Tower Limited (TWR) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for coming today. Okay, so anyway, good morning, everyone, and thanks for taking time to join us today. As everyone knows, I'm Michael Stiassny, and I'm Chairman of Tower Limited. It's 10:00. So I can open the shareholders Annual Shareholders Meeting. On behalf of my fellow directors, welcome to you all here in this new location, which I think is actually lovely, lovely building as well as those who have joined us today on the Computershare webcast. We do appreciate the time you've all taken to join us. I'm joined in the room today by my directors, Naomi Ballantyne; Mike Cutter and Geraldine McBride; and Marcus Nagel, who is on the web -- somewhere, joining us remotely. I'm also joined today by our Chief Executive, Paul Johnson; and our Interim CFO, Angus Shelton, a number of our senior management are in the room, and we have the auditors present and available to answer shareholder questions if so desired. Before we start the meeting proper, there are a few housekeeping matters. So please a little bit of patience, and I'll try not to bore you. Please turn off your cell phone. If you need to evacuate the room for any reason, please follow instructions from the Tote on Ascot staff or security who are present. If you're feeling unwell, please advise one of our people, and we should be able to assist you. For those who are attending the meeting online. We ask that you follow the information provided in the notice of meeting regarding voting and asking questions. Should you have any -- require any assistance, please type your query and one of the Computershare team will assist or alternatively, please call Computershare using the numbers on the slide, which will come, I hope. Okay. There we are. Please note, only shareholders and proxies can ask questions and submit votes. We encourage you all attending to submit questions via Computershare at any time during the meeting. If you 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. Specific questions on any of the resolutions to be considered will be answered as the relevant resolution is put forward, while general questions will be addressed later in the meeting. Questions may be moderated or if we receive multiple questions on a topic, they may be amalgamated. However, please be assured questions will not be censored unless they are unseemly or rude. If we run out of time to answer all the questions, we will answer them directly via e-mail and post the responses on our website. When asking a question in the room, please use the microphone and introduce yourself by name. To any media present, which I don't think there are, please a reminder, this is a meeting for shareholders, but Paul and I will be happy to talk to you after the meeting. Voting today is by way of a poll on all items of business and to provide you with enough time to vote, I will shortly open 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 the 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. Maybe we should do this for the elections every three years, that will be quite good fun. For those in the room, if you do not have a voting paper, please indicate now by raising your hand and a member of Computershare's staff will assist you. Voting papers will be collected at the end of the resolutions and voting section of the meeting. Computershare team will act as scrutineers, and the results will be posted to the NZX and ASX exchanges later today. I now declare voting open on all items of business. The resolutions will be opened in the vote tab. You may submit your votes at any time, and I'll let you know, as I said, when voting closes. Here is today's meeting agenda. We will provide you with an update on last year's performance and our strategy, the progress we've made at Tower in recent months and our focus looking forward. And following Paul'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? No, thank you. The company's constitution requires [indiscernible] shareholders for this meeting. The requirement has been met, and a quorum exists. In addition to those attending in person today, 498 shareholders holding a total of 161,578,450 shares have appointed proxies, including proxies instructed to abstain. The appointed proxies represent 46.9% of valid securities voted. And in my capacity as Chairman of the Meeting and in my own name, I hold proxies for 369 shareholders, representing 157,334,560 shares or 45.8% of all shares on issue. I intend to vote all undirected proxies I have received in favor of resolutions 1, 2 and 3. The annual report, together with our climate statement was made available on our website on the 27th of November 2025. I propose that we take the annual report climate statement and notice of meeting as read. So it's -- I get to say a few words. I think it could only be described as an exceptional year for Tower and its shareholders. But sadly, this is my last ASM as chair. A shareholder stopped me on the street the other day, and called me a traitor, kind of took me a little bit by the surprise. And basically said, are you jumping ship because after such a stellar year, the future can only be bad. The answer is, no. I am not leaving for that reason. It's not true. I'm simply going because I've been here for 12 years, and the FMA, NZX, NZSA, RBNZ and the proxy managers would simply make the [ Sonandarts ] and question my independence moving forward. And that would be detrimental for all of you as shareholders and for me, and that's something I don't wish to happen. Tower has been in turnaround for a long time, basically since the Christ Church earthquakes. I must say it took a little bit longer to turn it around than I would have liked. But hard fought and long-running transformation has come of age. With our 25 results demonstrating a business delivering value today, while continuing prudently to build for tomorrow. We've returned $45 million of capital to shareholders and declared total dividends for the year of $0.255 per share. That highlights two things. Firstly, both I and the Tower Board firmly believe that shareholders must benefit from the company's success. It's sadly a principle that is not -- is often forgotten by many other public company boards. Secondly, it underscores Tower's commitment to delivering consistent returns supported by sustainable profit growth and a robust capital and solvency position. It continually frustrates me that our share price does not reflect our success, it should, and as shareholders, we all deserve to benefit from this. However, before we get too carried away, we must also recognize that this dividend reflects an underlying profit, considerably boosted by the underutilization of our $50 million large events allowance. While -- whilst we have benefited from this for the past two years, this situation will not last forever. One day, we will have significant large events once again. It's just a matter of time. To counter this inevitability, our focus remains on controllable factors, such as investing in the digital platform, maintaining disciplined underwriting, innovating products and leveraging technology and data to drive performance. Our goal is to continue building a business that is resilient, customer focused and well prepared for the future. Tower continues to lead the market with initiatives like address level risk-based pricing, enabling lower premiums for low-risk customers, whilst managing exposures effectively. Strategic partnerships with Trade Me, Kiwi Bank and from Midyear Westpac along with our refreshed brand campaign position us well for the future. At the same time, we're investing in innovation, technology and AI to an enhanced efficiency, improving customer experiences and ensuring Tower remains competitive and a rapidly evolving market. Whilst we celebrate these achievements, and they are significant in the wake of the tragic events at Mount Monganui, Papamoa, Warkworth, and now we have to say Southern [indiscernible] Ultra Hanger, Akaroa and more, we face a chilling reality. Climate change is here, and it's costing lives and money. In recent years, we've had multiple wake-up calls and yet, while at a national level, some progress has been made to address the impacts of extreme weather events. It has been haphazard an adequate and painfully slow. Look back three years to the devastation brought by Cyclone Gabriel and the Auckland floods. Can we honestly say that in the intervening period, we have seen decisive action that will prevent loss of life. Are we confident that we are no longer building on flood planes or on vulnerable coastlines nationwide? Are we confident that we have active flood prevention measures in place that will protect against more frequent and severe rain events? Are we confident that our infrastructure is resilient and can cope with low -- with large storms that are no longer anomalies? The answers are resounding no. So along with others, Tower has been sounding the alarm for years because we are in a unique position. And with that comes a unique responsibility. Insurers are not just observers of climate change, we are enablers of resilience. As I've banged on for years, every insurance company has the exact same data we do. The industry as a whole knows on a granular level the specific risks each home and property faces. Central and local government have exactly the same information. They keep talking about a central register. It's actually really, really well overdue. We must reach the point immediately where that information becomes the viable, the single source of truth. For us at Tower, it will mean that we will lose our competitive edge as the only insurer in New Zealand, and I think in the world, that shares this information directly with customers, which, let's be honest, we were always going to lose that competitive edge at some point. But then in the future, we will be competing not on data, but we will be competing on service, on price and all the things that come down to how well we engage with the customer. And as management knows, the key to a successful company is the customer, the customer, the customer. How well we look after them at Tower will drive our success in the future. Some of you probably know me well enough to know that I would never -- you would never have seen me as a climate change crusader. But here I am. It's real, it's here. It's not some woke issue, of which there are actually plenty. It's not simply an environmental issue. Climate change is a financial issue. And the problem I personally have and where our part ways with the do-gooders is how we actually deal with it. As it's my last day Sam, I can actually say a few things that come to mind. So I'm actually going to go off peace here and cover one thing that really annoys me. Tower spends far too much time and money on climate statements and everything that comes with it. Is the world a better place because all of you can find out how many hybrid cars we use, or how many the [ Panolbita ] and [ EcoTouna ] uses. It makes no difference to climate change. To make real progress on climate change, do we need to focus on the world's biggest emitters who actually keep giving us the finger when it comes to climate change, or should we actually tackle the largest emitters being airline and ship fuel. Unfortunately, no one seems willing to act on what would, in fact, achieve far more, helping people move away from places already being hit, and that will be hit even harder by climate change. I read something very recently. The Financial Markets Authority has indicative data showing that if New Zealand adopted Australia's new climate change reporting threshold currently being phased in only 11 of the existing 164 climate reporting entities in New Zealand would be required to disclose. The contrast is striking. The reason why it's striking is, I imagine if we did the numbers, we are spending in real terms over $0.5 million preparing the climate statement, which I hope you've all read because we did put a lot of time into it. If -- sorry, and I'll finish this first. And whilst we all have to acknowledge the government has recently changed the New Zealand market capitalization reporting threshold from $60 million to $1 billion, which will come in March, that will reduce the number of companies that have to report to around 76, down from 164. Is that a sufficient reduction? And do we have the right balance? And my view remains no. Now just think about if you took the number of companies that aren't going to have to report anymore, let's say it's 100, let's say, how the number we spend is higher than some, take an average of 200,000, and so we put that into actually creating a database or help the government create a database. So we did something about resilience using that money. I think that would be a much better outcome for all of us. Finally, the government has recently announced an insurance affordability review. It stressed up differently from -- for all intents and purpose than the banking and supermarket inquiries that left many New Zealanders skeptical about real change. Tower is cooperating with the review, but let's be very clear. When comparing FY '24 to FY '25, Tower's average sum of contents insured increased by between 1% and 1.5%, while the average premium dropped 6% to 8%. The average premium renewal for motor experienced sizable reductions in 2025 peaking at a 14% reduction. And whilst average house premiums peaked at a 4% increase at the beginning of FY '25, they've now fallen steadily and dropped into negative territory since September. The rate of premium increases either on par with the sum insured increase or even lower. In short, premiums have not climbed as some ministers have said. The real issue when it comes to insurance affordability is the cost of living. With cost of goods and services spiraling up significantly more than incomes, it is inevitable that some people are unable to afford insurance. That's the issue that needs to be interested. And whilst we're here, we should actually consider the ACC and the national hazards insurance levies make up roughly 40% to 43% of insurance premiums. We have no control over that amount, and it is actually too low to cover the exposure for the natural hazards insurance. Finally, as I said, this is my last ASM. So I would like to acknowledge all the Tower team, past and present that I worked with. My tenure as Chair has been marked by working alongside a number of really talented and really passionate people. I've enjoyed it, and I am immensely proud of what we at Tower have achieved together. Thank you.

[indiscernible], and thank you, Michael. A warm welcome to everybody joining us today. I'm pleased to recap our full year 2025 results as well as share performance update for the first four months of this 2026 financial year. I'll also take the opportunity to give you an overview of Tower's plans for delivering its next phase of growth. Let me begin with a brief recap of our strategy. Over FY '24 and FY '25, under Horizon 1, we focused on strengthening Towers foundations, building resilience, improving efficiency, carefully managing risk and investing in technology to enhance our operations and customer experience. We also continue to shape a culture that empowers our people and sustains high performance over the long term. We did some offsetting -- we did see some offsetting pressure from lower investment income -- apologies. This work in Horizon 1 has put us on solid footing with those foundations in place and now being well into Horizon 2, our focus has shifted more towards innovation and transformation, leveraging our digital capabilities to accelerate growth and unlock the next phase of Tower's potential. So to recap on our FY '25 results, which demonstrate Tower's strong operational and business performance in the year to 30 September 2025, gross written premium increased to $600 million and customer numbers grew to 318,000. We also saw a substantial reduction in the BAU claims ratio, while the EMEA remained stable and large event costs were low. These factors combined led to a record underlying profit after tax of $107.2 million for Tower. Reported profit for FY '25 was $83.7 million. Tower declared a total FY '25 dividend of $0.245 per share and also returned $45 million of capital to shareholders. FY '25 was an exceptional year for Tower, supported by both favorable external conditions and disciplined execution of our strategy. Large event claims were just $7.2 million, well below the long-term average, and relatively benign weather helps moderate our BAU claims ratio as well as overall profitability. We saw solid policy growth and average premiums declined through the year. This reflects an increased competition across the industry, a soft rating cycle, lower inflation and fewer claims from our lower risk portfolio. We adjusted pricing quickly to stay competitive and attract quality risks, providing welcome relief for customers after the increases seen following COVID supply chain pressures and the 2023 weather events. Inflation returned to historical levels contributing to improved claims performance. Motor theft frequency also normalized following earlier steps to reduce exposure to high theft vehicles, improving both claim frequency and severity and our motor book. We did see some offsetting pressure from lower investment income as OCR reductions came through. So taken together, these factors combined with progress on our transformation program, created a unique and favorable operating environment in FY '25. Despite a soft rating cycle and intense competition, Tower delivered solid policy growth in FY '25. We added 13,000 new customers, lifting our total to 318,000 and achieved 6% growth in New Zealand core products, including an 11% increase in house policies. This reflects our strategic focus on the House portfolio, where customers typically hold more products and stay longer, prioritizing this segment strength in retention and profitability. Growth also came with better risk quality. Our risk-based pricing approach means we're growing in lower-risk customers, reducing average annual flood losses by 21% per policy and 16% across the portfolio, a meaningful lift in portfolio resilience. We further strengthened brand momentum with the launch of the Misses Campaign, which resonated well with New Zealanders and on a Kantar's Ad Impact Award in June 2025. The graphs clearly show the shift. House policies have grown steadily over five years, accelerating in FY '25, while Motor has returned to growth following risk appetite adjustments made in FY '23. Overall, these results reflect a disciplined strategy to attract high-quality risks and build a stronger, more resilient portfolio. In FY '25, we continue to leverage the benefits of our single core platform, our streamlined product set and our increased scale to invest in strategic initiatives designed to improve efficiency, strengthen customer experience and support long-term growth. We also launched our AI-enabled contact center platform, Amazon Connect, which is already showing significant improvements in customer service and streamline delivery. And we introduced an integrated motor claims assessing system that is speeding up assessments, reducing manual handling and lowering repair costs. Our digitization program is nearly complete for this phase with 79% of tasks now available online, making policy management and claims lodgement faster and easier for our customers. We also expanded risk-based pricing to include two additional perils and continue to build our AI capability, important steps towards greater efficiency and innovation in FY '26 and FY '27 and beyond. This continued focus on innovation was recognized with the insurance business, 5 Star Insurance Innovator Award for the second consecutive year. Delivering simple and rewarding experiences remained a core focus in FY '25, and we made solid progress. Our net promoter score increased to plus 44, supported by digitization and operational improvements. Telephony performance also improved with abandonment rates down to 7% as we streamline processes and strengthen digital capability. Digital adoption continued to arise during FY '25. 63% of sales, 51% of service tasks and 70% of claims lodgments in New Zealand were online, and MyTower registrations grew to 59%. Our Suva Hub also delivered greater efficiency scaling up to handle 83% of sales and service calls compared with 55% last year. These improvements were recognized externally with Tower winning the Insurance sector award at the 2025 CRM contact center awards. This chart illustrates Tower's performance over the 5 years to FY '25, during which we delivered consistent and sustainable improvements in underlying profitability through disciplined execution and targeted investment. When large event costs were removed, the underlying trend becomes clear. Underlying NPAT strengthened each year, reflecting the cumulative impact of the changes made across the business. Profitability in the latter part of this period was also supported by a particularly benign BAU claims conditions in FY '24 and FY '25. For FY '26, our guidance remains underlying NPAT of $87 million to $97 million, excluding large events. This assumes the soft rating cycle continues and BAU claims ratios begin normalizing. Turning now to the first four months of 2026 financial year. We continue to feature solid operational and business performance. Here is a summary of our steady progress for the first part of the financial year. The financial information provided in this update is based on Tower's unaudited management accounts as at 31 January 2026. GWP has seen positive momentum in our New Zealand portfolio in the first four months, with policy numbers up 5% compared with January last year. This has been led by continued growth in house policies, which were up 10%, alongside 6% growth in content and 2% in Motor. Gross written premium grew 2% to $204 million, for the 4 months, an increase from the 1% decrease we saw in the 4 months to September, which was impacted by lower pricing. The improvement reflects disciplined risk selection, stabilized pricing and the continued appeal of our offering. We added 12,000 new customers in the year to 31 January, taking total customers to 323,000. And our new Westpac partnership and the Kiwi Bank back book referral will both go live in the second half of this year, further supporting policy and premium growth as the year progresses. The charts on the right show that GWP growth is returning to a more sustainable trajectory as we continue to deliver growth initiatives and the rating environment stabilizes. The effective average premium curves have flattened, reflecting a more balanced market after two years of significant reductions in movement. The insurance industry remains highly competitive, and we are committed to earning every customer by delivering value through our products, service, benefits and being there at claim time when our customers need us the most. Our progress is also underpinned by ongoing investment in digital and underwriting capabilities, from straight through processing for motor claims to enhancements in our pricing and risk-based models. Turning to claims performance. Our BAU claims ratio for the first four months remains favorable at 43% compared to long-run averages of between 48% and 50%. As we noted at the full year results, the premium rate decreases that came through in FY '25 will continue to earn through during FY '26, and this is contributing to the gradual normalization we're seeing here. We expect the BAU claims ratio to continue to increase but to remain below the long-term average this financial year. Our claims transformation program continues to deliver improvements, particularly in Motor. Over the period, 53% of New Zealand motor claims went straight through to repairs and utilization of our preferred partner network increased to 74%. These gains are helping to reduce handling times, lower costs and improve customer experience. Paying claims is what we're here for, and large events were part of that. Tower has a $45 million large events allowance for FY '26. And in the first four months, we've recorded three large events with an estimated combined cost of $12.1 million. This includes the October wind storm, the Timmer hailstorm in November and the late January Nationwide store. Claims from the stormy weather across New Zealand over the past few days are still being assessed. And at this early stage, Tower expects cost to exceed that $2 million large event threshold as well. Tower has $32.9 million available for the remaining 8 months of the financial year of our large events allowance. Any unused portion of this allowance at year-end will contribute to underlying NPAT to improve the full year result. Our response to these events continues to improve as our capability strengthens while the impacts are reducing. Towers risk-based pricing is lowering our exposure to natural hazards. With the expected average annual loss from flood, landslide and [ sea serge ] down by an average of 20% on a per policy basis, and 14% overall compared to the same time last year. This continues to strengthen portfolio resilience and reduce volatility. We also continue to enhance the customer experience during events. For the January storm, we sent more than 23,000 automated SMS updates to affected customers, helping keep people informed at a time when communication matters most. Digital lodgement and straight-through processing are also helping customers lodge claims more easily and getting motor and house repairs underway faster. And we're required we can scale quickly through our third-party assessor and claims management partners to ensure we maintain quality and pace during periods of high demand. The map on the right highlights the geographic spread and volume of claims across the three events within the 4-month period. We continue to invest in digital capability and operational transformation to deliver simple and rewarding customer experiences and drive sustainable efficiency gains across the business. Our Net Promoter Score increased to plus 52%, up from plus 44% in September, reflecting improvements across digital channels, the telephony platform and claims processes. Amazon Connect launched at the end of FY '25 has reduced overall call times by around 2 minutes and is streamlining customer interactions. Two-way integration of the motor assessing platform is reducing manual effort for our people and improving accuracy. During the period, 24% of New Zealand motor claim reserves were automatically updated and 46% of motor claim payments were automatically processed. We have streamlined our geographical operations to improve consistency and resource allocation. We also continue to invest in systems and processes to help avoid areas that lead to customer remediations. Our comprehensive multi-policy discount remediation program is now nearing completion. And as part of simplifying our pricing, and reducing future risk, we have removed the multi-policy discount from our insurance offerings. This change is allowing us to offer targeted rate reductions across our core products. The FMA's regulatory action regarding the misapplication of multi-policy discounts was concluded in the first four months of the year. Penalty was fully provided for in Tower's past financial results and therefore, will have no impact on Tower's FY '26 results. This resolution allows us to move forward with clarity of future costs. Our focus remains on continuous improvement and delivering value to customers through fair and competitive pricing. The management expense ratio was 31%, marginally higher than the prior comparable period, reflecting disciplined cost management alongside continued investment in efficiency and service initiatives. Tower remains well capitalized with a strong solvency margin, well above regulatory requirements and our internal targets. The solvency ratio was 160% as at 31 January 2026, up from 143% at 30 September '25. The adjusted solvency margin increased to $121 million at 31 January 2026, an improvement of $32.1 million from September. Tower's internal target solvency margin remains $84.3 million. The final dividend for FY '26 of $0.165 per share was paid in January '26. Tower continues to hold an A- financial strength rating. Looking forward, we'll continue our focus on strategic growth initiatives and improving customer experience and efficiency through innovation. We have a clear set of strategic growth initiatives in place to accelerate performance through Horizon 2 and beyond, with a target of delivering more than $750 million in GWP by FY '28 through organic growth. Our new digitally enabled partnership with Westpac New Zealand will open Tower up to one of the country's largest retail customer bases, supported by seamless digital onboarding and modernized underwriting. The referral of the Kiwi Bank back book in the second half of FY '26 will help to further support growth. We also note that Trade Me has commenced a review of its insurance partnerships in 2026. While we are not able to elaborate on the process at this stage, Trade Me remains an important channel in New Zealand insurance market, and we will continue to participate constructively as this process continues. We are also investing further in Tower's brand to support growth, strengthening awareness, improving consideration and ensuring we show up consistently as a modern customer-focused insurer. Enhancements to our sea surge and landslide risk ratings continue to sharpen our risk-based pricing, helping us target lower-risk properties, more effectively and improve portfolio quality. And by removing multi-policy discounts, we've simplified our pricing structure to help ensure we're competitive for customers. We're focused on continuing to lift customer experience and efficiency with continued improvements across digital platforms through streamlined processes and give the use of data and AI. We're targeting 80% of sales, service and claims lodgement tasks to be completed through digital channels by FY '28. This shift will create faster, more intuitive experiences for customers, while driving efficiency gains. Work is also underway on a new customer data platform that will enable more personalized service over time, allowing us to tailor communications, offers and support based on individual customer needs. New AI tools have been introduced across key processes to streamline workflows, reduce manual effort and improve accuracy. This will become an increasingly important capability as we scale. Our partnership with Amazon Connect is already enabling enhancements to our contact center platform, supporting smarter routing, more efficient interactions and deeper insights to improve service even further. And we continue to focus on product innovation to meet emerging customer needs, ensuring Tower remains competitive and relevant as risks evolve. Together, these initiatives position us to deliver a more personalized, more digital and more efficient customer experience and will help us to drive down our management expense ratio aligned with the ambitions of Horizon 2 of our strategic plan. For FY '26, we are maintaining guidance consistent with what was communicated at the full year results. We are targeting gross written premium of between $630 million and $660 million, representing 5% to 10% growth. The management expense ratio is expected to remain in the 31% to 32% range this year. Underlying NPAT, excluding large events, is forecast to be between $87 million and $97 million and of course, our large events allowance for FY '26 is $45 million. We are targeting a combined operating ratio of 86% to 88%. And assuming full utilization of the large events allowance, underlying NPAT is expected to be between $55 million and $65 million. Any unused portion of the allowance after tax will flow through to improve the full year result. Reported NPAT will continue to have nonunderlying costs related to ongoing remediation activity and regulatory change. Looking ahead to FY '28, we have reaffirmed our medium-term targets. As the insurance cycle stabilizes and strategic initiatives deliver, we expect GWP to reach more than $750 million, implying a 3-year compound annual growth rate of 7.5%. Our customer experience, innovation and efficiency gains are expected to deliver an MER of 28% to 30%. And in FY '28, the combined operating range is targeted to land between 85% and 87%. These targets reflect confidence in our strategy and the momentum we are building through Horizon 2. Before I hand back to Michael, I want to reflect on what Tower has achieved during his tenure as chair. Over this period, Towers reshaped itself into a modern digital direct insurer, simplifying products and bedding addressed level risk-based pricing across 4 major perils, investing in claims and digital platforms and building a stronger, more resilient portfolio. We've navigated major events across New Zealand and the Pacific, supported communities when it mattered and delivered operational and financial progress. We've prepared a short video that captures these milestones more than a decade of progress we're proud of. [Presentation]

So thank you, Michael, for your wise counsel, steady Chairmanship, clear strategic guidance, your challenge and unwavering focus on long-term value for customers and shareholders. Your leadership has helped set the platform we are building from today. And on a personal note, thank you for the support you've shown me and the executive team. Tower is well positioned for the next phase with a clear strategy, high-performing culture modern capability and significant growth opportunities ahead. Thank you.

Thank you for that, Paul. That was very kind. So perhaps we should now move on to the formal part of the meeting. So Resolutions 1, 2 and 3. They will each be passed by a simple majority of votes of those shareholders entitled to vote and voting on the relevant resolution. As noted earlier, voting has already opened online and will close shortly after the discussion on the resolutions are completed, so that everyone has the opportunity to cast their votes. So resolution 1, authorization to determine auditor remuneration. Company are provides that a company's auditor is automatically reappointed unless there is a resolution or other reason for the auditor not to be reappointed. The company wishes to -- which is PwC to continue in this role and PwC has indicated its willingness to do so. Companies Act provides that 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 that consistent with past practice, the auditor's fees be fixed by the Board. I therefore record that the auditors, PwC, are automatically reappointed as auditors of the company and move that the Board be authorized to determine the auditors' fees and expenses for the 2026 financial year. At this point, I'd also like to note the Shareholders' Association Policy and international best practice that in order to firm should not serve for more than 10 years and the lead audit partner should be rotated at 5 years to ensure the appropriate degree of independence. We agree with this view and the Board has adopted a policy of requiring a rotation of the lead audit partner every 5 years and a tender to the audit firm, if not necessarily a change to the firm at least every 10 years. I note that a tender process was carried out in FY '25 with proposals submitted by four audit firms. At the conclusion of this process, the Board resolved to retain PwC as Tower's external auditor. Additionally, our lead partner, Lisa [indiscernible] is here, was rotated 2 years ago, and we have included audit firm tenure and lead audit partner rotation information in the corporate governance statement on our website. Are there any questions? Oh Yes.

We have a question online from Stephen Maine. If the government can take the time to change the market cap threshold for climate reporting, why can't they change the requirement to approve order to pay each year? Does the chair agree it would be better to have an annual vote on the overall pay practices of the company, not just a resolution on order to pay.

There are quite a few questions by Mr. Maine, which I think I'll be entitled to take a little bit of leeway with. I think we need to come back to what we're trying to achieve. The Board is appointed by our or management are appointed by the Board. We have the necessary power to remove them or not. We can remove them during the year if we're unhappy with their performance. But we do have to give them some leeway, and we do need to come back to, well, I believe we need to come back to what they all we're trying to do here. And what we're trying to do here is to maximize shareholder return, if we're not careful, we're just going to add another 27 different requirements on the Board, which will cost us all money for a little or no merit. We can fix the auditor's remuneration, but the -- and it is -- the role of the shareholders to have a say in how we do that, et cetera. So I don't think we need to go to that level. Any other questions? If not, I think we can then move on to the second resolution, which is the reelection of Geraldine McBride. Geraldine retires by rotation, being eligible, offers herself for reelection. And I now invite Geraldine to address the meeting on her proposed reelection.

Thank you, Michael. Can you all hear me all right? Good. Thank you. Well, I'd like to thank you shareholders for the opportunity to speak with you today. As you know, my name is Geraldine McBride. I'm seeking your support the reelection to the Tower Board. Over this past term, I've served three years so far. I had the privilege of serving as Chair of the Risk Committee as well as a member of the main Board. And during that period, I have worked very closely with both the Board and the leadership team, our un-strengthening risk governance, which, as you know, is very important in an insurance company. This has also been a focus on enhancing, as Paul has been talking about process excellence, advancing best practice and data, which is very important and also exploring how emerging technologies, including AI, and you might even hear more about Agentic AI can improve operational efficiency, deliver better customer outcomes and responsibly manage cost. So we're looking at basically managing risk, but also how we can use technology to actually deliver better returns also for our shareholders. So Tower continues on this important journey. So you've seen what we have achieved in the past years. And now we're looking forward to continuing this ahead. So we're wanting to deliver value for shareholders, for our customers and meeting all our regulatory obligations. And the key focus really has been around discipline, purpose and efficiency. So I continue to remain very excited and optimistic about where the business is heading. In terms of my background, you probably will know me by now. I won't go into too much of it, but basically, you will know that I have a strong governance background, having served on the Board of National Australia Bank, Fisher & Pace Healthcare and Sky television and past Board roles and the extensive technology leadership with many years in the technology sector, 27 years looking at all different types of technologies, and how we can apply them effectively together with business to be able to deliver better outcomes. The other thing that I'm bringing into this role for reelection is when I obviously am New Zealand-based, but I actually sought to advise some of the largest companies in the U.S. and in Europe on how they can extract great value out of AI and Agentic AI. So this is a particular domain expertise that I have that I'm able to bring to Tower, but I'm also -- actually when I'm not in New Zealand, helping other big companies navigate these questions overseas. So I'm excited by the opportunity to continue contributing positively to Tower's future success and growth. So I believe that I bring a governance perspective, technology know-how and how we apply this technology to business, delivering better outcomes through everyone both customers -- both you our shareholders and also the employees. So I respectfully ask for your support for my reelection as Non-Executive Director for Tower today. Thank you very much.

Thank you, Geraldine. I will now move that Geraldine McBride, who retires [indiscernible] in accordance with NZX Listing Rule 2.71 be reelected as a Director of Tower Limited. Are there any questions? Mr. Best.

Thanks, Mr. Chairman. I'm Alan Best, and I carry the proxies of the members of the New Zealand Shareholders' Association as well as being a shareholder for many years. Geraldine, I'd just like to ask you a little bit more about the generative AI aspect almost every company that I attend meetings of is saying that we're using AI internally to enhance our operations. And I understand that degenerative is the system whereby the computer or the system learns from mistakes or from general data and incidents that it records. So can you give us an example of how generative AI is actually being used. Most of them are saying we're using AI. When you look closely, it's actually just no more than a database.

That's a very, very good question. And in fact, everyone uses this term AI very loosely. So a lot of companies, when they say they're using AI, they're infusing AI into existing applications, and that's useful and that's data, as you rightly point out. Generative AI are the large language models like everyone will be hearing the check and rock and all of these other different systems. They're called large language models. And they're being used now in what they call agentic platforms for enterprise. So you can't just go and take a standard open tech GPT consumer-based application and expect it to run your regulated business process. It's fine to help you write a letter at home or generate me, I don't know, my shopping list for my groceries or help me go and find a better carpet to buy online. So they're very useful in everyday purposes, but they're not sufficient because they hallucinate. You'll find they make up things. They get things wrong, and you can't use them in regulated business. So what you -- the reason why we have created a new category of technology called Agentic, it means that technology that can take agency, they're almost like digital humans. And without getting too technical, to answer your question, it's a mixture of generative large language models mixed with what I call guardrails, which then tell a large languish model, what they're allowed to do and not how to do. And you've got to keep them also private, so that they don't go sharing your data and your proprietary company data with all and sundry around the network. So what you want to look at when you're a shareholder and the shareholders' association is who is using Agentic technology. So everything that Paul has spoken about, like if you look at what they've done with Amazon Connect, they're taking out time, cost and effort out of the contact center, they're speeding up now the ability to answer customer questions get customers issues resolved. Those are now positive use of AI. And you're going to start to see ahead without preannouncing anything, there's going to be more of this being done into Tower in 2026, 2027. So if you look at the forward numbers that Paul is talking about on the efficiency, that is assuming that identic technology are going to be used to replace human work, which means that work goes much faster. So when you're a shareholder and the shareholders' association ask the question, are you using Agentic technology? Because if they're just using generative AI to help people write letters. Actually, it doesn't make -- it makes it a little bit efficient, like it might give you, I don't know, 10% or 20%. We are looking for the 50% to 80% productivity gains, which is actually what drives them better shareholder value, better regulatory compliance and better results generally. And so this is your question. So I would just say, ask that question. You will find not many people in New Zealand are doing it yet. I spend more of my time helping American companies and European companies then I see down here. They're all still playing around with copilot and copilot won't help you either. It's not good enough.

Thank you. Any other questions? If not, we'll move on to Resolution 3, the reelection of Naomi Ballantyne's Director Tower Limited. Naomi was appointed as an independent director to the Board effective 21 May 2025 and to fill a casual vacancy. As required by our constitution Naomi retires and being eligible offers his help for reelection. I now invite Naomi to address the meeting on her proposed reelection.

Thank you, Michael, and thank you, shareholders for the opportunity to speak with you this morning. I'm delighted to be seeking your support for my election to the Tower Board. I have more than 40 years insurance experience, including founding, building and selling two of the most successful life and health insurers in New Zealand. So I believe I bring a strong understanding of growth market innovation, competition, financial structures and regulatory obligations. I've got extensive experience in the insurance sector in New Zealand and insurance governance experience across the wider Asia Pacific region. In addition to my position within the Tower Board, I'm currently Chair of a company called Tech Group Limited, which is 1 of the largest privately owned financial services distribution businesses in New Zealand. I'm also Chair of GEO EdgeX Limited, which is a brand-new startup in the GEO technology field. And I'm also very shortly stepping away from my current directorship role on the Advisory Board for Dai-ichi Life Asia Pacific, on which I have served since I retired from Partners Life Limited. So I believe the specific international and industry experience will make me an effective contributor to the Tower Board. I've also previously been a long-standing judge for the New Zealander of the Year awards as well as being the recipient of a number of awards and recognitions myself, for contributions to the New Zealand insurance sector and the wider business environment, including being made an officer of the New Zealand Order of Merit. Tower has a long history in New Zealand and in the Pacific which today is now coupled with an ambition to lead market innovation in order to deliver increasing value to you, its shareholders, through delivering better solutions and experiences to its customers, and I am extremely excited to bring my experience to the table to help guide Towers through that journey. That's why today, I am seeking your support for my election as a nonexecutive director for Tower. Thank you.

Thank you. Any questions. Yes?

We have a question online from Stephen Maine. Which recruitment firm do we use to assist in the recruitment of Naomi Ballantyne to the Board how competitive was the process? And did Naomi know any of our directors before engaging with the recruitment process?

We did use a reputable recruitment firm. We were specific about what we were looking for and that we wanted a director who had either -- well, preferably general but if not general life insurance experience. And we also wanted someone who could assist or believe in their blood around customer engagement. And Naomi was the best person on that list by a country mile. And I think she's added immensely to the Board since she was appointed. I don't know about the other Board members. I knew of Miami, I had met at various functions, maybe 3 or 4 times previously, but knew of her reputation. So I think that answers that question. Are there any other questions?

Sorry, I hope I can ask a question for Geraldine, moving back a bit. My name is Darren. My question is about AI and its interaction with climate change, and I understand that there's quite a lot of concerns about...

Should we leave? Sorry, if it's not really the exact election purpose, why don't we leave it to general business and you're more than welcome to ask the question. I think it will be interesting. Let us deal with the appointment of directors, formal business, if that's okay. Is there any other questions? If not, that concludes the discussion on the items of business. And there is one more page. We're getting in the end. If you have already done so, please cast your votes now. Voting will conclude in approximately 2 minutes. The votes will then be counted under the scrutiny of Computershare, who will be collecting the voting papers from within the room. We'll have a -- sure we don't need to pause. But please ensure that all votes have been made. And if there are any other questions regarding those resolutions, please ask them. If not, a cup of coffee awaits. Final item of the item on the agenda is questions and general business. So are there any questions of general business that anyone would like to ask either here or on the phone? I'm on the line.

Can I ask that question about.

Yes, why not. You've got the microphone. Let's go.

So I'm quite interested in Tower's use of AI, given -- my understanding is that there are general concerns about AI's impact on climate change, the role of Tower then and trying to -- whether it's as corporate responsibility or just reputation. What are your thoughts on how AI can be used responsibly from a climate perspective to ensure we're not, say, using huge data centers that are damaging the environment, contributing to climate change and your thoughts on that generally?

Well, I will answer it with two hats on actually because my background before I ever got into technology was -- I'm a zoologists and an oncologist. And in fact, conservation is a very core ethos for me personally. And the question you ask is a very, very big, wide and very deep question that touches on because we have 8 billion people on the planet, and actually 8 billion people here affects the planet and actually causes a lot of the effects of that. So yes, the effect of us using more advanced technologies, of course, is going to create more demand for power, all right, which drives the data centers. And the data centers are being set up all over the world. and they're using many different types of technologies. There's a great discussion now on how do we actually make all these data centers greener. What types of reusable energies and power can be used, including even nuclear being discussed yet again when we thought that we had finally put that to bay. So I don't think that the human kind, the 8 billion people, we have not solved renewable energy at scale. So that is still something we as humans have to solve. So when you look at Tower then in the context of humanity, we're obviously ensuring risks and making sure that people in New Zealand feel like they could rely on Tower as a worthy partner to help them in times of trouble, okay? And we're leading on risk-based pricing, and how we're actually understanding the environment and also even going to the point of how you can use data to help customers create better risks even in the homes that they're ensuring and where they are. So it's all -- so that's another topic in its own right. Bringing it down to our use of AI. The use of AI, we're using it very responsibly. So we're not using it for frivolous things. We're using it to basically deliver better shareholder outcome. So that's -- you can argue is a good use. We use it to deliver a bit of claims outcomes, so we're able to speed up claims. So when you're in a disaster, you want to now be able to know that your claim is going to get fixed faster that we get a better outcome for people. So I think that as a Board, you actually have to manage all these issues and all these topics stakeholders. So we definitely lean very much into the environment the effects of changing climate, increased weather events, and we're actually then also as shareholders, are affected by that as well because we -- in some years, when we have many severe events, then we -- our dividends will be affected. So I think that my answer to you is we are balancing all of these. It's a very big, wide question you asked. There are many answers to that question. And there is no one simple answer. There's no one simple bullet other than as a Board, we balance out all of these because they're all critical stakeholders to humanity, being New Zealanders, what it means to be responsible for our own climate agendas in this country and delivering the best outcomes we can for shareholders, which is actually why we are here as well as for our customers. So hopefully, that answered the question, but there is no one answer to that very wide question.

Thank you, Geraldine. I think Alan had another question.

Thanks, Mr. Chairman. During the time I've been a shareholder, we've regarded Tower as a challenger brand. And it looks as though from the staging that Paul showed us that we're moving from being just a challenger brand. So I'm wondering what's the total market, say, measured in gross premiums in New Zealand or in our area? And what's our share like? And when are we going to be beyond being a challenger brand.

I'll let Paul answer that.

Good question. Thank you. So the total general insurance market for New Zealand is about $10 billion, give or take. The total personal lines or consumer market, which is obviously where Tower largely plays is about $5 billion, so half that. And then -- and so our market share is just over 10% of that. Obviously, we are very focused on competing incredibly hard in this market and growing. And so our 3-year target is to grow our business by about 20% or a CAGR of 7.5%, as I said. So that will continue to enable us to chip away and take market share year-on-year. And that's through organic growth opportunities, as I've mentioned as well. So we'll continue to focus on that and continue to be proud of the fact that we are a New Zealand company, and New Zealand insurance business that has been in this country for 156 years now, and we'll continue to push and grow as a business.

Great answer.

Another one, Mr. Chairman.

Oh, by all means.

All right. I was really interested in the $7 million settlement that you reached with the Financial Markets Authority. And Paul was good enough to explain to me how that arose. You put the shutters up on that. But would it be possible for AI to learn from that mistake, if you like, and correct the -- and be able to handle any emissions by customers so that you fulfill the general requirement that the market authority has put on you.

Well, they haven't put anything on us. But I think the simple answer is yes. Every day, Tower, they're working to improve the way we engage and simplifying and improving the systems so that we are even more focused on customer. And if we promise something to a customer, that is what we deliver to our customer. The fundamental issue is that we also -- any company should be pushing as hard as possible to be not on the edge, but it's got to be going hard to achieve profit and to look after its customers. So from time to time, there will be footfaults. If there weren't any footfaults, then management and the board aren't doing their job, because all they're doing is running away and being the most conservative people in the world, and we're not going to make any money. So the answer is to push as hard as you can. There will be footfaults. It is all about the system and the vision and desire of management to make sure that they fix those as quickly as possible and bring them back into line. And it's a very continuing challenge as to how we get there. I think that's no more questions?

Just a quick one. Okay, yes. My name is Ron Spears, my family trust, just bought some shares in really in January. So I'm a new shareholder. The question I want to ask is who is going to be the new Chairman?

I'll let the Board work that out. This is [indiscernible]. Two members of the board are up for reelection. It is inappropriate for the Board to decide who the new Chair is until the shareholders have had the right to vote who is going to be on the board. Now we all know there's a 99.9% chance that you'll vote out or we will vote out some of those Board members. But we do have to follow a process. And the right thing to do is to wait until those votes are in. And then for the Board to meet and appoint one of their own as Chair. So we just have to wait and let that happen. But the caliber of all four Board members is such that I think we will be comfortable with whatever they decide, I hope.

But we as shareholders get the vote through [indiscernible]

Not on chair, just on the Board members. Results. Sorry.

Not in this business of the new Chairman.

No, we don't. The Board appoints there on as chair.

Any other questions? Yes.

We have a question on line from Thomas Young. The Chairman spoke as to the share price not reflecting true value. Every time there is a large event, the share price suffers and potential investors are reminded Tower's in the business of insurance and paying out claims. It may help investors if management explain the financial relevance of the $2 million large event threshold and the benefits of reinsurance. An example real or theoretical may assist understanding.

I'll just hand over to Paul in a second to do that. I think we've already covered off some of the issues around us and hopefully, have alleviated some worries around the size of the claims for the last month or so, but I will hand over to Paul to...

Thank you. Yes, so Tower's in the business of paying claims. We have BAU claims, so everyday accidents with motor vehicles or around the house that we pay claims for and they sit in what we call our business as usual loss ratio. We also, though, as we know in New Zealand, a with large weather events. And so we separate out the cost of those large weather events so that we can measure them and manage them specifically as well with a large events team. And so for us, we call a large weather event, any event where the total -- more than 1 claim and the total value of those claims goes over to $2 million. In the past, we've set a precedent of informing shareholders if an event goes over $5 million. But fundamentally for us, if it's over $2 million, we call it a large event. We know that New Zealand gets hit with large events every year. And as I talked about before, New Zealand has been hit with earlier this year, before this weekend, three massive large events, which have been really quite significant for New Zealand as a whole, up and down the country. However, as I said, for Tower, as we've been disciplined in rolling out our risk-based pricing approach, those three events have total at a cost of only $12.1 million for us. Obviously, we've had the weather event to the last few days, and we're looking at assessing that as well at the moment. And it's still too early to give you shareholders a number on that. But as I can say, I think it's going to be reasonably in line with those sorts of numbers as well. And we'll keep the market updated as and when we know more. But for us, we have a large events allowance. It's been $50 million in the last few years, and we fortunately have not needed to use very much of it at all. This year, it's $45 million. And so far, we've only used $12.1 million of that. So there's significant headroom to go. And we prepare for that volatility, we prepare for the fact that we'll get large events every year. We expect it, it's the business we're in. And so we're happy to receive them and our customers' claims and pay those claims as and when necessary.

Thank you, Paul.

We have another question online from Hamesh Jameson. The upper limit of Tower's large event allowance is $915 million. They say this would cover a 1 in 1,000 year event. However, the Chris Church earthquake costs in the tens of billions. It is likely New Zealand will have another major alpine fault quake in the next 50 years. Are you confident the $915 million large event allowance would cover that?

Angus is going to answer that.

Yes. Thank you. So what the shareholder is referring to there is actually our reinsurance arrangements. Tower is very robustly covered by reinsurance, if any of those large events that Paul mentioned earlier, tips over a $20 million mark. We have reinsurance cover in place for a catastrophe of that size, up to a total cost of $915 million. We also have cover for a second or third event of that greater than $20 million size. We put a lot of time and effort using our modeling and our actuaries into understanding the potential risks, and we stress test those for a range of different catastrophes, whether it's earthquake or storms. And we are very confident that we have the appropriate amount of reinsurance in place and that we have a very robust capital position as well.

Thank you, Angus. Any others, yes, please?

We have a question online from Stephen Maine. If zero [indiscernible] building can voluntarily put up a remuneration report for approval as the law requires in Australia, while the remaining directors under a new Chair agree to do the same next year, given that we are dual-listed in Australia and many of our Australian shareholders would like to see such a move.

Well, maybe you have to ask them next year. But as I said earlier, maybe we should focus on what we're trying to do, which is make money out of our shares. I'm not sure that paying somewhere between $30,000 and $100,000 for a report, we'll actually achieve anything? It won't make the bike go faster. Any other questions?

We have a question online from Stephen Maine. How many full-time equivalent staff do we currently have? And is this likely to fall over the coming 12 months with the rapid rollout of AI which parts of our business and operations are the most prospective AI productivity gains? And how energetically are we embracing those opportunities?

Well, I'll let Paul answer that, but I think most of that will probably not be answered because it's surely competitive, and we should keep that in-house. But Paul, over to you.

Yes. We have about 900 FTE. As I think we've indicated, we are running hard with AI, but also actually just with all technology investments over the years, and we're starting to see the benefit of that. Now in efficiencies as well as customer service, of course. We will look at AI across all areas of the business, and we have multiple initiatives underway in that, and it definitely can deliver productivity improvements for us across all the areas of the business. I think Geraldine also answered it very well and quite in depth around what AI can do for Tower, and what we're planning as well.

We have a question from Hamish Jameson online. What is the probability of the $915 million not being enough to cover a catastrophe?

No, definitely [indiscernible]. Angus answer that one.

Well, as I think one of your questions said, we set the prudence level on our catastrophe reinsurance at a 1 in 1,000 year event level. So essentially 1 in 1,000 years would expect to potentially to breach that top met, but we do stress test that reinsurance arrangements for a range of different events the Reserve Bank of New Zealand also carried out stress testing across New Zealand insurance a couple of years ago, which the information on that is publicly available. And it showed that even if there was an event that was of less likelihood than that Tower would still be in a position to continue as a business and capital position supports that.

Any, yes please.

We have a question online from Brett Osler. Can you please confirm Tower's dividend policy?

Needs to go up?

So Tower's dividend policy is to pay 60% to 80% of adjusted earnings each year. Adjusted earnings refers to our net profit after tax adjusted for unusual events. That's sort of the first limit based on profit. The second line of it is to ensure that we still have a prudent capital position after the dividend. So the Board looks both at the profitability and paying out those earnings to shareholders and ensuring that we have a robust capital position after any dividend is paid. And I think the other thing to note is that if the large events allowance are not used. I think as shareholders, we would expect that based on past history to be sent through to shareholders in the form of a dividend.

No more questions online, well, that's good. Sir?

Hi, shareholder. Gee, I never heard some bloody gloom. I mean, we mean to be here. I know to ask questions, but well done Board. You've done a marvelous job, and I've been a long shareholder use, and we not think way back what the share was, and now what liquidity you've got, fantastic. That's all I'm going to say.

Thank you. Any other questions or that kind of closes it off probably. It does. It's really nice that one of my family [indiscernible]. No, no. So if everyone we should close the voting off and get back to process. So if you haven't voted, if you could please do so now. I'll now assume voting is closed. So the results of the polls will be released to the stock exchange later today, probably in half an hour or so, if we're lucky. That concludes the formal business of the meeting. I'd like to thank you not only for being here today, but also for the support of the company that continues to deliver both for you as shareholders and to all customers. As I said, it's been an honor to be here, and I'll be watching with interest, and we'll probably see you all here next year. So thank you.