TOWER LIMITED — Interim / Quarterly Report 2012

May 24, 2012

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25 May 2012

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

Information pack - TOWER Limited preliminary results for the six months ended 31 March 2012

Further to the announcement today of TOWER’s results for the six months ended 31 March 2012, attached is a results information pack.

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Bronwyn Walsh Company Secretary TOWER Limited

ARBN 088 481 234 Incorporated in New Zealand

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Results Information

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Contents

1	Financial overview	3
2	Results summary	4
3	Balance sheet summary	5
4	Business unit performance
	Health
	Analysis of profit – Health	7
	Health Insurance – Profit summary	7
	Health Insurance – Change in embedded value	8
	Health Insurance – Change in value of one year’s new business	8
	Health Insurance – Embedded value and value of one year’s new business	9
	Health Insurance – Assumptions and sensitivity analysis	9
	Life
	Analysis of profit – Life	10
	Life Insurance – Profit summary	10
	Life Insurance – Change in embedded value	11
	Life Insurance – Change in value of one year’s new business	11
	Life Insurance – Embedded value and value of one year’s new business	12
	Life Insurance – Assumptions and sensitivity analysis	12
	Health and Life
	Health & Life – In-force premium (Rolling 12)	13
	Health & Life – Premium from new business	13
	Health & Life – Lapses	13
	Health & Life – Claims ratio	13
	Health & Life – Management and sales expenses	13
	General Insurance
	Analysis of profit – General Insurance	14
	General Insurance – Gross written premiums (rolling 12) and lapses	14
	General Insurance – Net premiums and claims	14
	General Insurance – Underwriting profits	14
	General Insurance – Management and sales expenses	14
	Investments
	Analysis of profit – Investments	15
	Investments – Funds under management and advice	15
	Investments – KiwiSaver	15
	Investments – Management and sales expenses	15
5	Group appraisal value	16
6	Group carrying value / appraisal value	17

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Financial Overview 1

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HALF YEAR ENDED
$ M I L L I O N S ( U N L E S S S TAT E D O T H E R W I S E ) MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
PREMIUM AND FUNDS
Group gross premium (12 month rolling) 471.0 445.8 429.0 425.3 416.0 419.4
Funds under management / advice 4,116.1 3,969.0 3,977.5 3,906.8 3,748.5 3,623.0
PROFIT
Net profit after tax 23.6 20.4 13.0 30.0 28.1 23.5
Profit excluding the impact of discount rate 22.8 14.0 17.0 26.1 27.7 25.4
EQUITY
Net assets 476.6 455.5 447.2 441.3 416.4 404.4
Shares on issue (millions) 266.4 265.2 263.6 260.6 258.7 254.8
DIVIDEND
Cents per share 5.0 2.0 4.0 6.0 4.0 9.0
Dividend to earnings per share 56% 26% 82% 52% 37% 37%
EARNINGS RATIOS
Earnings per share (cents per share)
Profit attributed to shareholders 8.87 7.69 4.88 11.45 10.88 11.33
Return on equity (annualised)
Profit attributed to shareholders 10.1% 9.0% 5.8% 14.0% 13.7% 14.3%
Profit excluding the impact of discount rate [(1)] 9.9% 6.3% 7.7% 12.2% 13.6% 15.3%
CAPITAL STRENGTH
Gearing gross 14.6% 15.1% 15.3% 15.4% 16.2% 16.5%
Interest cover (times) 10.3 14.5 8.2 13.8 13.2 8.3
Financial strength rating - Health A- A- A- A- A- A-
Financial strength rating - Life A- A- A- A- A- A-
Financial strength rating - General Insurance A- A- A- A- A- A-
EV & VNB
Embedded value [(2)] 371.4 357.0 359.8 339.4 313.2 297.1
Change in embedded value (pre transfers) [(2)] 14.4 (2.8) 20.4 24.2 19.2 21.7
Value of one year's new business 7.1 7.6 7.1 8.9 6.6 6.7
INSURANCE PROFIT RATIOS
Insurance profit/(loss) to net earned premium ratio - Health 12.0% 5.3% 10.3% 1.9% 12.4% 8.0%
Insurance profit/(loss) to net earned premium ratio - Life [(1)] 40.0% 26.4% 10.9% 37.1% 46.9% 42.1%
Insurance profit/(loss) to net earned premium ratio - General Insurance [(1)] 8.1% (4.8%) 7.1% 12.5% 16.6% 8.4%
MANAGEMENT AND SALES EXPENSES AND COST RATIOS
Management and sales expenses 95.4 80.8 93.9 83.1 89.9 84.5
Cost to income ratio [(1)] 72.3% 72.8% 84.3% 61.2% 66.2% 70.7%
Staff numbers 833 831 783 749 761 773
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(2) Combined total of Health and Life

(1) Calculation includes impact of catastrophe events in all periods. FY11 and Sep-10 adjusted to reflect this.

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Results Summary 2

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Health 9.4 4.7 9.1 1.6 9.6 6.4
Life [(1)] 19.5 18.7 5.2 34.8 20.0 16.9
General Insurance 9.2 (0.3) 7.7 14.6 17.5 10.6
Investments 5.0 5.5 4.4 1.0 2.9 4.9
Finance & corporate expenses (7.2) (5.0) (4.8) (4.9) (4.5) (5.1)
Profit before tax 35.9 23.6 21.6 47.1 45.5 33.7
Income tax (expense)/credit (13.1) (9.6) (4.6) (21.0) (17.8) (8.3)
Profit excluding the impact of discount rate 22.8 14.0 17.0 26.1 27.7 25.4
Discount rate effect 0.7 6.4 (4.0) 3.9 0.4 (1.9)
Profit from continuing operations 23.6 20.4 13.0 30.0 28.1 23.5
Results to 31 March 2012
$ M I L L I O N S
Insurance profit/(loss) and operating earnings 8.7 9.0 7.6 5.0 30.3 5.4 35.7
Investment income on shareholders' funds 0.7 5.1 1.6 1.8 9.2 9.2
Corporate expenses (5.1) (5.1) (5.1)
Financing costs (3.9) (3.9) (3.9)
Profit/(loss) before tax 9.4 14.1 9.2 5.0 (7.2) 30.5 5.4 35.9
Tax (expense)/credit (2.6) (1.7) (3.8) (1.4) 1.9 (7.6) (5.4) (13.1)
Profit/(loss) excluding the impact of discount rate 6.8 12.4 5.4 3.6 (5.3) 22.8 0.0 22.8
Discount rate effect 0.7 0.7 0.7
Profit/(loss) after tax 6.8 13.1 5.4 3.6 (5.3) 23.6 0.0 23.6
INSURANCE HEALTH SHAREHOLDER LIFE INSURANCE GENERAL INVESTMENTS CORPORATE SHAREHOLDER GROUP POLICYHOLDER LIFE GROUP TOTAL
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Results to 31 March 2011

Results to 31 March 2011
$ M I L L I O N S
Insurance profit and operating earnings 7.2 3.6	6.3 4.4 21.5	0.1 21.6
Investment income on shareholders' funds 1.9 1.5	1.4 2.2 7.0	7.0
Corporate expenses	(3.2) (3.2)	(3.2)
Financing costs	(3.8) (3.8)	(3.8)
Profit/(loss) before tax 9.1 5.1	7.7 4.4 (4.8) 21.5	0.1 21.6
Tax (expense)/credit(2) (2.6) 1.2	(3.1) (1.3) 1.4 (4.5)	(0.1) (4.6)
Profit/(loss) excluding the impact of discount rate 6.5 6.3	4.6 3.1 (3.4) 17.0	0.0 17.0
Discount rate effect(2) (4.0) (4.0)		(4.0)
Profit/(loss) after tax 6.5 2.3 4.6 3.1 (3.4) 13.0		0.0 13.0

(1) Adjustment made on March 11 Life profit due to tax reclass. (2) Discount rate tax methodology change applied.

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M A R C H 2 0 1 2 Balance Sheet Summary 3

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HALF YEAR ENDED
GENERAL HEAD OFFICE &
$ M I L L I O N S HEALTH & LIFE INSURANCE INVESTMENTS ELIMINATIONS GROUP MAR-12 GROUP SEP-11
Cash & call deposits [ (1)] 46.0 58.8 0.2 87.1 192.1 152.9
Total investment assets 856.2 147.4 0.1 1,003.7 1,029.8
Deferred acquisition costs 20.7 16.2 6.7 43.6 42.4
Intangible assets 13.1 17.7 48.0 78.8 72.7
Other operational assets/(liabilities) 97.8 512.4 24.9 (9.5) 625.6 678.7
Total assets 1,033.8 752.5 31.9 125.6 1,943.8 1,976.5
Policy liabilities & insurance provisions (700.6) (569.1) (1,269.7) (1,326.3)
External debt (81.6) (81.6) (81.3)
Other operational (liabilities)/assets (62.3) (48.7) (10.0) 5.1 (115.9) (113.4)
Total liabilities (762.9) (617.8) (10.0) (76.5) (1,467.2) (1,521.0)
Total equity 270.9 134.7 21.9 49.1 476.6 455.5
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Investment assets breakdown

Cash in transit(1) 0.0 0.0	0.0
Fixed interest securities(NZ) 524.6 60.2 0.0	584.8
Fixed interest securities(AUS) 0.0 48.1	48.1
Fixed interest securities(International) 5.3 27.4	32.7
Total fixed interest securities 529.9 135.7 0.0 0.0	665.6
Equitysecurities(NZ) 51.8	51.8
Equitysecurities(AUS) 0.0 0.0	0.0
Equitysecurities(International) 129.8 3.3	133.1
Total equities securities 181.6 3.3 0.0 0.0	184.9
Propertysecurities 70.6 8.3 0.1	79.0
Derivative financial instruments 74.1 0.1	74.2
Total investment assets 856.2 147.4 0.1 0.0	1,003.7

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Credit ratings for investment assets MAR-12
Investment assets subject to credit rating
AAA 221.1
AA 579.8
A 36.5
BBB or below 3.0
Unrated investments 79.7
920.1
Investment assets not subject to credit rating
Fixed interest securities 11.9
Equity securities 184.9
Property securities 78.9
275.7
Total cash and investment assets 1,195.8
Cash and call deposits 192.1
Investment assets 1,003.7
Total cash and investment assets 1,195.8
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(1) Cash in transit has been included in the investment assets portfolio.

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Balance Sheet Summary

M A R C H 2 0 1 1

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HEAD OFFICE &
$ M I L L I O N S HEALTH & LIFE GENERAL INS INVESTMENTS ELIMINATIONS GROUP MAR-11 GROUP SEP-10
Cash & call deposits 32.6 38.2 2.0 114.9 187.7 138.5
Total investment assets 828.9 182.0 0.2 1.2 1,012.3 1,094.3
Deferred acquisition costs 21.2 13.6 7.4 42.2 43.6
Intangible assets 13.1 17.7 30.9 61.7 55.0
Other operational assets/(liabilities) [(1)] 118.4 467.9 20.2 (21.2) 585.3 286.2
Total assets 1,014.2 719.4 29.8 125.8 1,889.2 1,617.6
Policy liabilities & insurance provisions (723.7) (533.6) (1,257.3) (980.4)
External debt (80.9) (80.9) (80.6)
Other operational (liabilities)/assets (61.5) (51.0) (8.9) 17.6 (103.8) (115.3)
Total liabilities (785.2) (584.6) (8.9) (63.3) (1,442.0) (1,176.3)
Total equity [(1)] 229.0 134.8 20.9 62.5 447.2 441.3
Investment assets breakdown
Cash in transit [(2)] 26.1 31.4 57.5
Fixed interest securities (NZ) 471.9 57.2 529.1
Fixed interest securities (AUS) 49.3 49.3
Fixed interest securities (International) 3.6 31.8 35.4
Total fixed interest securities 475.5 138.3 0.0 0.0 613.8
Equity securities (NZ) 50.2 50.2
Equity securities (AUS) 1.2 1.2
Equity securities (International) 146.3 3.2 149.5
Total equities securities 196.5 3.2 0.0 1.2 200.9
Property securities 78.2 9.1 0.2 87.5
Derivative financial instruments 52.6 52.6
Total investment assets 828.9 182.0 0.2 1.2 1,012.3
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Credit ratings for investment assets

MAR-11

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Investment assets subject to credit rating
AAA 64.0
AA 543.7
A 133.2
BBB or below 8.4
Unrated investments 89.9
839.2
Investment assets not subject to credit rating
Fixed interest securities 72.4
Equity securities 200.9
Property securities 87.5
360.8
Total cash and investment assets 1,200.0
Cash and call deposits 187.7
Investment assets 1,012.3
Total cash and investment assets 1,200.0
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(1) Adjustments made to March 2011 carrying value due to a reclass of investment between Health & Life and head office.

(2) Cash in transit has been included in the investment assets portfolio.

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Business Unit Performance 4

Health Insurance - Analysis of profit

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Net premium 72.6 70.9 69.7 68.2 67.7 66.3
Incurred claims (37.3) (39.9) (37.1) (44.7) (37.3) (38.0)
Premium payback payments (9.0) (10.2) (9.9) (7.3) (6.0) (5.5)
Management and sales expenses (19.0) (18.6) (17.8) (18.1) (17.5) (18.3)
Movement in policy liabilities 0.2 (2.2) 3.2 (3.5) (0.1) 0.4
Investment income on assets backing policy liabilities 1.2 3.7 (0.9) 6.7 1.6 0.4
Insurance profit 8.7 3.7 7.2 1.3 8.4 5.3
Investment income on shareholders' funds 0.7 1.0 1.9 0.3 1.2 1.1
Profit before tax 9.4 4.7 9.1 1.6 9.6 6.4
Income tax expense (2.6) (1.5) (2.6) (0.8) (2.9) (1.9)
Profit after tax 6.8 3.2 6.5 0.8 6.7 4.5
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Health Insurance - Profit summary

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$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Planned profits 6.2 5.0 7.0 5.3 6.9 3.3
Experience (loss)/profit 0.1 (2.5) (1.8) (4.7) (1.1) 0.4
Insurance profit net of tax 6.3 2.5 5.2 0.6 5.8 3.7
Investment income on shareholders' funds (net of tax) 0.5 0.7 1.3 0.2 0.9 0.8
Profit after tax 6.8 3.2 6.5 0.8 6.7 4.5
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C O M M E N T S

Health Insurance profit has increased from the September 2011 half year mainly due to seasonal effects. Net profit is $0.3m higher than the corresponding period last year.

A small experience profit was made as the effect of premium increases more than offset underlying claim cost increases.

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Health Insurance - Change in embedded value

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$ M I L L I O N S TOWER MEDICAL
Embedded value as at 30 September 2011 116.5
Expected increase in value of in-force 3.3
Experience:
Investment earnings (0.3)
Other (0.3)
Changes in assumptions:
Investment earnings 0.0
Other 0.0
Value from new business 0.2
Miscellaneous:
Dividend Received / (Paid) 0.0
Other 0.0
Embedded value as at 31 March 2012 119.4
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C O M M E N T S

The Embedded Value has increased slightly less than expected. The main reasons for this were:

▪ a small investment loss due to increase in credit spreads

▪ higher than expected lapses.

The value of new business written in TOWER Medical Insurance continues to be positive.

Health Insurance - Change in value of one year’s new business

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$ M I L L I O N S TOWER MEDICAL
Value of one year’s new business as at 30 September 2011 0.4
Change in one year’s volumes and mix of business 0.0
Changes in assumptions: 0.0
Other 0.0
Value of one year’s new business as at 31 March 2012 0.4
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C O M M E N T S

Our assessment of future new business value remains stable. Refer to page 9 for assumptions used.

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Health Insurance - Embedded value and value of one year’s new business

	MAR-12	SEP-11	MAR-11	SEP-10	SEP-10
$ M I L L I O N S	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL
Net worth	32.1	25.5	22.2	15.8
Value of in-force business	87.3	91.0	93.1	95.7
Embedded value	119.4	116.5	115.3	111.5
Value of one year’s new business	0.4	0.4	0.5	0.5

Health Insurance - Assumptions and sensitivity analysis

Assumptions	MAR-12	SEP-11	MAR-11	SEP-10	SEP-10
	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL
Inflation
Discount rate	11.0%	11.0%	11.0%	11.5%
Earnings assumption (net of tax) ranges	2.5% - 3.5%	2.5% - 3.5%	2.5%	3.4%
Expenses inflation	2.0%	2.0%	2.0%	2.0%

Sensitivity analysis	MAR-12	SEP-11	MAR-11	SEP-10	SEP-10
$ M I L L I O N S	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL	TOWER MEDICAL
Base appraisal value	121.1	118.2	117.4	114.0
Appraisal value assuming:
Discount rate 1% higher	116.2	113.7	113.3	109.8
Investment returns 1% higher	121.8	119.4	118.5	118.0
Discontinuance rate 10% higher	114.0	110.2	114.8	108.3
Renewal expenses 10% higher	115.3	113.6	111.9	108.4

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Life - Analysis of profit

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Net premiums 36.0 34.5 34.0 32.7 31.7 30.9
Policyholder maturities (21.7) (24.0) (30.3) (25.5) (20.2) (27.7)
Life claims (13.5) (13.4) (12.5) (11.5) (12.1) (5.9)
Life claims catastrophe 1.1 (2.3)
Management and sales expenses (19.2) (20.8) (20.2) (21.9) (19.7) (23.1)
Movement in policy liabilities 0.5 17.0 19.5 (9.4) (11.0) (11.3)
Investment income on assets backing policy liabilities 32.3 14.7 15.5 47.7 46.2 50.1
Insurance profit 14.4 9.1 3.7 12.1 14.9 13.0
Investment income on shareholders' funds 5.1 9.6 1.5 22.7 5.1 3.9
Profit before tax 19.5 18.7 5.2 34.8 20.0 16.9
Income tax (expense)/credit (7.1) (6.2) 1.1 (17.6) (9.8) (3.6)
Profit excluding the impact of discount rate 12.4 12.5 6.3 17.2 10.2 13.3
Discount rate effect 0.7 6.4 (4.0) 3.9 0.4 (1.9)
Profit after tax 13.1 18.9 2.3 21.1 10.6 11.4
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Life - Profit summary

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$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Life insurance operating earnings
Planned profits 8.2 8.9 8.7 7.7 7.1 8.0
Experience (loss)/profit 0.5 (3.2) (3.3) (3.7) 0.7 2.7
Insurance profit net of tax 8.7 5.7 5.4 4.0 7.8 10.7
Investment income on shareholders' funds (net of tax) 3.7 6.8 0.9 13.2 2.4 2.6
Underlying profit 12.4 12.5 6.3 17.2 10.2 13.3
Discount rate changes 0.7 6.4 (4.0) 3.9 0.4 (1.9)
Profit after tax 13.1 18.9 2.3 21.1 10.6 11.4
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C O M M E N T S

A strong underlying life insurance profit was recorded for the six month period on the back of favourable claims experience. Investment returns on shareholder funds were lower than in the September 2011 half year and there was only a modest discount rate effect.

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Life Insurance - Change in embedded value

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$ M I L L I O N S TOWER LIFE TOWER HEALTH & LIFE
Embedded value as at 30 September 2011 52.7 187.8
Expected increase in value of in-force 1.5 8.7
Experience:
- Investment earnings 1.9 0.3
- Other 0.5 0.2
Changes in assumptions:
- Investment earnings (3.0) (0.3)
- Other 0.0 0.0
Value from new business 0.5 1.6
Miscellaneous:
- Dividend Received / (Paid) (4.7) 4.7
- Other 0.0 (0.4)
Embedded value as at 31 March 2012 49.4 202.6
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C O M M E N T S

The primary contributors to the change in embedded value have been:

• A reduction in embedded value for TOWER Life New Zealand, mainly due to the dividend paid and the effect of lower interest earnings assumed;

▪ Positive value generated by TOWER Health & Life new business.

Life Insurance - Change in value of one year’s new business

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$ M I L L I O N S TOWER LIFE TOWER HEALTH & LIFE
Value of one year’s new business as at 30 September 2011 0.9 6.3
Change in one year’s volumes and mix of business 0.0 (0.5)
Changes in assumptions: 0.0 0.0
Other 0.0 0.0
Value of one year’s new business as at 31 March 2012 0.9 5.8
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C O M M E N T S

The assessment of future new business that we expect to write has reduced from that determined as at September 2011.

Refer to page 12 for assumptions used.

1 1

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Life Insurance - Embedded value and value of one year’s new business

$ M I L L I O N S	MAR12 SEP-11 MAR-11 SEP-10
	TOWER LIFE TOWER HEALTH & LIFE TOWER LIFE TOWER HEALTH & LIFE TOWER LIFE TOWER HEALTH & LIFE TOWER LIFE TOWER HEALTH & LIFE
Net worth	17.4 43.1 18.1 32.3 19.3 31.3 17.5 26.7
Value of in-force business	32.0 159.5 34.6 155.4 41.9 152.0 41.1 142.7
Embedded value	49.4 202.6 52.7 187.8 61.2 183.3 58.6 169.3
Value of one year’s new business	0.9 5.8 0.9 6.3 1.0 5.6 1.2 7.2

Life Insurance - Assumptions and sensitivity analysis

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Assumptions MAR12 SEP-11 MAR-11 SEP-10
TOWER LIFE TOWER HEALTH TOWER LIFE TOWER HEALTH TOWER LIFE TOWER HEALTH TOWER LIFE TOWER HEALTH
& LIFE & LIFE & LIFE & LIFE
Inflation
Discount rate 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0%
2.9% to 3.0% to 3.5% to 3.2% to
Earnings assumption (net of tax) ranges 4.5% 3.1% 4.8% 3.1% 6.0% 3.8% 6.0% 3.4%
Expenses inflation 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Sensitivity analysis MAR12 SEP-11 MAR-11 SEP-10
TOWER HEALTH TOWER HEALTH TOWER HEALTH TOWER HEALTH
$ M I L L I O N S TOWER LIFE & LIFE TOWER LIFE & LIFE TOWER LIFE & LIFE TOWER LIFE & LIFE
Base appraisal value 53.3 225.5 56.5 212.8 65.2 205.7 63.3 198.3
Appraisal value assuming:
Discount rate 1% higher 50.7 211.6 53.7 198.4 62.0 192.5 60.1 184.5
Investment returns 1% higher [(1)] 60.7 227.1 62.8 213.8 72.4 207.2 70.4 199.8
Discontinuance rate 10% higher 52.8 208.0 55.7 195.5 64.3 189.7 62.3 181.4
Renewal expenses 10% higher 52.4 220.0 55.3 207.8 63.8 201.3 62.0 193.4
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(1) TOWER Life history restated to reflect method change to allow for offset effect in valuation of assets.

12

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Health & Life - In-force premium (Rolling 12)

Health & Life - In-force premium (Rolling	12)
$ M I L L I O N S	PERIOD ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Individual & Group Health	146.3 145.0 140.4 139.8 137.9 135.6
Individual Life	66.8 64.5 60.9 59.1 54.8 51.5
Group Life	19.9 19.4 18.5 17.9 18.2 20.0
Total in-force premium	233.0 228.9 219.8 216.8 210.9 207.1

Health & Life - Premium from new business

$ M I L L I O N S	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Individual & Group Health	2.6 3.0 3.3 3.5 3.0 3.3
Individual Life	4.3 4.5 4.2 4.3 4.3 5.7
Group Life	0.8 0.9 0.5 1.2 0.5 2.0
Total new business	7.7 8.4 8.0 9.0 7.8 11.0

Health & Life - Lapses

Health & Life - Lapses
%	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Individual & Group Health lapse	10.6% 11.6% 13.2% 10.8% 10.6% 13.4%
Individual Life lapse	12.1% 13.9% 10.9% 11.8% 11.1% 12.0%

Health & Life - Claims ratio[(1)]

Health & Life - Claims ratio(1)
%	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Individual & Group Health	56.2% 62.2% 58.9% 65.6% 55.0% 59.0%
Individual Life	28.2% 38.9% 36.2% 27.4% 33.1% 31.5%
Group Life	42.0% 50.1% 84.6% 45.3% 46.8% 66.8%
All claims	48.6% 55.9% 54.3% 55.4% 49.6% 53.5%
Total Life	30.3% 40.7% 42.3% 32.3% 35.8% 38.4%

Health & Life - Management and sales expenses

$ M I L L I O N S	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Management expenses	19.3 17.9 18.7 19.5 18.5 20.4
Commissions	18.8 21.4 19.3 20.5 18.7 21.0
Total expenses	38.1 39.3 38.0 40.0 37.2 41.4

(1) Excludes premium payback and annuities.

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General Insurance - Analysis of profit

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Net premiums 93.9 78.1 89.2 92.5 90.8 95.3
- Gross earned premiums 113.9 106.2 102.1 104.8 101.5 104.2
- Reinsurance (20.0) (13.2) (10.2) (10.9) (10.7) (8.9)
- Catastrophe reinsurance reinstatement (14.9) (2.7) (1.4)
Claims (44.9) (41.8) (44.6) (48.3) (46.0) (56.7)
Claims catastrophe [(1)] (5.5) (9.1) (5.0) (5.0)
Management and sales expenses (38.8) (35.0) (35.9) (32.3) (33.6) (35.2)
Underwriting profit 4.7 (7.8) 3.7 6.9 11.2 3.4
Investment income on assets backing technical reserves 2.9 4.1 2.6 4.7 3.9 4.6
Insurance profit 7.6 (3.7) 6.3 11.6 15.1 8.0
Investment income on shareholders' funds 1.6 3.4 1.4 3.0 2.4 2.6
Profit before tax 9.2 (0.3) 7.7 14.6 17.5 10.6
Income tax expense (3.8) (1.8) (3.1) (4.6) (5.6) (2.7)
Profit after tax 5.4 (2.1) 4.6 10.0 11.9 7.9
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General Insurance - Gross written premiums (Rolling 12) and lapse

$ M I L L I O N S	PERIOD ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
New Zealand	190.1 171.8 164.7 163.1 159.1 160.6
Pacific Islands	47.9 45.0 44.5 45.4 46.0 51.7
Total gross written premiums	238.0 216.8 209.2 208.5 205.1 212.3
Lapse rate	13.3% 12.7% 13.5% 14.4% 15.5% 16.8%

General Insurance - Net premiums and claims

$ M I L L I O N S	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Net premiums(2)	93.9 78.1 89.2 92.5 90.8 95.3
Claims	50.4 50.9 49.6 53.3 46.0 56.7
Claims ratio	53.7% 65.2% 55.6% 57.6% 50.7% 59.5%

General Insurance - Underwriting profits

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Underwriting profit 4.7 (7.8) 3.7 6.9 11.2 3.4
Combined ratio [(3)] 95.0% 109.9% 96.0% 92.5% 87.7% 96.4%
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General Insurance - Management and sales expenses

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HALF YEAR ENDED
$ M I L L I O N S MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Management expenses 30.8 27.6 29.1 27.4 25.3 26.2
Commissions 8.0 7.4 6.8 4.9 8.3 9.0
Total expenses 38.8 35.0 35.9 32.3 33.6 35.2
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(1) Events > $1m.

(2) Net premiums include net premium costs associated with the Christchurch earthquakes.

(3) Claims and costs to net premium ratio.

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Analysis of profit - Investments

Ali f f I
nayss o prot - nvestments $ M I L L I O N S	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Total income	18.9 19.3 19.0 19.9 18.2 21.0
Management and sales expenses	(13.9) (13.8) (14.6) (18.9) (15.3) (16.1)
Profit before tax	5.0 5.5 4.4 1.0 2.9 4.9
Income tax expense	(1.4) (1.8) (1.3) (0.2) (0.9) (1.4)
Profit after tax	3.6 3.7 3.1 0.8 2.0 3.5

Investments - Funds under management and advice[(1)]

nvestments - uns uner management a $ M I L L I O N S	n avce HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Total funds under management and advice	4,116 3,969 3,977 3,907 3,749 3,623
Total income	18.9 19.3 19.0 19.9 18.2 21.0

Investments - KiwiSaver

I KiiS
nvestments - waver	HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Funds under management ($ millions)	764.1 673.6 579.2 505.3 402.4 326.5
Number of members	103,010 99,105 93,231 87,675 82,143 76,957
Average funds per member ($)	7,418 6,796 6,212 5,763 4,899 4,243

Investments - Management and sales expenses

nvestments - anagement an saes expe $ M I L L I O N S	nses HALF YEAR ENDED
	MAR-12 SEP-11 MAR-11 SEP-10 MAR-10 SEP-09
Management expenses	11.7 12.6 12.6 16.3 13.2 13.5
Other expenses	0.0 0.0 0.0 0.0 0.1 0.1
Sales expenses	2.2 1.2 2.0 2.6 2.0 2.5
Total expenses	13.9 13.8 14.6 18.9 15.3 16.1

(1) Total funds under management includes funds from Kiwisaver.

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Group Appraisal Value 5

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HEALTH & LIFE GENERAL INS INVESTMENTS HOLDINGS GROUP MAR-12 GROUP SEP-11 GROUP MAR-11
$ M I L L I O N S COMPANIES
Net worth 92.6 92.6 75.9 72.8
Value of In-force business 278.8 278.8 281.1 287.0
Embedded value 371.4 0.0 0.0 0.0 371.4 357.0 359.8
Value of 1 years new business 7.1 7.1 7.6 7.1
Value of Future new business 28.5 28.5 30.5 28.4
Appraisal value (enterprise value) 399.9 0.0 0.0 0.0 399.9 387.5 388.2
Fair value of net assets [(1)] 173.9 21.9 49.1 244.9 241.9 248.9
Appraisal value [(1)] 399.9 173.9 21.9 49.1 644.8 629.4 637.1
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C O M M E N T S

The life companies’ embedded values increased by a combined $14.4m over the 6 months or an increase of 4.0%, whilst the appraisal values increased by $12.4m.

The value of TOWER Insurance and other companies increased by $3m, a return of 1.2%.

(1) Adjustment made to March 2011 to reflect fair value of net assets.

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Group Carrying Value / Appraisal Value 6 MAR-12 SEP-11 MAR-11

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MAR-12 SEP-11 MAR-11 SEP-10
CARRYING VALUE CARRYING VALUE CARRYING VALUE CARRYING VALUE
$ M I L L I O N S OF NET ASSETS APPRAISAL VALUE OF NET ASSETS APPRAISAL VALUE OF NET ASSETS APPRAISAL VALUE OF NET ASSETS APPRAISAL VALUE
Health & Life
TOWER Health & Life 166.3 225.5 151.4 212.8 135.4 205.6 133.3 198.3
TOWER Medical 77.5 121.1 70.7 118.2 67.6 117.4 61.1 114.0
TOWER Life (NZ) 27.1 53.3 28.9 56.5 26.0 65.2 25.8 63.3
270.9 399.9 251.1 387.5 229.0 388.2 220.2 375.6
General Insurance
TOWER Insurance 134.7 173.9 128.7 166.2 134.8 165.5 147.7 177.1
134.7 173.9 128.7 166.2 134.8 165.5 147.7 177.1
Investment Business
TOWER Asset Management 9.2 9.2 10.6 10.6 8.1 8.1 6.5 6.5
TOWER Managed Funds 12.7 12.7 14.1 14.1 12.8 12.8 11.3 11.3
21.9 21.9 24.7 24.7 20.9 20.9 17.8 17.8
Other
TOWER Group head office 130.7 130.7 132.3 132.3 143.4 143.4 136.2 136.2
External debt (81.6) (81.6) (81.3) (81.3) (80.9) (80.9) (80.6) (80.6)
Total capital employed 476.6 644.8 455.5 629.4 447.2 637.1 441.3 626.1
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C O M M E N T S

The appraisal value of total capital employed of TOWER Group is well in excess of the carrying value of its net assets. The ratios of appraisal value over carrying value for the insurance companies are:

	MAR-12	SEP-11	MAR-11
Health & Life	148%	154%	170%
TOWER Insurance	129%	129%	123%

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