy

from strength to strength. The Pacific

nd pandemic induced inflationary

of paying 60 to 80% of cash earnings

business has proven remarkably

pressures swiftly leading to increased

where it is prudent to do so, the Board

resilient through Covid and digitisation

business as usual claims costs.

declared a final dividend of 2.5 cents

will lead to further improvements in

per share, to be paid on the 2nd of

efficiency and competitiveness. Our

Tower has not been immune.

February 2022, bringing total dividends

leading technology partnerships are

for FY21 to 5 cents per share.

enabling the business to be increasingly

These challenges which were

nimble in responding to challenges and

emerging at the half year, continued

In March this year, the Reserve Bank

capitalising on opportunities.

to put pressure on profits during the

lowered Tower's solvency condition

econd half. Consequently, in the year

from $50m to $25m in recognition of

As we all recognise, it's been a difficult

to 30 September 2021, underlying

Tower's decreasing risk related to the

year on many fronts. However, despite

profit including large events was

Canterbury earthquakes. As at 30th

this, we are paying a dividend, we

$20.8 million (m), compared to

September, Tower's New Zealand

remain strong and well capitalised, and

$28.4m in the prior year. Reported

Parent solvency ratio was 271% and

we have achieved sustained premium

profit including large events was

the company was holding $56.6m

growth, reaching a milestone this year,

$19.3m, up from $11.2m at the full

above its target solvency margin.

with Tower writing more than $400m

personalyear 2020 (which included a $9.5m

Considering current opportunities

in premiums.

impact from the settlement with the

Earthquake Commission). It has been a

and our capital position, the Board

These hard won victories are a credit

tough year, and we acknowledge and

has proposed the return of $30.4m

to Tower's focused strategy and

share our shareholders' frustration.

in excess capital to shareholders, by

the dedication of the people who

way of a compulsory share buyback,

implement it. In short, even with the

We are well underway addressing

under a Court Scheme of Arrangement.

obstacles of 2021, Tower continues to

these issues and their impact on

This is subject to shareholder approval,

be well positioned for long term growth.

profitability across the business.

High Court approval and Inland

For

Revenue approval.

Most significantly, we have already

implemented rating and underwriting

changes including the introduction of

MICHAEL

a full house fire replacement cap and

BLAIR

risk‐based pricing for inland flooding.

STIASSNY

TURNBULL

Chairman

CEO

These actions are a substantial

response, and their benefit will continue

to be realised throughout FY22.

UPDATE FROM CHAIR & CEO

TOWER LIMITED ANNUAL REPORT 2021

05

06

For personal use only

TOWER LIMITED ANNUAL REPORT 2021

2021 YEAR IN REVIEW

2021 YEAR IN REVIEW

-GOOD GROWTH IN A CHALLENGING ENVIRONMENT

Our leading online presence, combined with our unique partnerships, is helping to deliver consistent growth ahead of the market in New Zealand.

Tower's FY21 results were achieved while navigating a challenging external environment. Our investments in technology mean we are well placed to respond rapidly with rating and underwriting actions to address these challenges.

We are pleased to resume shareholder dividends after a five-year hiatus. The total dividend represents a dividend pay-out ratio of 80% of cash earnings and reflects our strong capital position.

Considering current opportunities and the company's capital position, the Board has proposed the return of $30.4m excess capital to shareholders by way of a compulsory share buyback.

2021 YEAR IN REVIEW

REPORTED PROFIT AFTER TAX ($M)

$19.3m

$19.3

$16.8

$11.2

FY19 FY20 FY21

UNDERLYING NPAT ($M)

$35.4

$30.8

$28.4

$7.0

$10.0

$0.9

$28.4

$27.4

$20.8

FY19

FY20

FY21

Underlying NPAT ($m)

Large events

Underlying NPAT does not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently it may not be comparable to similar measures presented

by other reporting entities and is not subject to audit or independent review. Underlying NPAT is derived from reported profit after tax adjusted for any large or non-recurring items that may obscure trends in Towers underlying performance. For FY21 these are adjustments in relation to Canterbury impact, Insurance Face decommissioning and SaaS impact.

TOWER LIMITED ANNUAL REPORT 2021

07

Results achieved while navigating the challenges

Tower's journey to deliver a beautifully simple and rewarding customer experience through an innovative, quality product range, enabled through digital, data and leading partnerships is gaining momentum.

These gains have supported reported profit after tax up 72%, from $11.2m in FY20. Underlying net profit after tax (including large events) was at $20.8m, versus $28.4m in FY20 reflecting the combined impact of an increase in large events and large house claims, Covid-related claims costs inflation, and lower investment income.

Tower's combined operating ratio increased 2.7% during the prior year to 91.4%, reflecting claims inflationary pressure and higher large events.

Offering customers a simple and rewarding experience through our leading technology platform has helped grow Tower's gross written premium (GWP) to a milestone $404m, up 5% on the same period last year.

Key successes include reaching a $42.1m settlement with EQC and the Reserve Bank recognising our decreasing risk related to the Canterbury earthquakes by reducing our licence condition, from $50m to $25m. We also further simplified our structure, placing us on a solid foundation to deliver long term earnings, dividends, and sustained growth.

By continuing to scale our cloud-based digital and data platforms, and enhancing our Tower Pacific and Partnerships business, we are heading in a positive direction in line with our strategy. In future, we'll keep offering a versatile, varied product suite, coupled with greater customer satisfaction and engagement, to deliver improved retention and growth.

Our focus on exceptional customer service remains unchanged, underpinned by investment in growing and developing our amazing Tower team.

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Tower Limited published this content on 21 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 December 2021 20:39:01 UTC.