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Ann: ADDRESS: TWR: Annual Meeting Address

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    11/02/2015 10:00
    REL: 1000 HRS Tower Limited
    ADDRESS: TWR: Annual Meeting Address
    11 February 2015
    Market Information
    NZX Limited
    Level 2, NZX Centre
    11 Cable Street
    New Zealand
    Company Announcements Office
    Australian Stock Exchange Limited
    Exchange Centre
    Level 6, 20 Bridge Street
    Sydney NSW 2000
    TOWER Limited: Annual Meeting Address
    Attached is a copy of the address to the annual meeting of shareholders.
    Michael Boggs
    Chief Financial Officer
    TOWER Limited
    ARBN 088 481 234 Incorporated in New Zealand
    11 FEBRUARY 2015
    Ladies and Gentlemen
    TOWER is now a focused general insurer following our multi-year corporate
    Our divestment programme has realised significant value for shareholders.
    TOWER has returned $179 million via buybacks and all of the company's debt
    has been repaid. Total Shareholder Return for the year is 18.1%.
    We now have a more efficient and agile business with the resources to take
    full advantage of the opportunities for growth that we have identified in New
    Zealand and the Pacific Islands.
    TOWER achieved a group net profit after tax (NPAT) of $23.6 million for the
    year ended 30 September 2014.
    It is particularly encouraging that general insurance underlying net profit
    after tax grew 32.3% to $25.1 million in FY2014.
    TOWER is - and will continue to be - a focused Kiwi general insurer offering
    an attractive, independent alternative to the big foreign brands.
    We have been successful in increasing the profile of our brand, launching
    innovative insurance products and improving customer service. These are all
    important parts of our general insurance growth strategy.
    Highlights for FY2014 included an encouraging 79.1% increase in underlying
    net profit from the Pacific, which we see as a growth engine for the company.
    Rebuilding Canterbury remains an important focus for TOWER, the insurance
    industry, and New Zealand as a whole. Despite remaining an industry leader in
    claims resolution, with 91% to date settled and closed, risks continue in
    regard to increasing costs and time delays. The Board is acutely aware of
    We continue to be on track to achieve 95% settled and closed claims by the
    end of calendar year 2015.
    Our sturdy capital position has allowed the return of $56.7 million to
    shareholders through buybacks in January 2014 and September 2014. The
    September buyback gave shareholders with small holdings a cost-effective way
    to sell their shares.
    You have indicated that dividends remain an important component of
    shareholder returns. The Board's policy is to pay out 90% to 100% of NPAT as
    In line with this, we declared a final dividend for FY2014 of 8.0 cents per
    share unimputed. This brought the full year dividend paid to you to 14.5
    cents per share, which is a 31.8% increase on the previous year.
    Given our capital position, as previously advised, we intend to undertake a
    further on-market share buyback of up to $34 million. We expect to be able to
    release further details this quarter.
    We strive to ensure the TOWER Board has the appropriate mix of skills and
    experience to deliver value for shareholders. During the year we were very
    pleased to welcome Rebecca Dee-Bradbury as a Director, who will stand for
    election today.
    John Spencer retires by rotation today, and is not seeking re-election.  I
    thank John for his valuable contribution to TOWER over the last 11 years and
    wish him all the best for his future endeavours.
    We have plans to review the Board's performance and continue refreshing it
    going forward.
    On behalf of the Board, I acknowledge the hard work and commitment of all our
    staff over the past 12 months. I thank CEO David Hancock for his dedication
    and strong leadership in establishing and executing a strategy for realising
    our potential in general insurance and enhancing shareholder value. The TOWER
    team has worked very hard to strengthen this business for the long-term.
    I would also today like to acknowledge the contribution of TOWER's Chief
    Financial Officer, Michael Boggs, who announced in late 2014 that he will be
    leaving TOWER. Michael has made a significant contribution to the business
    during his four years with TOWER which included being recognised as CFO of
    the year at the New Zealand CFO Awards in March 2014. Thank you very much
    Thank you again for your support of TOWER.
    I will now hand over to David to brief you in more detail on the 2014
    performance and the way forward.
    Chief Executive Officer's Address
    Thank you Michael. Good morning everyone and welcome, my name is David
    Hancock.  It is terrific to be here today and have the opportunity to meet so
    many shareholders who are as committed as I am to TOWER.
    TOWER has come through a period of significant change and we start 2015 as a
    pure general insurer. We are stronger, more focused and very well
    capitalised. This positions us for growth in general insurance in New Zealand
    and the Pacific.
    In November 2014 we announced our annual results.  These were encouraging
    given that the full benefits of the work we are doing to drive revenue, lower
    costs and lift shareholder returns are yet to be fully realised.
    Growth in underlying general insurance profit after tax of 32.3% to $25.1
    million was especially pleasing.
    This highlights healthy growth in general insurance, which we see as an
    attractive business in the region. The results were aided by 6.6% growth in
    Gross Written Premium, supported by premium increases across the industry.
    The Pacific had a strong profit rebound after the losses incurred in 2013 due
    to Cyclone Evan. We see the Pacific market offering attractive long-term
    fundamentals, and as a key growth engine of general insurance premiums as we
    look to build on our unique experience in the region that goes back more than
    100 years.
    In 2014 we experienced storms and adverse weather in New Zealand that
    impacted profitability. New reinsurance cover in place from 1 October 2014
    has the potential to reduce earnings volatility.
    Finally, as the Chairman has mentioned, we declared a final dividend for
    FY2014 of 8.0 cents per share unimputed. This brought the full year dividend
    paid to you to 14.5 cents per share, which is a 31.8% increase on the
    previous year.
    One of the milestones during FY2014 was the completion of the sale of our
    remaining life business, TOWER Life (N.Z.) Limited, in August 2014 for $36
    million.  This further release of capital has allowed us to review TOWER's
    capital structure and with the annual results, we announced our intention to
    undertake a $34 million share buyback to occur over the next 12 months.
    In November 2013 we began to actively monitor customer interactions through
    the recording of Net Promoter Score to measure customer satisfaction. This
    started at 6 in November 2013 and was 29 at the end of the financial year.
    As a people-focused business, we know that engaged staff drive a high
    performance culture and employee efficiency. Staff engagement is one of our
    three strategic pillars and we have invested heavily in our team over the
    past year, particularly in developing management capability.
    Our focus on customer service, product innovation, staff engagement and cost
    management is beginning to deliver results. Brand recognition, net promoter
    score and staff engagement measures have improved markedly in the last 12
    The industry continues to see increases in costs with regard to settling
    claims from the Canterbury earthquakes. For TOWER, these costs continue to be
    borne by EQC and our international reinsurers.
    The Board recognises the ongoing risk regarding these increasing costs and
    this is a key reason why it remains important for the company to maintain its
    strong capital position.
    The Board takes a close interest in our progress and just last week spent
    time in Christchurch to experience this first-hand.
    As the Chairman noted, we have made solid progress on the Canterbury rebuild,
    reaching to date 91% of all claims settled and closed for customers to date.
    TOWER reviews its earthquake provisions on a quarterly basis. Our quarterly
    review to December affirmed that there is no change required to the key
    February 2011 event provisions. However we continue to monitor this closely
    given the continued risk and time delays.
    The Pacific business enjoyed a strong rebound in earnings in FY2014 following
    the devastation of Cyclone Evan in FY2013 and now represents almost a third
    of underlying general insurance net profit.
    TOWER aims to deliver attractive shareholder returns by growing a general
    insurance business that is seen as a leading light in New Zealand and the
    Pacific Islands.
    To do this, our strategic pillars are financial performance, customer
    satisfaction and staff engagement.
    We have a clear strategy for growth and our approach to building shareholder
    value seeks to:
    -Drive growth and efficiency through staff engagement
    -Unlock significant brand potential through customer service
    -Maintain a leading position in attractive Pacific markets
    -Deliver financial performance
    -Efficiently manage risk and capital for better returns
    -Capitalise on the opportunities presented by industry consolidation.
    Based on these strategic themes, we have set a number of ambitious but
    achievable goals and exciting initiatives in 2015.
    We are aiming to make significant further progress on staff engagement,
    customer service, cost ratios and product innovation in 2015.
    We are looking to build on the improvements made to our operating platform
    and customer culture in FY2014, with a focus on reducing management expenses.
    Our staff have been enthusiastic about our move to new offices in both
    Auckland and Christchurch which better reflect our new direction and high
    performance culture.
    We continue to use Net Promoter Score as a benchmark for customer loyalty. We
    know that promoters will hold more policies with us, hold higher value
    policies and stay with us longer. Our goal is to lift NPS to 35 by September
    We also continue to focus on innovation. In 2014 we launched our
    award-winning SmartDriver app and our full replacement for house fire
    benefit, which have been very well received. Technological change will
    continue to have a significant impact on the industry, presenting
    opportunities to improve our service and offering.
    Capital management and shareholder returns remain key strategic outcomes.
    We have already spoken about our intention to undertake a further on-market
    share buyback of up to $34 million.
    You have indicated that dividends remain an important component of
    shareholder returns.  The Board has maintained our policy to pay out 90 to
    100% of NPAT as dividends, which supported a more than 30% increase in 2014
    We continue to be on track to achieve 95% settled and closed Canterbury
    earthquake claims by the end of calendar year 2015.
    With a strong focus on customers and staff, the third pillar of our strategy
    is financial performance.
    Our initiatives are focused on growing Gross Written Premium while reducing
    overall expense ratios through cost control.
    We are exploring opportunities to further expand our presence in the Pacific,
    which represents growth opportunities aligned to our core strength and
    Industry consolidation is expected to remain a trend in New Zealand
    insurance. TOWER will look to actively participate in this where there is
    benefit to shareholders.
    We are also working hard to broaden the strong portfolio of alliance
    relationships to enhance our distribution channels and in December announced
    a new partnership which will see us become Trade Me's insurance partner. This
    is in line with our strategy to expand our alliance portfolio and to drive
    policy growth through digital platforms.
    FY2014 was clearly a busy and productive year. It has been a period of
    significant change but we are now a more focused, nimble and stronger
    These are still early days in the implementation of our strategy but over the
    coming years we are expecting to see our hard work delivering revenue growth,
    lower costs and continued attractive shareholder returns.
    Over time this will support the continued recognition of the value of our
    quality general insurance business and the people that make it great.
    I would like to acknowledge the hard work and commitment shown during the
    year by the leadership team and all of our staff and partners in New Zealand
    and the Pacific. I would also like to thank the Board for its invaluable
    advice and support.
    Finally, I thank our shareholders and customers for giving us the opportunity
    to deliver insurance products and services they value and helping make TOWER
    even stronger.
    I'd like to now take the opportunity to share some insights into the
    innovative technology we're using in Christchurch to help repair earthquake
    damaged homes, through a short video clip.
    Those of you joining us on today's webcast can access the video outside of
    this presentation via the TOWER website.
    From the Chairman
    Thank you David.
    I would now like to take the opportunity to answer some questions that have
    been submitted to us in advance:
    When are you going to reinstate the DRP that we used to have?
    There are no current plans to reinstate the DRP, given the further intended
    capital return.
    Does TOWER Limited place any limit on the number of directorships that a
    member of the Board may hold?
    No, but the expectation is that our directors have appropriate capacity to
    fulfill their duties and obligations as directors of the company.
    I would also like to take this opportunity to remind you of the key
    performance indicators for the CEO.
    You will note that these are focused on delivering growth and total
    shareholder returns.  The KPIs are:
    -Financial Performance measured by net profit after tax
    -Capital Adequacy which is linked to maintaining regulated capital positions
    -Employee Engagement, measured by our Aon Hewitt staff engagement score
    -Customer Satisfaction, measured by our net promoter score
    -Shareholder returns measured by total shareholder return
    End CA:00260485 For:TWR    Type:ADDRESS    Time:2015-02-11 10:00:05
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