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26 November 2013

Market Information Company Announcements Office NZX Limited ASX Limited Level 2, NZX Centre Exchange Centre 11 Cable Street Level 6, 20 Bridge Street PO Box 2959 Sydney Wellington NSW 2000 NEW ZEALAND AUSTRALIA

TOWER Limited - Results for announcement to the market

Attached are the following documents in relation to TOWER Limited’s preliminary announcement for the year ended 30 September 2013:

Media release
NZX Appendix 1
ASX Appendix 4E
Appendix 7
Financial Statements (including Independent Auditors’ Report)
Results announcement presentation

Michael Boggs Chief Financial Officer TOWER Limited

ARBN 088 481 234 Incorporated in New Zealand

For further information, please contact: Tracey Palmer Head of Corporate Communications DDI +64 9 369 2017

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MEDIA RELEASE

For immediate release

26 November 2013

TOWER NET PROFIT OF $34.4m, LAYS FOUNDATIONS FOR THE FUTURE

(Auckland – NZ) TOWER Limited has reported a $34.4 million net profit after tax for the full year ended 30 September 2013.

The full year result was impacted by a number of abnormal items related to its divestment programme. It compares to $55.8 million net profit after tax in the previous equivalent period, which included the results for the three businesses that have been sold.

TOWER Chairman Michael Stiassny said the solid performance was pleasing, with TOWER now well positioned as a general insurer.

“Following the divestment of our Health, Investments and Life businesses earlier this year, the transition to a General Insurance business is now complete and a strong foundation for future growth is being laid. This could not have been achieved without significant effort from the entire TOWER team and on behalf of the Board, I would like to thank them for their perseverance.

“Our focus remains on ensuring our shareholders benefit from TOWER’s proven ability to maintain an efficient capital structure while delivering strong returns. And our policyholders should benefit from initiatives designed to improve service and product offerings,” Mr Stiassny said.

TOWER Chief Executive Officer David Hancock said that since his appointment in July, he had concentrated on improving the capital structure, refining and implementing the new business strategy and embarking on an organisational change programme.

“The executive team and I have prepared the way for our future growth and we are now starting to execute our refreshed strategy. Our three-pillared strategy is comprised of financial performance, customer satisfaction and staff engagement and we are confident it will enable us to release the untapped potential within the TOWER business.”

Mr Hancock said TOWER was committed to sustainable growth and was already developing a series of initiatives, alongside the transitional support it was providing to the divested businesses. Key areas of focus include customer retention, product bundling and brand positioning.

Finance and corporate expenses have reduced and there are opportunities for productivity gains to be achieved through further business efficiencies. These would be driven by removing cost from the business and process improvement.

Effective and prudent risk management is another significant area of focus for the business including taking a conservative approach to reinsurance.

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TOWER would also continue to evolve its highly-recognised brand, signifying one of New Zealand’s most enduring financial services companies.

Mr Hancock said TOWER was pleased with the progress it was making in settling claims related to the Canterbury earthquake events, with 74% of all claims now settled and closed.

“Our customers affected by the Canterbury earthquakes are very important to us and we are running at peak resource in this area. We have committed to substantially completing the balance of our claims by the end of 2015, with a small tail of more complex claims.”

Mr Hancock said TOWER operations outside of New Zealand continued to perform well.

“We have a well-established presence in the Pacific Islands, and our team has a strong and loyal customer base. Over the past six months we have identified a number of growth opportunities in different markets that we will be exploring.”

With TOWER’s solid underlying performance and strong capital position, the Board has announced an unimputed dividend of 6 cents per share, to be paid on 3 February 2014. This brings the annual dividend to 11 cents per share (unimputed).

Given the planned $70 million return of capital following the sale of the majority of the Life business, TOWER’s dividend reinvestment plan will not operate for the final dividend. A separate announcement has been made as to the form of the capital repayment.

ENDS

For further information, please contact: Tracey Palmer Head of Corporate Communications DDI +64 9 369 2017

APPENDIX 1

FULL YEAR PRELIMINARY ANNOUNCEMENTS AND FULL YEAR RESULTS

RESULTS FOR ANNOUNCEMENT TO THE MARKET

TOWER LIMITED

ReportingPeriod	12 months to 30 September 2013
PreviousReportingPeriod	12 months to 30 September 2012

	Amounts (000s)	Percentage change

Revenue from ordinary activities	NZ$ 282,610	8.4 % increase

Net profit from ordinary activities aftertaxattributable to shareholders	NZ$ 34,245	38.1 % decrease
Net profit attributable to shareholders	NZ$ 34,245	38.1% decrease

Final Dividend	Amount per security	Imputed amount per security

	NZ 6.0 cents	Nil
RecordDate	22January2014
DividendPaymentDate	3February2014

Comments	2012 comparatives for total revenue have been restated to NZ$260.7 million (from NZ$483.3 million as previously reported to NZX) due to current year reclassification of various business units as discontinued operations in accordance with accounting standards. Total revenue from ordinary activities is greater than prior year primarily as a result of increased general insurance premium revenue. Net profit from ordinary activities is less than prior year as a result of divestment activity. 2012 net profit from ordinary activities included a full 12 months of profits from divested businesses. 2013 includes two months of profit from Health; six months of profit from Investments and 10 months of profit from non-participating Life Insurance. 2013 includes gains on sale of the Investments and non-participating Life businesses net of directly attributable costs of sale (2012: Health). In addition, 2013 includes a loss of NZ$9 million (2012: gain of NZ$9 million) being the after tax effect of movements in the discount rate used to value individual risk life insurance policy liabilities. Net profit for the year ended 30 September 2013 was NZ$34.4 million, including minority interest of NZ$0.1 million. (2012: $55.8 million including minority interest of $0.5 million).


Additional Information	TOWER’s dividend reinvestment plan will not apply for the final dividend.

Refer attached 2013 audited Financial Statements for TOWER Limited and its subsidiaries and Presentation for more detailed analysis and explanation.

TOWER Limited Level 11 22 Fanshawe Street, Auckland PO Box 90347 Auckland New Zealand Tel (+64) 9 369 2000 Fax (+64) 9 369 2160

TOWER Limited APPENDIX 4E PRELIMINARY FINAL REPORT 26 November 2013 ASX LISTING RULES 4.3A

TOWER LIMITED PRELIMINARY FINAL REPORT

Current Reporting Period 12 Months ended 30 September 2013 Previous Reporting Period 12 Months ended 30 September 2012

RESULTS FOR ANNOUNCEMENT TO THE MARKET Year Ended Movement 30 September 2013 000’s Total revenue from ordinary activities NZ$ 282,610 +8.4% Net profit from ordinary activities after tax NZ$ 34,245 -38.1% attributable to shareholders Net profit attributable to shareholders NZ$ 34,245 -38.1%

FINAL DIVIDEND

A final dividend of NZ 6.0 cents per share has been declared. The Record Date is 22 January 2014. The dividend will have no imputation credits attached and will be paid net of withholding tax (where applicable) on 3 February 2014. No franking credits apply. Participation in TOWER’s dividend reinvestment plan will not apply for the final dividend.

ADDITIONAL COMMENTS

2012 comparatives for total revenue have been restated to NZ$260.7 million (from NZ$483.3 million as previously reported to NZX) due to current year reclassification of various business units as discontinued operations in accordance with accounting standards.

Total revenue from ordinary activities is greater than prior year primarily as a result of increased general insurance premium revenue.

Net profit from ordinary activities is less than prior year as a result of divestment activity. 2012 net profit from ordinary activities included a full 12 months of profits from divested businesses. 2013 includes two months of profit from Health; six months of profit from Investments and 10 months of profit from non-participating Life Insurance. 2013 includes gains on sale of the Investments and non-participating Life businesses net of directly attributable costs of sale (2012: Health). In addition, 2013 includes a loss of NZ$9 million (2012: gain of NZ$9 million) being the after tax effect of movements in the discount rate used to value individual risk life insurance policy liabilities.

Net profit for the year ended 30 September 2013 was NZ$34.4 million, including minority interest of NZ$0.1 million. (2012: $55.8 million including minority interest of $0.5 million).

Refer attached 2013 audited Financial Statements for TOWER Limited and its subsidiaries and Presentation for more detailed analysis and explanation

TOWER Limited Level 11 22 Fanshawe Street, Auckland PO Box 90347 Auckland New Zealand Tel (+64) 9 369 2000 Fax (+64) 9 369 2160

APPENDIX 7 – NZSX Listing Rules

EMAIL: [email protected]

Notice of event affecting securities

NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.

Number of pages including this one (Please provide any other relevant details on additional pages)

Full name of Issuer Name of officer make this notice	Full name of Issuer Name of officer make this notice	TOWER Limited	TOWER Limited	TOWER Limited	TOWER Limited	TOWER Limited
		authori	sed to							Authority for e.g. Directors			event, ' resolution
							Michael Boggs								Directors' resolution

Contact phone number			09 369 2172							09 369 2160				e		26 11			2013

Nature of event Tick as appropriate				Bonus Issue Rights Issue			If ticked, state whether: Capital Ca	Taxable ll Dividend		/ Non Taxable If ticked, state		Conv F	ersion ull			Rights Issue Interest Renouncable


				non-renouncable			change			whether: In		terim Y	ear 	Special
EXISTING securitie Description of the class of securities			s affe	cted by this				If more than on		e security is affecte		d by the event, u	se a separate fo ISIN	rm.
				Ordinary shares													NZTWRE0001S3
																	If unknown, contact NZX
Details of securitie			s issu	ed pursuant t	o t	his event		If		more than one clas		s of security is to	be issued, use ISIN	a separ			ate form for each class.
Description of the class of securities Number of Securities to be issued following eve			nt

												Minimum Entitlement					If unknown, contact NZX Ratio, e.g 1 for 2 for


Conversion, Maturity, Call Payable or Exercise Date Strike price per security for any Strike Price available.				issue in lieu or	dat					Tick if paripassu		Treatment of Fractions provide an OR explanation of the ranking
						e Enter N/A if not applicable



M	*onies Associated with E*			*vent* In dollars	an	Dividen d cents		d payable, Call payable, Exercise price, C Source of Payment				onversion price, Redemption price, Application money.

												Retained profits
	Amount per security (does not include any exc			luded income)
					$0.06
	Excluded income per security (only applicable to listed PIEs)


	Currency Total monies				NZ$*						Supplementary Amount per security dividend in dollars and cents details - NZSX Listing Rule 7.12.7 *Date Payable*							$0.000000

					$12,431,606													n/a

T In is	*axation* the case of a taxable bonus sue state strike price										Amountper Security in Dollars and cents to six deci							malplaces
									Resident Withholding Tax		Imputation Credits (Give details) $0.019800
							$				$0.019800							$0.000000
									Foreign Withholding Tax		FWP Credits (Give details)


*Timing* (Refer Appendix 8 in th *Record Date 5pm* For calculation of entitlements - *Notice Date* Entitlement letters, call notices,					e NZ		SX Listing Rules)				*Application Date* Also, Call Payable, Dividend / Interest Payable, Exercise Date, Conversion Date. In the case of applications this must be the last business day of the week. *Allotment Date* For the issue of new securities.
							22 January, 2014							3 February, 2014

conversion notices mailed

OFFICE USE ONLY Ex Date: Commence Quoting Rights: Cease Quoting Rights 5pm: Commence Quoting New Securities: Cease QuotingOld Security5pm:											Security Code: Security Code:

Shareholders on the Company's Australian register will be paid in AU$ calculated at the exchange rate on the Record Date

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TOWER LIMITED

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2013

TOWER LIMITED FINANCIAL STATEMENTS For the year ended 30 September 2013

INCOME STATEMENTS ................................................................................................................................................ 2 STATEMENTS OF COMPREHENSIVE INCOME .............................................................................................................. 3 BALANCE SHEETS ........................................................................................................................................................ 4 STATEMENTS OF CHANGES IN EQUITY ........................................................................................................................ 5 STATEMENTS OF CASH FLOWS .................................................................................................................................... 7 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................................................................. 8 2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES .......................................................................................... 17 3. IMPACT OF AMENDMENTS TO NZ IFRS .................................................................................................................... 18 4. PREMIUM REVENUE ................................................................................................................................................ 19 5. INVESTMENT REVENUE ............................................................................................................................................ 19 6. FEE AND OTHER REVENUE ....................................................................................................................................... 19 7. CLAIMS EXPENSE ...................................................................................................................................................... 19 8. OTHER EXPENSES ..................................................................................................................................................... 20 9. TAXATION ................................................................................................................................................................. 21 10. RECEIVABLES .......................................................................................................................................................... 23 11. INTANGIBLE ASSETS ................................................................................................................................................ 24 12. INVESTMENT IN SUBSIDIARIES ............................................................................................................................... 25 13. DEFERRED ACQUISITION COSTS (NON LIFE) ........................................................................................................... 26 14. PROPERTY, PLANT AND EQUIPMENT ...................................................................................................................... 26 15. PAYABLES ............................................................................................................................................................... 27 16. PROVISIONS ............................................................................................................................................................ 28 17. INTEREST BEARING LIABILITIES ............................................................................................................................... 29 18. INSURANCE LIABILITIES .......................................................................................................................................... 29 19. CONTRIBUTED EQUITY ........................................................................................................................................... 30 20. ACCUMULATED PROFITS/(LOSSES) ......................................................................................................................... 30 21. RESERVES ................................................................................................................................................................ 31 22. NET ASSETS PER SHARE ........................................................................................................................................... 31 23. DISTRIBUTIONS TO SHAREHOLDERS ....................................................................................................................... 32 24. SEGMENTAL REPORTING ........................................................................................................................................ 32 25. LIFE INSURANCE BUSINESS ..................................................................................................................................... 34 26. GENERAL INSURANCE BUSINESS ............................................................................................................................ 43 27. FINANCIAL INSTRUMENT CATEGORIES ................................................................................................................... 48 28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION ...................................................................... 50 29. CAPITAL RISK MANAGEMENT ................................................................................................................................. 59 30. OPERATING LEASES ................................................................................................................................................ 59 31. CASH AND CASH EQUIVALENTS .............................................................................................................................. 59 32. CONTINGENT LIABILITIES ........................................................................................................................................ 60 33. CAPITAL COMMITMENTS ....................................................................................................................................... 60 34. SHARE BASED PAYMENTS ....................................................................................................................................... 61 35. TRANSACTIONS AND BALANCES WITH RELATED PARTIES ...................................................................................... 62 36. INVESTMENT LINKED AND NON-INVESTMENT LINKED BUSINESS OF LIFE INSURANCE COMPANIES ...................... 63 37. EARNINGS PER SHARE............................................................................................................................................. 63 38. BUSINESS COMBINATION ....................................................................................................................................... 64 39. IMPACT OF CHRISTCHURCH EARTHQUAKES ........................................................................................................... 64 40. SUBSEQUENT EVENTS............................................................................................................................................. 65 41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE ................................................................. 65

TOWER LIMITED INCOME STATEMENTS For the year ended 30 September 2013

Note Revenue Premium revenue from insurance contracts Less: Outwards reinsurance expense Net premium revenue 4 Investment revenue 5 Fee and other revenue 6 Net operating revenue Expenses Claims expense Less: Reinsurance recoveries revenue Net claims expense 7 Management and sales expenses 8(A) Net claims and operating expenses Financing costs 8(B) Total expenses Profit before taxation Tax expense attributed to shareholders' profits 9(A) Profit for the year from continuing operations (Loss)/profit for the year from discontinued operations 41 Profit from disposal of subsidiaries 41 Profit for the year Profit attributed to: Shareholders Minority interests Basic and diluted earnings per share for continuing operations 37 Basic and diluted earnings per share from discontinued operations 37	Group 2013 2012 $000 $000 267,160 238,859 (48,617) (41,137) 218,543 197,722 15,057 21,718 393 158 233,993 219,598 198,818 169,135 (52,253) (44,580) 146,565 124,555 72,069 59,811 218,634 184,366 7,869 7,903 226,503 192,269 7,490 27,329 (7,071) (7,925) 419 19,404 (2,981) 36,420 36,937 - 34,375 55,824 34,245 55,339 130 485 34,375 55,824 Cents Cents 0.12 7.10 14.24 13.66	Company 2013 2012 $000 $000
		- - - -
		- - 179,728 22,137 - -
		179,728 22,137 - - - -
		- -
		813 693
		813 693 - -
		813 693 178,915 21,444
		(129) (1,054)
		178,786 20,390
		- - - -
		178,786 20,390
		178,786 20,390 - -
		178,786 20,390

The above income statements should be read in conjunction with the accompanying notes.

TOWER LIMITED STATEMENTS OF COMPREHENSIVE INCOME For the year ended 30 September 2013

Profit for the year Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Gain on asset revaluation Gain transferred to income statement from asset sold Deferred income tax relating to asset revaluation Deferred income tax relating to asset sold Currency translation differences Other comprehensive (loss)/income net of taxation Total comprehensive income for the year Total comprehensive income attributed to: Shareholders Minority interests Total comprehensive income attributed equity shareholders arises from: Continuing operations Assets of disposal group held for sale	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 34,375 55,824 178,786 20,390 715 327 - - (467) - - (218) (91) - - 87 - - (6,453) (115) - - (6,336) 121 - - 28,039 55,945 178,786 20,390
	27,916 56,252 178,786 20,390
	123 (307) - -
	28,039 55,945 178,786 20,390

	31,020 19,525 178,786 20,390
	(2,981) 36,420 - -
	28,039 55,945 178,786 20,390

The above statements of comprehensive income should be read in conjunction with the accompanying notes.

TOWER LIMITED BALANCE SHEETS As at 30 September 2013

Note
Assets
Cash and cash equivalents
31(A)
Receivables
10
Financial assets at fair value through profit or loss
27
Derivative financial assets
27
Liabilities ceded under reinsurance
25
Property, plant and equipment
14
Current tax assets
Deferred acquisition costs
13
Investments in subsidiaries
12
Deferred tax assets
9(C)
Intangible assets
11
Assets of disposal groups classified as held for sale
41
Total Assets
Liabilities
Payables
15
Current tax liabilities
9(B)
Provisions
16
Derivative financial liabilities
27
Interest bearing liabilities
17
Insurance liabilities
18
Deferred tax liabilities
9(C)
Life insurance contract liabilities
25
Life investment contract liabilities
25
Liabilities of disposal groups classified as held for sale
41
Total Liabilities
Net Assets
Equity
Contributed equity
19
Accumulated profit/(losses)
20
Reserves
21
Total equity attributed to shareholders
Minority interests
Total Equity

Group
Company
2013
2012
2013
2012
$000
$000
$000
$000
341,624
186,477
1,507
72,928
380,957
532,162
20,008
2,252
147,437
853,427
-
-
122
91,026
-
-
-
17,617
-
-
4,879
5,529
-
-
10,713
3,615
2,181
1,271
18,211
23,467
-
-
-
-
235,254
235,237
23,652
15,906
-
-
30,174
68,822
-
-
957,769
1,798,048
258,950
311,688
738,801
167,546
-
-
1,696,570
1,965,594
258,950
311,688
45,036
56,772
104,077
190,154
1,654
-
-
-
12,213
7,097
-
-
-
170
-
-
82,791
81,990
-
-
451,905
563,779
-
-
5,464
47,472
-
-
-
591,458
-
-
-
27,476
-
-
599,063
1,376,214
104,077
190,154
716,430
90,591
-
-
1,315,493
1,466,805
104,077
190,154
381,077
498,789
154,873
121,534
453,935
572,805
453,935
572,805
42,983
33,546
(186,106)
(340,085)
(117,103)
(109,005)
(112,956)
(111,186)
379,815
497,346
154,873
121,534
1,262
1,443
-
-
381,077
498,789
154,873
121,534

The financial statements were approved for issue by the Board on 26 November 2013.

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Michael P Stiassny Graham R Stuart Chairman Director The above balance sheets should be read in conjunction with the accompanying notes.

TOWER LIMITED STATEMENTS OF CHANGES IN EQUITY For the year ended 30 September 2013

Group Note Year ended 30 September 2013 At the beginning of the year Comprehensive income Profit for the year *Other comprehensive income* Gain on asset revaluation Gain transferred to income statement from asset sold Deferred income tax relating to asset revaluation Deferred income tax relating to asset sold Currency translation differences Total comprehensive income Transactions with shareholders Capital repayment plan 19 Shares issued under employee share options scheme 19	Contributed equity Accumulated losses/profits Reserves Total Minority interests Total equity $000 $000 $000 $000 $000 $000 Attributed to shareholders
	572,805 33,546 (109,005) 497,346 1,443 498,789 - 34,245 - 34,245 130 34,375 - - 715 715 - 715 (467) (467) - (467) - - (218) (218) - (218) 87 87 - 87 - - (6,446) (6,446) (7) (6,453)
	- 34,245 (6,329) 27,916 123 28,039 (119,228) - - (119,228) - (119,228) 358 - - 358 - 358 - 1,697 (1,770) (73) - (73) - (26,505) - (26,505) - (26,505) - - - - (304) (304) - - 1 1 - 1
Movement in share based payment reserve 20,21
Dividends paid 20
Minority interest dividend paid
Other
Total transactions with shareholders	(118,870) (24,808) (1,769) (145,447) (304) (145,751)
At the end of the year	453,935 42,983 (117,103) 379,815 1,262 381,077
Year ended 30 September 2012 At the beginning of the year Comprehensive income Profit for the year *Other comprehensive income* Gains on asset revaluation Deferred income tax relating to asset revaluation Currency translation differences Total comprehensive income Transactions with shareholders	567,031 (4,352) (109,688) 452,991 2,526 455,517 - 55,339 - 55,339 485 55,824 - - 327 327 - 327 - - (91) (91) - (91) - - 677 677 (792) (115)
	- 55,339 913 56,252 (307) 55,945 5,774 - - 5,774 - 5,774 - 322 (230) 92 - 92 - (18,622) - (18,622) - (18,622) - - - - (392) (392) - 859 - 859 (384) 475
Shares issued under dividend reinvestment plan 19 Movement in share based payment reserve 20,21
Dividends paid 20 Minority interest dividend paid
Other Total transactions with shareholders At the end of the year
	5,774 (17,441) (230) (11,897) (776) (12,673)
	572,805 33,546 (109,005) 497,346 1,443 498,789

The above statements of changes in equity should be read in conjunction with the accompanying notes.

TOWER LIMITED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) For the year ended 30 September 2013

Company Note Year ended 30 September 2013 At the beginning of the year Comprehensive income Profit for the year Total comprehensive income Transactions with shareholders Capital repayment plan 19 Shares issued under employee share options scheme 19 Movement in share based payment reserve 20,21 Dividends paid 20 Other Total transactions with shareholders At the end of the year Year ended 30 September 2012 At the beginning of the year Comprehensive income Profit for the year Total comprehensive income Transactions with shareholders Shares issued under dividend reinvestment plan 19 Movement in share based payment reserve 20,21 Dividends paid 20 Other Total transactions with shareholders At the end of the year	Contributed equity Accumulated losses Reserves Total equity $000 $000 $000 $000
	572,805 (340,085) (111,186) 121,534 - 178,786 - 178,786
	- 178,786 - 178,786 (119,228) - - (119,228) 358 - - 358 - 1,697 (1,770) (73) - (26,505) - (26,505)
	- 1 - 1
	(118,870) (24,807) (1,770) (145,447)
	453,935 (186,106) (112,956) 154,873
	567,031 (342,786) (110,956) 113,289 - 20,390 - 20,390
	- 20,390 - 20,390 5,774 - - 5,774 - 322 (230) 92 - (18,622) - (18,622) - 611 - 611
	5,774 (17,689) (230) (12,145)
	572,805 (340,085) (111,186) 121,534

The above statements of changes in equity should be read in conjunction with the accompanying notes.

TOWER LIMITED STATEMENTS OF CASH FLOWS For the year ended 30 September 2013

Note Cash flows from operating activities Premiums received Interest received Dividends received Investment income Non-life company fee income Reinsurance received Reinsurance paid Claims paid Payments to suppliers and employees Interest paid Income tax paid Net cash inflow/(outflow) from operating activities 31(B) Cash flows from investing activities Net (payments)/receipts for financial assets Net payments for purchase of property, plant and equipment and intangible assets Cash from acquisition of subsidiary Cash disposed with sale of subsidiaries Proceeds from sale of subsidiaries Net cash (outflow)/inflow from investing activities Cash flows from financing activities Proceeds from issue of share capital Dividends paid Payment of supplementary dividends Payment of minority interest dividends Capital repayment Investment in subsidiary Net advances from subsidiaries Net cash outflow from financing activities Net (decrease)/increase in cash and cash equivalents Foreign exchange movement in cash Cash and cash equivalents at the beginning of year	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 378,947 480,212 - - 38,981 36,415 1,528 3,218 1,710 2,138 - 18,960 21,660 63,319 - - 16,304 33,297 - - 178,492 147,116 - - (69,416) (65,430) - - (399,880) (439,607) - - (156,481) (170,996) (14) (26) (7,068) (7,175) - - (13,306) (8,619) - - (10,057) 70,670 1,514 22,152 126,058 (71,799) - - (11,628) (12,915) - - - 3,389 - - (58,101) - - - 253,895 - - - 310,224 (81,325) - - 276 - 276 - (26,505) (12,848) (26,505) (12,848) - (200) - (200) (304) (392) - - (119,227) - (119,227) - - - - (20,000) - - 72,521 (6,115) (145,760) (13,440) (72,935) (39,163) 154,407 (24,095) (71,421) (17,011) (4,118) (152) - - 186,477 223,981 72,928 89,939 13,257 - - - (8,399) (13,257) - - 341,624 186,477 1,507 72,928
Cash reclassified as part of sale Cash reclassified to disposal group held for sale
Cash and cash equivalents at the end of year 31(A)

Note
Cash flows from operating activities
Premiums received
Interest received
Dividends received
Investment income
Non-life company fee income
Reinsurance received
Reinsurance paid
Claims paid
Payments to suppliers and employees
Interest paid
Income tax paid
Net cash inflow/(outflow) from operating activities
31(B)
Cash flows from investing activities
Net (payments)/receipts for financial assets
Net payments for purchase of property, plant and equipment
and intangible assets
Cash from acquisition of subsidiary
Cash disposed with sale of subsidiaries
Proceeds from sale of subsidiaries
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Dividends paid
Payment of supplementary dividends
Payment of minority interest dividends
Capital repayment
Investment in subsidiary
Net advances from subsidiaries
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Foreign exchange movement in cash
Cash and cash equivalents at the beginning of year

Group
Company
2013
2012
2013
2012
$000
$000
$000
$000
378,947
480,212
-
-
38,981
36,415
1,528
3,218
1,710
2,138
-
18,960
21,660
63,319
-
-
16,304
33,297
-
-
178,492
147,116
-
-
(69,416)
(65,430)
-
-
(399,880)
(439,607)
-
-
(156,481)
(170,996)
(14)
(26)
(7,068)
(7,175)
-
-
(13,306)
(8,619)
-
-
(10,057)
70,670
1,514
22,152
126,058
(71,799)
-
-
(11,628)
(12,915)
-
-
-
3,389
-
-
(58,101)
-
-
-
253,895
-
-
-
310,224
(81,325)
-
-
276
-
276
-
(26,505)
(12,848)
(26,505)
(12,848)
-
(200)
-
(200)
(304)
(392)
-
-
(119,227)
-
(119,227)
-
-
-
-
(20,000)
-
-
72,521
(6,115)
(145,760)
(13,440)
(72,935)
(39,163)
154,407
(24,095)
(71,421)
(17,011)
(4,118)
(152)
-
-
186,477
223,981
72,928
89,939
13,257
-
-
-
(8,399)
(13,257)
-
-
341,624
186,477
1,507
72,928

Cash reclassified as part of sale
Cash reclassified to disposal group held for sale

Cash and cash equivalents at the end of year
31(A)

The above statements of cash flows should be read in conjunction with the accompanying notes.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been applied to all the periods presented, unless otherwise stated.

TOWER Limited (the Company) is a profit-oriented company incorporated in New Zealand under the New Zealand Companies Act 1993. The Company is listed on the New Zealand and Australian Stock Exchanges. The Company is an issuer under the Financial Reporting Act 1993. The Company and its subsidiaries together are referred to in this financial report as TOWER, or the Group, or the consolidated entity. The address of its registered office is 22 Fanshawe Street, Auckland, New Zealand.

The financial report of the Company and the Group has been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). It complies with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable financial reporting standards, as appropriate for profit-oriented entities.

During the periods presented, the principal activity of the TOWER Limited Group was provision of life, health and general insurance and investment management services. The Group predominantly operates in New Zealand with some of its general insurance operations based in the Pacific Islands region.

On 30 November 2012, TOWER Limited sold its health insurance business, TOWER Medical Insurance Limited. The sale of TOWER Medical Insurance Limited has resulted in the health insurance business segment being treated as a discontinued operation, which was disclosed as a disposal group held for sale at 30 September 2012. The sale is disclosed in more detail in note 41(A).

On 26 February 2013, TOWER Limited announced the sale of its investment business comprising, TOWER Managed Funds Limited, TOWER Managed Funds Investments Limited, TOWER Employee Benefits Limited, TOWER Asset Management Limited and TOWER Investments Limited. The sale was completed on 2 April 2013 and resulted in the investment business segment being treated as a discontinued operation in these financial statements. The sale is disclosed in more detail in note 41(B).

On 10 May 2013, TOWER Limited announced the sale of most of its non-participating life insurance business to Fidelity Life Assurance Company Limited. The sale was completed on 1 August 2013 and resulted in the non-participating life business segment being treated as a discontinued operation, which has been disclosed as a discontinued operation in these financial statements. The sale is disclosed in more detail in note 41(C).

During the period the directors of TOWER Insurance Limited (a subsidiary of the Company), approved the disposal of the Company‟s general insurance run-off business in its Australian branch to an Australian domiciled entity. The transaction will include disposing of all policies written or assumed by the branch and all the associated assets and liabilities under those policies. Subsequent to the disposal of the policy liabilities and related assets, the balance of the Australian branch assets will be repatriated to New Zealand and the operations of the branch will be discontinued. The Australian branch of TOWER Insurance Limited has been disclosed as a disposal group held for sale in these financial statements. The sale is disclosed in more detail in note 41(D).

At 30 September 2013 TOWER Limited was marketing its remaining participating life insurance business for sale. Consequently the participating life business segment is being treated as a discontinued operation, which has been disclosed as a disposal group held for sale in these financial statements. The proposed sale is disclosed in more detail in note 41(E).

As disclosed in accounting policy (AH) Comparatives, the sale of TOWER businesses has resulted in the reclassification of balances into two line items. Income statement balances for 2013 and 2012 years have been reclassified into either, „Profit for the year from discontinued operations‟ or „Profit from disposal of subsidiaries‟. 2013 balance sheet items have been reclassified into two lines „Assets of disposal group classified as held for sale‟ and „Liabilities of disposal group classified as held for sale‟. The cash flow statement continues to include related cash flows from discontinued operations within each line item. A summary of cash flows from discontinued operations is presented in the relevant sections of note 41 – Discontinued operations, which contains full details of the business disposals.

Compliance with International Financial Reporting Standards (IFRS)

The consolidated financial statements and notes of TOWER Limited comply with International Financial Reporting Standards (IFRS).

The financial statements have been prepared on a fair value basis with any exceptions noted in the accounting policies below.

The Company‟s owners or others do not have the power to amend the financial statements after they have been authorised for issue.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 September 2013 and the results of all subsidiaries for the year then ended.

Subsidiaries are all those entities over which the consolidated entity has control, being the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the consolidated entity controls another entity.

The results of any subsidiaries acquired during the year are consolidated from the date on which control is transferred to the consolidated entity and the results of any subsidiaries disposed of during the year are consolidated up to the date control ceases.

The acquisition of controlled entities from external parties is accounted for using the acquisition method of accounting. The acquisition of entities under common control is accounted for using the predecessor values method. The share of net assets of controlled entities attributable to minority interests is disclosed separately in the balance sheet, income statement and statement of comprehensive income.

When the group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss.

Intercompany transactions and balances between Group entities are eliminated on consolidation.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT IN SUBSIDARIES

Investments in subsidiaries are accounted for at cost less impairment. Cost also includes directly attributable costs of investment.

PRINCIPLES UNDERLYING THE CONDUCT OF LIFE INSURANCE BUSINESS

The life insurance operations of the Group comprise the selling and administration of contracts which are classified as either life insurance contracts or life investment contracts. Contracts that include both investment and insurance elements are separated into these two elements and reported accordingly.

Life insurance contracts involve the acceptance of significant insurance risk. Insurance risk is defined as significant if and only if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance. Insurance contracts include those where the insured benefit is payable on the occurrence of a specified event such as death, injury or disability caused by accident or illness. The insured benefit is either not linked or only partly linked to the market value of the investments held by the life insurer, and the financial risks are substantially borne by the life insurer. Any products that do not meet the definition of a life insurance contract are classified as life investment contracts.

Life investment contracts include investment-linked contracts where the benefit amount is directly linked to the market value of the investments held. While the underlying assets are registered in the name of the life insurer and the investment-linked policy owner has no direct access to the specific assets, the contractual arrangements are such that the investment-linked policy owner bears the risks and rewards of the investment performance. The life insurer derives fee income from the administration of investment-linked policies. Participating policy owner benefits, both vested and unvested, are treated as expenses when incurred and liabilities until paid.

SPECIFIC ACCOUNTING POLICIES

(A) PREMIUM REVENUE

(i) Life insurance contracts

Premiums on life insurance contracts are separated into their revenue and deposit components. Where it is not practicable to split out the two components all premiums have been recognised as revenue. Where policies provide for the payment of amounts of premiums on specific due dates, such premiums are recognised as revenue when due. Unpaid premiums are recognised as revenue only during the days of grace or where secured by the surrender values of the policies concerned. Other premiums are recognised as revenue on a cash received basis.

(ii) Life investment contracts

Under life investment contracts the life companies receive deposits from policyholders which are then invested on behalf of the policyholders. No premiums are recognised as revenue. Fees deducted from members‟ accounts are accounted for as fee revenue.

(iii) Health and General insurance contracts

Premium revenue is recognised in the period in which the premiums are earned during the term of the contract.

The proportion of premiums not earned in the income statement at the reporting date is recognised in the balance sheet as unearned premium liability.

Premiums on unclosed business are brought to account using estimates based on the previous year's actual unclosed business with due allowance made for any changes in the pattern of new business and renewals.

(B) FEE AND OTHER REVENUE

Fee revenue on investment contracts and other services provided by the Group is recognised in the period the services are provided.

(C) INVESTMENT REVENUE

Investment revenue is recognised as follows:

(i) Dividends and distributions

Revenue is recognised on an accrual basis when the right to receive payment is established.

(ii) Property income

Property income is recognised on an accrual basis.

(iii) Interest income

Interest income is recognised using the effective interest method.

(iv) Fair value gains and losses

Fair value gains and losses on financial assets at fair value through profit or loss are recognised through the income statement in the period in which they arise.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(D) CLAIMS EXPENSE

(i) Life insurance contracts

Claims are recognised when the liability to a policyholder under a life insurance contract has been established or upon notification of the insured event. Claims are separated into their expense and withdrawal components. Claims on risk business are treated as an expense and are recognised when a liability to the policyholder is established.

(ii) Life investment contracts

There is no claims expense in respect of investment contracts. Surrenders and withdrawals which relate to life investment contracts are treated as a movement in life investment contract liabilities. Other claim amounts are similar to withdrawals and as such do not relate to the provision of services or the bearing of risk. Accordingly, they are not expenses and are treated as movements in life insurance contract liabilities.

(iii) General insurance contracts

Claims expenses are recognised when claims are notified with the exception of claims incurred not reported for which a provision is estimated (discussed in note 2(B)).

(E) BASIS OF EXPENSE APPORTIONMENT

All operating expenses in respect of life insurance or life investment contracts have been apportioned between policy acquisition, policy maintenance and investment management expenses with regard to the objective when incurring the expense and the outcome achieved.

The apportionment process is adopted by applying the following methodology:

(i) Expenses that can be directly identifiable and attributable to a particular class of business are not apportioned.

(ii) Commission expenses that cannot be allocated to a class of business, for example volume bonuses, are apportioned on the basis of new business and renewal commissions of each class, allowing for limits implied by the basis of adviser remuneration.

(iii) Investment expenses are apportioned to the classes of business on the mean balance of assets under management.

(iv) Other expenses that cannot be allocated to a particular class of business are apportioned to classes of business based on appropriate cost drivers, including number of new policies issued and related premiums, number of new units issued, mean balance of assets under management, average number of policies in-force and time and activity based allocations.

(F) POLICY ACQUISITION COSTS

(i) Life insurance contracts

In determining the life insurance contract liabilities, the deferral and future recovery of acquisition costs are capitalised by way of movement in life insurance contract liabilities, then amortised over the period in which they will be recoverable.

(ii) Other contracts

Policy acquisition costs comprise the costs of acquiring new business, including commission, advertising, policy issue and underwriting costs, agency expenses and other sales costs. Acquisition costs are initially recorded in the income statement, with any amounts to be deferred then taken to the balance sheet as a deferred acquisition cost. Deferred acquisition costs are recognised for the products noted below.

- Superannuation and medical products

The acquisition costs of establishing contracts for certain superannuation and medical products are deferred. These costs are amortised over the periods of expected future benefit. A comparison to recoverable value is carried out annually, with any variance below carrying value taken to the income statement in that year.

(iii) General insurance products

Acquisition costs incurred in obtaining general insurance contracts are deferred and recognised as assets where they can be reliably measured and where it is probable that they will give rise to premium revenue that will be recognised in subsequent reporting periods.

Deferred acquisition costs are amortised systematically in accordance with the expected pattern of the incidence of risk under the general insurance contracts to which they relate. This pattern of amortisation corresponds to the earning pattern of the corresponding premium revenue.

(G) OUTWARDS REINSURANCE

Premiums ceded to reinsurers under reinsurance contracts are recorded as an outwards reinsurance expense and are recognised over the period of indemnity of the reinsurance contract. Accordingly, a portion of outwards reinsurance premium is treated at balance date as a prepayment.

(H) REINSURANCE RECOVERIES

Reinsurance recoveries are recognised as revenue. Amounts recoverable are assessed in accordance with the terms of the reinsurance contracts, which is in a manner similar to the assessment of outstanding claims. Recoveries are measured as the present value of the expected future receipts, calculated on the same basis as the provision for outstanding claims.

(I) FINANCING COSTS

Financing costs include interest on external debt (borrowing costs), and amortisation of transaction costs and are recognised on an effective interest method basis.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(J) TAXATION

(i) Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

(ii) Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities settled, based on the tax rates enacted or substantively enacted for each jurisdiction. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences or unused tax losses can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of the other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(iii) Tax consolidation

TOWER Limited and its New Zealand wholly-owned subsidiaries comprise a New Zealand tax consolidated Group of which TOWER Limited is the head entity. All members of the tax consolidated group are jointly and severally liable for the tax liabilities of the Group.

(iv) Income tax expense

The income tax expense is the tax payable on taxable income for the current period, based on the income tax rate for each jurisdiction and adjusted for changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

(v) Life Insurance tax

From 1 July 2010, life insurers have been subject to a new tax regime. Two tax bases are maintained; the shareholder base which is subject to tax on life risk products (premiums less claims) and net investment income from shareholder funds, and the policyholder base which is subject to tax on net investment income from policyholder funds. The life insurer pays tax on both bases at the prevailing corporate tax rate of 28% (2012: 28%). As the life insurer is taxed as proxy for the policyholder, returns to policyholders are tax exempt.

Transitional provisions are included in the new regime which effectively maintains the historical tax treatment for most policies in force on 30 June 2010 for a period of time (five years in most cases). Under the previous tax regime, the life office base was subject to tax on investment income less expenses plus underwriting income, and tax was calculated on the policyholder base as benefits accrued to policyholders under the policies. The life insurer paid tax on the higher of the two bases at the company tax rate applying at the time.

(vi) GST

All revenues, expenses and certain assets are recognised net of goods and services taxes (GST) except where the GST is not recoverable. In these circumstances the GST is included in the related asset or expense. Receivables and payables are reported inclusive of GST. The net GST payable to or recoverable from the tax authorities as at balance date is included as a receivable or payable in the balance sheet.

Cash flows are included in the statements of cash flows on a net basis to the extent that the GST is not recoverable and has been included in the expense or asset.

(K) FOREIGN CURRENCY

(i) Functional and presentation currencies

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates. The consolidated Group financial statements are presented in New Zealand dollars and rounded off to the nearest thousand dollars.

(ii) Transactions and balances

In preparing the financial statements of the individual entities transactions denominated in foreign currencies are translated into the reporting currency using the exchange rates in effect at the transaction dates. Monetary items receivable or payable in a foreign currency, including forward exchange contracts, are translated at reporting date at the closing exchange rate.

Translation differences on non-monetary items such as financial assets held at fair value through profit or loss are reported as part of their fair value gain or loss.

Exchange differences arising on the settlement or retranslation of monetary items at year end exchange rates are recognised in the income statement.

(iii) Consolidation

For the purpose of preparing consolidated financial statements the assets and liabilities of subsidiaries with a functional currency different to the Company are translated at the closing rate at the balance sheet date. Income and expense items for each subsidiary are translated at a weighted average of exchange rates over the period, as a surrogate for the spot rates at transaction dates. Exchange differences are taken to the Foreign Currency Translation Reserve and recognised in the statement of comprehensive income and the statement of changes in equity.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(L) CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions, other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within cash and cash equivalents on the balance sheet if the net position is an asset due to TOWER Group‟s right to offset overdrafts within its banking facility.

(M) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is initially recorded at cost including transaction costs and subsequently measured at cost less any subsequent accumulated depreciation and impairment losses.

Land and buildings are shown at fair value, based on valuations by external independent appraisers less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. In the prior year land and buildings were shown at cost.

Depreciation is calculated using the straight line method to allocate their cost or revalued amounts, net of any residual amounts, over their useful lives. The assets' useful lives are reviewed and adjusted if appropriate at each balance date. An asset's carrying amount is written down immediately to its recoverable amount if it is considered that the carrying amount is greater than its recoverable amount.

Computer equipment 3 - 5 years Office equipment and furniture 5 years Motor vehicles 5 years Buildings 50 - 100 years Leasehold property improvements 3 - 12 years

(N) ASSETS BACKING INSURANCE BUSINESS

The Group has determined that:

all assets of the life insurance companies are assets backing the policy liabilities of the life insurance business including life
insurance contract liabilities and life investment contract liabilities, with the exception of investments in operating subsidiaries;
all assets within the general insurance companies are held to back general insurance liabilities, with the exception of property, plant and equipment and investments in operating subsidiaries; and
all assets within the health insurance company are held to back health insurance liabilities, with the exception of investments in operating subsidiaries.

These assets are managed in accordance with approved investment mandate agreements on a fair value basis and are reported to the Board on this basis. They have been measured at fair value through profit or loss wherever the applicable standard allows.

Fair value is determined as follows:

cash assets and bank overdrafts are carried at face value which approximates fair value;
shares, fixed interest securities, options and units in trusts listed on stock exchanges are valued at the quoted bid price of the instrument at balance sheet date;
unlisted fixed interest securities are recorded at amounts based on valuations using rates of interest equivalent to the yields obtainable on comparable traded investments at balance date;
unlisted unit trusts are recorded at fund managers' quoted redemption prices; and,
receivables are carried at amortised cost less any impairment, which is the best estimate of fair value as they are settled within a short period.

(O) EARNINGS PER SHARE

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements of ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(P) INTANGIBLES

(i) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the entity acquired, at the date of acquisition.

Following initial recognition, goodwill on acquisition of a business combination is not amortised but is tested for impairment bi-annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group‟s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.

Any impairment is recognised immediately in the income statement.

On disposal of an entity the carrying value of any associated goodwill is included in the calculation of the gain or loss on sale.

(ii) Software

Application software is recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over the estimated useful life of the software.

Internally generated intangible assets are recorded at cost which includes all the directly attributable costs necessary to create, produce and prepare the asset capable of operating in the manner intended by management. Amortisation of internally generated intangible assets begins when the asset is available for use and is amortised on a straight line basis over the estimated useful life.

General use computer software 3-5 years Core operating system software 10 years

(Q) IMPAIRMENT OF NON FINANCIAL ASSETS

Assets that have an indefinite useful life are not subject to amortisation and are tested bi-annually for impairment. Assets with a finite useful life are subject to amortisation and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell, and value in use.

For the purposes of assessing impairment assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(R) FINANCIAL INSTRUMENTS

The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

All purchases and sales of financial assets classified as fair value through profit or loss that require delivery within the timeframe established by regulation or market convention ("regular way" purchases and sales) are recognised at trade date, which is the date the Group commits to purchase or sell the assets. Loans and receivables are recognised at settlement date, which is the date that the assets are delivered or received.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet. Loans and receivables are measured initially at fair value plus transactions costs and subsequently at amortised cost using the effective interest method less any impairment.

(ii) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss comprise of financial assets that are either held for trading or designated on initial recognition at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. Designation by management takes place when it is necessary to eliminate or significantly reduce measurement or recognition inconsistencies or if related financial assets or liabilities are managed and evaluated on a fair value basis.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in the income statement. The net gain or loss recognised in the income statement includes any dividend or interest earned on the financial assets.

Derivatives are categorised as held for trading unless they are designated as hedges. All derivatives entered into by the Group are classified as held for trading as the Group does not apply hedge accounting.

(iii) Fair value

The fair value of the Group‟s financial assets and liabilities that are measured at fair value is determined based on available market prices or using appropriate valuation methods if these are not traded in an active market. Financial instruments carried at fair value are categorised into the three level fair value hierarchy based on significance of inputs used in the measurement. Level 1 includes inputs of quoted prices in active markets for identical assets or liabilities. Level 2 includes inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. Level 3 includes inputs for the assets or liabilities that are not based on observable market data.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(iv) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(v) Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

(S) IMPAIRMENT OF FINANCIAL ASSETS

Financial assets, with the exception of those measured at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired when there is objective evidence that the estimated future cash flows of the asset have been impacted as a result of one or more events that occurred after the initial recognition of the financial asset.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets' carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate.

For all financial assets, other than trade receivables, the carrying amount is reduced by the impairment loss directly. For trade receivables the carrying amount is reduced via an allowance account, against which an uncollectible trade receivable is written off.

A trade receivable is deemed to be uncollectible upon notification of insolvency of the debtor or upon receipt of similar evidence that the Group will be unable to collect the amount. Changes in the carrying amount of the allowance account are recognised in the income statement.

A previously recognised impairment loss is reversed when, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was initially recognised.

In respect of financial assets carried at amortised cost, with the exception of trade receivables, the impairment loss is reversed through the income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Subsequent recoveries of trade receivables previously written off are credited against the allowance account.

(T) LEASED ASSETS

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognised as an expense in the periods the services are received over the period of the lease.

Benefits received and receivable for entering into an operating lease are recognised on a straight line basis over the term of the lease.

(U) INTEREST BEARING LIABILITIES

Interest bearing debt and overdrafts are initially measured at fair value, net of transaction costs incurred and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds, net of transaction costs, and the settlement or redemption of liability is recognised over the term of the liability.

(V) PAYABLES

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unsettled. Payables are recognised initially at fair value net of transaction costs and subsequently measured at amortised cost using the effective interest method.

(W) PROVISIONS

Provisions are only recognised when the Group has a present legal or constructive obligation as a result of a past event or decision, and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are recognised at the best estimate of future cash flows discounted to present value where the effect is material.

(X) EMPLOYEE ENTITLEMENTS

Provision is made for employee entitlements for services rendered up to the balance date. This includes salaries, wages, bonuses, annual leave and long service leave, but excludes share-based payments. Liabilities arising in respect of employee entitlements expected to be settled within 12 months of the reporting date are measured at their nominal amounts. All other employee entitlements are measured at the present value of the estimated future cash outflows to be made in respect of services provided up to the balance date. In determining the present value of future cash outflows, discount rates used are based on the interest rates attaching to government securities which have terms to maturity approximating the terms of the related liability.

(Y) DERIVATIVES

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in the income statement. A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(Z) LIFE INSURANCE LIABILITIES

The Group‟s life insurance liabilities are split between life insurance contracts and life investment contracts. Life insurance contracts are accounted for in accordance with the requirements of NZ IFRS 4 Insurance Contracts. Life investment contracts are accounted for in accordance with NZ IAS 18 Revenue and NZ IAS 39 Financial Instruments: Recognition and Measurement.

Life insurance contracts are those contracts that transfer significant insurance risk. Life investment contracts are those contracts with no insurance risk, but which give rise to a financial asset and/or liability under NZ IAS 39. Contracts that contain a discretionary participating feature are also classified as life insurance contracts.

(i) Life investment contract liabilities

These contracts are designated at inception as at fair value through profit or loss and subsequently measured at fair value with any change in value being recognised in the income statement. Fair value is the current value of units plus investment fluctuation reserves subject to a minimum of current surrender value.

The Group designates these investment contracts to be measured at fair value through profit or loss because it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets and liabilities or recognising gains or losses on different basis.

(ii) Life insurance contract liabilities

The financial reporting methodology used to determine the value of life insurance contract liabilities is referred to as Margin on Services (MoS).

Under MoS the excess of premium received over claims and expenses, „the profit margin‟, is recognised over the life of the contract in a manner that reflects the pattern of risk accepted from the policyholder „the service‟, hence the term Margin on Services.

Life insurance contract liabilities are determined using either the projection method or accumulation method as referred to in note 26. Under the projection method the policy liability is calculated as the net present value of these projected cash flows using best estimate assumptions about the future. When the benefits under the life insurance contract liability are linked to the assets backing it, the discount rate applied is based on the expected future earnings rate on those assets. Where the benefits are not linked to the performance of the backing assets, a risk free discount rate is used. The risk free discount rate is determined by the Appointed Actuary based on the zero coupon swap rates, depending on the nature, structure and term of the contract liabilities.

The assumptions used in the calculation of the policy liabilities are reviewed at each reporting date.

(AA) GENERAL AND HEALTH INSURANCE LIABILITIES

General insurance outstanding claims are measured at the central estimate of the present value of expected future payments after allowing for inflation and superimposed inflation and discounted at the risk free rate. Health insurance outstanding claims are measured at the central estimate of the present value of expected future payments after allowing for historical claims cost escalation and discounted at the risk free rate. In addition a risk margin is added to the claims provision to recognise the inherent uncertainty of the central estimate.

The expected future payments include those in relation to claims reported but not yet paid, claims incurred but not yet reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs. Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.

Provision has been made for the estimate of claim recoveries from third parties in respect of general insurance business.

Liability adequacy testing is performed in order to recognise any deficiencies in the income statement arising from the carrying amount of the unearned premium liability less any related deferred acquisition costs and intangible assets not meeting the estimated future claims under current insurance conditions. Liability adequacy testing is performed at a portfolio level of contracts that are subject to broadly similar risks and are managed together as a single portfolio.

(AB) CONTRIBUTED EQUITY

(i) Ordinary share capital

Ordinary shares issued by the Group are classified as equity and are recognised at fair value less direct issue costs.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(AC) SHARE BASED PAYMENTS

The Group issues share based compensation packages to senior executives as part of their remuneration packages.

These options are measured at fair value at grant date and expensed over the period during which the employee becomes unconditionally entitled to the options, based on the estimate of shares that will eventually vest. Fair value at grant date is measured using a binomial model, taking into account the specific conditions of the options issued. The determination of fair value excludes the impact of any non-market vesting conditions which are allowed for in assumptions about the number of options that are expected to be exercisable. When an expense is recognised there is an equal and opposite entry made to the share option reserve in equity. When the options are exercised the receipt of the exercise price is transferred to share capital.

Where there is a tax deduction allowable in relation to the share option scheme this is recognised in the income statement, to the extent of the tax credit commensurate to the expense recognised in the income statement, with the balance reported through the share option reserve in equity.

Where terms are changed during the period that increase the cost of the options then this is recognised over the remaining vesting period. Where terms are changed during the period that decrease the cost of the options then there is no change to the expense recognised.

(AD) SEGMENT REPORTING

An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other operating segments. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker who reviews the operating results on a regular basis and makes decisions on resource allocation and assessing performance. The chief operating decision-maker has been identified as the Company‟s Board of Directors.

(AE) CASH FLOWS

The statements of cash flows present the net cash flows for financial assets, property, plant and equipment, intangible assets and advances to subsidiaries. TOWER considers that knowledge of gross receipts and payments is not essential to understanding the activities of TOWER and it is considered acceptable to report only the net cash flows for these items. This is based on the fact that either the turnover of these items is quick, the amounts are large, and the maturities are short or the value of the sales are immaterial.

(AF) DISCONTINUED OPERATIONS AND DISPOSAL GROUPS

Assets and liabilities of a disposal group are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. A disposal group is defined as a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated. This condition is regarded as being met only when the sale is highly probable and the assets or businesses are available for immediate sale in their present condition or is a subsidiary acquired exclusively with a view to resale.

As required by accounting standards assets and liabilities of a disposal group are measured at the lower of carrying amount and fair value less costs to sell and disclosed in aggregate on the balance sheet as single line items. Items in the Income Statements and Statements of Comprehensive Income relating to discontinued operations are shown individually on the face of the statements, however profit for the year is separated between continuing and discontinued operations.

Cash flows associated with discontinued operations are disclosed in note 41.

(AG) BUSINESS COMBINATIONS

Identifiable assets acquired and liabilities assumed in business combination are measured at fair value at acquisition date with any excess of cost over the fair value of the net assets acquired recognised as goodwill on the balance sheet.

If there is negative goodwill then this is recognised directly in the income statement.

(AH) COMPARATIVES

Where necessary, comparative information has been reclassified to achieve consistency in disclosure with the current year.

As required by NZ IFRS 5 „Non-current Assets Held for Sale and Discontinued Operations‟, the sale of TOWER businesses has resulted in the reclassification of balances into two line items. Income statement balances for 2013 and 2012 years have been reclassified into either, „Profit for the year from discontinued operations‟ or „Profit from disposal of subsidiaries‟. 2013 balance sheet items have been reclassified into two lines „Assets of disposal group classified as held for sale‟ and „Liabilities of disposal group classified as held for sale‟. The cash flow statement continues to include related cash flows from discontinued operations within each line item. A summary of cash flows from discontinued operations is presented in the relevant section note 41 – Discontinued operations, which contains full details of the business disposals.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The Group makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas where critical accounting estimates are applied are noted below.

(A) LIFE INSURANCE POLICY LIABILITIES

Policy liabilities for life insurance contracts are computed using statistical or mathematical methods, which are expected to give approximately the same results as if an individual liability was calculated for each contract. The computations are made by suitably qualified personnel on the basis of recognised actuarial methods, with due regard to relevant actuarial principles. The methodology takes into account the risks and uncertainties of the particular classes of life insurance business written. Deferred policy acquisition costs are connected with the measurement basis of life insurance liabilities and are equally sensitive to the factors that are considered in the liability measurement.

The key factors that affect the estimation of these liabilities and related assets are:

the cost of providing benefits and administering these insurance contracts;
mortality and morbidity experience on life insurance products, including enhancements to policyholder benefits;
discontinuance experience, which affects the Group‟s ability to recover the cost of acquiring new business over the lives of the contracts; and
the amounts credited to policyholders‟ accounts compared to the returns on invested assets through asset-liability management and strategic and tactical asset allocation.

In addition, factors such as regulation, competition, interest rates, taxes, securities market conditions and general economic conditions affect the level of these liabilities. In some contracts, the Group shares experience on mortality, morbidity, persistency and investment results with its customers, which can offset the impact of these factors on profitability from those products. Details of specific actuarial policies and methods are set out in note 25.

(B) CLAIMS LIABILITIES UNDER GENERAL INSURANCE CONTRACTS

Provision is made at the end of the year for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Group.

The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.

The estimation of claims incurred but not reported (IBNR) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Group, where more information about the claim event is generally available. IBNR claims may often not be apparent to the insured until many years after the events giving rise to the claims has happened. In calculating the estimated cost of unpaid claims the Group uses a variety of estimation techniques, generally based on statistical analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which may cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:

changes in Group processes which might accelerate or slow down the development and (or) recording of paid or incurred claims, compared with statistics from previous periods;
changes in the legal environment;
the effects of inflation;
changes in the mix of business;
the impact of large losses;
movements in industry benchmarks; and
technological developments.

A component of these estimation techniques is usually the estimation of the cost of notified but not paid claims. In estimating the cost of these the Group has regard to the claim circumstances as reported, any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods.

Large claims impacting each relevant business class are generally assessed separately, being measured on a case by case basis or projected separately in order to allow for the possible distortive effect of the development and incidence of these large claims.

Where possible the Group adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.

Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based on the gross provisions. Details of specific assumptions used in deriving the outstanding claims liability at year end are detailed in note 26.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

(C) ASSETS ARISING FROM REINSURANCE CONTRACTS

Assets arising from reinsurance contracts are also determined using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Group may not receive amounts due to it and these amounts can be reliably measured.

(D) TAXATION

The Group is subject to income taxes in New Zealand and jurisdictions where it has foreign operations. Significant management judgement is required in determining the worldwide provision for income taxes. There are some transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on its understanding of tax law in each relevant jurisdiction. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Deferred tax assets are recognised for all unused tax losses to the extent it is probable that taxable profits will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based on the likely timing and quantum of future taxable profits.

3. IMPACT OF AMENDMENTS TO NZ IFRS

(A) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group.

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group‟s accounting periods beginning after 1 October 2013 or later periods, and the Group has not early adopted them. The Group expects to adopt the following new standards on 1 October after the effective date.

NZ IFRS 9 „Financial Instruments‟ (effective from 1 January 2015). The standard partly replaces NZ IAS 39 and introduces requirements for classifying and measuring financial assets and liabilities. The Company is in the process of evaluating the potential effect of this standard.
NZ IFRS 13 „Fair value measurement‟ (effective from 1 January 2013). The standard replaces the guidance on fair value measurement in existing IFRS literature with a single standard. The standard is not expected to have a material impact on the financial statements.
NZ IFRS 10 „Consolidated Financial statements‟ (effective from 1 January 2013). The standard requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in NZ IAS 27 Consolidated and Separate Financial Statements. The standard is not expected to have a material impact on the financial statements.
NZ IFRS 12 „Disclosure of Interests in Other Entities‟ (effective from 1 January 2013). The standard requires extensive disclosure of information that enables users of the financial statements to evaluate the nature of, and risks associated with, interests in other entities. The Company is in the process of evaluating the potential effect of this standard.

(B) Standards, amendments and interpretations to existing standards effective 2013 or early adopted by the Group.

The Group has adopted the following new and amended IFRS‟s as of 1 October 2012:

NZ IAS 1 „Presentation of Financial Statements (effective from 1 January 2013). This revised standard amendment requires entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss in subsequent periods. The revised standard has not had a material impact on the financial statements.
Improvements to NZ IFRS 2009 -2011 cycle includes various amendments effective for periods beginning on or after 1 January 2012. The amendments have not had a material impact on the financial statements.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

4. PREMIUM REVENUE

General insurance premiums Premium revenue from insurance contracts Less: Outwards reinsurance expense Total net premium revenue 5. INVESTMENT REVENUE Fixed interest securities Interest income Net realised gain Net unrealised loss Equity securities Dividend income Net realised loss (1) (1)	2013 2012 2013 2012 $000 $000 $000 $000 Group Company
	267,160238,859 - - 267,160 238,859 - - (48,617) (41,137) - - 218,543 197,722 - -


	16,750 15,192 1,252 3,165
	3,100 8,272 - - (6,455) (3,596) - - 13,395 19,868 1,252 3,165 231 141 178,453 18,960 461 - - -
Net unrealised gain	196 1,356 - -
Property securities Property income Net realised gain Net unrealised loss Other Other investment income Net realised gain Net unrealised gain/(loss) Total investment revenue Total investment revenue Total net realised gain Total net unrealised loss (2) (1)	888 1,497 178,453 18,960


	105 212 - -
	3,215 810 - -
	(2,729) (615) - -
	591 407 - -


	- 12 23 12
	(63) (4) - -
	246 (62) - -
	183 (54) 23 12


	17,086 15,557 179,728 22,137
	6,713 9,078 - -
	(8,742) (2,917) - -
	15,057 21,718 179,728 22,137

5. INVESTMENT REVENUE

(1) The income and loss in these categories has been generated by financial assets designated on initial recognition at fair value through profit or loss.

(2) Other investment gains and losses has been generated by derivative financial assets and financial liabilities classified as held for trading at fair value through profit or loss.

6. FEE AND OTHER REVENUE

Investment and management fees Other revenue Total fee and other revenue 7. CLAIMS EXPENSE General insurance claims Less: Reinsurance recoveries revenue Total net claims expense	85 - - - 308 158 - - 393 158 - -

	198,818 169,135 - - (52,253) (44,580) - - 146,565 124,555 - -

7. CLAIMS EXPENSE

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

8. OTHER EXPENSES

(A) MANAGEMENT AND SALES EXPENSES Non-life expenses Total management and sales expenses Included in total management and sales expenses are the following: Amortisation of non-life deferred acquisition costs Bad debts written off Change in provision for doubtful debts Amortisation of software Depreciation: Office equipment and furniture Motor vehicles Computer equipment Directors‟ fees Operating leases Employee benefits expense Gain/(loss) on disposal of property, plant and equipment Auditors' remuneration Fees paid to Company's auditors: Audit of financial statements Other assurance related services Tax related services Non-assurance advisory related services Fees paid to subsidiary's auditors: Audit of financial statements	Group 2013 2012 2013 2012 $000 $000 $000 $000 Company
	72,069 59,811 813 693 72,069 59,811 813 693
	17,086 23,166 - - 219 55 - -
	161 92 - -
	3,648 2,697 - - 323 513 - - 292 389 - - 1,214 1,305 - -
	824 624 724 624
	4,413 4,227 - -
	47,242 54,648 - -
	(2,140) 131 - -
	761 1,046 - -
	160 40 - - - 49 - - 43 7 - - 37 30 - -

Other assurance related services in the current year relate to work performed on the sale of TOWER‟s investment business and strategic review initiatives.

In the prior year other assurance related services related predominantly to work performed on the sale of TOWER Medical Insurance Limited.

(B) FINANCING COSTS Interest expense Other costs Total financing costs
	7,750 7,677 - -
	119 226 - -
	7,869 7,903 - -

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

9. TAXATION

(A) CURRENT TAX EXPENSE Analysis of taxation expense	Group 2013 2012 $000 $000	2013 2012 $000 $000 Company
		129 696 - - - 358
Current taxation Deferred taxation Under provided in prior years	7,446 6,018 (34) 2,089 (341) (182)
Income tax expense for the year 7,071 7,925 Income tax expense attributed to shareholders 7,071 7,925 7,071 7,925 The tax expense recognised can be reconciled to the accounting profit as follows:		129 1,054 129 1,054
		129 1,054

Profit before taxation from continuing operation	7,490 27,329	178,915 21,444
		50,096 6,004 - -
Income tax at the current rate of 28%	2,097 7,652
Taxation effect of non deductible expenses / non- assessable revenue:
Life insurance companies permanent differences	(33) -
Recognition of prior period current tax	(340) (181) (78) 28 423 153 - - 3,592 -	- 358
Non deductible (income)/losses from PIEs Non deductible expenditure Non taxable dividend from subsidiaries		- - - - (49,967) (5,308) - - - -
Foreign tax credits write-off
Other	1,410 273
Income tax expense	7,071 7,925	129 1,054

The Group taxation expense includes both tax on shareholder profits and on returns attributed to policyholders. The allocation of tax expense between shareholders and policyholders has been disclosed in the income statement.

(B) CURRENT TAX LIABILITIES

Current tax liabilities of $1,654,000 relate to taxes payable to off shore tax authorities in the Pacific Islands.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

9. TAXATION (CONTINUED)

(C) DEFERRED TAX ASSETS AND LIABILITIES

Group 2013	Opening balance at 1 October Charged/ (credited) to income statement Credited to statement of comprehensive income Acquired on Acquisition of Subsidiary Discontinued Operations and Disposal Group Held for Sale Closing balance at 30 September $000 $000 $000 $000 $000 $000
Movements in deferred tax assets
Provisions and accruals Tax losses Insurance Liabilities Fixed Assets Other Total deferred tax assets	1,759 721 - - 1,267 3,747 11,703 5,298 - - (6,539) 10,462 1,177 (1,177) - - - 1,248 (4,356) - - 12,551 9,443 19 - - - (19) -
	15,906 486 - - 7,260 23,652
Movements in deferred tax liabilities
Deferred acquistion costs Unrealised gains Life insurance contract liabilities Other Total deferred tax liabilities	5,923 298 - - (1,787) 4,434 1,148 (274) - - (874) - 39,784 - - - (39,784) - 617 428 131 - (146) 1,030
	47,472 452 131 - (42,591) 5,464

Net deferred tax	(31,566) 34 (131) - 49,851 18,188
2012 Movements in deferred tax assets
Provisions and accruals Tax losses Insurance Liabilities Fixed Assets Other Total deferred tax assets	1,415 421 - - (77) 1,759 - 26 - 11,677 - 11,703 15,686 (70) - - (14,439) 1,177 1,682 (434) - - - 1,248 511 (492) - - - 19
	19,294 (549) - 11,677 (14,516) 15,906
Movements in deferred tax liabilities
Deferred acquistion costs Unrealised gains Life insurance contract liabilities Other Total deferred tax liabilities	14,052 802 - - (8,931) 5,923 1,294 (130) - (16) - 1,148 32,687 7,097 - - - 39,784 737 (211) 91 - - 617
	48,770 7,558 91 (16) (8,931) 47,472

Net deferred tax	(29,476) (8,107) (91) 11,693 (5,585) (31,566)

	Group
Net deferred tax Expected to crystallise in the next 12 months Not expected to crystallise in the next 12 months	2013 2012 $000 $000
	3,173 4,840 15,015 (36,406)
	18,188 (31,566)

Deferred tax liabilities of $1,355,000 have not been recognised in respect of temporary differences associated with investments in subsidiaries (2012: liabilities of $3,758,000).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

9. TAXATION (CONTINUED)

(D) IMPUTATION CREDITS

The Group imputation credit account reflects the imputation credits held by the Company as the representative member of the Group.

Imputation credits available for use in subsequent reporting periods	2013 2012 Group

	361 337

The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:

i) Imputation credits that will arise from the payment of the amount of the provision for income tax;
ii) Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
iii) Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

The company and its New Zealand subsidiaries have form a tax consolidated group. The consolidated group imputation credit account balance reflects the imputation credits available to all members of the group.

10. RECEIVABLES

	Group 2013 2012 2013 2012 $000 $000 $000 $000 Company
Reinsurance recovery receivables	257,310 376,427 - -
Outstanding premiums and trade receivables	114,535 139,235 - -
Unsettled investment sales Related party receivables Other Total receivables Analysed as: Current Non current	601 857 - - - - 20,008 1,975 8,511 15,643 - 277 380,957 532,162 20,008 2,252 310,629 363,267 20,008 2,252 70,328168,895 - - 380,957 532,162 20,008 2,252

Outstanding premiums and trade receivables above are presented net of allowance for credit losses and impairment. Movement in the allowance for credit losses and impairment during the reporting period was as follows:

Outstanding premiums and trade receivables Allowance for doubtful debts	141,413 141,187 - - (2,113) (1,952) - -
Transferred to discontinued operation	(24,765) - - -
Balance at 1 October Provisions added during the year Impairment loss recognised during the year Provisions released during the year	114,535 139,235 - - 1,952 2,057 - - 567 249 - - (219) (55) - - (187) (23) - -
Reclassified to disposal groups held for sale	- (276) - -
Balance at 30 September	2,113 1,952 - -

The allowance for credit losses and impairment in relation to trade receivables is provided for based on estimated recoverable amounts determined by reference to current customer circumstances and past default experience. In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date the credit was initially granted up to the reporting date. The Group has provided fully for receivables over 120 days past due. Trade receivables between 60 and 120 days past due are provided for based on estimated irrecoverable amounts determined by reference to past due default experience.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

11. INTANGIBLE ASSETS

Group Year ended 30 September 2013 Cost: At 1 October 2012 Additions Disposals Impairment of assets At 30 September 2013 Accumulated amortisation: At 1 October 2012 Amortisation charge Amortisation on disposals At 30 September 2013 At 30 September 2013 At cost Accumulated amortisation Net book value at 30 September 2013 Year ended 30 September 2012 Cost: At 1 October 2011 Additions	Goodwill Acquired Internally developed Under development Total $000 $000 $000 $000 $000 Software
	17,744 3,485 59,798 5,877 86,904 - 632 - 9,268 9,900 - - (1,588) - (1,588) - - (44,900) - (44,900)
	17,744 4,117 13,310 15,145 50,316

	- (2,545) (15,537) - (18,082) - (635) (3,013) - (3,648) - - 1,588 - 1,588
	- (3,180) (16,962) - (20,142)
	17,744 4,117 13,310 15,145 50,316 - (3,180) (16,962) - (20,142)
	17,744 937 (3,652) 15,145 30,174
	30,811 2,790 15,004 39,479 88,084 - 653 - 11,192 11,845
Reclassified to disposal group held for sale	(13,067) - - - (13,067)
Transfers At 30 September 2012 Accumulated amortisation: At 1 October 2011 Amortisation charge Transfers At 30 September 2012 At 30 September 2012 At cost Accumulated amortisation Net book value at 30 September 2012	- 42 44,794 (44,794) 42
	17,744 3,485 59,798 5,877 86,904

	- (1,764) (13,579) - (15,343)
	- (739) (1,958) - (2,697)
	- (42) - - (42)
	- (2,545) (15,537) - (18,082)
	17,744 3,485 59,798 5,877 86,904 - (2,545) (15,537) - (18,082)
	17,744 940 44,261 5,877 68,822

Impairment testing for goodwill

Goodwill is allocated to general insurance cash generating unit. The carrying amount of goodwill allocated to the cash generating unit is shown below:

Carrying amount of goodwill	2013 2012 $000 $000 General Insurance
	17,744 17,744

Goodwill is subject to impairment testing at the cash-generating unit level every six months. No impairment loss has been recognised in 2013 as a result of the impairment review (2012: Nil).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

11. INTANGIBLE ASSETS (CONTINUED)

Impairment review method overview

General Insurance

The recoverable amount of the general insurance business has been assessed with reference to its appraisal value to determine its value in use. A base discount rate of 10% was used in the calculation (2012: 10.1%). Other assumptions used are consistent with the actuarial assumptions in note 26 in respect of TOWER Insurance. The projected cash flows have been determined using a steady average growth rate of 4% (2012: 4%). The cash flows were projected over the expected life of the policies. The projected cash flows are determined based on past performances and management expectations for market developments.

Sensitivity to changes in assumptions

Management considers that the recoverable amount from the general insurance business, as determined by the appraisal value, will exceed the carrying value under a reasonable range of adverse scenarios.

12. INVESTMENT IN SUBSIDIARIES

Investments in controlled entities carried at cost

Company
2013	2012
$000	$000
235,254	235,237

The table below lists TOWER Limited subsidiary companies and controlled entities. All entities have a balance date of 30 September.

Principal trading subsidiary companies and controlled entries at 30 September 2013 and 2012 are as follows:

Name of Company	Holdings		Nature of Business
	2013	2012
Incorporated in New Zealand
TOWER Asset Management Limited	-	100%	Investment management services (sold 2 April 2013)
TOWER New Zealand Limited	100%	100%	Management services
TOWER Health & Life Limited	100%	100%	Non operating company (2012: Term and disability
			insurance)
TOWER Insurance Limited	100%	100%	Fire and general insurance
TOWER Investments Limited	-	100%	Holding company (sold 2 April 2013 )
TOWER Life (N.Z.) Limited	100%	100%	Life insurance and superannuation management
TOWER Managed Funds Limited	-	100%	Life insurance administration and personal
			superannuation management (sold 2 April 2013)
TOWER Medical Insurance Limited	-	100%	Health insurance (sold 30 November 2013)
TOWER Financial Services Group Limited	100%	100%	Holding company
TOWER Option Scheme Limited	100%	100%	Trustee for executive share options
TOWER Capital Limited	100%	100%	Holding company for fixed rate senior
			unsecured bonds
TOWER Employee Benefits Limited	-	100%	Holding company (sold 2 April 2013)
TOWER Managed Funds Investment Limited	-	100%	Holding company (sold 2 April 2013)
TAM International Trust Income Fund	100%	100%	Unitised equity investment trust
Incorporated in Fiji
TOWER Insurance (Fiji) Limited	100%	100%	Fire and general insurance
Incorporated in Cook Islands
TOWER Insurance (Cook Islands) Limited	100%	100%	Fire and general insurance
Incorporated in PNG
TOWER Insurance (PNG) Limited	100%	100%	Fire and general insurance
Incorporated in Samoa
National Pacific Insurance Limited	71%	71%	Fire and general insurance

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

13. DEFERRED ACQUISITION COSTS (NON LIFE)

Balance at 1 October Acquisition costs deferred during the year Current period amortisation Reclassified as discontinued operations Balance at 30 September Analysed as: Current Non current	Group 2013 2012 2013 2012 $000 $000 $000 $000 23,467 42,383 - - 18,211 26,617 - - (17,086) (23,166) - - (6,381) (22,367) - - 18,211 23,467 - - 18,211 17,783 - - - 5,684 - - 18,211 23,467 - - Company

14. PROPERTY, PLANT AND EQUIPMENT

Group Year ended 30 September 2013 Cost: At 1 October 2012 Additions Revaluation Disposals Foreign exchange movements Transfers At 30 September 2013 Accumulated Depreciation: At 1 October 2012 Depreciation charge Disposals Foreign exchange movements Transfers At 30 September 2013 At 30 September 2013 At cost Accumulated depreciation Net book value at 30 September 2013	Land and buildings Office equipment and furniture Motor vehicles Computer equipment Total $000 $000 $000 $000 $000 Group

	2,207 7,620 2,021 9,775 21,623 - 257 17 1,330 1,604 715 - - - 715 (533) (1,064) (627) (405) (2,629)
	(109) (80) (126) (34) (349)
	- - - - -
	2,280 6,733 1,285 10,666 20,964

	- (6,727) (1,096) (8,271) (16,094) - (323) (292) (1,214) (1,829) - 941 380 325 1,646 - 71 90 31 192 - - - - -
	- (6,038) (918) (9,129) (16,085)
	2,280 6,733 1,285 10,666 20,964 - (6,038) (918) (9,129) (16,085)
	2,280 695 367 1,537 4,879

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Group Year ended 30 September 2012 Cost: At 1 October 2011 Additions Revaluation Disposals Foreign exchange movements Transfers At 30 September 2012 Accumulated Depreciation: At 1 October 2011 Depreciation charge Disposals Foreign exchange movements Transfers At 30 September 2012 At 30 September 2012 At cost Accumulated depreciation Net book value at 30 September 2012	Land and buildings Office equipment and furniture Motor vehicles Computer equipment Total $000 $000 $000 $000 $000 Group

	1,938 7,460 1,902 9,408 20,708 - 323 397 582 1,302 327 - - - 327 - (102) (269) (172) (543)
	(58) (61) (9) (1) (129)
	- - - (42) (42)
	2,207 7,620 2,021 9,775 21,623
	- (6,304) (969) (7,137) (14,410) - (513) (389) (1,305) (2,207) - 37 263 130 430 - 53 (1) (1) 51 - - - 42 42
	- (6,727) (1,096) (8,271) (16,094)
	2,207 7,620 2,021 9,775 21,623 - (6,727) (1,096) (8,271) (16,094)
	2,207 893 925 1,504 5,529

Land and buildings are all located in Fiji and are stated at fair value. Fair value is determined using a replacement cost approach whereby the depreciated replacement cost of improvements is added to the leasehold interest in the land. This value is then adjusted to take into account recent market activity. Valuation of the commercial building was performed as at 16 August 2013 by Rolle Associates, registered valuers in Fiji. There has been no material movement in the valuation between 16 August and 30 September 2013.

The residential property was sold effective 30 September 2013 and as a result is presented as a disposal in the table above.

Had land and buildings been recognised under the cost model the carrying amount would have been $1,145,000 (2012: $1,868,000). The revaluation surplus for the period is recorded in other comprehensive income. There are no restrictions on the distribution of this balance to shareholders.

The Company does not hold any property, plant and equipment.

15. PAYABLES

15. PAYABLES
Note Trade payables Reinsurance payables Unsettled investment purchases Other payables Related party payables 35 Total payables Analysed as: Current Non current	Group 2013 2012 2013 2012 $000 $000 $000 $000 Company
	11,902 22,435 - - 5,864 8,583 - - - 21 - - 27,270 25,733 1,732 1,554 - - 102,345 188,600 45,03656,772 104,077 190,154
	45,036 56,772 104,077 190,154
	- - - - 45,03656,772 104,077 190,154

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

16. PROVISIONS

Business separation Employee benefits Total provisions Analysed as: Current Non current	Group 2013 2012 2013 2012 $000 $000 $000 $000 9,257 2 - - 2,956 7,095 - - 12,213 7,097 - - 12,075 7,097 - - 138- - - 12,213 7,097 - - Company

Employee benefits include provisions for holiday pay and long service leave.

Movement in provisions

Movements in each class of provision other than employee benefits during the financial year are set out below:

Business separation Opening balance at 1 October Additions Amount utilised in the year Closing balance at 30 September	2 57 - - 21,115 - - - (11,860) (55) - - 9,257 2 - -

Health business

Separation costs of $3,213,000 relating directly to the sale of the health business were provided for during the year ended 30 September 2013. $2,841,000 of the provision has been utilised for legal, consultancy and IT related costs. The remaining balance is expected to be fully utilised by November 2013.

Investments business

Separation costs of $4,878,000 relating directly to the sale of the investments business were provided for during the year ended 30 September 2013. $3,434,000 of the provision has been utilised for legal, consultancy and IT related separation costs. The remaining balance is expected to be fully utilised by March 2014.

Non-participating life business

Separation costs of $10,145,000 relating directly to the sale of the non-participating life business were provided for during the year ended 30 September 2013. $5,584,000 of the provision has been utilised for legal, consultancy and IT related separation costs. The remaining is expected to be fully utilised by June 2015.

Remaining Life business

Separation costs of $2,880,000 relating directly to the sale of the remaining life business were provided for at 30 September 2013. The provision relates to legal, consultancy and IT related separation costs and is expected to be fully utilised by September 2014.

Further details of the discontinued operations to which these provisions relate are disclosed in note 41.

Employee benefits

Employee benefits include provisions for holiday pay and long service leave.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

17. INTEREST BEARING LIABILITIES

Fixed rate senior unsecured bonds Unamortised capitalised costs Analysed as: Current Non current	Group 2013 2012 2013 2012 $000 $000 $000 $000 83,219 83,219 - - (428) (1,229) - - 82,79181,990 - - 82,791 659 - - -81,331 - - 82,79181,990 - - Company

Fixed rate senior unsecured bonds

On 24 March 2009, the Group issued $81,759,000 of fixed rate senior unsecured bonds, bearing a fixed interest rate of 8.5% per annum. The bonds mature on 15 April 2014.

The above total of $82,791,000 includes $1,460,000 of accrued interest (2012: $1,460,000). The Group capitalised $3,499,000 of costs associated with the issuance of the bonds. These costs are amortised over the five year term of the bonds using the effective interest method. The bonds are carried at amortised cost using the effective interest method. The amortised issuance costs during the period to 30 September 2013 were $800,500 (2012: $727,000)

The fair value of fixed rate senior unsecured bonds as at 30 September 2013 is $83,692,000 (2012: $86,104,000). This has been estimated using the method outlined in note 28 (D).

18. INSURANCE LIABILITIES Unearned premiums – general insurance Outstanding claims – general and health insurance Outstanding claims – life and other Analysed as: Current Non current The table below includes a reconciliation of unearned premiums a Unearned premiums - general insurance Opening balance at 1 October 2012 Premiums written Premiums earned Other Closing balance at 30 September 2013 Unearned premiums - health Opening balance at 1 October 2012 Premiums written Premiums earned Reclassified to disposal group held for sale Closing balance at 30 September 2013
	136,915 127,309 - - 314,990 427,396 - - - 9,074 - - 451,905 563,779 - - 345,926 396,926 - - 105,979 166,853 - - 451,905 563,779 - - s at balance date:

	127,309 108,430 - - 265,259 257,738 - - (254,701) (238,859) - - (952) - - - 136,915 127,309 - - - 15,959 - - - 145,711 - - - (146,230) - - - (15,440) - - - - - -

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

19. CONTRIBUTED EQUITY

Ordinary share capital (fully paid)
Total contributed equity
Represented by:
Ordinary shares
Movements in ordinary shares
Balance at 1 October
Dividend reinvestment plan shares issued
Capital repayment plan
Employee share options scheme shares issued
Balance at 30 September
Movements in ordinary share capital
Balance at 1 October
Dividend reinvestment plan shares issued
Capital repayment plan
Employee share options scheme shares issued
Balance at 30 September

Group
2013
2012
2013
2012
$000
$000
$000
$000
453,935 572,805
453,935 572,805
453,935
572,805
453,935
572,805
Number of shares
207,193,438 269,091,094
207,193,438 269,091,094
269,091,094
265,176,580
269,091,094 265,176,580
- 3,914,514
- 3,914,514
(62,097,656) -
(62,097,656) -
200,000-
200,000-
207,193,438
269,091,094
207,193,438
269,091,094
$000
$000
$000
$000
572,805 567,031
572,805 567,031
- 5,774
- 5,774
(119,228)
(119,228) -
358-
358-
453,935
572,805
453,935
572,805
Company
Number of shares

All shares rank equally with one vote attached to each share. There is no par value for each share.

20. ACCUMULATED PROFITS/(LOSSES)

20. ACCUMULATED PROFITS/(LOSSES)
Accumulated losses Balance at 1 October Profit for the year Movement in share based payments reserve Dividends paid Other Balance at 30 September	Group 2013 2012 $000 $000 33,546 (4,352) 34,245 55,339 1,697 322 (26,505) (18,622) - 859 42,983 33,546	2013 2012 $000 $000 Company
		(340,085) (342,786) 178,786 20,390 1,697 322 (26,505) (18,622)
		1 611
		(186,106) (340,085)

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

21. RESERVES

Foreign currency translation reserve (FCTR) Balance at 1 October Currency translation differences arising during the year Balance at 30 September	Group 2013 2012 2013 2012 $000 $000 $000 $000 1,945 1,268 - - (6,446) 677 - - (4,501) 1,945 - - Company

Exchange differences arising on translation of foreign controlled entities are taken to the FCTR as described in note 1(K). The reserve is recognised in profit and loss when the net investment is disposed of.

Share based payments reserve Balance at 1 October Movement in share based payments reserve Balance at 30 September The share based payments reserve is used to recognise the Separation reserve	1,814 2,044 1,814 2,044
	(1,770) (230) (1,770) (230)
	44 1,814 44 1,814
	fair value of options issued but not exercised.
	(113,000) (113,000) (113,000) (113,000)

The share based payments reserve is used to recognise the fair value of options issued but not exercised.

The separation reserve was created in 2007 at the time of the demerger of the New Zealand and Australian businesses in accordance with a ruling provided by the Australian Tax Office (ATO). It will be carried forward indefinitely as a non equity reserve to meet the requirements of the ATO.

Asset revaluation reserves Opening balance at 1 October Gain on revaluation Gain transferred to income statement from asset sold Balance at 30 September
	236 - - - 498 - - - (380) 236 - - 354 236 - -

The asset revaluation reserve is used to recognise unrealised gains on the value of land and buildings above their initial cost.

Total reserves 22. NET ASSETS PER SHARE Net assets per share (dollars) Net tangible assets per share (dollars)	(117,103) (109,005) (112,956) (111,186) 1.84 1.85 0.75 0.45 1.53 1.67 0.75 0.45

Net assets per share represents the value of the Group‟s total net assets divided by the number of ordinary shares on issue at the balance date. Net tangible assets per share represents the net assets per share adjusted for the effect of intangible assets and deferred tax balances. Assets from the disposal group are included in the calculation.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

23. DISTRIBUTIONS TO SHAREHOLDERS

Dividend payments

On 29 November 2012 the Directors declared a final dividend of 6 cents per share for the 2012 financial year. The dividend was paid on 1 February 2013. The total amount payable was $16,145,466. There were no imputation credits attached to the dividend and TOWER did not offer its Dividend Reinvestment Plan for this dividend.

An interim dividend of 5 cents per share was declared by the Board of Directors on 27 May 2013 for the half year ended 31 March 2013. There were no imputation credits attached to the dividend and TOWER did not offer its Dividend Reinvestment Plan for this dividend. The total amount payable was $10,359,672. The dividend was paid on 1 July 2013.

Return of Capital

On 8 April 2013 TOWER announced the cancellation of 3 in every 13 ordinary TOWER shares listed on the ASX and NZX exchanges and registered in the name of each TOWER ordinary shareholder. This resulted in the cancellation of 62,097,656 shares, leaving 206,993,438 shares on issue immediately following the cancellation. This cancellation occurred pursuant to the return of capital arrangement approved by TOWER Limited shareholders at the Annual Shareholders' Meeting held on 21 March 2013. TOWER shares traded on an 'ex return of capital' basis on ASX from 28 March 2013 and on NZX from 3 April 2013.

On 12 April 2013, TOWER paid NZ$1.92 for each share cancelled. Shareholders received total payments of NZ$119,227,500 for all shares cancelled. Australian shareholders received approximately AUD$1.55 per cancelled share (based on a NZD/AUD exchange rate of 0.8065 as at the record date).

24. SEGMENTAL REPORTING

24. SEGMENTAL REPORTING
Group 30 September 2013 Revenue Revenue - external Revenue - internal Total revenue Earnings before interest, tax, depreciation and amortisation Interest expense Depreciation and amortisation Profit before income tax Income tax credit/(expense)(1) Profit for the year Total assets Total liabilities Acquisition of property, plant and equipment, intangibles and other non current assets	New Zealand General Insurance Pacific General Insurance Other (Holding companies and eliminations) Total $000 $000 $000 $000
	181,683 45,539 6,771 233,993 2,614 (2,609) (5) -
	184,297 42,930 6,766 233,993

	(919) 13,580 8,175 20,836 - - (7,869) (7,869) (2) (236) (5,239) (5,477)
	(921) 13,344 (4,933) 7,490 186 (8,772) 1,515 (7,071)
	(735) 4,572 (3,418) 419
	707,623 67,503 182,643 957,769 471,045 45,282 82,736 599,063 (4) 159 11,349 11,504

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

24. SEGMENTAL REPORTING (CONTINUED)

Group 30 September 2012 Revenue Revenue - external Revenue - internal Total revenue Earnings before interest, tax, depreciation and amortisation Interest expense Depreciation and amortisation Profit before income tax Income tax (expense)(1) Profit for the year Total assets(2) Total liabilities(2) Acquisition of property, plant and equipment, intangibles and other non current assets	New Zealand General Insurance Pacific General Insurance Other (Holding companies and eliminations) Total $000 $000 $000 $000
	172,000 39,822 7,776 219,598 (398) 551 (153) -
	171,602 40,373 7,623 219,598

	7,702 14,776 17,658 40,136 74 (156) (7,821) (7,903) - (236) (4,668) (4,904)
	7,776 14,384 5,169 27,329
	(3,982) (2,608) (1,335) (7,925)
	3,794 11,776 3,834 19,404

	644,201 120,746 1,033,101 1,798,048 552,347 50,974 772,893 1,376,214
	- 299 12,848 13,147

(1) Tax expense of individual segments has been impacted by intercompany reclassifications which have been eliminated for management and segmental reporting. This has a nil impact on the Group.

(2) The investment businesses, Australian liabilities, non-participating and remaining life business has been excluded from the above disclosure as the results, assets and liabilities of this segment are contained within note 41.

DESCRIPTION OF SEGMENTS AND OTHER SEGMENT INFORMATION

Operating segments are based on the assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other operating segments.

Management has determined operating segments are based on internal reporting reviewed by the Board of Directors (Chief Operating Decision Maker) for the purpose of making decisions on resource allocation and assessing performance.

New Zealand general insurance includes all fire and general insurance business written in New Zealand. Pacific general insurance includes all fire and general insurance business with customers in the Pacific Islands written by TOWER insurance subsidiaries and branches operations. Other includes head office expenses, financing costs and eliminations. The health, investments and life businesses have been excluded from the above disclosure as the results of these segments are contained within note 41.

TOWER Group operates predominantly in two geographical segments, New Zealand and the Pacific region. The operations in the United Kingdom and the United States do not represent a significant part of the Group's operations or hold material non-current assets.

The Group is domiciled in New Zealand. Revenue from external customers in New Zealand (excluding disposal group held for sale) is $188,454,000 (2012: $179,776,000) and total revenue from external customers from other countries is $45,539,000 (2012: $39,822,000).

The Group does not derive revenue from an individual policy holder or intermediary that represents 10% or more of the Group‟s total revenue.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS

TOWER Health & Life Limited ceased to be a licensed insurer in August 2013 following the sale and legal transfer of all of its insurance business to Fidelity Life Assurance Company Limited. As it is no longer an insurance company, it has no solvency obligations.

(A) POLICY LIABILITIES

Life insurance contract liabilities Value of policy liabilities – Projection Method Future policy benefits Future bonuses Future expenses Reinsurance Future profit margins Future premiums Value of policy liabilities – Accumulation Method Future policy benefits Unvested policy benefits Net policy liabilities - life insurance contracts Reconciliation of movements in life insurance contract policy liabilities Gross life insurance liabilities at 1 October Increase in liabilities ceded under reinsurance	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 547,606 939,446 - - 127,649 122,385 - - 26,515 177,095 - - - (4,146) - - 32,387 163,702 - - (99,905) (857,603) - - 634,252 540,879 - - 1,047 10,488 - - 25,646 22,475 - - 660,945 573,842 - - 591,458 587,476 - - (13,470) (2,409) - - (29,079) 6,470 - - 14 20 - - (230) (99) - - (548,693) - - - - 591,458 - - 23,589 27,476 - - 23,589 27,476 - -
Increase/(decrease) in life insurance contract liabilities recognised in the income statement
Deposits recognised as an increase in policy liabilities Withdrawals recognised as a decrease in policy liabilities Reclassified as discontinued operation Gross life insurance liabilities at 30 September Life investment contract liabilities Value of policy liabilities – Accumulation Method Future policy benefits Gross policy liabilities - life investment contracts

Life insurance contract liabilities
Value of policy liabilities – Projection Method
Future policy benefits
Future bonuses
Future expenses
Reinsurance
Future profit margins
Future premiums
Value of policy liabilities – Accumulation Method
Future policy benefits
Unvested policy benefits
Net policy liabilities - life insurance contracts
Reconciliation of movements in life insurance contract
policy liabilities
Gross life insurance liabilities at 1 October
Increase in liabilities ceded under reinsurance

Group
Company
2013
2012
2013
2012
$000
$000
$000
$000
547,606
939,446
-
-
127,649
122,385
-
-
26,515
177,095
-
-
-
(4,146)
-
-
32,387
163,702
-
-
(99,905)
(857,603)
-
-
634,252
540,879
-
-
1,047
10,488
-
-
25,646
22,475
-
-
660,945
573,842
-
-
591,458
587,476
-
-
(13,470)
(2,409)
-
-
(29,079)
6,470
-
-
14
20
-
-
(230)
(99)
-
-
(548,693)
-
-
-
- 591,458
-
-
23,589 27,476
-
-
23,589 27,476
-
-

Increase/(decrease) in life insurance contract liabilities
recognised in the income statement

Deposits recognised as an increase in policy liabilities
Withdrawals recognised as a decrease in policy liabilities
Reclassified as discontinued operation
Gross life insurance liabilities at 30 September
Life investment contract liabilities
Value of policy liabilities – Accumulation Method
Future policy benefits
Gross policy liabilities - life investment contracts

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

Note Reconciliation of movements in investment contract policy liabilities Gross life investment contract liabilities at 1 October	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 27,476 28,084 - - 2,474 2,408 - - 383 345 - - (6,744) (3,361) - - (23,589) - - 27,476 - - - 618,934 - - 17,617 20,026 - - (13,470) (2,409) - - (4,147) - - 17,617 - -
Increase/(decrease) in life investment contract liabilities recognised in the income statement
Deposits recognised as an increase in policy liabilities Withdrawals recognised as a decrease in policy liabilities Reclassified as discontinued operation Gross life investment contract liabilities at 30 September Total gross policy liabilities Liabilities ceded under reinsurance Balance at 1 October Movement in income statement Reclassified as discontinued operation Balance at 30 September Net policy liabilities Gross policy liabilities analysed as: Current Non current Liabilities ceded under reinsurance analysed as: Current Non current
	- 601,317 - -
	- 18,606 - - - 600,328 - - - 618,934 - - - 7,405 - - - 10,212 - - - 17,617 - -

The Group has designated life investment contract liabilities at fair value through profit or loss. The impact on the fair value of these liabilities resulting from changes in credit risk recognised during the year is nil (2012: Nil), except where the fair value of investment assets backing these liabilities is impacted by changes in credit risk. Any such impact on the investment assets is reflected in the movement in the fair value of these contracts.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

(B) ANALYSIS OF LIFE INSURANCE AND LIFE INVESTMENT CONTRACT RESULTS

Life insurance contracts
Planned profit margins
Experience profit/loss
Capitalised loss recognition
Investment earnings on assets in excess of policy liabilities of
life companies
Operating profit after tax attributable to shareholders
arising from life insurance contracts
Life investment contracts
Planned profit margins
Experience profit
Operating profit after tax attributable to shareholders
arising from life investment contracts

Group
Company
2013
2012
2013
2012
$000
$000
$000
$000
1,829
11,937
-
-
9,842
11,170
-
-
-
198
-
-
552
9,164
-
-
12,223
32,469
- -
309
25
-
-
15
236
-
-
324 261
- -

All operating profit after tax arising from life insurance and life investment contracts is attributed to the shareholders.

(C) SOLVENCY REQUIREMENTS OF LIFE FUNDS

The minimum solvency capital required to be retained to meet solvency requirements under the Insurance (Prudential Supervision) Act 2010 are shown below. The actual solvency capital exceeds the minimum requirements by $23.7 million.

2013 Actual Solvency Capital Minimum Solvency Capital Solvency Margin 2012 Actual Solvency Capital Minimum Solvency Capital Solvency Margin Excess assets to meet solvency requirement Excess assets to meet solvency requirement	$000 $000 29,779 - 6,053 - 23,726 - 23,726 - (1)$000 $000 12,415 179,338 11,494 144,312 921 35,026 921 35,026 TOWER Life (NZ) TOWER Health & Life

On 26[th] August the Reserve Bank of New Zealand imposed a condition of license requirement for TOWER Life (N.Z.) Limited to maintain a minimum solvency margin of $15.0 million.

The methodology and bases for determining the Solvency Margin are in accordance with the requirements of the Solvency Standard for Life Insurance Business published by the Reserve Bank of New Zealand.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

(D) SUMMARY OF SIGNIFICANT ACTUARIAL METHODS AND ASSUMPTIONS – LIFE INSURANCE

The effective date of the policy liabilities and solvency reserves calculation is 30 September 2013. The Appointed Actuary, Charles Hett, FNZSA, FIA, Head of Actuarial Services, Deloitte, has calculated policy liabilities for TOWER Life (NZ) Limited. The actuary is satisfied as to the accuracy of the data from which the policy liabilities have been determined. This note summarises the assumptions made and the methods adopted for the calculation of policy liabilities and solvency requirements.

(a) Policy liabilities

Policy liabilities for the life insurance business of TOWER Life (NZ) Limited have been determined in accordance with Professional Standard No.3 “Determination of Life Insurance Policy Liabilities” issued by the New Zealand Society of Actuaries. This standard requires that policy liabilities be calculated on the basis of best estimate assumptions and in a way that allows for the release of planned margins as services are provided to policyholders.

Valuation of policy liabilities

Policy liabilities comprise the amount required to pay the expected future benefits and expenses after receiving expected future premiums and investment earnings.

The value of policy liabilities may also include a component for profit margins on existing business that will be earned as services are provided to policy owners over the time the relevant policies are held with the Company.

The Company incurs costs in selling new policies. Any costs not recovered by specific charges received from the policy owner at inception are normally deferred. New business selling costs (or acquisition costs) related to the acquisition of new business are deferred as long as the underlying policies are expected to be profitable. Where costs are deferred, they are recovered from premiums or charges receivable in the future.

Methods used to value policy liabilities

(i) Projection method

The projection method uses expected cash flows (premiums, investment income, redemptions or benefit payments, expenses) plus profit margins to be released in future periods, to establish the value of policy liabilities. The value of expected future premiums is deducted from the value of expected benefit and expense payments to arrive at the obligation to policy owners.

(ii) Accumulation method

The accumulation method is only used if the results are not materially different from the projection method. Under the accumulation method for risk policies the policy liability is the sum of the unearned premiums, outstanding claims plus an allowance for claims incurred but not yet reported. For non-participating investment account policies, the policy liability is determined as the policy account balance including accrued interest to the balance date, plus investment fluctuation reserves subject to a minimum of the current surrender value.

Methods used

Where the policy liability is determined by the projection method, actuarial standards require profit to be related to one or more financially measurable indicators of the provision of service (or related income) called „profit carriers‟. The profit carriers adopted for the major product groups are shown in the table below:

MAJOR PRODUCT GROUPS	METHOD	PROFIT CARRIERS
		(for business valued using projection
		method)
Traditional participating	Projection	Cost of supportable bonus
Traditional non-participating, renewal and level term and	Projection	Expected death claims
mortgage repayment insurance
Annuities	Projection	Expected annuity payments
Individual lump sum life insurance risk (life, temporary and	Projection	Expected claims
permanent disability and trauma) and disability income
protection insurance
Non-participating investment account	Accumulation
Group risk insurances and renewable insurances	Accumulation

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

(b) Disclosure of assumptions

The following table summarises the key assumptions used in the calculation of policy liabilities, together with notes on any significant changes in the assumptions:

REQUIRED ASSUMPTION	BASIS OF ASSUMPTION (By product group)	ASSUMPTION
Discount rates for	As the value of benefits is contractually linked to	The discount rates used are as follows:
participating business	the performance of assets, a discount rate based
	on the market return on the asset backing policy	September 2013 : 3.6% net of tax
	liabilities is used. The discount rate assumed in	September 2012 : 3.1% net of tax
	calculating policyholder liabilities was derived
	from the expected long term average rates of
	return for the asset pool backing this business,
	based on the benchmark asset mix. Discount
	rates assumed are net of taxation and investment
	expense.
Discount rates for non-	Risk free discount rates have been adopted for	The discount rates used are as follows:
participating life insurance	life insurance contracts where the benefits are
contracts	not contractually linked to the performance of	Risk Business (discount rates gross of
	backing asset pools. The risk free discount rates	tax)
	have been determined based on swap rates,	September 2013: Discontinued operation
	depending on the nature structure and term of the	September 2012:. 3% to 3.5%
	contract liabilities. Discount rates are assumed
	net of investment management expenses.	Annuities (discount rates net of tax)
		September 2013: 3.3%
		September 2012: 2.6%
Inflation	Benefit indexation is before allowance for the	Benefit Indexation
	proportion of policyholders who take up	September 2013: 2.0%
	indexation.	September 2012: 2.0%
		Expense inflation
		September 2013: 2.0%
		September 2012: 2.0%
Future expenses	Future maintenance expenses have been set	Per policy expenses
	based on experience analyses conducted by the	Participating Business:
	various companies as well as the actuary‟s	September 2013: Discontinued operation
	expectations of future expense levels.	September 2012: $50 p.a.
	Future investment expenses have been assumed	Risk business:
	to be at the same percentage of assets under	September 2013: Discontinued operation
	management as currently applies.	September 2012: $55 to $226 p.a.
		Annuities:
		September 2013: $55 p.a.
		September 2012:$55 p.a.
Rates of taxation	Rates of taxation have been assumed to remain	The corporate tax rate used is:
	as under current legislation or legislation	September 2013: 28%
	substantively enacted at the valuation date.	September 2012: 28%
	Risk policy liabilities have been calculated on a	GST rate:
	gross of tax basis. As such there is no allowance	September 2013: 15%
	for tax within those policy liabilities (excluding	September 2012: 15%
	GST).
	GST has been allowed for at the current rate
	applicable.
Mortality – participating	Mortality assumption is based on NZ97 table	Factors applied to NZ97:
business	adjusted for company experience.	September 2013: 46% to 77%
		September 2012: 46% to 77%
	No changes were made to assumptions at
	September 2013.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

REQUIRED ASSUMPTION	BASIS OF ASSUMPTION (By product group)	ASSUMPTION
Mortality – risk products	Mortality assumption is based on NZ07 table	Mortality rates for main risk product lines:
	adjusted for company experience. No changes	Factors applied to NZ97:
	were made to assumptions at September 2013.	September 2013: 20.6%to 84% for non-
		smokers. Additional loading for smokers.
		September 2012: 20.6%to 84% for non-
		smokers. Additional loading for smokers.
Mortality – annuities	Mortality assumption is based on PML80C10	Historical and Future Improvement
	table projected to 1994 and adjusted for company	factors:
	experience. Factors were applied to take into	September 2013: 1% to 3% p.a.
	account both historical (from 1994) and	depending on age and sex.
	prospective mortality improvement. No changes	September 2012: 1% to 3% p.a.
	were made to assumptions at September 2013.	depending on age and sex.
Disability – lump sum	Based upon recent company and reinsurer	September 2013: 105% to 139% of
(Trauma)	experience adjusting for different product	reinsurance tables
	definitions. Some wholesale schemes use	September 2012: 105% to 139% of
	specific company experience.	reinsurance tables
Disability income	Standard morbidity tables (CIDA) adjusted for	September 2013: CIDA85 adjusted
	company experience. Specific company	September 2012: CIDA85 adjusted
	experience is used for certain wholesale
	schemes. There has been no material change to
	incidence.
Discontinuances	Assumed discontinuance rates vary by sub-	Annual discontinuance rates for main risk
	grouping within a class and vary according to the	product lines:
	length of time tranches of business have been in-	September 2013: 0% to 15% p.a.
	force and other relevant factors.	September 2012: 0% to 15% p.a.
		In both years additional discontinuances
		were assumedforages over65 years.
Surrender values	Surrender values are based on current practice.
Rates of future supportable	Assumed future supportable bonus rates	Future supportable bonus rates as a
participating benefits	included in policyholder liabilities were set such	percentage of Sum Assured:
	that the present value of policyholder liabilities,	September 2013: 0.4% to 2.6%
	allowing for the shareholders‟ right to participate	September 2012: 0.2% to 1.3%
	in distributions, equals the value of assets
	supporting the business.	Future supportable bonus rates as a
		percentage of Reversionary Bonus:
	Distributions are split between policyholders and	September 2013: 0.5% to 0.6%
	shareholders with the valuation allowing for	September 2012: 0.5% to 0.6%
	shareholders to share in distributions. The rate
	of shareholder participation is 25% of the value of	Future terminal bonus:
	bonuses distributed to participating policyholders	September 2013: 10.6% to 34.3%
	subject to policy conditions.	September 2012: 10.6% to 34.3%
	Additional policy bonuses will emerge from the
	assets representing policyholders‟ unvested
	benefits.
Premium rates.	Premium rates are assumed to be equivalent to	Discontinued operation
	those being charged by the Group at the
	reporting date.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

Effect of changes in actuarial assumptions during the reporting period

The liabilities for life insurance contracts include the value of future profit margins that are to be released over future reporting periods. For participating business, the impact of assumption changes is absorbed by the value of future supportable bonus. The current period contract liability is impacted by the change in cost of current period supportable bonus.

The impact of the assumption changes in the current period on future profit margins in respect of life insurance contracts (excluding new business contracts which are measured using assumptions at the valuation date) are shown below.

Where the values of future profit margins are insufficient to absorb the assumption changes, the resulting losses are recognised in the current year via a change in the contract liability. These losses may be reversed in subsequent periods should experience improve.

The life insurance contract liability calculations include the use of published market yields, such as government bond and swap rates. The changes in these yields do not represent actuarial assumption changes and they impact both life insurance contract liabilities and asset values as at the balance date.

The impact of assumption changes for life insurance contracts made during the year is shown below.

	Change in	Change	in		Change in	Change in
	future	next financial			current period	current period
	shareholder	year's			contract	shareholder
	profit margins	shareholder			liability	profit
		planned profit
2013	$000	$000			$000	$000
Assumption change
Mortality and Morbidity	-			-	-	-
Discontinuances	-			-	-	-
Expenses	-			-	-	-
Tax	-			-	-	-
Other	-			-	-	-
2012
Assumption change
Mortality and Morbidity	-			-	-	-
Discontinuances	(27,610)	(1,791)			-	-
Expenses	10,894		504		(1,201)	201
Tax	-			-	-	-
Other	-			-	-	-

(c) Sensitivity analysis

Sensitivity analysis is conducted to quantify the exposure to risk of change in the key underlying variables.

Variable Impact of movement in underlying variable

Expense risk An increase in the level or inflationary growth of expenses over assumed levels will decrease profit and shareholder equity.

Interest rate risk Depending on the profile of the investment portfolio, the investment income of the Group will decrease as interest rates decrease. This may be offset to an extent by changes in the market value of fixed interest investments. The impact on profit and shareholder equity depends on the relative profiles of assets and liabilities, to the extent that these are not matched.

Mortality rates For insurance contracts providing death benefits, greater mortality rates would lead to higher levels of claims, increasing associated claims costs and therefore reducing profit and shareholder equity.

Morbidity rates The cost of health-related claims depends on both the incidence of policyholders becoming temporarily or totally and permanently disabled and, in the case of temporary disablement, the duration which they remain temporarily disabled. Higher than expected incidence and duration would increase claim costs, reducing profit and shareholder equity.

Discontinuance The impact of the discontinuance rate assumption depends on a range of factors including the type of contract, the surrender value basis (where applicable) and the duration in force. For example, an increase in discontinuance rates at earlier durations of life insurance contracts usually has a negative effect on profit and shareholder equity. However, due to the interplay between the factors, there is not always an adverse outcome from an increase in discontinuance rates.

Market risk For benefits which are not contractually linked to the underlying assets, the Group is exposed to market risk.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the performance and equity of the Group. The table below describes how the change in each assumption will affect the insurance liabilities and show an analysis of the sensitivity of the profit or loss and equity net of reinsurance to changes in assumptions.

Variable Change in following financial year's shareholder profit and equity net of reinsurance

Variable	Change in following financial year's shareholder profit and equity net of reinsurance
Mortality Morbidity claims costs Annuitant mortality Renewal expenses Lapses and surrenders	2013 2012
	+ 10% - 10% + 10% - 10% $000 $000 $000 $000 (84) 84 (1,042) 1,042 - - (622) 622 155 (155) 188 (188) 65 (65) (801) 801 (35) 35 (994) 994

The impact from changes to interest rates has been reflected in note 28 (F).

(d) Life insurance risk

The life insurance business of the Group involves a number of non-financial risks concerned with the pricing, acceptance and management of the mortality, morbidity and longevity risks accepted from policyholders. Financial risks involving the Group are in note 28.

Key objectives in managing insurance risk are;

(i) To ensure sound business practices are in place for underwriting risks and claims management;
(ii) To achieve a target return on capital that is invested in order to take on insurance risk; (iii) To ensure solvency and capital requirements are met.

Insurance risks are controlled through the use of underwriting procedures and adequate premium rates and policy charges, all of which are approved by the Chief Actuary. Tight controls are also maintained over claims management practices to ensure the correct and timely payment of insurance claims.

(i) Underwriting management procedures

Underwriting is managed by a separate department with underwriting limits in place to enforce appropriate risk selection criteria. The Group provides appropriate training and development of underwriting staff. Individual policies carrying insurance risk are underwritten on their merits and are generally not issued without having been examined and underwritten individually. Group risk insurance policies are underwritten on the merits of an employee group as a whole, subject to certain limits for individual members.

(ii) Claim management procedures

Claims are managed through a dedicated claims team, with appropriate training and development of staff to ensure procedures are adhered to. Claims are managed to ensure timely and correct payment in accordance with policy conditions. Claims experience is reviewed regularly and appropriate actuarial reserves are established.

(iii) Reinsurance management procedures

The Group holds appropriate reinsurance arrangements to limit exposure to individual and catastrophe risks. All reinsurance arrangements are approved by the Chief Actuary.

(iv)Terms and conditions of life insurance contracts

The nature of the terms of the insurance contracts written by the Group is such that certain external variables can be identified on which related cash flows for claim payments depend. The tables below provide an overview of the key variables upon which the amount of related cash flows are dependent.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

25. LIFE INSURANCE BUSINESS (CONTINUED)

Type of contract	Details of contract workings	Nature of compensation for claims	Key variables affecting future cash flows
Life annuity contracts	These policies provide a guaranteed regular income for the life of the insured in return for an initialsingle premium.	The amount of the guaranteed regular income is set at inception of the policy including any indexation.	Longevity, benefit inflation, expenses and market earnings on assets backing theliabilities
Traditional life insurance contracts with discretionary participating benefits (endowment and whole of life)	These policies include a defined initial guaranteed sum assured that is payable on death. The guarantee amount is increased throughout the duration of the policy by the addition of bonuses annually that once added are not removed. An additional (terminal) bonus is payable on claims paid as a result of death or maturity. Terminal bonus amounts are not guaranteed.	Benefits arising from the discretionary participation feature are based on the performance of a specified pool of contracts or a specified type of contract. Operating profit arising from these contracts is allocated between the policyholders and shareholders. The amount allocated to policyholders is held as an unvested policy liability until it is distributed to policyholders via bonuses.	Mortality, morbidity, lapses, expenses and market earnings on assets backing the liabilities
Investment account contracts with discretionary participating features	The gross value of the premiums received is invested in the investment account with fees and premiums for any associated insurance cover being deducted from the account balance. Interest is creditedregularly.	The payment of the account balance is generally guaranteed, although it may be subject to certain penalties on early termination. On certain contracts withdrawals can be deferred over limited time periods.	Fees, lapses, expenses and market earnings on assets backing the liabilities

(e) Concentration of insurance risk

The Group aims to maintain a portfolio of policyholders with a broad spread of insurance risk types, ages, sexes, occupation classes and geographical locations for the individual and group risk business. The Group uses reinsurance to limit the insurance risk exposure for any one individual. The group risk business unit offers insurance in respect of groups of employees. The Group is exposed to a greater risk of loss from events affecting a location where groups of insured employees work. The Group has purchased catastrophe reinsurance to limit the exposure from any one group event.

(f) Liquidity risk and future net cash outflows

The table below shows the estimated timing of future cash outflows resulting from life insurance contract liabilities. This includes estimated future claims offset by expected future premiums and reinsurance recoveries. All values are discounted to the valuation date.

	Total Less than one year One to two years Two to three years Three to five years Over five years $000 $000 $000 $000 $000 $000

30 September 2013	569,490 32,630 30,999 28,742 53,703 423,416
30 September 2012	201,098 778 1,421 2,697 5,945 190,257

(g) Insurer financial strength rating

TOWER Health & Life Limited and TOWER Life (NZ) Limited have insurer financial strength ratings of „A-‟ (Excellent) issued by international rating agency A.M. Best Company Inc. with effective dates of 25 July 2013.

Following the sale of TOWER Health & Life Limited‟s life insurance business and subsequent cancellation of its insurance licence in August, TOWER Health & Life Limited had its financial strength rating withdrawn by A.M. Best Company Inc. effective 30 August 2013 as it was no longer an insurance company with policyholder related insurance liabilities or risks.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS

These disclosures include an analysis of general insurance business, and where relevant include amounts relating to the health business which has been reclassified as disposal group held for sale.

Net claims incurred Premium revenue Net premium income Claims expense Reinsurance recoveries Acquisition costs Other underwriting expenses Underwriting result Outward reinsurance expense (A) ANALYSIS OF GENERAL INSURANCE OPERATING RESULT	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 267,160 238,859 - - (48,617) (41,137) - - 218,543 197,722 - -	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 267,160 238,859 - - (48,617) (41,137) - - 218,543 197,722 - -

	198,818 168,868 - - (51,880) (44,580) - - 146,938 124,288 - -
	36,281 35,621 - -
	35,226 32,170 - - 98 5,643 - -
Investment and other income	12,325 16,518 - -
Operating profit before taxation
	12,423 22,161 - -
Profit before taxation from general insurance	12,423 22,161 - -

(B) NET GENERAL INSURANCE CLAIMS INCURRED 2013 Risks borne Risks borne current prior years Total $000 $000 $000 Gross claims expense Direct claims - undiscounted 131,045 65,395 196,440 Movement in discount (410) 2,788 2,378 Gross claims expense 130,635 68,183 198,818 Reinsurance and other recoveries Reinsurance and other recoveries revenue - undiscounted (6,844) (44,961) (51,805) Movement in discount 25 (100) (75) Reinsurance recoveries (6,819) (45,061) (51,880) Net claims incurred 123,816 23,122 146,938	(B) NET GENERAL INSURANCE CLAIMS INCURRED 2013 Risks borne Risks borne current prior years Total $000 $000 $000 Gross claims expense Direct claims - undiscounted 131,045 65,395 196,440 Movement in discount (410) 2,788 2,378 Gross claims expense 130,635 68,183 198,818 Reinsurance and other recoveries Reinsurance and other recoveries revenue - undiscounted (6,844) (44,961) (51,805) Movement in discount 25 (100) (75) Reinsurance recoveries (6,819) (45,061) (51,880) Net claims incurred 123,816 23,122 146,938	2012 Risks borne in Risks borne in current year prior years Total $000 $000 $000

	131,045 65,395 196,440 (410) 2,788 2,378 130,635 68,183 198,818 (6,844) (44,961) (51,805)	119,568 46,326 165,894 (132) 3,106 2,974
		119,436 49,432 168,868 (4,975) (39,586) (44,561)
	25 (100) (75) (6,819) (45,061) (51,880) 123,816 23,122 146,938	4 (23) (19)
		(4,971) (39,609) (44,580)

		114,465 9,823 124,288

Current year amounts relates to risks borne in the current financial year. Prior period amounts relate to a reassessment of the risks borne in all previous financial years including those arising due to the Christchurch earthquakes. Refer to note 39.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS (CONTINUED)

Risk margin Claims handling costs Discount Outstanding claims liability Central estimate of expected present value of future payments for claims incurred	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 56,996 69,775 - - 19,350 6,248 - - 3,061 7,007 - - 79,407 83,030 - - (2,792) (12,329) - - 76,615 70,701 - -

(C) OUTSTANDING CLAIMS

(a) Assumptions adopted in calculation of general insurance provisions

Estimates of the outstanding claims as at 30 September 2013 have been carried out by the following Actuaries:

General Insurance: P. Davies, B.Bus.Sc, FNZSA, FIA; and

C. Hett, FIA, FNZSA, Head of Actuarial Services, Deloitte

The New Zealand actuarial assessments are in accordance with the standards of the New Zealand Society of Actuaries. The Actuaries were satisfied as to the nature, sufficiency and accuracy of the data used to determine the outstanding claims liability. The outstanding claims liability is set at a level that is appropriate and sustainable to cover the Group's claims obligations after having regard to the prevailing market environment and prudent industry practice.

The following assumptions have been made in determining general insurance net outstanding claims liabilities:

	2013	2012
Inflation rates for succeeding year	1.5% to 3.75%	1.5% to 4.25%
Inflation rates for following years	1.5% to 3.75%	1.5% to 4.25%
Discount rates for succeeding year	4.0% to 6.25%	2.9% to 6.75%
Discount rates for following years	4.0% to 6.75%	2.9% to 6.75%
Claims handling expense ratio	3.28% to 13.15%	4.7% to 22.97%
Risk margin	6.47% to 10.71%	15% to 25%

In addition to the risk margin range shown above, the total risk margin also includes $15,900,000 associated with the Christchurch earthquake.

The weighted average expected term to settlement of outstanding claims based on historical trends is:

Short tail claims	within 1 year	within 1 year
Long tail claims in the Pacific Islands	1.02 to 2.96 years	1.05 to 2.36 years
Inwards reinsurance	greater than 10 years	15.2 years
Inflation rate

Insurance costs are subject to inflationary pressures. Inflation assumptions for all general insurance classes of business are based on current economic indicators for the relevant country.

For motor and property classes, for example, claim costs are related to the inflationary pressures of the materials and goods insured as well as labour costs to effect repairs. These costs are expected to increase at a level between appropriate Consumer Price Index (CPI) indices and wage inflation.

Discount rate

General insurance outstanding claims liabilities are discounted to present value using a risk free rate relevant to the term of the liability and the jurisdiction.

Claims handling expense

The estimate of outstanding claims liabilities incorporates an allowance for the future cost of administrating the claims. This allowance is determined after analysing historical claim related expenses incurred by the classes of business.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS (CONTINUED)

Risk margin

The outstanding claim liability also includes a risk margin that relates to the inherent uncertainty in the central estimate of the future payments.

Risk margins are determined on a basis that reflects TOWER‟s business. Regard is given to the robustness of the valuation models, the reliability and volume of available data, past experience of the insurer and the industry and the characteristics of the classes of business written.

Uncertainty in claims is represented as a volatility measure in relation to the central estimate. The volatility measure is derived after consideration of statistical modelling and benchmarking to industry analysis. The measure of the volatility is referred to as the coefficient of variation, defined as the standard deviation of the distribution of future cash flows divided by the mean.

Risk margins are calculated jurisdiction separately for long tail and shorttail business and aggregated for the portfolio. The risk margin for all classes when aggregated is less than the sum of the individual risk margins. This reflects the benefit of diversification. The measure of the parameter used to derive the diversification benefit is referred to as correlation, which is adopted with regard to industry analysis, historical experience and actuarial judgement.

The risk margins applied to future claims payments are determined with the objective of achieving at least 75% probability of sufficiency for both the outstanding claims liability and the unexpired risk liability.

The following analysis is in respect of the general and health insurance businesses:

		2013			2012
	Gross	Reinsurance	Net	Gross	Reinsurance	Net
	$000	$000	$000	$000	$000	$000
Reconciliation of movements in
discounted outstanding claims liability
Balance brought forward	427,396	(356,695)	70,701	522,633	(441,367)	81,266
Effect of change in foreign exchange rates	(3,708)	3,830	122	(5,336)	190	(5,146)
Effect of changes in assumptions	(17,690)	271	(17,419)	3,480	(657)	2,823
Decrease in claims incurred anticipated over
year	-	-	-	(4,092)	-	(4,092)
Incurred claims recognised in the income
statement	198,818	(51,880)	146,938	272,789	(44,878)	227,911
Claim (payment) / recoveries during the year	(289,826)	166,099	(123,727)	(351,120)	130,017	(221,103)
Reclassified as disposal group held for sale	-	-	-	(10,958)	-	(10,958)
Balance carried forward	314,990	(238,375)	76,615	427,396	(356,695)	70,701
Reconciliation of undiscounted claims to
liability for outstanding claims
Outstanding claims undiscounted	6,235	(130)	6,105	29,720	(3,892)	25,828
Discount	(2,482)	66	(2,416)	(13,874)	1,791	(12,083)
Outstanding claims	3,753	(64)	3,689	15,846	(2,101)	13,745
Short tail outstanding claims			72,926			56,956
Total outstanding claims as per balance sheet			76,615			70,701

(b) Sensitivity analysis and terms of insurance business

Generally all insurance business entered into is short tail in nature. Key sensitivities relate to the volume of claims and in particular those for significant events such as earthquakes or weather events.

The Group has exposure to some historic inwards reinsurance business and, while this business is not large, it is sensitive to claims experience, timing of claims and changes in assumptions. The movement in any of these key variables will impact the performance and equity of the Group. The business written is long tail in nature and therefore it will be more impacted by changes in assumptions over time. The following table describes how a change in each assumption for the inwards reinsurance business will affect the net insurance liabilities and shows an analysis of the sensitivity of the profit or loss and equity to changes in assumptions related to this business.

The prior year comparatives included the long tail business in Australia which is being held for sale.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS (CONTINUED)

Variable Movement Claim settlement period + 0.5 years - 0.5 years Claims expenses ratio increase of 1% decrease of 1% Inflation rates increase of 1% decrease of 1% Discount rates increase of 1% decrease of 1%	2013 2012 $000 $000 (16) (267) 16 275 13 122 (13) (122) 24 2,074 (23) (1,685) (22) (1,745) 23 2,119 Change in following financial year's shareholder profit and equity net of reinsurance

(c) Future net cash out flows

The following table shows the expected run-off pattern of net undiscounted outstanding claims.

Expected Claims Run Off Reclassified as disposal group held for sale Within 3 months 3 to 6 months 6 to 12 months After 12 months Total	Health Insurance General Insurance Total Health Insurance General Insurance Total $000 $000 $000 $000 $000 $000 - - - (10,958) - (10,958) 2013 2012
	- 23,588 23,588 10,958 28,997 39,955 - 7,596 7,596 - 9,985 9,985 - 5,627 5,627 - 9,917 9,917 - 39,804 39,804 - 21,802 21,802
	- 76,615 76,615 - 70,701 70,701

(D) RISK MANAGEMENT POLICIES AND PROCEDURES

The financial condition and operations of the general insurance business are affected by a number of key risks including insurance risk, interest rate risk, currency risk, market risk, financial risk, compliance risk, fiscal risk and operational risk, refer to note 28. Notes on the policies and procedures employed in managing these risks in the general insurance business are set out below.

(a) Objectives in managing risks arising from insurance contracts and policies for mitigating those risks

The risk management activities include prudent underwriting, pricing, and management of risk, together with claims management, reserving and investment management. The objective of these disciplines is to enhance the financial performance of the insurance operations and to ensure sound business practices are in place for underwriting risks and claims management;

The key processes and controls in place to mitigate risk arising from writing general insurance contracts include:

comprehensive management information systems and actuarial models using historical information to calculate premiums and monitor claims;
monitoring natural disasters such as earthquakes, floods, storms and other catastrophes using models; and
the use of reinsurance to limit the Group's exposure to individual catastrophic risks.

(b) Concentration of insurance risk

Risk	Source of concentration	Risk Management measures
An accumulation of risks arising from a natural peril A large property loss Inclusion of multiple classes of casualty business in the one event	Insured property concentrations Fire or collapse affecting one building or a group of adjacent buildings Response by a multitude of the Group's policies to the one event, for example a construction liability and professional indemnity policy	Accumulation risk modelling, reinsurance protection Maximum acceptance limits, property risk grading, reinsurance protection Purchase of reinsurance clash protection

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS (CONTINUED)

(d) Development of claims

The following table shows the development of net undiscounted general insurance outstanding claims relative to the current estimate of ultimate claims costs for the five most recent years.

	Incidentyear
Ultimate claims cost estimate	Prior 2009 2010 2011 2012 2013 Total $000 $000 $000 $000 $000 $000 $000

At end of incident year One year later Two years later Three years later Four years later Current estimate of ultimate claims cost Cumulativepayments	120,934 110,287 113,814 113,839 123,816 121,734 109,078 127,689 117,277 - 120,395 108,277 147,024 - - 120,354 108,968 - - - 120,330 - - - - 120,330 108,968 147,024 117,277 123,816 (119,913) (108,085) (128,720) (114,201) (94,428)
Undiscounted central estimate Discount topresent value	4,928 417 884 18,303 3,076 29,388 56,996 (2,307) (11) (13) (30) (47) (384) (2,792)
Discounted central estimate	2,621 406 871 18,273 3,029 29,004 54,204 3,061 19,350
Claims handling expense Risk margin
Net outstanding claims liabilities	76,615 238,375
Reinsurance recoveries on outstanding claims liabilities and other recoveries
Gross outstanding claims liabilities	314,990

(E) LIABILITY ADEQUACY TEST

Liability adequacy tests are performed to determine whether the unearned premium liability is sufficient to cover the present value of the expected cash flows arising from rights and obligations under current insurance contracts, plus an additional risk margin to reflect the inherent uncertainty in the central estimate. The future cash flows are future claims, associated claims handling costs and other administration costs relating to the business.

If the unearned premium liability less related deferred acquisition costs exceeds the present value of the expected future cash flows plus the additional risk margin to reflect the inherent uncertainty in the central estimate then the unearned premium liability is deemed to be sufficient. The risk margins applied to future claims were determined with the objective of achieving at least 75% probability of sufficiency of the unexpired risk liability using the same methodology as described above.

	Central estimate claim	Risk	Margin
	% of premium
	2013 2012	2013	2012
General Insurance	43.7% 42.3%	11.8%	11.4%

Unearned premium liabilities as at 30 September 2013 were sufficient (2012: sufficient).

(F) INSURER FINANCIAL STRENGTH RATING

TOWER Insurance Limited has an insurer financial strength rating of „A-‟ (Excellent) issued by international rating agency A.M. Best Company Inc. with an effective date of 25 July 2013.

(G) REINSURANCE PROGRAMME

Reinsurance programmes are structured to adequately protect the general insurance companies‟ solvency and capital positions. The adequacy of reinsurance cover is modelled on assessing TOWER's exposure under a range of scenarios. The plausible scenario that has the most financial significance for TOWER is a major Wellington earthquake. Each year, as part of setting the coming year's reinsurance cover, comprehensive modelling of the event probability and amount of the Group's exposure is undertaken.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

26. GENERAL INSURANCE BUSINESS (CONTINUED)

(H) SOLVENCY REQUIREMENTS

Actual Solvency Capital Minimum Solvency Capital Solvency Margin	2013 2012 $000 $000 195,993 120,902 78,805 81,894 117,188 39,008

On 27[th] August the Reserve Bank of New Zealand imposed a condition of license requirement for TOWER Insurance Limited to maintain a minimum solvency margin of $80.0 million.

The methodology and bases for determining the Solvency Margin are in accordance with the requirements of the Solvency Standard for Non-life Insurance Business published by the Reserve Bank of New Zealand.

27. FINANCIAL INSTRUMENT CATEGORIES

The analysis of financial assets and liabilities into their categories and classes is set out in the following tables.

Group As at 30 September 2013 Financial assets Cash and cash equivalents Reinsurance recoveries receivable Outstanding premiums and trade receivables Unsettled investments sale Other receivables Derivative financial assets Investment in equity securities Investment in fixed interest securities Investment in property securities Total financial assets As at 30 September 2012 Financial assets Cash and cash equivalents Reinsurance recoveries receivable Outstanding premiums and trade receivables Unsettled investments sale Other receivables Derivative financial assets Investment in equity securities Investment in fixed interest securities Investment in property securities Total financial assets	Total $000 341,624 257,310 114,535 601 4,865 122 1,685 144,897 855 866,494 186,477 376,427 139,235 857 10,928 91,026 97,617 700,609 55,201 1,658,377	Loans and Receivables $000 341,624 257,310 114,535 601 4,865 - - - -	Fair value through profit or loss
			Designated Held for trading $000 $000 - - - - - - - - - - - 122 1,685 - 144,897 - 855 -
		718,935	147,437 122
		186,477 376,427 139,235 857 10,928 - - - -	- - - - - - - - - - - 91,026 97,617 - 700,609 - 55,201 -
		713,924	853,427 91,026

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

27. FINANCIAL INSTRUMENT CATEGORIES (CONTINUED)

Designated Held for trading $000 $000 - - - - - - - - - - - - - - Fair value through profit or loss	Designated Held for trading $000 $000 - - - - - - - - - - - - - - Fair value through profit or loss	$000 Financial liabilities at amortised cost
Designated $000

- - - - -		11,902 5,864 - 6,204 82,791
-		-
-		-
-	-	106,761
	- - - - - 170 -
- - - - -		22,237 8,583 21 12,720 81,990
-		-
27,476		-
27,476	170	125,551
$000 1,507 - 20,008 21,515 72,928 277 1,975 75,180 $000 1,732 102,345 104,077 1,554 188,600 190,154 Loans and Receivables Financial liabilities at amortised cost

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION

The financial condition and operating results of the Group are affected by a number of key financial and non-financial risks. Financial risks include market risk, credit risk, financing and liquidity risk. The non-financial risks include insurance risk, compliance risk and operational risk. The Group's objectives and policies in respect of insurance risks are disclosed in notes 25 and 26, while the managing of financial and other non financial risks are set out in the remainder of this section.

TOWER's objective is to satisfactorily manage these risks in line with the Board approved Group Risk and Compliance framework policy. Various procedures are in place to help identify, mitigate and monitor the risks faced by the Group. Business managers are responsible for understanding and managing their risks including operational and compliance risk. The consolidated entity‟s exposure to all high and critical risks is reported monthly to the board and quarterly to the Group Audit and Risk Committee.

The Board has delegated to the Group Audit and Risk Committee the responsibility to review the effectiveness and efficiency of management processes, internal audit services, group risk management and internal financial controls and systems as part of their duties. A Group Risk and Compliance team is in place in an oversight and advisory capacity and to manage the risk and compliance framework.

Financial risks are generally monitored and controlled by selecting appropriate assets to back policy liabilities. The assets are regularly monitored to ensure that there are no material asset and liability mismatching issues and other risks such as liquidity risk and credit risk are maintained within acceptable limits.

The Board is responsible for:

reviewing investment policy for TOWER shareholder and policyholder funds;
reviewing the risk management policy and statements in respect of investment management, including the derivative policy;
considering the establishment, adjustment or deletion of limits and counter-party approvals, and the scope of financial instruments to be used in the management of TOWER's investments;
reviewing the appointment of external investment managers;
monitoring investment and fund manager performance; and
monitoring compliance with investment policies and client mandates.

(A) MARKET RISK

Market risk is the risk of change in the fair value of financial instruments from fluctuations in the foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk), whether such change in price is caused by factors specific to an individual financial instrument or its issuer or factors affecting all financial instruments traded in a market.

The impact of reasonably possible changes in market risk on the Group shareholders' profit and equity is included in note 28(F) below.

(i) Currency risk

Currency risk is the risk of loss resulting from changes in exchange rates when applied to assets and liabilities or future transactions denominated in a currency that is not the Group's functional currency.

TOWER's principal transactions are carried out in New Zealand Dollars and its exposure to foreign exchange risk arises primarily with respect to the Pacific Island General Insurance business.

TOWER generally elects to not hedge the capital invested in overseas entities, thereby accepting the foreign currency translation risk on invested capital.

The Board sets limits for the management of currency risk arising from its investments based on prudent international asset management practice. Regular reviews are conducted to ensure that these limits are adhered to. In accordance with this policy, TOWER does not hedge the currency risk arising from translation of the financial statements of foreign operations other than through net investments in foreign operations.

The Group enters into forward foreign exchange contracts in accordance with its investment policies as economic hedges of foreign currency exposure in investments in international equities through its holdings in international equities funds. The main foreign currencies exposure of the funds is to Australian and US dollars, Japanese Yen, Euro‟s and British Pounds. The notional amounts and contractual cash flows of these derivatives are included in note 28(E) below.

(ii) Interest rate risk

Interest rate risk is the risk that the value or future value cash flows of a financial instrument will fluctuate because of changes in interest rates.

The Board is responsible for the management of the interest rate risk arising from external borrowings. As at 30 September 2013 there were no interest rate swaps in place in relation to external borrowings (2012: nil). The Group manages interest rate risk arising from its interest bearing investments in accordance with Group Investment Committee approved policies.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

General insurance

Interest rate risk arises in general insurance to the extent that there is a mismatch between the fixed interest portfolios used to back outstanding claims liabilities and those outstanding claims. Interest rate risk is managed by matching the duration profiles of investment assets and outstanding claim liabilities.

Life insurance

Interest rate risk and other market risks arise in life insurance to the extent that there is a mismatch between the policyholder liabilities and assets backing those liabilities. These mismatches could impact current period operating profits.

The primary areas of mismatch for the Group‟s life insurance business are:

For a portion of the life investment contract business, the mismatch between the value of financial instrument liabilities (including the discount rates used in their calculation, if applicable) and the backing asset values.

Interest rate and other market risks are managed by the Group through a strategic asset allocation policy and an investment management policy that has regard to policyholder expectations and risks and to target surplus for solvency as advised by the Appointed Actuary.

(iii) Price risk Price risk is the risk of loss resulting from the decline in prices of equity securities or other assets. The Group is exposed to price risk because of its investments in publicly traded equity securities and other unit trusts.

Price risk is managed by diversification of the investment portfolio, which is done in accordance with the limits set by investment mandates and monitored by the Board.

(B) CREDIT RISK

Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitment in full and on time, or from losses arising from the change in value of a trading financial instrument as a result in changes in credit risk of that instrument.

The Group's exposure to credit risk is limited to deposits and investments held with banks and other financial institutions as well as credit exposure to trade customers or other counterparties. For banks and financial institutions the minimum credit rating accepted by the Group is 'A'. Independent ratings are used for customers that are rated by rating agencies. For customers with no external ratings, internally developed minimum credit quality requirements are applied, which take into account customers' financial position, past experience and other relevant factors. Overall exposure to credit risk is monitored on a group basis in accordance with limits set by the Board.

The Company has no significant exposure to credit risk. Credit exposure in respect of the Company‟s cash balances is limited to institutions with minimum AA credit ratings.

(i) Credit risk concentration

Concentration of credit risk exists when the Group enters into contracts or financial instruments with a number of counterparties that are engaged in similar business activities or exposed to similar economic factors that might affect their ability to meet contractual obligations. TOWER manages concentration of credit risk by credit rating, industry type and individual counterparty.

The significant concentrations of credit risk are outlined by industry type below.

New Zealand government Other government agencies Banks	2013 2012 $000 $000 13,773 58,965 23,635 109,141 447,835 778,296 Carrying value
Financial institutions Other non-investment related receivable Other industries Total financial assets with credit exposure	1,920 11,466 373,077 508,554 3,114 39,137 863,354 1,505,559

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

(ii) Maximum exposure to credit risk

The Group's maximum exposure to credit risk without taking account of any collateral or any other credit enhancements, is as follows:

Cash and cash equivalents
Loans and receivables
Financial assets at fair value through profit or loss
Derivative financial assets

2013
2012
$000
$000
341,624
186,477
376,711
527,447
144,897
700,609
122
91,026
Carrying value

Total credit risk
863,354
1,505,559
(iii) Credit quality of financial assets that are neither past due nor impaired
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratin
applicable) or to historical information about counterparty default rates:
Credit exposure by credit rating
AAA
59,602
315,839
AA
397,872
605,413
A
5,053
21,850
Below BBB
12,798
15,579
475,325
958,681
Group 1
361,555
486,671
Group 2
-
-
Group 3
12,499
38,712
Total counterparties with no external credit rating
374,054
525,383
849,379
1,484,064
Total counterparties with external credit rating by
Standard and Poor's
Total financial assets neither past due nor impaired with
credit exposure

(iii) Credit quality of financial assets that are neither past due nor impaired

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if applicable) or to historical information about counterparty default rates:

Group 1 - trade debtors outstanding for less than 6 months Group 2 - trade debtors outstanding for more than 6 months with no defaults in the past Group 3 - unrated investments

TOWER invests in a number of Pacific region investment markets through its Pacific Islands operations to comply with local statutory requirements and in accordance with TOWER investment policies. These investments relate to the general insurance business of the Group and generally have low credit ratings. These investments represent the majority of the value included in the 'Below BBB' and unrated categories in the table above.

(iv) Financial assets that would otherwise be past due whose terms have been renegotiated

None of the financial assets that are fully performing have been renegotiated in the past year (2012: Nil).

(v) Financial assets that are past due but not impaired

The Group considers that financial assets are past due if payments have not been received when contractually due. At the reporting date, the total of carrying value of past due but not impaired assets held by the Group is as follows:

As at 30 September 2013 Reinsurance recoveries receivable Outstanding premiums and trade receivables Total As at 30 September 2012 Reinsurance recoveries receivable Outstanding premiums and trade receivables Total	Less than 30 days 31 to 60 days 61 to 90 days Over 90 days Total $000 $000 $000 $000 $000 Past due but not impaired
	80 474 620 3,509 4,683 5,5502,434 1,098210 9,292
	5,630 2,908 1,718 3,719 13,975
	2,854 1,113 853 2,750 7,570 8,250 3,4281,679 568 13,925
	11,104 4,541 2,532 3,318 21,495

The parent company does not have past due financial assets as at 30 September 2013 (2012: Nil).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

(vi) Financial assets that are individually impaired

Outstanding premiums and trade receivables Total	2013 2012 $000 $000 - - - - Carrying value

(C) FINANCING AND LIQUIDITY RISK

Financing and liquidity risk is the risk that the Group will not be able to meet its cash outflows or refinance debt obligations, as they fall due, because of lack of liquid assets or access to funding on acceptable terms.

To mitigate financing and liquidity risk the Group treasury function maintains sufficient liquid assets to ensure that the Group can meet its debt obligations and other cash outflows on a timely basis.

(i) Financial liabilities and guarantees by contractual maturity

The table below summarises the Group's financial liabilities and guarantees into relevant maturity groups based on the remaining period at the balance date to the contractual maturity date. All amounts disclosed are contractual undiscounted cash flows that include interest payments and exclude the impact of netting agreements.

	Total
	Carrying contractual	Less than One to two	Two to four	Over five	On
Group	value cash flows	one year years	years	years	demand
	$000 $000	$000 $000	$000	$000	$000
As at 30 September 2013
Financial liabilities and guarantees
Trade payables	11,902 11,902	11,902 -	-		- -
Reinsurance payables	5,864 5,864	5,864 -	-		- -
Unsettled investment purchases	- -	- -	-		- -
Other payables	6,204 6,204	6,204 -	-		- -
Derivative financial liabilities(1)	- -	- -	-		- -
Interest bearing liabilities	82,791 85,510	85,510 -	-		- -
Life investment contract liabilities	- -	- -	-		- -
Funds invested guarantee	- -	- -	-		- -
Total financial liabilities and
guarantees	106,761 109,480	109,480 -	-		- -
As at 30 September 2012
Financial liabilities and guarantees
Trade payables	22,237 22,237	22,237 -	-		- -
Reinsurance payables	8,583 8,583	8,583 -	-		- -
Unsettled investment purchases	21 21	21 -	-		- -
Other payables	12,720 12,720	12,720 -	-		- -
Derivative financial liabilities(1)	170 5,599	5,498 67	34		- -
Interest bearing liabilities	81,990 92,460	6,950 85,510	-		- -
Life investment contract liabilities	27,476 27,476	- -	-		- 27,476
Funds invested guarantee	880 880	- -	-		- 880
Total financial liabilities and
guarantees	154,077 169,976	56,009 85,577	34		- 28,356

(1) Please see note 28(E) for total cash flows for forward foreign exchange contracts

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

Company As at 30 September 2013 Financial liabilities Related party payables Other payables Total financial liabilities As at 30 September 2012 Financial liabilities Related party payables Other payables Total financial liabilities	Carrying value Total contractual cash flows Less than one year On demand $000 $000 $000 $000
	102,345 102,345 - 102,345 1,732 1,732 1,732-
	104,077 104,077 1,732 102,345
	188,600 188,600 - 188,600 1,554 1,554 1,554-
	190,154 190,154 1,554 188,600

(D) FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Refer below for details of valuation methods used for each category of financial assets and liabilities.

The carrying amounts of all financial assets and liabilities reasonably approximate their fair values with the exception of senior unsecured bonds which is disclosed in note 17.

The following methods and assumptions were used by TOWER in estimating the fair values of financial instruments.

(i) Cash and cash equivalents

The carrying amount of cash and cash equivalents reasonably approximates its fair value.

(ii) Financial assets at fair value through profit or loss and held for trading

The fair value of financial assets at fair value through profit or loss is determined by reference to their quoted price at the reporting date.

(iii) Loans and receivables and other financial liabilities held at amortised cost Carrying values of loans and receivables, adjusted for impairment values, and carrying values of other financial liabilities held at amortised cost reasonably approximate their fair values.

(iv) Derivative financial liabilities

The fair value of derivative financial liabilities is determined by reference to the quoted market price of the underlying equity securities.

(v) Interest bearing liabilities

The fair value of senior unsecured bonds is determined by reference to the quoted market price of the underlying debt securities.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

Financial instruments that are measured in the balance sheet at fair value (excluding short term amounts held at a reasonable approximation of fair value), are categorised by the following fair value measurement hierarchy levels:

==> picture [8 x 11] intentionally omitted <==

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 - Inputs for that asset or liability that are not based on observable market data (i.e. unobservable inputs)

The following tables present the Group‟s assets and liabilities categorised by fair value measurement hierarchy levels.

Group As at 30 September 2013 Assets Derivative financial assets Investment in equity securities Investments in fixed Interest securities Investments in property securities Total financial assets Liabilities Derivative financial liabilities Life investment contract liabilities Total financial liabilities As at 30 September 2012 Assets	Total Level 1 Level 2 Level 3 $000 $000 $000 $000
	122 - 122 - 1,685 - - 1,685 144,897 - 144,897 - 855 - 855 -
	147,559 - 145,874 1,685
	- - - - - - - -
	- - - -


Derivative financial assets Investment in equity securities Investments in fixed Interest securities Investments in property securities Total financial assets	91,026 - 91,026 - 97,617 46,334 48,032 3,251 700,609 - 700,609 - 55,201 - 55,201 -
	944,453 46,334 894,868 3,251
Liabilities	170 - 170 - 27,476 - 27,476 -
Derivative financial liabilities Life investment contract liabilities Total financial liabilities
	27,646 - 27,646 -

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm‟s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. At 30 September 2013, the level 3 category includes an investment in equity securities of $1,685,000 (2012: $3,251,000). Previously these investments were included in level 2 and were immaterial. This investment is unlisted and its fair value is calculated based on the net assets of the investment as per its most recently available financial information.

The following table represents the changes in Level 3 instruments for the year ended 30 September 2013.

Opening balance Total gains and losses recognised in profit and loss Foreign currency movement Transfers in/out Closing balance	2013 2012 $000 $000 Investment in equity securities
	3,251 -
	(1,050) 1,052 (516) 67
	- 2,132
	1,685 3,251

The following table shows the sensitivity of Level 3 measurements to reasonably possible favourable or unfavourable changes in assumptions used to determine the fair value of the financial asset. If the market value of the investment in equity securities were to change by +/- 10% the impact is outlined below:

2013 Investment in equity securities 2012 Investment in equity securities	Carrying Favourable Unfavourable Amount changes of 10% changes of 10% $000 $000 $000

	1,685 169 (169)

	3,251 325 (325)

Specific valuation techniques used to value financial instruments include:

==> picture [8 x 10] intentionally omitted <==

Quoted market prices or dealer quotes for similar instruments.

==> picture [8 x 11] intentionally omitted <==

The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

==> picture [8 x 11] intentionally omitted <==

Other techniques, such as discounted cash flow analysis, are used to determine fair value for remaining financial instruments.

(E) DERIVATIVE FINANCIAL INSTRUMENTS

The Group utilises derivative financial instruments to reduce investment risk. Specifically, derivatives are used to achieve cost effective short-term re-weightings of asset class, sector and security exposures and to hedge portfolios, as an economic hedge, when a market is subject to significant short-term risk.

Derivative financial instruments used by the Group include interest rate swaps and foreign exchange forward contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The fair values of interest rate swaps are calculated by discounting estimated future cash flows based on the terms and maturity of each contract using market interest rates. The average interest rate is based on the outstanding balances at the start of the financial year.

The table below details the notional principal amounts (amounts used to calculate payments made on swap contracts), fair values and remaining terms of interest rate swap contracts outstanding as at reporting date:

	Average contracted fixed	Notionalprincipal amount	Fair value
	2013 2012 % %	2013 2012 $000 $000	2013 2012 $000 $000
	0% 0% - - - - 0% 0% - - - - 0% 3% 10,400 10,400 34,203 - 0% 7% - 360,588 - 91,026
Less than 1 year 1 to 2 years 2 to 5 years over 5 years
		10,400 370,988 34,203 91,026

Foreign exchange forward contracts are settled on a gross basis. All contracts mature within 12 months of the reporting date and their carrying values reasonably approximate undiscounted cash flows because the impact of discounting is not significant.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

Group As at 30 September 2013 Forward foreign exchange contracts Outflow Inflow	Total contractual cash flows Less than one year $000 $000
	- - - -
As at 30 September 2012 Forward foreign exchange contracts Outflow Inflow
	(62,948) (62,948)
	63,173 63,173

( F) SENSITIVITY ANALYSIS

The analysis below demonstrates the impact of changes in interest rates, exchange rates and equity prices on profit after tax and equity on continuing business. The analysis is based on changes in economic conditions that are considered reasonably possible at the reporting date. The potential impact is assumed as at the reporting date.

(i) Interest rate

The impact of a 50 basis point change in New Zealand and international interest rates as at the reporting date on the Group's profit after tax and equity is included in the table below. The sensitivity analysis assumes changes in interest rates only. All other variables are held constant.

Change in variables	profit after tax equity profit after tax equity $000 $000 $000 $000 2013 2012 Impact on Impact on
+50 basis points -50 basis points	(879) (879) (3,145) (3,145) 584 584 3,262 3,262

This analysis assumes that the sensitivity applies to the closing market yields of fixed interest investments. A parallel shift in the yield curve is assumed.

The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the reporting period included in the analysis.

The impact of changes in market interest rates presented here excludes insurance contract liabilities, which are also affected by the changes in market interest rates that determine the discount rates applicable to these contracts.

The table below provides a sensitivity analysis in respect of changes in interest rates as applied to insurance contract liabilities. A combined effect is necessary to appreciate the sensitivity of the Group's profit to movements in interest rates.

Change in variables	profit after tax equity profit after tax equity $000 $000 $000 $000 2013 2012 Impact on Impact on
+50 basis points -50 basis points	- - (4,375) (4,375) - - 4,343 4,343

Sensitivity to interest rates has been assessed by reference to internal investigations of the movement in insurance contract liabilities to movements in discount rates consistent with that used for internal management reporting.

(ii) Foreign currency

The table below demonstrates the impact of a 10% movement of currency rates against the New Zealand dollar on profit after tax and equity. The analysis assumes changes in foreign currency rates only, with all other variables held constant. The potential impact on the profit and equity of the Group is due to the changes in fair value of currency sensitive monetary assets and liabilities as at the reporting date.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

28. RISK MANAGEMENT AND FINANCIAL INSTRUMENT INFORMATION (CONTINUED)

Change in variables	profit after tax equity profit after tax equity $000 $000 $000 $000 2013 2012 Impact on Impact on
10% appreciation of New Zealand dollar 10% depreciation of New Zealand dollar	291 (6,812) 970 (10,435) (274) 8,408 (1,182) 12,757

The dollar impact of the change in currency movements is determined by applying the sensitivity to the value of the unhedged international assets.

The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the reporting period included in the analysis.

(iii) Equity price

Equity price risk is the risk that the fair value of equities will decrease as a result of changes in levels of equity indices and the value of individual stocks. The Group holds all of its equities at fair value through profit or loss.

The table below demonstrates the impact of a 10% movement in New Zealand equities on the profit after tax and equity. The potential impact is assumed as at the reporting date.

Change in variables +10% in New Zealand equities -10% in New Zealand equities	profit after tax equity profit after tax equity $000 $000 $000 $000 - - 44 44 - - (44) (44) Impact on Impact on 2013 2012

The dollar impact of the change in New Zealand equities is determined by applying the sensitivity to the value of equities.

The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the two reporting periods included in the analysis.

(iv) Other price

Other price sensitivity includes sensitivity to unit price fluctuations. Unit price risk is the risk that the fair value of investments in property fund units and international equities held in unit trusts will decrease as a result of changes in the value of these units. The Group holds all of its investments in property securities, international equities and other unit trusts at fair value through profit or loss.

The table below demonstrates the impact of a 10% movement in the value of property funds, international equities and other unit trusts on the profit after tax and equity of the Group. The potential impact is assumed as at the reporting date.

Change in variables +10% property funds and other unit trusts -10% property funds and other unit trusts +10% in International equities -10% in International equities	profit after tax equity profit after tax equity $000 $000 $000 $000 2013 2012 Impact on Impact on
	59 59 787 787 (59) (59) (787) (787) - - 130 130 - - (130) (130)

International equity assets are held via a unit trust which invests in a number of different countries. The sensitivity for each individual country is small so a breakdown by country has not been provided.

The risks assumed and methods used for deriving sensitivity information and significant variables have been applied consistently over the two reporting periods included in the analysis.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

29. CAPITAL RISK MANAGEMENT

The Group's objective when managing capital is to ensure that the Group's level of capital is sufficient to meet statutory solvency obligation including a look forward basis to enable it to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders of the Group.

The Group's capital resources include ordinary shareholders‟ equity and interest bearing liabilities.

Interest bearing liabilities (Note 17) TOWER shareholder equity Total capital resources	Group 2013 2012 $000 $000
	82,791 81,990 379,815 497,346
	462,606 579,336

The Group measures adequacy of their capital against Solvency Standards for Non-life Insurance and Life Insurance Business (the solvency standards) published by the Reserve Bank of New Zealand (RBNZ) alongside additional capital held to meet RBNZ minimum requirements and any further capital as determined by the Board.

From August 2013 the Group is required to maintain a minimum solvency margin of no less than $80,000,000 in TOWER Insurance Limited and $15,000,000 in TOWER Life (N.Z.) Limited. The actual solvency capital as determined under the solvency standards should exceed the minimum solvency capital level by at least these amounts. The amount retained as minimum solvency capital is shown in note 25 (C) and note 26 (H).

During the year ended 30 September 2013 the Group complied with all externally imposed capital requirements.

The Group holds assets in excess of the levels specified by the various solvency requirements to ensure that they continue to meet the minimum requirements under a reasonable range of adverse scenarios. The Group‟s capital management strategy forms part of the Group‟s broader strategic planning process overseen by the Audit and Risk Committee.

30. OPERATING LEASES

As lessee Rent paid under non-cancellable operating leases during the year Rent payable under non-cancellable operating leases to the end of the lease terms are: – Not later than one year – Later than five years – Later than one year and not later than five years	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 4,413 4,227 - -
	4,703 5,694 - - 1,569 2,524 - - 293 553 - -
	6,565 8,771 - -

Operating lease payments represent the future rentals payable for office space under current leases. Initial leases were for an average of four years with rental rates reviewed every two to six years.

31. CASH AND CASH EQUIVALENTS

(A) RECONCILIATION OF CASH AT THE END OF THE YEAR

Cash at bank and in hand Deposits at call Total cash and cash equivalents	15,100 22,763 1,507 2,448 326,524 163,714 - 70,480 341,624 186,477 1,507 72,928

The effective interest rate for deposits at call is 3.0% (2012: 3.0%). The balances primarily mature within three months of balance date.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

31. CASH AND CASH EQUIVALENTS (CONTINUED)

(B) RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES

Add/(less) non-cash items Profit after tax for the year	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 34,375 55,824 178,786 20,390 1,829 2,207 - - 3,648 2,697 - - (25,316) 5,783 - -	Group Company 2013 2012 2013 2012 $000 $000 $000 $000 34,375 55,824 178,786 20,390 1,829 2,207 - - 3,648 2,697 - - (25,316) 5,783 - -
Depreciation of property, plant and equipment
Amortisation of software Change in life insurance and life investment contract liabilities
41,902 (20,106) - - 17 92 - - Decrease in deferred tax (13,959) 8,198 - - 420 (131) - - Intangible asset impairment net of tax 32,328 - - - Gross gain on sale of subsidiaries (96,056) - - - (20,812) 54,564 178,786 20,390 Decrease in receivables 106,464 64,434 277 53 (Decrease)/increase in payables (87,379) (66,013) (177,549) 1,709 (Increase)/decrease in taxation (9,130) 16,958 - - 9,955 15,379 (177,272) 1,762 800 727 - - Decrease in capitalised costs (Gain)/loss on disposal of property, plant and equipment Add other items classified as financing activities Add/(less) movements in working capital (excluding the effects of exchange differences on consolidation) Share based payments expense and movement in fair value of employee share option derivative Unrealised gain on financial assets
		(177,272) 1,762 - -
Net cash inflow/(outflow) from operating activities	(10,057) 70,670
		1,514 22,152

32. CONTINGENT LIABILITIES

The Group has the following contingent liabilities as at 30 September 2013 (2012: Nil).

TOWER Limited has a contingent liability at 30 September 2013 in respect of guarantee obligations arising under the Sale and Purchase Agreement (SPA) for the sale of non-participating life insurance business to Fidelity Life Assurance Company Limited. This contingent liability is limited to $10 million in aggregate and is only in respect of claims notified within four months of the transaction‟s completion (i.e. between 1 August 2013 and 1 December 2013).

The Group is occasionally subject to claims and disputes as a commercial outcome of conducting its insurance business. Provisions are recorded for these claims or disputes when it is probable that an outflow of resources will be required to settle any obligations. Best estimates are included within claims reserves for any litigation that has arisen in the usual course of business.

33. CAPITAL COMMITMENTS

The Group has capital commitments of approximately $2,556,000 at reporting date related to software under development (2012: $6,792,000).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

34. SHARE BASED PAYMENTS

The Company has one active executive share option scheme. The equity settled conditions are set out in the tables below. The exercise prices are set at the average of the share price for the 5 days before grant date. Subject to the discretion of the Board, options are forfeited if an employee leaves the Group before the options vest.

Vesting requirements include service and performance conditions. The performance condition is based on a market condition such as total shareholder return achieved at the end of each reporting period. The holders of the options are not entitled to dividends or have other shareholder benefits, including voting rights.

The grant date fair value for options was estimated by using a binomial pricing model. The main inputs to the model were as follows:

Terms of share schemes Exercise price after rights issue Grant date Vesting date Expiry date Expected volatility Risk free rate Amount expensed during 2013 year ($000) Amount expensed during 2012 year ($000)	Tranche F $2.10 11-Dec-07 1-Dec-10 1-Dec-13 20% 5.71%
	- -

Expected volatility was determined by looking at the performance of the share price over a number of periods ranging from six months to two years adjusted to remove significant impacts arising from one off events.

The expected life is based on best estimates of management allowing for non-transferability, exercise restrictions and behavioural considerations. No share options were issued in 2013 (2012: Nil).

Amounts expensed during the 2013 year of $17,354 related to Tranche I share options that were later forfeited.

The following reconciles the share options outstanding at the beginning and end of the year.

30 September 2013 Outstanding at start of year Granted Forfeited Exercised Outstanding at the end of the year Exercisable at the end of the year	Weighted Tranche E Tranche F Tranche G Tranche I average exercise price Number of options
	3,000,000 300,000 200,000 300,000 $1.92 (3,000,000) (200,000) - (300,000) $1.95 (200,000) $1.38
	- 100,000 - - $2.10
	- 100,000 - - $2.10

30 September 2012 Outstanding at start of year Forfeited Outstanding at the end of the year Exercisable at the end of the year	Weighted Weighted Tranche D Tranche E Tranche F Tranche G Tranche I average exercise price Number of options
	300,000 3,000,000 500,000 200,000 $300,000 $1.97 (300,000) - (200,000) - - $2.32
	- 3,000,000 300,000 200,000 300,000 $1.92
	- 3,000,000 300,000 200,000 - $1.92

All tranches have been fully vested as at 30 September 2013. The weighted average share price at the date of exercise of share options in 2013 was $1.38.

The exercise prices for options outstanding as at 30 September 2013 is $2.10 (2012: range from $1.38 to $2.10) and the weighted average remaining contractual life is 2 months (2012: 0.5 years).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

35. TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The Group holds a number of equity security holdings across a large number of New Zealand and overseas entities. A significant part of these investments are held by TOWER Life (NZ) Limited for the purposes of meeting requirements of the Group‟s participating life insurance business. These portfolios, which are managed by external investment managers, may from time to time include investments in companies that themselves have a shareholding in the Group.

Up until 29 September 2013, Guinness Peat Group Plc (GPG) held approximately 34% of TOWER‟s shares, which made it a related party to the Group. The Group did not have any material transactions or balances with GPG during the year, other than in the normal course of its investment activities, as discussed above. As with all shareholders, GPG participated in the return of capital arrangement approved by TOWER Limited shareholders at the Annual Shareholders‟ Meeting on 21 March 2013, and had 3 in every 13 of its ordinary shares cancelled. TOWER paid $1.92 for each share cancelled.

(A) SUBSIDIARIES

During the year there have been transactions between TOWER Limited and its subsidiaries. Balances outstanding are interest free and payable on demand.

Related party receivable and payable balances of TOWER Limited at the reporting date were as follows:

Related party	2013 2012 Nature of Type of $000 $000 Relationship Transaction
TOWER New Zealand Limited TOWER Health & Life Limited TOWER Financial Services Group Limited TOWER consolidated tax group members	- (178,453) Subsidiary Advance 20,008 (10,147) Subsidiary Advance - 1,975 Subsidiary Tax losses (102,346) - Subsidiary Loan

The receivable owing from TOWER consolidated tax group members in 2013 of nil (2012: $1,975,000) represents the benefit of tax losses offset by TOWER Limited as a member of the TOWER consolidated tax group. All subsidiary companies incorporated in New Zealand listed in note 12 except for TOWER Option Scheme Limited are members of the TOWER consolidated tax group.

TOWER Limited enters into transactions with its related parties in the normal course of business. Transactions during the year included partial settlement of intercompany balances and intercompany dividends as shown below:

Related party TOWER New Zealand Limited TOWER Financial Services Group Limited	2013 2012 Nature of Type of $000 $000 Relationship Transaction 29,333 (8,133) Subsidiary Settlement/Advance 178,453 18,960 Subsidiary Dividend
TOWER Health & Life Limited	(102,346) - Subsidiary Loan (1,153) (5,030) Subsidiary Group tax loss offset
TOWER New Zealand limited

(B) KEY MANAGEMENT PERSONNEL COMPENSATION

The remuneration of key management personnel during the year was as follows:

Termination benefits Share based payments Salaries and other short-term employee benefits paid	2013 2012 2013 2012 $000 $000 $000 $000 3,384 3,342 - - 1,042 273 - - 17 89 - - Group Company
Independent directors fees(1)	824 624 724 624 5,267 4,328 724 624

(1) Information regarding individual directors‟ and executives‟ compensation is provided in the Corporate Governance section of the Annual Report.

(C) LOANS TO KEY MANAGEMENT PERSONNEL

There have been no loans made to directors of the Company and other key management personnel of the Group, including their personally related parties (2012: Nil).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

35. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

(D) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL

Key management also hold various policies and accounts with TOWER Group companies. These are operated in the normal course of business on normal customer terms.

36. INVESTMENT LINKED AND NON-INVESTMENT LINKED BUSINESS OF LIFE INSURANCE COMPANIES

Investment assets Other assets Policyholder liabilities Other liabilities Net assets Retained earnings	Investment linked Non- investment linked Investment linked Non- investment linked $000 $000 $000 $000 - - 27,476 838,347 - - - 17,617 - - (27,476) (591,457) - - - (57,906) - - - 206,601 - - - 189,065 Group 2013 2012

Investment revenue allocated to policyholders was nil (2012: $3,177,000) due to the sale of the non-participating life business as disclosed in discontinued operations note 41.

37. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributed to shareholders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing the net profit attributed to shareholders of the Company by the weighted average number of ordinary shares on issue during the year adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

There was no dilutive impact of outstanding share options on basic earnings per share for 2013 (2012: Nil).

Profit attributable to shareholders Weighted average number of ordinary shares for basic and diluted earnings per share Basic and diluted earnings per share from continuing operations Basic and diluted earnings per share from discontinued operations	2013 2012 $000 $000 Group
	34,245 55,339 Number Number of shares of shares
	207,193,438 266,639,339
	Cents Cents
	0.12 7.10 14.24 13.66

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

38. BUSINESS COMBINATION

There have been no business combinations in the current financial year to 30 September 2013.

On 24 September 2012, TOWER Life (N.Z.) Limited moved from 52% to 100% ownership of the units in TAM International Income Fund (the Fund), a unitised equity investment trust.

The Fund is held for the benefit of policyholders, and during the 6 day period from 24 September 2012 to 30 September 2012 it reported revenues of ($967,000) and a net loss of ($1.04 million). If the increase in units held to 100% had occurred on 1 October 2011, revenues from the Fund would have been $19.2m and profit would have been $19.8m.

No cash was paid as consideration for the additional ownership. Control was obtained through the withdrawal of funds by other members of the Fund.

The assets and liabilities arising from the acquisition at 24 September 2012 were as follows:

Cash and cash equivalents Receivables Financial assets at fair value through profit and loss Other assets - intercompany receivable Deferred tax asset Total assets Payables Total liabilities Net assets	Acquiree's Fair carrying Value amount $000 $000
	3,389 3,389 1,857 1,857 161,669 161,669 11 11 11,693 11,693
	178,619 178,619
	84,352 84,352
	84,352 84,352

	94,267 94,267

39. IMPACT OF CHRISTCHURCH EARTHQUAKES

For the year ended 30 September 2013, the income statement includes gross incurred claims and claims management team expenses of $72,245,982 (2012: $64,986,944) less reinsurance recoveries of $51,878,598 (2012: $46,094,128) in respect of the 4 September 2010, 22 February 2011, 13 June 2011 and 23 December 2011 earthquakes, resulting in a pre tax net claims related expense of $20,367,384 (2012: $18,892,816). Of this pre tax net claims related expense $19,700,000 is a result of the 22 February 2011 earthquake and $667,384 is a result of the 23 December 2011 earthquake. The net risk margin disclosed in note 23 includes $15,900,000 associated with the Christchurch earthquakes.

In October 2013, TOWER Limited confirmed the successful placement of its reinsurance programme for the TOWER Limited Group for the 2013/14 financial year. The programme again involves reinsurance cover for two catastrophe events. TOWER has continued to enhance its reinsurance programme, with the limit for 2013/14 increased to $585 million per event (2012: $525 million) (the excess for an event in 2013/14 is $10.0 million compared with $11.7 million for the 2012/13 programme).

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

40. SUBSEQUENT EVENTS

DIVIDEND DECLARED

On 26 November 2013 the Directors declared a dividend of 6 cents per share. There will be no imputation credits attached to the dividend. The dividend will be paid on 3 February 2014 (Payment Date) to all shareholders on the register as at 5pm on Tuesday, 22 January 2014 (Record Date). The estimated dividend payable is $12,432,000 based on the share register at 30 September 2013.

TOWER will not be operating the Dividend Reinvestment Plan for the final dividend.

TOWER will withhold resident and non-resident withholding tax where applicable.

RETURN OF CAPITAL

On 25 November 2013 the Board passed a resolution approving the return of approximately $70 million of capital to shareholders via an off market, pro rata buy back. A formal offer document to shareholders will be issued in December 2013.

STATUTORY FUND

On 1 October 2013, TOWER Life (N.Z) Limited established a statutory fund in accordance with the Insurance (Prudential Supervision) Act 2010 (IPSA). All life insurance policies within TOWER Life (N.Z.) Limited at 1 October are referable to the fund, named Statutory Fund No. 1. Assets sufficient to meet TOWER Life (N.Z.) Limited‟s minimum solvency requirements calculated under Reserve Bank requirements have been transferred to Statutory Fund No. 1 on establishment. The purpose of a statutory fund is to ensure that the funds received and paid out in respect of life insurance policies are separately identifiable as being part of the statutory fund.

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE

Consolidated results of discontinued operations/disposal groups are as follows:

Profit for the year from discontinued operations/disposal groups (Loss)/profit for the year from discontinued operations: Health business(A) Investments business(B) Non-Participating life business(C) Australian liabilities(D) Participating life business(E) (Loss)/profit from discontinued operations Profit from disposal of subsidiaries Health business(A) Investments business(B) Non-Participating life business(C) Participating life business attributable cost(E) Impairment of intangible assets(1) Profit from discontinued operations/disposal groups Net assets/(liabilities) held for sale: Health business(A) Australian liabilities(D) Participating life business(E) Total net assets held for sale	2013 2012 $000 $000
	940 13,250 4,007 6,959 (3,655) 15,955 (7,114) (2,332) 2,841 2,587
	(2,981) 36,420 17,553 - 66,626 - (12,483) - (2,431) (32,328) -
	36,937 -
	33,956 36,420
	2013 2012 $000 $000
	- 76,955 (17,068) - 39,439 -
	22,371 76,955

Note:

(1) Management have reviewed the carrying value of intangible assets in light of recent business disposals. Following this review, an impairment of $44.9 million ($32.3 million net of tax) was recorded against the carrying value of Intangible assets – software. This impairment has been expensed in the 30 September 2013 results reducing the profit from discontinued operations/disposal groups.

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

(A) SALE OF TOWER MEDICAL INSURANCE LIMITED

On 30 November 2012, TOWER Limited sold its health insurance business, TOWER Medical Insurance Limited to Australian health insurer, nib holdings limited for approximately $102 million. The sale followed a strategic review of TOWER Group‟s businesses announced earlier in 2012. The sale of TOWER Medical Insurance Limited has resulted in the health insurance business segment being treated as a discontinued operation of the Group.

Operating results for the two months prior to sale of TOWER Medical Insurance Limited have been removed from individual lines in the financial statements and notes, as required by accounting standards, and have been presented as a discontinued operation. A more detailed breakdown of the financial performance, position and cash flows of TOWER Medical Insurance Limited is presented below.

The results of the health business were as follows:

Premium revenue from insurance contracts Investment revenue Net operating revenue Claims expense Net claims expense Decrease in policy liabilities Management and sales expenses Net claims and operating expenses Profit before taxation Income tax expense Profit after tax from discontinued operations Cash flows of the health business: Operating cash inflow Investing cash inflow/(outflow) Financing cash (outflow) Total cash inflow/(outflow)	2013 2012 $000 $000
	24,812 146,230 1,047 5,761
	25,859 151,991 18,718 97,199
	18,718 97,199 (667) (510) 6,503 36,899
	24,554 133,588 1,305 18,403 (365) (5,153)
	940 13,250
	3,068 10,783 41,230 (18,691) - (7,000)
	44,298 (14,909)

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

The financial position of the health business was as follows:

Assets Cash and cash equivalents Receivables Financial assets at fair value through profit or loss Derivative financial assets Deferred commission Deferred acquisition costs Deferred tax asset Attributed goodwill Total assets Liabilities Payables Current tax liability Insurance liabilities Derivative financial liability Deferred tax liability Premium payback liability Total liabilities Net assets	30 November 30 September 2012 2012 $000 $000
	57,557 13,257 2,669 2,576 47,653 88,914 3,306 3,318 9,680 9,530 22,456 22,367 14,421 14,517 13,067 13,067
	170,809 167,546 2,713 1,834 - 234 28,910 26,397 62 34 8,998 8,931 52,494 53,161
	93,177 90,591
	77,632 76,955

Profit on disposal Cash consideration received Net assets at 30 September 2012 Profit after tax to 30 November 2012 Net assets at 30 November 2012 Gross profit on disposal Less directly attributable costs of sale Tax directly attributable to costs of sale Profit on disposal	2013 $000 102,346 76,955 940 77,895 24,451 (7,235) 337 (6,898) 17,553

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

(B) SALE OF TOWER INVESTMENTS BUSINESS

On 26 February 2013, TOWER Limited announced the sale of its investments business comprising, TOWER Managed Funds Limited, TOWER Managed Funds Investments Limited, TOWER Employee Benefits Limited, TOWER Asset Management Limited and TOWER Investments Limited, to Fisher Funds Management Limited for approximately $79 million. The sale followed a strategic review of TOWER Group‟s businesses announced in 2012. The sale has resulted in the investments business segment being treated as a discontinued operation of the Group. Completion of the sale occurred on 2 April 2013.

The operating results of the investments business have been removed from individual lines in the financial statements and notes, as required by accounting standards, and have been presented as a discontinued operation. A more detailed breakdown of the financial performance, position and cash flows of the investments business is presented below.

The results of the investments business were as follows:

Investment revenue	2013 2012 $000 $000
	123 77
Fee and other revenue	17,996 35,340
Net operating revenue Management and sales expenses Net claims and operating expenses Profit before taxation Income tax expense Profit after tax from discontinued operations Cash flows of disposal group held for sale: Operating cash inflow Investing cash (outflow)/inflow Financing cash outflow Total cash outflow	18,119 35,417 12,517 25,751
	12,517 25,751 5,602 9,666 (1,595) (2,707)
	4,007 6,959
	246 5,083 (63) 105 (236) (6,800)
	(53) (1,612)

The financial position of the investments business immediately prior to sale was as follows:

Assets disposed Cash and cash equivalents Receivables	2 April 2013 $000
	543 4,235
Property, plant and equipment	65
Deferred acquisition costs Deferred tax asset Total assets Liabilities disposed Payables	6,091 315
	11,249 1,085
Provisions	1,759
Deferred tax liability Total liabilities Provisional net assets	1,691
	4,535
	6,714

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

Profit on disposal

Cash consideration receivable Net assets at 1 April 2013 Net assets on disposal Gross profit on disposal Less directly attributable costs of sale Tax directly attributable to costs of sale Profit on disposal	2013 $000
	79,708 6,714
	6,714
	72,994
	(6,877) 509
	(6,368)
	66,626

(C) SALE OF NON-PARTICIPATING LIFE BUSINESS

On 10 May 2013, TOWER Limited announced the sale of most of its non-participating life insurance business to Fidelity Life Assurance Company Limited for the aggregate value to TOWER, including cash consideration and release of capital, of $189 million. The sale followed a strategic review of TOWER Group‟s businesses announced in 2012. The sale has resulted in the non-participating life business segment being treated as a discontinued operation of the Group. Completion of the sale occurred on 1 August 2013.

At 30 September 2013, the Provisional net asset figure and Profit on disposal calculation remain provisional until confirmed in accordance with transaction documents.

The provisional operating results and financial position of the non-participating life business have been removed from individual lines in the financial statements and notes, as required by accounting standards, and have been presented as a discontinued operation and disposal group held for sale. A more detailed breakdown of the financial performance, position and cash flows of the non-participating life business is presented below.

The results of the non-participating life business were as follows:

Premium revenue from insurance contracts Less: Outwards reinsurance expense Net operating revenue Claims expense Less: reinsurance recoveries revenue Net claims expense Decrease in policy liabilities Management and sales expenses Net claims and operating expenses (Loss)/profit before taxation Income tax credit (Loss)/profit after tax from discontinued operations Cash flows of the health business: Operating cash inflow Total cash inflow	2013 2012 $000 $000
	72,614 83,184 (19,279) (19,981)
	53,335 63,203 33,900 36,939 (13,242) (14,877)
	20,658 22,062 9,388 (23,744) 33,315 50,018
	63,361 48,336 (10,026) 14,866 6,371 1,089
	(3,655) 15,955
	(1,851) 39,237
	(1,851) 39,237

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

The financial position of the non-participating life business was as follows:

Assets Receivables Liabilities ceded under reinsurance Total assets Liabilities Payables Deferred tax liability Life insurance contract liabilities(1) Total liabilities Provisional net assets	1 August 2013 $000 2,500 20,099 22,599 83 37,721 (88,435) (50,631) 73,230
Profit on disposal Cash consideration received Provisional net assets as at 1 August 2013 Gross loss on disposal Less directly attributable costs of sale Tax directly attributable to costs of sale Loss on disposal	2013 $000 71,841 73,230 (1,389) (12,696) 1,602 (11,094) (12,483)

Note:

(1) The Individual risk business presented as discontinued operations includes negative insurance liabilities arising from the net present value of the future cash flows of current inforce life insurance policies.

(D) DISPOSAL OF AUSTRALIAN LIABILITIES

These financial statements present the Group‟s general insurance run-off business in its Australian branch as a discontinued operation and disposal group held for sale. The Australian branch insurance liabilities will be disposed to a third party, subject to a court approved scheme of arrangement. The transaction will include disposing of all policies written or assumed by the branch and all the associated liabilities under those policies. Net claims expense in the current year includes $6,031,000 resulting from the revaluation of these associated liabilities to fair value.

The sale amount will be settled in cash on the transfer date, which will be determined by an Australian Federal Court subject to approval of the scheme. Subsequent to the disposal of the policy liabilities, the balance of the Australian branch assets will be repatriated to New Zealand and the operations of the branch will be discontinued.

Claims expense Less: reinsurance recoveries revenue Net claims expense Management and sales expenses Net claims and operating expenses Loss before taxation Income tax expense Loss after tax from discontinued operations	2013 2012 $000 $000 6,718 2,363 340 (298)
	7,058 2,065 56 267
	7,114 2,332 (7,114) (2,332) - -
	(7,114) (2,332)

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

The financial position of the Australian business held for sale were as follows:

Assets Reinsurance receivables Total assets Liabilities Insurance liabilities Total liabilities Net liabilities	2013 $000 622
	622 17,690
	17,690
	(17,068)

Cash flows associated with the Australian liabilities:

Operating cash outflow Total cash outflow	2013 2012 $000 $000 (3,006) 7 (3,006) 7

(E) TOWER LIFE (N.Z.) LIMITED HELD FOR SALE

At 30 September 2013 TOWER Limited was marketing its remaining participating life insurance business for sale. The decision to actively market followed a strategic review of TOWER Group‟s businesses announced in 2012. The decision has resulted in the remaining TOWER Life (N.Z.) business segment being treated as a discontinued operation of the Group.

The operating results and financial position of the life business have been removed from individual lines in the financial statements and notes, as required by accounting standards, and have been presented as a discontinued operation and disposal group held for sale. A more detailed breakdown of the financial performance, position and cash flows of the non-participating life business is presented below.

The results of the remaining life business were as follows:

Premium revenue from insurance contracts Less: Outwards reinsurance expense Net premium revenue Investment revenue Management fees Net operating revenue Claims expense Less: reinsurance recoveries revenue Net claims expense Decrease in policy liabilities Management and sales expenses Net claims and operating expenses (Loss)/profit before taxation Income tax credit Profit after tax from discontinued operations Cash flows of the health business: Operating cash inflow Investing cash inflow/(outflow) Financing cash (outflow) Total cash inflow	2013 2012 $000 $000
	9,771 11,003 53 35
	9,824 11,038 4,045 97,126 73 12
	13,942 108,176 39,041 45,431 - (87)
	39,041 45,344 (27,807) 32,622 5,135 7,747
	16,369 85,713 (2,427) 22,463 5,268 (19,876)
	2,841 2,587
	(22,008) 11,154 8,831 (18,033) 14,091 (6,460)
	914 (13,339)

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

41. DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE (CONTINUED)

The financial position of the remaining life business was as follows:

Assets Cash and cash equivalents Receivables Financial assets at fair value through profit or loss Derivative financial assets Current tax asset Deferred tax asset Total assets Liabilities Payables Provisions Insurance liabilities Derivative financial liability Deferred tax liabilities Life insurance contract liabilities Life investment contract liabilities Total liabilities Net assets Costs of sale:	2013 $000
	8,399 36,452 625,663 48,082 3,479 16,104
	738,179 1,971 57 7,008 5,086 84 660,945 23,589
	698,740
	39,439


Directly attributable costs of sale Tax directly attributable to costs of sale	(2,880) 449
	(2,431)

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Independent Auditors’ Report to the shareholders of TOWER Limited

Report on the Financial Statements

We have audited the financial statements of TOWER Limited (“the Company”) on pages 2 to 72, which comprise the balance sheets as at 30 September 2013, the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 30 September 2013 or from time to time during the financial year.

Directors’ Responsibility for the Financial Statements

The Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

We have no relationship with, or interests in, TOWER Limited or any of its subsidiaries other than in our capacities as auditors and providers of other assurance, taxation and advisory services. These services have not impaired our independence as auditors of the Company and the Group.

PricewaterhouseCoopers , 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz

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Independent Auditors’ Report TOWER Limited

Opinion

In our opinion, the financial statements on pages 2 to 72:

(i) comply with generally accepted accounting practice in New Zealand; and
(ii) comply with International Financial Reporting Standards; and
(iii) give a true and fair view of the financial position of the Company and the Group as at 30 September 2013 and their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements

We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 30 September 2013:

(i) we have obtained all the information and explanations that we have required; and
(ii) in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records.

Restriction on Distribution or Use

This report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

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Chartered Accountants 26 November 2013

Auckland

PwC

A customer focused general insurer

Full year results to 30 September 2013

26 November 2013

A customer focused general insurer

This presentation has been prepared by TOWER Limited to provide shareholders with information on TOWER’s business. This document is part of, and should be read in conjunction with an oral briefing to be given by TOWER. A copy of this webcast of the briefing is available at http://www.tower.co.nz/company/investor-centre/webcasts/

It contains summary information about TOWER as at 30 September 2013, which is general in nature, and does not purport to contain all information a prospective investor should consider when evaluating an investment. It is not an offer or invitation to buy TOWER shares.

Investors must rely on their own enquiries and seek appropriate professional advice in relation to the information and statements in relation to the proposed prospects, business and operations of TOWER. The data contained in this document is for illustrative purposes only. Past performance is not a guarantee of future performance and must not be relied on as such.

Forward looking statements

This document contains certain forward-looking statements. Such statements relate to events and depend on circumstances that will occur in the future and are subject to risks, uncertainties and assumptions. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements, including, among others: the enactment of legislation or regulation that may impose costs or restrict activities; the renegotiation of contracts; fluctuations in demand and pricing in the industry; fluctuations in exchange controls; changes in government policy and taxation; industrial disputes; and war and terrorism. These forward-looking statements speak only as at the date of this document. Solvency estimates contained herein are yet to be reviewed by the Reserve Bank of New Zealand.

Disclaimer

Neither TOWER nor any of its advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents (other persons) makes any representation or warranty as to the currency, accuracy, reliability or completeness of information in this presentation.

To the maximum extent permitted by law, TOWER and the Other Persons expressly disclaim any liability incurred as a result of the information in this Presentation being inaccurate or incomplete in any way.

The statements made in this presentation are made only as at the date of this presentation. The accuracy of the information in this presentation remains subject to change without notice.

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transition complete, foundations being laid

TOWER Group presentation highlights

Full year reported profit of $34.4 million

A final dividend of 6 cents per share (unimputed), bringing the total to 11 cents per share for the year. Payout ratio reconfirmed at 90-100%

Three business sales realised a total of $370 million

Three business sales realised a total of $370 million Industry leading settlement of earthquake claims and on track to complete at the end of 2015 Costs to complete the sale of the retained Life business Strategy and operating model refreshed have been provisioned

Confirmation and details of capital return of $70 million. Foundation being laid for realising TOWER’s growth A commitment to continually focusing on capital potential management

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What we are covering today

+ Financials

Profit

Balance sheet

Solvency

+ Strategy

Positioning for growth Operating structure

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Full year results to 30 September 2013

TOWER Group summary Profit

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NPAT
$34.4m
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|||||||
|---|---|---|---|---|---|
|Full year ended September|
|2013|2012|2011|
|General Insurance|19.0|26.8|24.7|
|Life|12.0|23.7|19.9|
|Health|0.9|13.3|9.7|
|Part year contribution|
|Investments|4.0|7.0|6.8|due to sale of|
|business units|
|Business unit net profit after tax|35.9|70.8|61.1|
|Finance and corporate expenses|(7.2)|(10.4)|(6.5)|
|Profit excluding the impact of discount rate and abnormal items|28.7|60.4|54.6|
|Discount rate effect|(9.0)|9.0|2.4|
|Net impact of abnormal items|[1]|14.7|(13.6)|(23.6)|
|Reflects gains on sale of|
|Reported net profit after tax|[2]|34.4|55.8|33.4|business units and Canterbury|
|earthquake provision|
|$ millions|

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1 Refer page 8 for overview

2 A number of items are classified as discontinued operations in the Group financial statements

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Analysis of profit General Insurance

sustained premium growth

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Full year ended September
2013 2012 2011
Gross earned premiums 267.2 238.9 208.3
Reinsurance (47.9) (41.2) (23.4)
Net premiums 219.3 197.7 184.9
Net incurred claims (101.3) (91.3) (86.4)
Large claim events [1] (9.6) (1.3) -
Management and sales expenses (83.0) (78.8) (70.9)
Underwriting profit 25.4 26.3 27.6
Investment income 8.1 12.4 11.5
Profit before tax – normal trading 33.5 38.7 39.1
Income tax expense (14.5) (11.9) (14.4)
Profit (loss) after tax before impact of Canterbury 19.0 26.8 24.7
earthquakes and revaluation of Australian liabilities
Impact of Canterbury earthquakes [2] (15.2) (13.6) (22.2)
Loss from Australia discontinued operation [3] (7.1)
Profit (loss) after tax [4] (3.3) 13.2 2.5
$ millions
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Sustained premium growth
Reinsurance outlook stabilising
Large claim events reflect New Zealand weather events and the impact of Cyclone Evan in the Pacific
Foreign exchange losses and increased sales costs impacted management and sales expenses
Second half results in line with proforma NPAT previously provided

Half year to: Sept 13 $13.1m Mar 13 $ 5.9m

Claim events >$1m. FY13 represents Cyclone Evan in Pacific and a series of weather events in New Zealand. FY12 represents New Zealand weather event
FY13 includes $14.2m of increase in provision; $0.5m of claims expense; $0.5m reinsurance premiums

Includes $6m revaluation of Australian liabilities

The impacts of the Canterbury earthquakes and the discontinuation of the Australian business are classified differently in the Group financial statements

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Overview of abnormal items

Investments sale	79.7
Gain on sale	73.0
Sale related costs	(6.4)
Net gain on sale	66.61
Health sale	102.3
Gain on sale	24.5
Sale related costs	(6.9)
Net gain on sale	17.61
Non-participating Life sale	71.8
Gain on sale	(1.4)
Sale related costs	(11.1)
Net gain on sale	(12.5)1
Remaining Life sale related costs	(2.4)1
Australian liabilities	(7.1)
Impact of Canterbury earthquakes	(15.2)
IT systems write down	(32.3)1
Net impact of one off items	14.7
	$ millions (net of tax)

Classified as profit from disposal of subsidiaries in the Group financial statements

one offs impacts

Remaining Life sale related costs

Costs associated with the sale and separation of the remaining Life business

Australian liabilities

Loss on sale of Australian workers compensation liabilities, subject to final approvals

Canterbury provisions

No changes in second half to key February 2011 event provisions

IT system writedown

Reflects reassessment and writedown of groupwide IT systems following group restructure

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Canterbury earthquake update

TOWER continues to lead the industry in settling claims, with 74% of all claims now settled and closed. Our rebuild phase is accelerating and we are working closely with customers, stakeholders and suppliers to ensure this continues at pace, providing certainty to affected customers and the wider community. We are on track for substantially completing claim settlement by the end of 2015.

TOWER is taking a prudent approach to provisioning with quarterly actuarial reviews, and will advise the market of any material changes.

Updates on our progress on Canterbury earthquake claims are published monthly at www.tower.co.nz/company/canterbury-earthquake

TOTAL PROPERTY CLAIMS AS AT OCTOBER 2013

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10,412 8,594
83%
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Cash settled 65% Work completed 6% In construction 1% Pre-construction 11%

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REBUILD PROPERTY CLAIMS
AS AT OCTOBER 2013
1,080 867
80%
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Cash settled 47% Work completed 5% In construction 4% Pre-construction 24%

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providing
certainty
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Key statistics - Oct 2013

10,412 properties have lodged claims
83% of total property claims are either settled or underway
74% (by number) of total claims have been settled and closed which represents 62% (by value) of total incurred claims

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Analysis of FY13 profit Other divisions

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other
results
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Analysis of FY13 proft Other divisions other results	Analysis of FY13 proft Other divisions other results	Analysis of FY13 proft Other divisions other results
Life1 Health1 Investments1 Sep-13 Sep-13 Sep-13 Net premium/income 62.7 24.8 18.1 Total incurred claims (66.8) (16.4) - Premium payback payments - (2.3) - Management and sales expenses (30.0) (6.5) (12.5) Movement in policy liabilities 34.6 0.7 - Investment income on assets backing policy liabilities (8.5) 0.4 - Insurance profit (8.0) 0.7 5.6 Investment income on shareholders’ funds 9.8 0.6 - Profit before tax excluding the impact of discount rate 1.8 1.3 5.6 Income tax expense 10.2 (0.4) (1.6) Includes: • Two month contribution from Health • Six month contribution from Investments • 10 month contribution from sold Life business

Profit after tax excluding the impact of discount rate 12.0 0.9 4.0 Discount rate effect (9.0) - - Profit after tax 3.0 0.9 4.0		Includes $2.8 million from the remaining Life business
$ millions

10 month contribution from sold Life business

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A number of items are classified as discontinued operations or held for sale in the Group financial statements

Balance sheet summary

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Year ended
2013 [1] 2012 2011
Cash and call deposits 350.0 199.7 152.9
Health and Life [1] 678.2 882.1 861.3
General Insurance 143.1 154.6 168.4
Investments - - 0.1
Total investment assets 821.3 1,036.7 1,029.8
Deferred acquisition costs 18.2 45.8 42.4
Intangible assets 30.2 81.9 72.7
Other operational assets (liabilities) 476.9 601.3 678.7
Total assets 1,696.6 1,965.4 1,976.5
Policy liabilities and insurance provisions (1,161.1) (1,262.3) (1,326.3)
External debt (82.8) (82.0) (81.3)
Other operational assets (liabilities) (71.6) (122.3) (113.4)
Total liabilities (1,315.5) (1,466.6) (1,521.0)
Total equity 381.1 498.8 455.5
$ millions
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A number of items are assets or liabilities of disposal groups classified discontinued operations or held for sale in the Group financial statements

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increased
cash on
hand
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Reflects the return of $120 million of capital in April 2013
Excludes the impact of the announced $70 million capital return

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Solvency

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focus on
capital
management
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TOWER is currently holding additional capital within its licensed insurers as part of the Reserve Bank of New Zealand licensing process. This covers risks associated with the Canterbury rebuild and the run-off of the remaining Life business.

TOWER will continue to work proactively to manage these risks and to allow movement to a more efficient capital structure.

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General
Solvency capital overview [1] Insurance Life Total
Actual solvency capital (ASC) 196.0 29.8 225.8
Minimum solvency capital (MSC) 78.8 6.1 84.9
Solvency margin 117.2 23.7 140.9
Minimum solvency margin requirement (MSM) 80.0 15.0 95.0
Current capital above regulatory minimum 37.2 8.7 45.9
$ millions
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Further cash and investments of $156.9 million is held outside the licensed insurers to cover capital return and debt repayment
Capital of $21 million will be released from Australia, subject to final court and regulatory approval
Reinsurance being utilised to minimise adverse impacts on capital and earnings

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Solvency has not been reviewed by the Reserve Bank of New Zealand

Strategy

Market overview

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growth
opportunities
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NEW ZEALAND TOTAL GWP MARKET SHARE[1]

Year ended 30 September 2013:

2 . $ 79 3m

TOWER’s GWP

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New Zealand 80% Pacific Islands 20%

1 Source: ICNZ September 13 market share report

Includes American Samoa and Tonga

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TOWER's FY13 GWP BREAKDOWN WITHIN THE PACIFIC ISLANDS

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IAG 41.7% AIG 3.7% Vero 25.4% Allianz 2.8% Lumley 9.5% ACE 2.5% TOWER 4.7% Zurich 1.4% FMG 3.8% QBE 1.1% Other 3.4%

PNG 35% Fiji 27% Samoa[2] 21% Cook Islands 9% Solomon Islands 8%

TOWER’s share in personal lines

House 10.5%
Contents 10.3%
Motor 6.4%

Pacific Islands

Focus on:

Building brand
Engaging with customers and partners
Leveraging technology

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General Insurance key highlights

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strong
[base]
for growth
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Year ended 30 September 2013:

2 . $ 79 3m

GWP

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New Zealand 80% Pacific Islands 20%

$19.0m

1 NORMALISED NPAT

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New Zealand $14.4m Pacific Islands $4.6m

266 2 1 499,707 , 7 Inforce policies Clients2

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New Zealand 87%
Pacific Islands 13%
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New Zealand 88% Pacific Islands 12%

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Only normalised for discontinued Australian business and Canterbury earthquakes
One customer can be comprised of multiple clients. Restated from half year to include additional contract types

Clear strategic direction

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realise
TOWER’s
value
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TOWER’s vision is to be the leading light in New Zealand general insurance.

We have a clear direction and a customer-centric strategy focused on five key enablers that position us for growth and the delivery of returns to shareholders.

We are a well capitalised business, with a highly recognised brand. This is not reflected in our market share.

Key enablers

Growth and retention

Key metrics

––– ––– –––

Value added services
Product bundling
Capital efficiencies
Direct and alliance channels
Data insights
Differentiate on customer experience and are easy to do business with
Customer segmentation and proactive engagement using data insights
Consistency of service across channels – a collaborative approach
Actively building and managing strategic relationships
Capital efficiencies to fund growth

Financial performance

Net profit after tax
Gross written premium retention ratio

Customer satisfaction

Net promoter score Staff engagement
AonHewitt engagement survey

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Operating structure

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customer
focused
structure
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“It was so nice to have someone who understands what we were trying to insure, and the best way of going about it. It really did make it enjoyable rather than a hassle.”

Risk and finance Service enablement Customer proposition Sales and service Michael Boggs Debbie Eyre Mark Savage

We have reorganised our business to be more agile, responsive and customer focused. This has seen us create four collaborating divisions, working together to deliver shared goals. A number of key senior appointments have already been made.

“I came away from the phone call very satisfied with the TOWER experience and also found the subsequent follow through of sending policy documents very quick and efficient. I thought the service was excellent and thought at least you should know.”

This new organisation design, with a focus on customers, not policies, will improve the delivery of our services to customers and drive value to shareholders.

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In summary

customer focused insurer

Give meaning to the TOWER brand – recognise its potential

Deliver new products and services to the market to drive value

Settle Canterbury earthquake claims, giving customers and the community certainty Continue to focus on cost efficiencies to deliver bottom line improvements Capital will remain an ongoing focus

Invest time and energy in stakeholder engagement to improve TOWER’s position

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Thank you, any questions?

Appendix A: Supporting information

Corporate governance and policies

TOWER continues to focus on improving overall Corporate Governance and policies:

IPSA compliant governance structures in place for each licensed insurer
Review of Board structure and size underway
Diversity policy approved and implemented
Enhanced disclosure and increased engagement with stakeholders

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Balance sheet summary Divisions

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As at September 2013
General Life Corp Total Group [1]
Cash and call deposits 189.1 8.4 152.5 350.0
Total investment assets 143.1 673.8 4.4 821.3
Deferred acquisition costs 18.2 - - 18.2
Intangible assets - - 30.2 30.2
Other operational assets (liabilities) 377.9 56.0 43.0 476.9
Total assets 728.3 738.2 230.1 1,696.6
Policy liabilities and insurance provisions (470.7) (679.3) (11.1) (1,161.1)
External debt - - (82.8) (82.8)
Other operational assets (liabilities) (45.6) (19.5) (6.5) (71.6)
Total liabilities (516.3) (698.8) (100.4) (1,315.5)
Total equity 212.0 39.4 129.7 381.1
$ millions
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A number of items are assets or liabilities of disposal groups classified discontinued operations or held for sale in the Group financial statements

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Investment assets breakdown

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As at September 2013
General Life Corp Total Group
Fixed interest securities (NZ) 127.9 482.0 4.4 614.3
Fixed interest securities (AUS) 12.5 - - 12.5
Total fixed interest securities 140.4 482.0 4.4 626.8
Equity securities (NZ) - 94.7 - 94.7
Equity securities (AUS) - - - -
Equity securities (International) 1.7 - - 1.7
Total equities securities 1.7 94.7 - 96.4
Property securities 0.9 49.0 - 49.9
Derivative financial instruments 0.1 48.1 - 48.2
Total investment assets 143.1 673.8 4.4 821.3
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$ millions

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Credit ratings for investment assets

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2013
Investment assets subject to credit rating
AAA 229.1
AA 652.2
A 21.5
BBB or below 12.8
Unrated investments [1] 56.7
972.3
Investment assets not subject to credit rating
Fixed interest securities 52.7
Equity securities 96.4
Property securities 49.9
199.0
Total cash and investment assets 1,171.3
Cash and call deposits 350.0
Investment assets 821.3
Total cash and investment assets 1,171.3
$ millions
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Includes derivative financial assets and cash

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General Insurance Analysis of profit

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Half year ended
Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Sep-10
Net premiums 111.2 107.3 103.8 93.9 78.0 89.2 92.4
- Gross earned premiums 136.4 130.8 125.0 113.9 106.2 102.1 104.8
- Reinsurance (24.4) (23.5) (21.2) (20.0) (13.3) (10.2) (11.0)
- - -
- Catastrophe reinsurance reinstatement (0.7) (14.9) (2.7) (1.4)
Net incurred claims (49.8) (58.6) (46.4) (44.9) (41.7) (44.6) (48.3)
- - -
Large claim events [1] (6.2) (3.4) (0.2) (1.1)
-
Impact of Canterbury earthquakes (20.4) (14.5) (4.4) (9.1) (5.0) (5.0)
Management and sales expenses (41.3) (41.7) (40.0) (38.8) (35.0) (35.9) (32.3)
Underwriting profit 13.9 (16.7) 2.7 4.7 (7.8) 3.7 6.8
Investment income 3.9 4.2 7.9 4.5 7.5 4.0 7.8
Profit before tax 17.8 (12.5) 10.6 9.2 (0.3) 7.7 14.6
Income tax expense (6.4) (2.3) (2.8) (3.8) (1.8) (3.1) (4.6)
Profit (loss) after tax 11.4 (14.7) 7.8 5.4 (2.1) 4.6 10.0
$ millions
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Claim events >$1m. FY13 represents Cyclone Evan in Pacific and a series of weather events in New Zealand. FY12 represents New Zealand weather event

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General Insurance Key statistics

General Insurance – Gross Written Premiums (rolling 12 month) and lapses

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Half year ended
Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Sep-10
New Zealand 224.7 213.8 206.5 190.1 171.8 164.7 163.1
Pacific Islands 54.6 55.3 53.4 47.9 45.0 44.5 45.4
Total gross written premiums 279.3 269.0 259.9 238.0 216.8 209.2 208.5
Lapse rate [1] 13.5% 13.7% 13.7% 13.1% 13.1% 14.3% 15.7%
$ millions
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General Insurance – Net premiums and claims

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Half year ended
Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Sep-10
Net premiums 111.2 107.3 103.8 93.9 78.0 89.2 92.4
Claims including catastrophe events 56.0 82.3 61.1 50.4 50.8 49.6 53.3
Claims ratio [2] 50.4% 76.7% 58.9% 53.7% 65.1% 55.6% 57.7%
$ millions
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Premium lapse rate excluding FinTel
Includes Canterbury earthquakes, large claim events and $7.1m from Australian operations

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General Insurance Key statistics

General Insurance – Underwriting profits

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Half year ended
Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Sep-10
Underwriting profit (loss) 13.9 (16.7) 2.7 4.7 (7.8) 3.7 6.8
Combined ratio [1] 87.5% 115.5% 97.4% 95.0% 110.0% 96.0% 92.7%
$ millions
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General Insurance – Management and sales expenses

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Half year ended
Sep-13 Mar-13 Sep-12 Mar-12 Sep-11 Mar-11 Sep-10
Management expenses 32.5 33.2 32.1 30.8 27.6 29.1 27.4
Commissions 8.8 8.5 7.9 8.0 7.4 6.8 4.9
Total expenses 41.3 41.7 40.0 38.8 35.0 35.9 32.3
$ millions
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Claims and costs to net premium ratio

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General Insurance New Zealand overview

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FY13 GWP BREAKDOWN
BY PRODUCT
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Home 37%
Motor 29%
Contents 25%
Other 9%
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FY13 GWP BREAKDOWN
BY DISTRIBUTION CHANNEL
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Direct 56%
Fintel 4%
Alliances 40%
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FY13 NEW BUSINESS GWP BY DISTRIBUTION CHANNEL

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TOWER and FinTel phone sales 69% Online 2% Small and medium enterprises 6% Rural 4% Alliances 19%

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General Insurance overview Pacific Islands

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FY13 GWP BREAKDOWN FY13 GWP BREAKDOWN
BY PRODUCT BY DISTRIBUTION
Commercial 30% PNG 35%
Motor 34% Fiji 27%
Home & contents 19% Samoa [1] 21%
Workers comp 6% Cook Islands 9%
Accident 3% Solomon Islands 8%
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Commercial 30%
Motor 34%
Home & contents 19%
Workers comp 6%
Accident 3%
Other 8%
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Includes American Samoa and Tonga

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FY13 GWP BREAKDOWN
BY CHANNEL
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Alliances 17%
Broker 33%
Direct 50%
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AI assistant

TOWER LIMITED — Annual Report 2013

65971_rns_2013-11-25_85df2863-6fef-45bb-84db-704643422bf4.pdf

26 November 2013

TOWER Limited - Results for announcement to the market

MEDIA RELEASE

TOWER NET PROFIT OF $34.4m, LAYS FOUNDATIONS FOR THE FUTURE

RESULTS FOR ANNOUNCEMENT TO THE MARKET

TOWER LIMITED

Refer attached 2013 audited Financial Statements for TOWER Limited and its subsidiaries and Presentation for more detailed analysis and explanation.

TOWER LIMITED PRELIMINARY FINAL REPORT

FINAL DIVIDEND

ADDITIONAL COMMENTS

Refer attached 2013 audited Financial Statements for TOWER Limited and its subsidiaries and Presentation for more detailed analysis and explanation

EMAIL: [email protected]

Notice of event affecting securities

TOWER LIMITED

FINANCIAL STATEMENTS

Table of Contents

TOWER LIMITED INCOME STATEMENTS For the year ended 30 September 2013

TOWER LIMITED STATEMENTS OF COMPREHENSIVE INCOME For the year ended 30 September 2013

TOWER LIMITED BALANCE SHEETS As at 30 September 2013

TOWER LIMITED STATEMENTS OF CHANGES IN EQUITY For the year ended 30 September 2013

TOWER LIMITED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) For the year ended 30 September 2013

TOWER LIMITED STATEMENTS OF CASH FLOWS For the year ended 30 September 2013

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Compliance with International Financial Reporting Standards (IFRS)

PRINCIPLES OF CONSOLIDATION

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT IN SUBSIDARIES

PRINCIPLES UNDERLYING THE CONDUCT OF LIFE INSURANCE BUSINESS

SPECIFIC ACCOUNTING POLICIES

(A) PREMIUM REVENUE

(i) Life insurance contracts

(B) FEE AND OTHER REVENUE

(C) INVESTMENT REVENUE

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(D) CLAIMS EXPENSE

(i) Life insurance contracts

(E) BASIS OF EXPENSE APPORTIONMENT

(F) POLICY ACQUISITION COSTS

- Superannuation and medical products

(G) OUTWARDS REINSURANCE

(H) REINSURANCE RECOVERIES

(I) FINANCING COSTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(J) TAXATION

(i) Current tax

(ii) Deferred tax

(iii) Tax consolidation

(iv) Income tax expense

(v) Life Insurance tax

(vi) GST

(K) FOREIGN CURRENCY

(i) Functional and presentation currencies

(ii) Transactions and balances

(iii) Consolidation

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(L) CASH AND CASH EQUIVALENTS

(M) PROPERTY, PLANT AND EQUIPMENT

(N) ASSETS BACKING INSURANCE BUSINESS

(O) EARNINGS PER SHARE

(i) Basic earnings per share

(ii) Diluted earnings per share

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(P) INTANGIBLES

(i) Goodwill

(ii) Software

(Q) IMPAIRMENT OF NON FINANCIAL ASSETS

(R) FINANCIAL INSTRUMENTS

(i) Loans and receivables

(ii) Financial assets at fair value through profit or loss

(iii) Fair value

TOWER LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 September 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(iv) Offsetting financial instruments

(v) Derecognition

(S) IMPAIRMENT OF FINANCIAL ASSETS

TOWER LIMITED Annual Report 2013