Tower Limited (TWR) Earnings Call Transcript & Summary

Morena, good morning, and thank you for making the time to join us online this morning. I'm Michael Stiassny, Chairman of Tower and as it is now 10:00, I am pleased to open Tower's Annual Shareholders Meeting. On behalf of my fellow directors, welcome and thank you for joining us via the Computershare online meetings platform. This is your meeting. And given the ongoing restrictions imposed by the pandemic, we appreciate you making the effort to join us remotely today. With me this morning and following strict COVID-19 protocols in Tower's Auckland office are directors, Steve Smith and Graham Stuart. And joining us by the video link due to COVID-19 travel restrictions are your directors, Warren Lee, Wendy Thorpe and Marcus Nagel. Also, joining us in the room today are our Chief Executive Officer, Blair Turnbull; and our newly appointed Chief Financial Officer, Paul Johnston. Our auditors, PricewaterhouseCoopers, are also present virtually and will be available to answer shareholder questions. As today's meeting is being held online via the Computershare meeting platform, we have shareholders, proxies and guests attending the meeting virtually. Shareholders and proxies are able to ask questions and submit votes. I encourage you to submit questions via Computershare at any time during the meeting. If you do have a question, please select the Q&A tab on the right half of your screen, type your question into the field and press send. Your question will be submitted immediately and specific questions on any of the resolutions to be considered will be answered as the relevant, quick resolution has put forward and general questions will be addressed in question time later in the meeting. [Operator Instructions] Questions may be moderated or if we receive multiple questions on a topic, they may be amalgamated. However, questions will not be censored unless they are unseemly or rude. If we run out of time to answer all questions in the course of this meeting, we will answer them directly via e-mail and post responses to our website. Voting today will be by way of poll on all items of business. To provide you with enough time to vote, I will shortly open the voting for all resolutions. At that time, if you are eligible to vote at this meeting, you will be able to cast your vote under the Vote tab. To vote, simply select your voting direction from the options shown on screen. You can vote for all resolutions together, at once, or for individual resolutions. When the tick appears, your vote has been cast. To change your vote after that time, simply select, Change Your Vote. You can do this until I declare voting closed. I now declare voting open on all items of business. The resolutions will be open in the Vote tab. You may submit your votes at any time, and I will let you know in advance that voting will be closing. Here is today's meeting agenda. We will provide you with an update on last year's performance and our strategy as well as the progress we've made at Tower in recent months. Following Blair's presentation, we will move to the formal resolution set out in the notice of meeting. Let's now move on to the formal part of the meeting. Are there any apologies? Thank you. The company's constitution requires a quorum of 25 shareholders for this meeting. As confirmed by Computershare, this requirement has been met and a quorum exists. In addition to those attending in person today, 550 shareholders holding a total of 142,670,525 shares have appointed proxies, including proxies instructed to abstain. The appointed proxies represent 33.84% of valid securities voted. In my capacity as Chairman of the meeting and in my own name, I hold proxies for 460 shareholders representing 142,051,439 shares or 33.69% of all shares. I intend to vote all undirected proxies I have received in favor of resolutions 1, 2, 3, 4 and 5. The annual report was made available on Tower's website on the 22nd of December 2021. I propose that we take the annual report and Notice of Meeting as read. Before I talk about Tower's performance over the past year, I wish to take a moment to talk about the sad recent events in Tonga. The level of devastation is enormous and is often the case, will have the largest impact on those with the very least. We are grateful that our team up there were unharmed and are now able to assist our customers to large claims and pick up the fabric of their lives. However, the impact of the volcanic eruption and Tsunami on a community ill-equipped to cope with the disaster of this magnitude was a timely reminder of the need to do more to support resilience in the Pacific. Tower is proudly a New Zealand and Pacific insurer and takes its responsibilities to all those communities equally seriously. Insurance plays a vital role in economic resilience, enabling people to get on with their lives, remain productive and to face the future with confidence. And as a business operating in the Pacific, we are mindful that access to insurance is not a level-playing field. The proportion of people who have insurance in Tonga and indeed across the Pacific is low, and inevitably in times of natural disaster, substantial New Zealand aid is required to deliver a meaningful response. As the effects of climate change intensify in this region, this situation is only going to worsen. Without significantly increasing levels of insurance cover in the islands, reliance on New Zealand and indeed, other governments to provide relief is going to increase. We believe that by increasing rates of insurance in the Pacific, those nations will be far less reliant on foreign aid and disaster relief and can improve their long-term economic resilience. For some time, Tower has been working with other businesses who operate in the Pacific to look for ways to address this in equity and achieve a win-win for both New Zealand and Pacific Island nations. We are committed to finding a collective solution for this challenge, and we are doing our part by digitizing in the Pacific to help improve access to insurance. As we announced in our market update on the 21st of January, Tower is in a strong position to support our customers throughout Tonga's recovery. As an insurer, we plan for these events and our reinsurance excess is well within the $20 million provided for large events in our FY '22 guidance. The situation in Tonga is a timely reminder of changes closer to home in the future of private insurance in New Zealand. In September, the government announced its decision to increase the EQC building cap from $150,000 to $300,000. The damage caused by natural disasters, including earthquakes, Tsunamis and volcanic eruptions. The government has said it expects this change to lead to reduced insurance premiums and should that fail to occur, it is prepared to look at other options to assure New Zealanders the market is competitive. Unfortunately, the government's expectation of the impact of the raising of the EQC cap fails to take into account the full range of factors that drive premium costs. The EQC levy is only one component. Other considerations include inflation, supply chain issues, the rapidly rising cost of construction and most importantly, the reinsurance market which underwrites and supports the majority of New Zealand seismic risk. Tower is all for competition. Our model is predicated on offering an attractive alternative to the major Australian insurers. But we equally believe that ensuring the industry remains sustainable is essential. From a customer point of view, the changes to the EQC cap, we'll also see insurance costs rise for homeowners in less earthquake prone areas. While Tower has worked hard to remove the inherent unfairness of cross-subsidization by implementing a transparent, risk-based pricing, the EQC building cap will partly undo that work. Homeowners in high-risk areas like Wellington, Hawke's Bay and Gisborne will have their premiums subsidized by every other kiwi. Tower believes that the increase in EQC cap has the potential to undermine an already competitive industry that is vital to support New Zealanders in time of greatest need, and we do not wish to see a return to subsidization that is inequitable and penalizes our customers who live in lower seismic areas. Looking back on the past year, it is clear that the insurance industry faced numerous challenges. There was a marked increase in large events and large house claims. Pandemic-induced supply chain and inflationary pressures swiftly led to a general increase in business as usual claims costs and low interest rates meant lower investment income. Tower was not immune. It was a tough year that saw our profits squeezed. The Board acknowledges and shares your frustration, but can also confirm that actions taken to address these issues in the final quarter of the 2021 financial year are making inroads. In particular, the introduction of a full house fire replacement cap and risk-based pricing for land flooding will continue to have a positive impact in 2022. Along with the rest of the world, the COVID-19 pandemic continues to challenge New Zealand and the Pacific. Our business continuity practices have ensured we put people first. The entire Tower workforce is set up to work remotely, so they can remain safe while meeting the needs of our customers. You will also be aware that we were able to recommence the payment of dividends with a full year dividend of $0.05 per share being declared. There's no question it's been a long journey for Tower and you as our shareholders to get to this point, and we acknowledge and we thank you for your continued support. We look forward to consistently making dividend payments in a prudent and appropriately cautious manner. Shortly, we're also going to vote on a proposal for a capital return of $30.4 million to shareholders. As advised in our full year results in March 2021, the Reserve Bank lowered Tower's solvency condition from $50 million to $25 million. As at the 30th of September 2021, Tower's New Zealand parent solvency ratio was 271% and the company was holding $56.6 million above its target solvency margin. We have always said that we will not hold on to capital unnecessarily. Therefore, it makes sense at this time to return excess capital to all shareholders. Innovation and growth are the cornerstone of Tower strategy, and this approach saw Tower write more than $400 million in premiums in the financial year, a significant milestone. More customers than ever are choosing Tower and using our online offering. Our flagship Tower Direct business and unique partnership distribution capability continue to grow from strength to strength. Technology is also making a significant contribution, enabling the business to quickly respond to challenges and to indeed capitalize on opportunities. Blair will update you on how the strategy is progressing. But what I can say is that the business is in good heart. Your company remains well capitalized and positioned well for long-term growth despite the obstacles faced in 2021. On behalf of the Board, I'd like to thank Blair, the management team and our frontline teams and indeed all our staff for their continued resilience and sustained focus in difficult circumstances. The impact of COVID-19 restrictions on all of us and indeed our own workforce has been significant and they have continued to deliver good outcomes for customers despite working from kitchen tables, bedrooms and lounges, and we are indeed grateful for their efforts. I'll now hand over to Blair who will take you through the results and our plans for the business before we take questions.

Kia ora and thank you, Michael. A warm welcome to everyone joining us today. I'm delighted to share with you our full year 2021 results as well as a performance update for the first 3 months of the 2022 financial year. I would also like to take this opportunity to give you an overview of Tower's plans to continue growing and innovating in the future. Despite the headwinds, our FY '21 results demonstrate the resilience of our customer and digitally led strategy. We are continuing to grow to drive down expenses and to respond quickly to the changing external environment. And you can be confident that we are very focused on addressing the FY '21 challenges, improving profitability and continuing to see growth through our clear technology, customer experience and partnership advantage. Our core strategy is around personal lines and small to medium-sized commercial lines in New Zealand and the Pacific region. We have a set of 5 strategic priorities. We are relentlessly focused on our customers, deepening our relationships with them through rewards, new products and other offerings that make sense and drive value. We are leveraging our digital technology using the insights from our data to make our customers' lives easier and to better understand their needs. We are finding the best organizations to partner with to boost our offering, develop new products and deliver services in better ways and more efficiently. We understand that our people are the ultimate drivers of our success, as they are on the front line, building our customer relationships. So we're embracing agile ways of working and focusing on our culture and talent. And importantly, we are committed to maintaining a strong capital and solvency structure, delivering value for you, our shareholders. Tower's FY '21 results were achieved while navigating a challenging external environment which impacted profit. Reported profit, including large events, was $19.3 million for the year, up 72% from $11.2 million in the prior year. Underlying net profit after tax, including large events, was $20.8 million versus $28.4 million in FY '20. Tower's combined operating ratio was 91.4% versus 88.6% in the prior year, reflecting claims, inflationary pressure and higher large events. Offering customers a simple and rewarding experience, coupled with fair and transparent pricing and a richer product suite has helped grow Tower's Gross Written Premium to a milestone $404 million, up 5% on the same period last year. In insurance, there will always be volatility in claims. It's the nature of our business. However, it was the unusual combination of 4 external factors that weighed on our profits in FY '21. Inflation contributed an additional $7.1 million to business as usual claims costs. Seven large events contributed $13.9 million in costs versus $9.7 million in FY '20. Large house claims rose significantly from 57 in FY '20 to 92 in FY '21. And net investment income before tax dropped $5.1 million to $0.2 million. While the impact of any one of these factors alone would be sustainable in a normal year with the ongoing effects of the pandemic, this was not a normal year. Inflation accelerated rapidly in the second half of FY '21 with house construction reaching double digits at 12%. Supply chain issues for new vehicles drove up the value of secondhand vehicles by 13% year-on-year, significantly increasing the cost of total lost motor claims. The COVID-19 lockdown late in the year resulted in higher levels of open claims and therefore, higher claims costs due to significant delays in completing repairs as repairers struggled to obtain parts. We have taken decisive action to address these challenges. Tower's unique advantage is our ability to be nimble in identifying emerging trends and quickly addressing them utilizing the digital and data technology we've invested in. In the financial year, we took a number of decisive actions to address claims inflation, and these are delivering improvements. We quickly applied premium increases across Motor and Home to offset inflation. And this change will flow through the portfolio over the coming year. At the same time, we are continuously working with our supply chain to moderate the impact on customers as much as possible. In FY '21, we undertook a full supplier contract review, which resulted in better pricing and efficiencies. And this included our focus on ensuring claims are prioritized through our preferred referral network. Automation and data management continue to be at the forefront of our response through optimizing digital claims management to improve the quality of claims assessment. Repair and settlement. 1/3 of all claims are now lodged online, and we are working to increase this. Through our leading technology capability, we swiftly adjusted our underwriting and removed the full replacement for house fire benefit from our policies, instead capping it to an extended sum insured amount. A significant achievement was launching our risk-based pricing policy for flooding to the market in November last year. This received a very positive response from customers and stakeholders who recognize that Tower is leading the way in fairer and more transparent insurance pricing. As part of Tower's proactive approach to fraud management, we have partnered with Dutch AI-based solution FRISS to automate and accelerate our claims process. And in the coming months, this new tool will allow us to quickly and accurately screen and identify potentially fraudulent claims. And furthermore, it will help us to fast track those claims with low fraud risk to allow for a faster process for customers. We have continued to grow ahead of the market, particularly in New Zealand where GWP rose 7.9% to $350 million in FY '21. Our customer base, grew 5% to 304,000 customers in the year, and our market share of New Zealand personal lines increased to 9.2%. We aim to grow through a balanced mix of attracting new customers, deepening existing customer relationships through our expanded product range and competitive premium rating adjustments where appropriate. And pleasingly, our FY '21 growth also reflects improvements in customer satisfaction, as evidenced by our New Zealand Net Promoter Score, increasing to 43% versus 27% in the prior year. Our flagship Tower Direct business went from strength to strength, recording 132,000 MyTower registrations in FY '21 compared with 45,000 in the prior year. And Tower Direct GWP grew to 273 million, but noting this now includes the ANZ legacy portfolio, which is midway through migration. This was previously included in the partnership business which has reduced accordingly. Our partnership business also delivered positive growth as we continue to transform from a more traditional, higher commission portfolio to a new generation of partnerships. Our Pacific business GWP declined by 10% due to a combination of product rationalization, targeted underwriting and economic challenges related to COVID-19. However, that remains very resilient. Our growth has come from a relentless focus on our customers and a commitment to building deeper, more engaged customer relationships. And we do this by delivering the products, experiences and innovations people value along with fair and transparent pricing. And this has allowed us to attract new customers and keep existing customers for longer. We know that transparency and trust is more important than ever. And so last year, we raised the benchmark around open and transparent pricing for customers. Through MyTower, we are now presenting visual breakdowns of customer premiums in an easy-to-understand chart, which compares year-on-year changes for the various pricing elements. In November, we became the first New Zealand insurer to provide customers with a risk rating for flood and earthquake hazards for their homes. As we did with earthquake risks, we are also using data to better match flood premiums to risk. We believe that risk-based pricing is a fairer way to structure insurance to ensure that customers don't pay for risks they don't have. In FY '21, we further enhanced a quick quote process through smart use of data and algorithms to make it faster and easier experience for our customers. And this has helped contribute towards the number of quotes issued by Tower Direct business growing by 31% compared to FY '20, with the bulk of these sent through digital channels. We also trained our chatbot called Charlie on an additional 1,000 queries and phrases, which made it easier for our customers to do simple tasks and quickly get the answers they need. Our digital platform has allowed us to quickly develop and bring to market new and enhanced products to deepen our relationships with customers, improve revenue and increase retention. For example, with online boat insurance, we've given Kiwi boaties the ability to have all their things insured in one place and get a quote online. We also upgraded our motor offering to cover more electric vehicles and a home offering with a new sustainability benefit, which contributes $15,000 to sustainable products for a total rebuild. In December 2021, we launched Tower Pet Insurance and prior to that, we launched a new travel product in anticipation of future travel bubbles and border openings. In Fiji and Vanuatu, we launched new digital home and contents and motor policies. This year, we're developing a home renovation product and planning to upgrade our rural and SME offerings. We've also made insurance more accessible for our customers, particularly in the Pacific, where we became the first insurer to provide an online general insurance offering. Through our corporate partnerships such as Auckland Council and New Zealand Defense Force, we are bringing insurance to people's workplaces. And during the year, we continued to engage at GoCarma customers who drove 10.5 million kilometers around New Zealand receiving safe driving tips and feedback, as well as rewards and offers. In the year, we were proud to be awarded 2 Canstar Car Insurance Awards for 2021, Insurer Of the Year and Outstanding Value. Our ability to continue delivering these customer innovations as a leading digital and data business is only possible with a strong team and a positive workplace culture. On the 17th of January, we're pleased to welcome 2 new executives to the Tower whanau, a new CFO, Paul Johnston, is an internationally experienced finance professional with more than 15 years senior experience in the insurance and financial services sectors in the U.K. and Asia. And Paul has returned home to New Zealand after more than 15 years offshore, and we are delighted to have him at Tower. Steve Wilson also joined the Tower executive team as our Chief Claims Officer. He brings to Tower a wealth of experience across the breadth of claims operations with experience both in Australia and Asia. And having Steve's claims and digital transformation experience on Board will be invaluable to us. During the year, we made great strides with our flexible working capability with all staff now able to work remotely. Operating on a common desktop platform that enables us to move workloads across our office sites and support efficiency. While our people can work from home, we know it is not easy to navigate the challenges of COVID-19 lockdowns, both in New Zealand and across the Pacific. We have put in place several initiatives to support our people during this time, and we are pleased our employee engagement score has increased over the past year. It's also good to see the cultural diversity across our business continues to be strong and well over half of our people identify as non-European. In the coming year, we will continue to prioritize and invest in our people to ensure we have a diverse, inclusive culture, where everyone can contribute and feel valued. Last year, we also started our sustainability journey with the development of an ESG strategy that will guide how Tower manages its environment, social and governance issues in the future. Importantly, we have now measured our total carbon emissions across our New Zealand and Pacific operations and have set a science-based target for meaningful reduction towards a 0 carbon future. In New Zealand parent solvency ratio was 271%, which is $56.6 million above our target solvency margin and reflects our strong capital position. And during the year, we were pleased to resume dividend payments after a 5-year hiatus. The Board has confirmed a full year dividend payment of $0.025 per share, bringing total dividends for FY '21 to $0.05 per share. The total dividend payment is $21 million, with $10.5 million to be paid today, the 2nd of February 2022. This payment is in line with the ordinary dividend policy of paying 60% to 80% of adjusted earnings where prudent to do so. Tower is in a strong capital position, and we continue to look at acquisitions, which are sensible and value accretive for shareholders. In the year, we acquired the ANZ legacy portfolio, and we completed the acquisition of the remaining minority shares in National Pacific Insurance. However, having considered current opportunities and our capital position, the Board felt it would be appropriate to return excess capital to shareholders of $30.4 million, subject to necessary approvals being obtained. Turning now to our trading results for the first 3 months of our 2022 financial year. I'm pleased to say that we've had a good start to the financial year, while still navigating a challenging inflationary environment. In the 3 months to 31 December, we achieved $112 million of gross written premium GWP, representing growth of 12% on the same period last year. And this has been achieved by a combination of new business, improved customer retention and inflation-based rating adjustments. Our customer numbers continued to grow strongly as we welcomed another 6,000 customers over the quarter, increasing our customer base to 310,000, an increase of 24,000 customers year-on-year. Given the challenges we are facing around claims inflation, we are pleased that our claims ratio, excluding large events, has remained consistent with the same period in the prior year at 47% and our disciplined approach to controlling costs have seen management expenses remain consistent with the prior year at 38%. We are committed to supporting our Pacific communities, and we are proud of our 147-year history in the Pacific. Our hearts go out to everyone affected in Tonga, as well as the Tongan community in Aotearoa, New Zealand following the significant eruption of the underwater volcano and subsequent Tsunami in Tonga and surrounding areas. Our focus is on supporting our people and customers who have been affected by this natural disaster, and we are grateful that all our team members are safe. Our Nuku'alofa branch is open and assisting customers. To date, we have received 66 claims, mainly for damaged to commercial or domestic properties caused by the Tsunami. And right now, the removal of volcanic ash is the main priority for our customers and Tower has been running radio advertising to provide more helpful information on how to clean up ash and to encourage customers to make early contact with us. We are also fast-tracking assessments, thanks to our in-country expertise, and our ability to assess damage remotely. As you can see, Tower plans for such large-scale events. Alongside, a robust reinsurance program that underpins our resilience, we are in a strong position to support our customers and community with Tonga's recovery. We are currently assessing the financial impact of this event. Tower's reinsurance program provides up to $873 million of cover for catastrophe events. Our reinsurance excess for such events is $11.25 million, which is within the $20 million Tower has allowed for large events in FY '22. Our role as an insurer is to be there to help people when they need us most. This event in Tonga highlights the necessary and important role insurance plays in communities' economic resilience. There is no change to Tower's FY '22 underlying net profit after tax, NPAT guidance range of $21 million to $25 million. noting that this guidance assumes inflation pressures will continue throughout FY '22 and that the $20 million excess on Tower's aggregate reinsurance will be fully utilized. This represents a $4.4 million after-tax increase in the impact of large events when compared to FY '21. As the Chair previously noted, we look forward to consistently making dividend payments in a prudent manner and in line with Tower's dividend policy. In summary, FY '21 was a challenging year, and we've taken decisive actions to deliver improvements in FY '22. Tower is a well-capitalized business with a strong balance sheet and solvency margins. We have delivered customer and premium growth while further improving our management expenses. And in FY '22, our focus is on driving shareholder value by accelerating growth and innovation, continuing decisive action to address challenges with claims inflation and climate change risks and continuing to invest in our digital and data platform to drive efficiency and support growth. In the meantime, I'm pleased to say we've started this year well with a good first quarter performance. I will now hand back over to the Chair.

Thanks, Blair. I now propose that we move into the next item of business, which is shareholder resolutions, which are before the meeting. Resolutions 1 to 4 are ordinary resolutions, each passed by a simple majority of votes of those shareholders entitled to vote and voting on the relevant resolution. Resolution 5 relating to the return of capital is a special resolution requiring approval by a majority of 75% of those shareholders entitled to vote and voting on the resolution. As noted earlier, voting has already opened online and will close shortly after the discussion on these resolutions are completed, so everyone has the opportunity to cast their votes. Resolution 1, authorization to fix the remuneration of the auditor. The Companies Act provides that the company's auditor is automatically reappointed unless there is a resolution or other reason for the auditor not to be reappointed. The company wishes PricewaterhouseCoopers to continue as the company's auditor and PricewaterhouseCoopers has indicated its willingness to do so. Company Act provides that the fees and expenses of the auditors are to be fixed by the company or in the manner that the company determines at the annual meeting. The Board proposes they're consistent with best past practice. The auditor's fees will be fixed by the Board. I therefore record that the auditors, PricewaterhouseCoopers, are automatically reappointed as auditors of the company and move that the Board be authorized to determine the auditors' fees and expenses for the '22 financial year. At this point, I would also like to note that the New Zealand Shareholders' Association policy and international best practice is that the audit firm should not serve more than 10 years and that the lead audit partner should be rotated in 5 years to ensure the appropriate degree of independence is maintained. We agree with this view and have noted audit firm tenure and lead audit partner rotation information in the corporate governance statement on our website. Are there any questions?

There are no questions.

Thank you. I now move on to the reelection of directors. Warren Lee retires by rotation and being eligible offers himself for reelection. I will now invite Warren to address the meeting on his proposed reelection.

Thank you, Michael, and good morning, everyone. My name is Warren Lee, and I was appointed to the Tower Board in May 2015, and I'm up for reelection at this meeting of shareholders. I'm a chartered accountant and had an extensive executive career in financial services in Australia and Asia, including 2 CEO roles. I have 3 other financial services directorships, being MetLife Limited, MyState Limited and a start-up small business bank named Avenue. In addition to my position on the Tower Board, I'm also a member of the Audit Committee, Remuneration and Appointments Committee and act as Chair of the Risk Committee. The Tower business has developed significantly over the last few years with a focused digital and data strategy that efficiently delivers quality services to our current customers and our future customers in New Zealand and increasingly in the Pacific. We have resolved a number of historical issues, are well capitalized and have the right strategy and team to make the most of significant opportunities in both of these markets. I commend Blair and the team for keeping focus on business development even in the difficult times caused by COVID. And we can already see the growth of the company as we continue to invest for the future. This, coupled with strong capital and risk management is the way to deliver value for you, our shareholders and our other stakeholders. I'm very pleased to be involved with Tower, and if reelected, look forward to working with the other Board members and the executive as the Tower business continues its successful transition into the leading digital insurer in New Zealand and the Pacific. Thank you for your attention and your support.

Thank you, Warren. I will now move that Warren Lee who retires on rotation in accordance with NZX Listing Rule 2.7.1, be reelected as a Director of Tower Limited. Are there any questions?

There are no questions.

Thank you. I now move on to Graham Stuart, who also retires by rotation and being eligible offers himself for reelection. I now invite Graham to address the meeting on his proposed reelection.

Thank you, Michael. [Foreign language] Ladies and gentlemen, my name is Graham Stuart, and I welcome the opportunity to talk to you today. I'm seeking your support for my reelection to the Board. Over the past 9.5 years, I've been privileged to be elected and reelected on 3 occasions. It has been my intention to step down at this annual meeting. But COVID-19 and the restrictions that it has replaced on travel and physical meetings has meant that your Board hasn't yet been able to start a process to find new directors. For this reason, I am offering myself for reelection in order to be able to enable an orderly succession process to run. That said, my commitment and passion for Tower have not diminished. And if reelected, I will remain committed to working diligently for the continued success of the company and to ensure that it is governed and managed to high standards. Over the past 3 years since I last stood for reelection, my particular focus on the Board has been as Chair of the Audit Committee and as a member of the Risk Committee and the People and Appointments Committee. 18 months ago, we constituted a new standing committee of the Board, specifically to govern risk. Chaired by Warren Lee, this move has led to an important upgrade of the risk capabilities of the company. Outside these specific committee roles and the general governance work of the Board, the financial and capital position of the company has improved considerably, and it was particularly pleasing to be able to resume paying dividends after a 5-year break. Most importantly, the company is now well progressed on its journey to become New Zealand's leading digital insurance company. The outlook for Tower today is more positive than it has been at any time since the catastrophic grotesque earthquakes. Ladies and gentlemen, I am as many of you are a long-standing policyholder and a shareholder. It is a privilege to be a member of this Board also. I ask you and thank you for your support. Thank you.

Thank you, Graham. I will now move that Graham Stuart, who retires on rotation in accordance with NZX Listing Rule 2.7.1, be reelected as a Director of Tower Limited. Are there any questions?

There are no questions.

Thank you. And last, but not least, Marcus Nagel also retires by rotation and being eligible offers himself for reelection. I now invite Marcus to address the meeting on his proposed reelection.

Thank you, Chairman. Good morning, everyone. My name is Marcus Nagel. I was appointed to the Tower Board on the 14th of January 2019, and I'm seeking your support for my reelection. In addition to my 3 years on the Tower Board, I have significant expertise in the insurance sector and very senior leaderships within Zurich Insurance in Europe. In addition to that, I'm also serving as a nonexecutive Director of a very fast-growing insurtech in Switzerland called Jarowa. I hold the master's degree in banking finance from University in Frankfurt plus an MBA from Arizona State University in Arizona, United States. I'm currently based in Switzerland. So I would love to be in Auckland, but it's not possible due to the travel restrictions. But I'm pleased to support Tower's Management Board with my expertise from different angles and different geographies. As an adviser to Bain Capital, I represent Bain Capital's 19.99% stake in Tower. My position as a nonindependent director is supported by the Tower Board and it's important to note that Tower Board and Bain Capital have achieved and implemented necessary governance and confidentiality protocols to protect the interest of all shareholders. Over the last 3 years, I've been pleased to contribute as a member of 3 committees: the Audit, the Risk and the Remuneration and Appointments committees. While 2021 has been a difficult journey, Tower has navigated the external challenges well. It optimizes its capital position significantly and it's now in a position to propose the return of capital to all our shareholders. They also resumed the first dividend for a long period of time. Tower has built now a strong management team and culture over the last few years and is ready for growth. The Board has also made good progress in strengthening further the strategy and other parts of the management team. And I believe now that we have a very solid foundation to further grow the business based on 3 cylinders, Tower Direct, Partnerships and Pacific. I'm very pleased to be involved in Tower as we further develop our digital and data strategy to deliver innovative products and services that our New Zealand and Pacific customer will value. I thank you for your support. Thank you very much.

Thank you, Marcus, and I now move that Marcus Nagel, who retires on rotation in accordance with NZX Listing Rule 2.7.1, be reelected as a Director of Tower Limited. Are there any questions?

There are no questions.

Thank you. So I now move on to Resolution 5, which is the approval of the scheme of arrangement to return capital to shareholders. I will now move that the scheme of arrangement relating to the return of capital to shareholders as set out in the Arrangement Document, annexed to the Notice of Meeting dated 22 December 2021 be approved. Are there any questions?

There are no questions.

Thank you. As announced this morning to the stock exchange, we received last night IRD approval for the return of capital. The only conditions now remaining to be satisfied are shareholder approval of the scheme of arrangement, which I hope we will do shortly and final court orders. Assuming we receive both of these, our expectation is the payment will be made to shareholders around mid-March. That concludes our discussion on the items of business. So if you haven't already done so, could you please cast your votes now? Voting will close in approximately 2 minutes, and the votes will then be counted under the scrutiny of Computershare. We will now pause for a moment to ensure that all questions relating to resolutions have been received.

There are no further questions.

Okay. So let's move on. The final item on the agenda is questions and general business. At this point, I would also like to acknowledge, again, Steve Smith, who retires from the Tower Board with the effect from the end of this meeting. Steve has been a director of Tower since 24 May 2012. There is no doubt Tower today is a vastly improved company from the one Steve joined in the wake of the Christchurch earthquakes a decade ago. We're resilient, we're strong, well-capitalized business that is achieving sustained premium growth and delivering on our strategy of innovation and customer focus. On behalf of Tower Board and on behalf of you as shareholders, I would like to thank Steve for his considerable contribution to assisting and making this transformation over the last 10 years. Our recruitment process is underway for Steve's replacement, and the new director will be appointed to fill the casual vacancy and subject to reelection by shareholders at our next Annual Shareholders' Meeting. Are there any matters of general business or any other questions from the floor?

Yes. The first question I have is from Peter Morgan Hill. Should Tower look at reducing exposure to the Pacific Islands? It seems that the area is regularly being impacted by disasters.

Thank you for the question. We've been in the Pacific for 140 years, and we remain committed to supporting our customers and communities there. We're in a strong capital position. We have a very good reinsurance program. We plan for events, as sad as the event is with the Tonga volcanic eruption. We do plan for this. We're prepared for it, and we're supporting our customers and communities. I think as we look forward to our future strategy to support the Pacific, it's how we enable that. We're investing in digital because the one thing we know that is common across the Pacific countries is the mobile and the technology. That way we can reach our customers, we can give them a very good experience, and we can do it efficiently and effectively. And that is more aligned to how we operate in New Zealand. So again, we remain committed to the Pacific. It is part of our Tower DNA. Now we're enabling ourselves to be more efficient and effective in how we support that.

Thank you, Blair.

A question from the New Zealand Shareholders Association and also a similar question from Gordon Laurie Wallace and [indiscernible] Trustees Limited. Do you have an estimate of the total value of claims arising from the Tonga eruption? And does this figure include damage in adjacent jurisdictions such as Fiji and New Zealand? Also, what is the extent of your liability in relation to the Tonga earthquake? Did you have many claims for damage to boats in relation to the Tsunami wave that hit New Zealand?

Maybe if I can tackle that in reverse list. The first one for New Zealand. We were -- some of our staff were on the scene in Tutukaka to help customers and the broader community on the day after the impact. There was -- we have 1 customer who has a claim in Tutukaka, so it's not a material impact. So this hopefully that answers that last part of the question. In regard to Tonga itself, as mentioned earlier, we have had 66 claims to date. We're supporting customers and the communities that can quickly get back on their feet. We have a very robust reinsurance program that covers for large catastrophe events up to $873 million. The excess for that is $11.25 million, which we've clearly communicated. We feel we're in a good strong capital position, and we have a robust reinsurance program to support that. So hopefully, that answers the question.

Sorry, isn't the -- I think the other part of the answer to that question is that based on previous experience from large events in the Pacific, it does take a considerable period of time for us to receive the claims. And looking at those past events, it is still too early for us to get a real good handle on what that situation will be. But we are, at this point, very comfortable that it will be within the 11.25 that we have announced to the market.

Also from Gordon Wallace, how do you expect high inflationary expectations to affect insurance industry pricing?

Thanks for the question. And so over the past year, we've obviously looked into the impact of COVID-induced inflationary pressures a lot. And we've outlined a number of decisive actions that we're taking to address that, includes premium rate increases across both Motor and Home to reflect the inflationary pressures on claims costs. We're looking at supply chains and how we can be more efficient and effective through supply chain management, in particular, working with our preferred referral network. We've adjusted our underwriting and that includes total loss for house fires, where we moved that to sum insured where we kept sum insured. We've launched things like risk adjusted pricing for flood, which again helped us tackle inflationary concerns. So you can see there's a portfolio of actions that we have taken to address the inflationary concerns. We continue to monitor it very closely, daily, and we'll adjust. And the good thing that supports how Tower is positioned is that we do have a technology platform that enables us to move quickly and adjust our pricing accordingly when we see inflation coming through.

From the New Zealand Shareholders' Association. I was disappointed to note that Tower received a disappointing rating from consumer in 2021, below average approval at 39% and well down on the list of insurers. Can you comment on this performance?

I share your disappointment. I saw that survey also over a year ago, and we had a real call to action internally to understand why we were getting those ratings. I think we've made vast improvements over the last 18 months around our customer experience, particularly offline and online, where we've reduced waiting times. We've supported our frontline people, and I should highlight this is definitely a company-wide focus for us. The customer is at the heart of everything that we do. And delighted that over the last year, we've improved our Net Promoter Score from around 27%, what it was a year ago to 43% at the end of September. And we will continue to look for opportunities to improve the customer experience. At the heart of that, that is our strategy. We want to have that beautifully simple customer experience. And I hope I'm optimistic that when we see the next consumer survey come out, it will be vastly improved.

It's fair to say that in the last quarter, as you see it, you have another -- a new 6,000 customers. So we assume that they have made a decision, which is both positive and beneficial to them.

From Stephen Craig Burt and Helen Alice Burt and Tia Trustee Services Limited. We have been long-standing shareholders since the original IPO many years ago. Throughout this time, we've seen a plethora of reasonable capital and business restructuring initiatives. These often involving expensive unnecessarily deeply discounted underwritten capital raising arrangements often by parties associated with deferring shareholder interests. It appears to me that the $30 million return of capital whilst laudable in many respects suggest that the directorate and executive team can't find a better investment alternative. I challenge that such opportunities don't exist. Maybe we just haven't looked far enough. We have invested in Tower because we like the team, digital platforms and overall marketing positioning. Well done. What are we shareholders going to do with what will be relatively minor capital repayment, probably reinvest in Tower. I challenged the Tower Board and executive team to be more aspirational in their quest for investing further in the existing business or appropriate acquisitions such as that repayments aren't necessary in the future.

Fair comment. It is a last resort to return capital. However, it is also our responsibility as directors and management to manage the funds we have efficiently. We could not. And I can assure you, we looked under many stones and rocks to find investments that meet the hurdles and criteria we wanted for you and for the company. So hence, it is a sad position to do, but it is the correct thing to do to return capital unless we can find a better home for it. In this case, we could not.

From Leslie James Taylor. Historically, dividends have been paid in June and December. Today's dividend is in February. Could we please have guidance on future dividend seasons?

As noted earlier, this is the financial year 2021 is the first year in 5 years that we have paid dividends. And actually, looking back, in those previous years from 2016 and prior, our final dividend was actually paid in early February, similar to this, and then the midyear dividend was in June.

From Stephen Burrows, could you provide an indication of Tower's solvency ratio post capital return and dividend?

Yes, absolutely. It will approximately be 225%.

There are no further questions.

Thank you. So I'm now going to close the voting. I presume everyone has a quite a long time to vote. But if you haven't, please do so now. And whilst that's going on, I'd like to thank everyone for attending today. The results of those polls will be released to the stock exchange later today rather than during the course of morning tea, which I'm sorry, our shareholders miss out on. And before I go any further, I would now like to close the voting. And I would like to also conclude our meeting to thank everyone for their attendance, to thank all the people on the sides of our desk who have made this possible, to hope that we can actually do it in person next year because I think sadly, that we have underestimated the impact of COVID on all our mental well-being. I mean, just for instance, to take a thought about our Board meetings, and yes, we all get paid, et cetera. So that's not the issue. But Marcus is in Switzerland. So he's up in the middle of the night. Wendy and Warren are Australians. We won't hold that against them, but there is a 2-hour time difference. So they're starting exceedingly early in the morning, and we're coming into this via Zoom or Teams or whatever it is. And regardless how often we do it, it does have an impact on the way we engage with other people. There is no question that being in a room and whether you shake hands or touch with your elbow, it is a much better way to communicate and to transact life's activities. So let's hope we can go back to that very soon. So voting is closed. I thank everyone for their attendance, and I hope that you are well and we see you next year as satisfied and happy Tower customers and shareholders. Sorry. Thank you.