TOWER LIMITED — Interim / Quarterly Report 2024

May 14, 2024

Level 5, 136 Fanshawe Street Auckland 1142, New Zealand ARBN 645 941 028 Incorporated in New Zealand

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15 May 2024

IFRS 17 AND INTERIM SOLVENCY STANDARD TRANSITION UPDATE

Tower today released the attached presentation on the new insurance accounting standard, IFRS 17 Insurance Contracts , and the Reserve Bank of New Zealand (RBNZ) Interim Solvency Standard (ISS), which now apply in the current financial year, FY24.

Tower Chief Financial Officer, Paul Johnston, says that the adoption of these new standards is not expected to have any material impact.

“Tower’s strategy, profitability and dividend policy remain unaffected by the new standards, although the presentation and disclosure of information in Tower’s financial statements from HY24 onwards will change,” he said.

Full details of the disclosure changes are provided in the presentation, including the transitional adjustments to the Tower FY23 Balance Sheet and Statement of Comprehensive Income, which confirm the impacts are minimal and immaterial.

ENDS

This announcement has been authorised by: Blair Turnbull Chief Executive Officer Tower Limited

For media enquiries, please contact in the first instance: Emily Davies Head of Corporate Affairs and Reputation +64 21 815 149 emily.davies@tower.co.nz

For investor queries, please contact in the first instance: James Silcock Head of Strategy, Planning and Investor Relations +64 22 395 9327 james.silcock@tower.co.nz

Classification: Sensitive

Tower Limited Investor update on IFRS 17 and the interim solvency standard

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May 2024
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Contents

Contents
IFRS 17
A new accounting standard	4
Initial impact	6
Adjustments to profit & loss	7
Key measurement changes	8
Restated financial statements and key metrics	13
Interim Solvency Standard
Overview	19
Summary of key changes	20
Changes to FY23 solvency margin	22
Changes to FY23 solvency ratio	23
Solvency update at 31 December 2023	24
Appendices	25

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Accounting for insurance contracts

A new accounting standard

NZ IFRS 17 Insurance Contracts ( IFRS 17 ) is a new accounting standard applicable to all insurance companies. Tower is required to comply with IFRS 17 from 1 October 2023. Tower’s HY24 results, to be released in May 2024, will be the first interim reporting period under IFRS 17. Although Tower’s financial statements will look quite different, the practical impact of IFRS 17 on Tower’s operations is insignificant, as outlined below.

Profitability

Strategy Profitability Cash & capital Dividend policy No material changes No impact to No material impact to to profitability or No change to underlying business capital or timing of timing of revenue dividend policy economics cash flows recognition Net assets Reporting Key metrics Comparatives Changes to Existing key reporting Minor reduction, of FY23 comparatives presentation and metrics remain, $2.7m, in opening have been restated disclosure in financial supplemented by equity on transition under IFRS 17 statements IFRS 17 metrics

Overview of IFRS 17

IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. It replaces NZ IFRS 4 Insurance contracts ( IFRS 4 ).

Objectives of IFRS 17

• To establish consistent accounting principles for all insurance contracts across general, life and health insurance.

• To improve the transparency and comparability of financial disclosures.

Measurement model

• Tower will apply the Premium Allocation Approach ( PAA ), a simplified approach allowed under IFRS 17 where insurance revenue is recognised over the term of the policy, similar to IFRS 4.

• All current Tower products meet the eligibility criteria to use the PAA measurement model.

Unaudited

• Tower has consulted with its professional advisers in the preparation of this Investor Update, however the comparatives contained within this presentation and the associated tables are unaudited.

• The comparatives will be covered by the audit opinion on Tower’s FY24 year-end financial statements.

IFRS 17 initial impact

Adopting IFRS 17 reduced shareholders’ equity by $2.7m as at 1 October 2022

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0.1m (4.8m)
317.5m
1.1m 314.8m
1.1m (0.2m)
1
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• A transition adjustment has been calculated to record the impact of adopting IFRS 17 on opening equity for FY23.

• On transition to IFRS 17, at 1 October 2022, the net impact is a decrease in Group shareholders’ equity of $2.7m.

IFRS 17 adjustments to profit & loss Adopting IFRS 17 reduced the FY23 net loss after tax by $0.2m

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FY23 HY23
(Net loss after tax for the year ended 30 September 2023) (Net loss after tax for the half year ended 31 March 2023)
(0.1m) (1.0m)
(1.2m) (0.6m) 0.3m 0.0m (5.1m)
(5.1m) (0.1m) 0.5m
(0.7m) 0.4m
(0.4m) 1.0m
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Key measurement changes From IFRS 4 to IFRS 17

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Risk adjustment

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IFRS 17 reserves
IFRS 4
All reserves NZ BAU Pacific CEQ
90%
75% 75%
72.5% PoA Risk
Risk margin PoA PoA adjustment
PoA
Central Central
estimate of estimate of
future cash future cash
flows flows
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On transition the NZ BAU cost of capital approach is equivalent to a 72.5% probability of adequacy for BAU claims

IFRS 17 risk adjustment replaces IFRS 4 risk margin

• The risk adjustment reflects the compensation the insurer requires for bearing uncertainty related to timing and amount of cash flows arising from non-financial risks, therefore where there is more uncertainty about future cash flows, the risk adjustment is expected to be larger. Tower has separately assessed the risk adjustment for NZ business as usual ( BAU ), Pacific and Canterbury Earthquake ( CEQ ) reserves.

• Tower will apply a ‘cost of capital’ approach in determining the risk adjustment for the BAU reserves. Tower will apply a ‘confidence level technique’, at a 75% probability of adequacy ( PoA ), for the Pacific reserves; and a 90% PoA for CEQ reserves.

• The impact of this change on transition for NZ BAU reserves is a $0.8m (pre-tax) increase to retained earnings, due to the reduction in PoA from 75% to 72.5%. This is partially offset by a group diversification benefit adjustment of $0.7m (pre-tax) decrease to retained earnings.

• The impact of this change on transition for CEQ reserves is expected to be $4.8m (pre-tax) decrease to retained earnings, due to the increase in CEQ PoA from 75% to 90%.

Discounting

Discount rate calculation

Risk-free rate (%)

+ Illiquidity premium (%)

• Tower has adopted a 'bottom-up' approach to derive the NZ discount rate. There is a no illiquidity premium applied on transition.

• All IFRS 17 claims reserves for NZ are discounted, while with IFRS 4 only certain reserves were discounted as at 1 October 2022. The impact of this change on transition is a $1.1m (pre-tax) increase to retained earnings.

Change in presentation of discounting

IFRS 4 IFRS 17 Insurance service expense[1] : Net claims expense[1] : Present value adjustment on Present value adjustment on new claims new claims + Discount unwind Insurance finance expense[2] : + Discount unwind + Impact from changes in discount rates Impact from changes in discount rates

• Tower will not discount Pacific liabilities for incurred claims ( LIC ) as the effect of discounting is immaterial.

• 1 Part of underwriting result or insurance service result 2 Below insurance service result

Onerous contracts

The IFRS 17 onerous contracts tests replaces the IFRS 4 liability adequacy test (LAT)

• An onerous contract test is performed for groups of insurance contracts where ‘facts and circumstances’ have indicated the group of contracts may be loss making for Tower.

• The test is completed at a more granular level than the LAT and is calculated gross of reinsurance, whereas the LAT was calculated net of reinsurance.

• If a group is considered onerous then a loss component is recognised against insurance service expenses in the statement of comprehensive income, and against Liability for Remaining Coverage ( LRC ) in the balance sheet.

Onerous contracts calculation

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Discounted
Unearned Loss
claims and
premiums less - = component
expense
deferred IACF [1] (if < 0)
forecast
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• Although there were no onerous contracts as at transition date and therefore no impact to opening retained earnings, a provision for onerous contracts in the Fiji Motor portfolio was recognised in the restated profit & loss comparatives for HY23 ($0.7m pre-tax) and FY23 ($0.6m pre-tax)

• Onerous contracts do not change ultimate profitability, but do impact the timing of revenue recognition, with assessed future losses recognised immediately.

Insurance acquisition cash flows

IFRS 17 IACF replaces the IFRS 4 concept of acquisition costs

• Tower will defer IACF and recognise them across the life of the underlying insurance contracts, an approach that is consistent with deferred acquisition costs ( DAC ) under IFRS 4.

• The key difference in the amounts deferred under each method relates to costs considered non-attributable to insurance contracts under IFRS 17, which are excluded from the deferral.

• The impact of this change on transition is a $0.2m (pretax) decrease to retained earnings.

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Calculation of liability for
remaining coverage (LRC)
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Premiums
received
IACF
amortised
IACF
deferred
Insurance
revenue
recognised
Opening LRC Closing LRC
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LRC is the liability representing the insurance coverage to be provided by Tower after the balance date. It is the equivalent of unearned premiums, premium receivables and deferred insurance costs under IFRS 4.

Restated financial statements and key metrics

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Restated balance sheet

Our IFRS 17 balance sheet at 30 September 2023 and 1 October 2022

Restated consolidated balance sheet

Restated consolidated balance sheet
$ thousands	30-Sep-23	1-Oct-22
Cash and cash equivalents	64,009	84,502
Investments	258,798	258,634
Receivables	16,797	13,408
Current tax assets	12,917	13,069
Assets classified as held for sale	11,505	16,673
Reinsurance contract assets	147,236	26,918
Deferred tax assets Right-of-use assets	16,074 23,204	16,492 23,326
Property, plant and equipment Intangible assets Total assets Payables	6,280 98,524 655,344 18,378	5,417 94,653 553,092 20,861
Liability for remaining coverage Liability for incurred claims Current tax liabilities	44,614 241,195 198	43,343 121,569 136
Liabilities classified as held for sale Provisions Lease liabilities Deferred tax liabilities Total liabilities	7,609 12,823 32,615 178 357,610	5,119 11,873 35,054 339 238,294
Net assets	297,734	314,798

• While restated net assets are materially consistent with IFRS 4, the total assets and total liabilities have decreased due to reclassifications required by IFRS 17.

• Reinsurance contracts assets represents the asset for incurred claims (AIC) comprising reinsurance recoveries previously held in receivables under IFRS 4, less the asset for remaining coverage (ARC) comprising the reinsurance premium payable previously held in payables, plus deferred insurance costs related to reinsurance.

• Liability for remaining coverage (LRC) represents the net liability to customers on insurance contracts, previously held in receivables , unearned premiums and deferred insurance costs under IFRS 4.

• Liability for incurred claims (LIC) is consistent with the outstanding claims under IFRS 4.

• The reinsurance contract assets and LIC increased at 30 September 2023 due to the large events occurring during FY23. The profit impact of these large events decreased the net equity of Tower from FY22 to FY23.

Restated statutory profit & loss Our restated statement of comprehensive income for FY23 and HY23

Restated consolidated statement of comprehensive income

	$ thousands	30-Sep-23	31-Mar-23
	Insurance revenue	472,611	225,993
	Insurance service expense	(604,851)	(445,668)
	Net income from reinsurance contracts held	124,360	215,185
	Insurance service result	(7,880)	(4,490)
	Net investment income	14,329	6,277
	Net insurance finance expense	(1,348)	(663)
	Net insurance and investment result	5,101	1,124
	Other income	5,727	2,724
	Other operating expenses	(2,145)	(1,259)
	Finance costs Profit before taxation from continuing operations Tax expense	(920) 7,763 (5,176)	(462) 2,127 (2,044)
	Profit after taxation from continuing operations	2,587	83
	Loss after taxation from discontinued operations Loss after taxation for theyear Items that may be reclassified to profit or loss Currency translation differences Reclassification of the foreign currencytranslation reserve	(3,609) (1,022) (1,494) 544	(5,135) (5,052) (2,130) 544
	Other comprehensive loss net of taxation	(950)	(1,586)
	Total comprehensive loss for theyear	(1,972)	(6,638)

• Insurance revenue is consistent with gross earned premium under IFRS 4 plus commission revenue related to insurance contracts.

• Insurance service expenses is consistent with gross claims, commissions and underwriting expenses under IFRS 4.

• Net income from reinsurance contracts held is consistent with outward reinsurance premium expense and reinsurance recoveries under IFRS 4.

• Net insurance finance expense represents the discount unwind, and impact from changes in discount rates on LIC and AIC.

• IFRS 17 requires non-attributable income and expenses related to activities that do not directly relate to the fulfilment of insurance contracts to be disclosed separately from the insurance service result as other income and other operating expenses.

Restated underlying profit and loss Our restated IFRS 17 underlying profit and loss for FY23 and HY23

$ million	FY23 Restated underlying profit	HY23 Restated underlying profit
Gross written premium Insurance revenue Reinsurance expense	526.8 487.6 (69.5)	245.0 233.8 (32.2)
Net insurance revenue	418.1	201.7
Net claims expense - BAU Net claims expense - large events Large event reinsurance reinstatement Management and sales expenses Net commission expense	(230.2) (38.2) (17.4) (123.9) (10.1)	(103.0) (33.9) (3.4) (64.7) (5.8)
Net insurance service expense	(419.8)	(210.8)
Insurance service result Net investment income Net insurance finance expense Other income and expenses	(1.7) 14.3 (1.3) 0.2	(9.1) 6.3 (0.7) (0.9)
Underlying profit before tax Income tax expense	11.5 (4.4)	(4.4) 0.8
Underlying net profit/(loss) after tax (NPAT) Canterbury impact (net of tax) All other non-underlyingcosts (net of tax)	7.1 (0.5) (7.6)	(3.7) (0.6) (0.8)
Reported loss after tax	(1.0)	(5.1)
BAU claims ratio Large events claim ratio Expense ratio Combined Operating Ratio	55.1% 13.3% 32.0% 100.4%	51.1% 18.5% 35.0% 104.5%

• Net claims expense for large events relates to the large events occurring during FY23 (including the Auckland & upper North Island weather event, Cyclones Gabrielle, Judy and Kevin). The profit impact of these large events decreased the underlying profit for Tower in 2023. The large events claims ratio improved between HY23 and FY23 as there were fewer large events in the second half.

• BAU claims ratio has a minor improvement under restatement due to an increase in net insurance revenue and the unwind of the discount on LIC now excluded from claims expense.

• Expense ratio has a minor improvement under restatement due to a reclass of non-attributable expenses from management and sales expenses to other income and expenses , partially offset by the onerous contract expense.

Changes in key metrics

Metric	Definition	Impact from IFRS 17 adoption
Gross written premium (GWP)	The total premiums on insurance, excluding taxes and levies, underwritten by Tower during the financial reporting period, before deduction of any reinsurance premium	Gross Written Premium does not exist under IFRS 17 however will continue to be provided as part of our reporting
Insurance revenue	The portion of premiums recognised as revenue in the accounting period, reflecting insurance coverage provided during the period	This is a new metric approximately equivalent to gross earned premium (GEP) under IFRS 4, plus insurance commission relating to insurance contracts
Net insurance revenue	Insurance revenue less reinsurance expenses	This is a management metric approximately equivalent to net earned premium (NEP) under IFRS 4
Insurance service result	Comprises insurance revenue, insurance service expenses and reinsurance income and expenses	This is a new metric approximately equivalent to underwriting profit under IFRS 4 (excluding some non-attributable costs)
BAU claims ratio	BAU claims expense (net of reinsurance recoveries) as a percentage of net insurance revenue	There will be a minor decrease in this ratio due to the unwind of the discount which is now excluded from claims expense
Large events claims ratio	Large events claims expense (net of reinsurance recoveries) as a percentage of net insurance revenue	There will be a minor decrease in this ratio due to the increase in net insurance revenue
Management expense ratio (MER)	Management and sales expense as a percentage of net insurance revenue	There is a small decrease in this ratio due to the non-attributable expenses that are excluded from insurance service expense under IFRS 17, partially offset by the onerous contract expense
Combined operating ratio (COR)	The sum of the BAU and large event claims ratios, and MER as a percentage of net insurance revenue	Minor impact from the above changes

Interim Solvency Standard

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18

Overview of ISS

The RBNZ has introduced the Interim Solvency Standard 2023 ( ISS ), which replaces the Non-Life Solvency Standard ( NLSS ). Tower is required to comply with the ISS under its conditions of licence, from 1 October 2023. The ISS requires quarterly reporting on Tower’s solvency position. Tower’s solvency ratios and margin have changed, but we do not expect that to substantially change our strategy or the way we manage capital, as outlined below.

Strategy

No impact to underlying business economics

Solvency ratios

Decrease to solvency ratio, reflecting a change in presentation

Solvency margin

Dividend policy

Increased, reflecting a lower prescribed No change to our capital requirement dividend policy ( PCR )

Parts of the ISS need clarification or are not currently working as intended. The RBNZ is consulting on a proposed second amendment[1] to the ISS, which is not expected to be issued and effective until Tower’s 2025 financial year. The additional proposed changes to the ISS are likely to have a material impact on Tower’s regulatory solvency position and will reduce the solvency margin to a level closer to that previously reported under the NLSS. However, the second amendment does not affect the regulatory solvency position unless and until it comes into effect.

Summary of key changes

The ISS introduces new terminology for the solvency measures and some changes to their inputs

From the NLSS terminology		To the new ISS terminology	Calculation under ISS
Actual solvency capital (ASC)		Solvency capital (SC) Increased due to changes to allowable adjustments and the removal of deductions which are now included as extra charges in the PCR
Risk capital charges		Risk capital charges Minor changes to terminology of existing risk capital charges (e.g., underwriting risk capital charge is now covered by 'Insurance risk’) Introduction of an operational risk charge from 1 January 2024 The insurance risk and credit risk capital charges are materially reduced due to changes in inputs to the “stressed balance sheet”
Minimum solvency capital (MSC)		Prescribed capital requirement (PCR) Increased due to the inclusion of some items previously treated as a deduction from ASC now included in the PCR, partially offset by a decrease in insurance and credit risk capital charges
Solvency margin		Solvency margin (=SC - PCR) Increased margin due to differences in inputs to the PCR and SC
n/a		Adjusted solvency margin (ASM) Solvency margin less any licence condition
Solvency ratio (=ASC ÷ MSC)		Solvency ratio (=SC ÷ PCR) Decrease to solvency ratiodue to differences in inputs to PCR and MSC
n/a		Adjusted solvency ratio (=SC ÷ PCR + Licence condition) Solvency ratio, including an adjustment for any licence condition

Changes in solvency calculations

Adjusted solvency ratio calculation

• Intangibles and deferred tax assets ( DTA ) are no longer considered as a deduction from solvency capital and instead are now included as part of PCR. As a result, solvency ratios have changed considerably from the old standard, even though this reclassification has a nil impact on solvency margins.

• An operational risk capital charge ( ORCC ) has been introduced as part of PCR from 1 January 2024, which will increase from 1% of insurance service revenue ( ISR ) in 2024 to 3% of ISR in 2026.

• There are also a number of other changes to the calculation of other risk capital charges.

• Solvency calculations will be performed quarterly and submitted to RBNZ as part of a Quarterly Insurer Return. Solvency disclosures will also be published quarterly on the Tower website.[1]

Non-life solvency Interim solvency standard standard

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Actual solvency
capital
Solvency capital
Deductions for
intangibles + DTA
Minimum
solvency capital , Various risk
comprising
capital charges
various risk capital
Prescribed
charges
capital
Distressed wind-up
requirement
capital charge =
intangibles + DTA
Operational risk
capital charge [2]
Licence condition
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Changes to FY23 solvency margin

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39.9m (15.0m)
•
The waterfall shows the changes
in reported solvency margin under
79.8m
NLSS to the adjusted solvency
margin under ISS as at 30
September 2023, for Tower’s
parent entity.
•
The solvency figures are the
2.9m
53.8m (1.9m) mandatory regulatory solvency
position required until any
proposed amendments to the ISS
are issued and effective.
•
Tower’s $15m licence condition
has not changed, however it is
now explicitly incorporated into
the calculation of the adjusted
solvency margin.
•
The Appointed Actuary has
reviewed the solvency figures
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Changes to FY23 solvency ratio

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159% (2%) 3% (36%)
26% (11%)
139%
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• The waterfall shows the changes in reported solvency ratio under NLSS to the adjusted solvency ratio under ISS as at 30 September 2023, for Tower’s parent entity.

• The solvency figures are the mandatory regulatory solvency position required until any proposed amendments to the ISS are issued and effective.

• The Appointed Actuary has reviewed the solvency figures.

Solvency update at 31 December 2023

Tower calculates the solvency position on a quarterly basis under the ISS. The table below shows the solvency position for Tower’s parent entity under the NLSS at 30 September 2023, under the ISS at 30 September 2023 and under the ISS at 31 December 2023.

$ millions	From NLSS 30 September 2023
Solvency capital (actual solvency capital under NLSS)
Adjusted prescribed capital requirement (minimum solvency capital under NLSS)
Adjusted solvency margin (solvency margin under NLSS)
Adjusted solvency ratio (solvency ratio under NLSS)

• The solvency figures are the mandatory regulatory solvency position required until any proposed amendments to the ISS are issued and effective.

• The Appointed Actuary has reviewed the solvency figures.

Appendices

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Reclassification between balance sheet line items

The tables to the right show how various line items that were reported under IFRS 4 have been reclassified to new line items under IFRS 17

Reported consolidated balance sheet Reported $ thousands 30-Sep-23 Cash and cash equivalents 64,009 Investments 258,798 IFRS 4	Reported consolidated balance sheet Reported $ thousands 30-Sep-23 Cash and cash equivalents 64,009 Investments 258,798 IFRS 4				IFRS 17 Restated consolidated balance sheet Restated $ thousands 30-Sep-23
					Cash and cash equivalents 64,009 Investments 258,798 Receivables 16,797 Current tax assets 12,917 Assets classified as held for sale 11,505 Reinsurance contract assets 147,236 Deferred tax assets 16,074 Right-of-use assets 23,204 Property, plant and equipment 6,280 Intangible assets 98,524
Receivables 413,826 Current tax assets 12,917 Assets classified as held for sale 13,697 Deferred tax assets 14,971 Deferred insurance costs 39,95~~1~~ Right-of-use assets 23,204 Property, plant and equipment 6,280 Intangible assets 98,524 Total assets 946,177 Payables 77,03~~2~~ Ud i 272834
					Total assets 655,344
					Payables 18,378 Liability for remaining coverage 44,614 Liability for incurred claims 241,195 Current tax liabilities 198 Liabilities classified as held for sale 7,609 Provisions 12,823 Lease liabilities 32,615 Deferred tax liabilities 178
nearne premums , Outstanding claims 240,597 Current tax liabilities 198 Liabilities classified as held for sale 9,765 Provisions 12,823 Lease liabilities 32,615 Deferred tax liabilities 48 Total liabilities 645,912 Net assets 300,265
					Total liabilities 357,610
					Net assets 297,734

Statutory balance sheet - from IFRS 4 to IFRS 17

Restated consolidated balance sheet	Reported	IFRS 17	IFRS 17	Restated	Reported	IFRS 17	IFRS 17	Restated
$ thousands	30-Sep-23	Reclass	Adjustments	30-Sep-23	30-Sep-22	Reclass	Adjustments	1-Oct-22
Cash and cash equivalents	64,009	-	-	64,009	84,502	-	-	84,502
Investments	258,798	-	-	258,798	258,634	-	-	258,634
Receivables	413,826	(397,029)	-	16,797	242,089	(228,681)	-	13,408
Current tax assets	12,917	-	-	12,917	13,069	-	-	13,069
Assets classified as held for sale	13,697	(3,248)	1,056	11,505	20,811	(4,138)	-	16,673
Reinsurance contract assets	-	141,246	5,990	147,236	-	25,733	1,185	26,918
Deferred tax assets	14,971	-	1,103	16,074	23,893	-	(7,401)	16,492
Deferred insurance costs	39,951	(39,951)	-	-	37,819	(37,819)	-	-
Right-of-use assets	23,204	-	-	23,204	23,326	-	-	23,326
Property, plant and equipment	6,280	-	-	6,280	5,417	-	-	5,417
Intangible assets	98,524	-	-	98,524	94,653	-	-	94,653
Total assets	946,177	(298,982)	8,149	655,344	804,213	(244,905)	(6,216)	553,092
Payables	77,032	(66,087)	7,433	18,378	58,911	(44,522)	6,472	20,861
Unearned premiums	272,834	(272,834)	-	-	238,116	(238,116)	-	-
Outstanding claims	240,597	(240,597)	-	-	124,531	(124,531)	-	-
Liability for remaining coverage	-	51,656	(7,042)	44,614	-	49,660	(6,317)	43,343
Liability for incurred claims	-	232,125	9,070	241,195	-	116,743	4,826	121,569
Current tax liabilities	198	-	-	198	136	-	-	136
Liabilities classified as held for sale	9,765	(3,245)	1,089	7,609	9,258	(4,139)	-	5,119
Provisions	12,823	-	-	12,823	11,873	-	-	11,873
Lease liabilities	32,615	-	-	32,615	35,054	-	-	35,054
Deferred tax liabilities	48	-	130	178	8,806	-	(8,467)	339
Total liabilities	645,912	(298,982)	10,680	357,610	486,685	(244,905)	(3,486)	238,294
Net assets	300,265	-	(2,531)	297,734	317,528	-	(2,730)	314,798

Reclassification between profit & loss line items

Reported consolidated statement of comprehensive income Reported $ thousands 30-Sep-23 Gross writtenpremium 511,484 Gross earned premium 470,813 Outward reinsurancepremium expense (82,398) Net earned premium 388,415 Claims expense (492,197) Less: Reinsurance and other recoveries revenue 205,187 Net claims expense (287,010) Gross commission expense (12,342) Commission revenue 4,636 Net commission expense (7,706) Underwritingexpense (105,354) Underwriting loss (11,655) Net investment income 14,329 Other income 5,727 Other operating expenses (44) Financingcosts (920) Profit before tax from continuing operations 7,437 IFRS 4 The tables to the right show how various line items that were reported under IFRS 4 have been reclassified to new line items under IFRS 17	Reported consolidated statement of comprehensive income Reported $ thousands 30-Sep-23 Gross writtenpremium 511,484 Gross earned premium 470,813 Outward reinsurancepremium expense (82,398) Net earned premium 388,415 Claims expense (492,197) Less: Reinsurance and other recoveries revenue 205,187 Net claims expense (287,010) Gross commission expense (12,342) Commission revenue 4,636 Net commission expense (7,706) Underwritingexpense (105,354) Underwriting loss (11,655) Net investment income 14,329 Other income 5,727 Other operating expenses (44) Financingcosts (920) Profit before tax from continuing operations 7,437 IFRS 4 The tables to the right show how various line items that were reported under IFRS 4 have been reclassified to new line items under IFRS 17	Reported consolidated statement of comprehensive income Reported $ thousands 30-Sep-23 Gross writtenpremium 511,484 Gross earned premium 470,813 Outward reinsurancepremium expense (82,398) Net earned premium 388,415 Claims expense (492,197) Less: Reinsurance and other recoveries revenue 205,187 Net claims expense (287,010) Gross commission expense (12,342) Commission revenue 4,636 Net commission expense (7,706) Underwritingexpense (105,354) Underwriting loss (11,655) Net investment income 14,329 Other income 5,727 Other operating expenses (44) Financingcosts (920) Profit before tax from continuing operations 7,437 IFRS 4 The tables to the right show how various line items that were reported under IFRS 4 have been reclassified to new line items under IFRS 17
	Reported consolidated statement of comprehensive income Reported $ thousands 30-Sep-23 Gross writtenpremium 511,484 Gross earned premium 470813
	, Outward reinsurancepremium expense (82,398) Net earned premium 388,415 Claims expense (492,197) Less: Reinsurance and other recoveries revenue 205,187 Net claims expense (287,010) Gross commission expense (12,342) Commission revenue 4,636 Net commission expense (7,706) Underwritingexense (105354)
	p , Underwriting loss (11,655) Net investment income 14,329 Other income 5,727 Other operating expenses (44) Financingcosts (920) Profit before tax from continuing operations 7,437

IFRS 17

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Restated consolidated statement of comprehensive income Restated
$ thousands 30-Sep-23
Insurance revenue 472,611
Insurance service expense (604,851)
Net income from reinsurance contracts held 124,360
Insurance service result (7,880)
Net investment income 14,329
Net insurance finance expense (1,348)
Net insurance and investment result 5,101
Other income 5,727
Other operating expenses (2,145)
Finance costs (920)
Profit before taxation from continuing operations 7,763
Tax expense (5,176)
Profit after taxation from continuing operations 2,587
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Statutory profit & loss - from IFRS 4 to IFRS 17

	Restated consolidated statement of comprehensive income	Reported	IFRS 17	IFRS 17	Restated	Reported	IFRS 17	IFRS 17	Discontinued	Restated
	$ thousands	30-Sep-23	Reclass	Adjustments	30-Sep-23	31-Mar-23	Reclass	Adjustments	Operations 1	31-Mar-23
	IFRS 4 underwriting loss	(11,655)	11,655	-	-	(16,796)	15,283	-	1,513	-
	Insurance revenue	-	472,611	-	472,611	-	225,993	-	-	225,993
	Insurance service expense	-	(598,791)	(6,060)	(604,851)	-	(452,017)	(2,491)	8,840	(445,668)
	Net income from reinsurance contracts held	-	117,974	6,386	124,360	-	212,614	2,571	-	215,185
	Insurance service result	(11,655)	3,449	326	(7,880)	(16,796)	1,873	80	10,353	(4,490)
	Net investment income	14,329	-	-	14,329	6,285	-	-	(8)	6,277
	Net insurance finance expense	-	(1,348)	-	(1,348)	-	(663)	-	-	(663)
	Net insurance and investment result	2,674	2,101	326	5,101	(10,511)	1,210	80	10,345	1,124
	Other income	5,727	-	-	5,727	2,725	-	-	(1)	2,724
	Other operating expenses	(44)	(2,101)	-	(2,145)	(49)	(1,210)	-	-	(1,259)
	Finance costs	(920)	-	-	(920)	(465)	-	-	3	(462)
	Profit before taxation from continuing operations	7,437	-	326	7,763	(8,300)	-	80	10,347	2,127
	Tax expense	(5,085)	-	(91)	(5,176)	858	-	(15)	(2,887)	(2,044)
	Profit after taxation from continuing operations	2,352	-	235	2,587	(7,442)	-	65	7,460	83
	Loss after taxation from discontinued operations	(3,580)	-	(29)	(3,609)	2,340	-	(13)	(7,462)	(5,135)
	Loss after taxation for theyear	(1,228)	-	206	(1,022)	(5,102)	-	52	(2)	(5,052)
	Items that may be reclassified to profit or loss
	Currency translation differences	(1,487)	-	(7)	(1,494)	(2,130)	-	-	-	(2,130)
	Reclassification of the foreign currencytranslation reserve	544	-	-	544	544	-	-	-	544
	Other comprehensive loss net of taxation	(943)	-	(7)	(950)	(1,586)	-	-	-	(1,586)
	Total comprehensive loss for theyear	(2,171)	-	199	(1,972)	(6,688)	-	52	(2)	(6,638)

Reconciliation of changes in underlying NPAT Changes in our profit & loss from IFRS 4 to IFRS 17, for FY23 and HY23

$ million	FY23 Reported underlying profit	IFRS 17 reclass IFRS 17 adjustments	FY23 Restated underlying profit	HY23 Reported underlying profit	IFRS 17 reclass IFRS 17 adjustments HY23 Restated underlying profit
Gross written premium Insurance revenue Reinsurance expense	526.8 485.8 (69.5)	1.8	526.8 487.6 (69.5)	245.0 233.0 (32.2)	245.0 0.8 233.8 (32.2)
Net insurance revenue	416.3	1.8	418.1	200.9	0.8 201.7
Net claims expense - BAU Net claims expense - large events Large event reinsurance reinstatement Management and sales expenses Net commission expense	(231.1) (38.2) (17.4) (125.7) (8.3)	0.9 1.8 (1.8)	(230.2) (38.2) (17.4) (123.9) (10.1)	(103.6) (33.9) (3.4) (65.6) (5.0)	0.6 (103.0) (33.9) (3.4) 0.9 (64.7) (0.8) (5.8)
Net insurance service expense	(420.7)	(1.8) 2.7	(419.8)	(211.5)	(0.8) 1.5 (210.8)
Insurance service result Net investment income Net insurance finance expense Other income and expenses	(4.3) 14.3 - 2.3	2.7 (1.3) (2.1)	(1.7) 14.3 (1.3) 0.2	(10.6) 6.3 - 0.3	1.5 (9.1) 6.3 (0.7) (0.7) (1.2) (0.9)
Underlying profit before tax Income tax expense	12.3 (4.6)	(0.7) 0.2	11.5 (4.4)	(4.0) 0.7	(0.4) (4.4) 0.1 0.8
Underlying net profit/(loss) after tax (NPAT) Canterbury impact (net of tax) All other non-underlyingcosts (net of tax)	7.6 (1.2) (7.6)	(0.5) 0.7	7.1 (0.5) (7.6)	(3.3) (1.0) (0.8)	(0.4) (3.7) 0.4 (0.6) (0.8)
Reported loss after tax	(1.2)	0.2	(1.0)	(5.1)	- (5.1)
BAU claims ratio Large events claim ratio Expense ratio Combined Operating Ratio	55.5% 13.4% 32.2% 101.1%		55.1% 13.3% 32.0% 100.4%	51.6% 18.6% 35.1% 105.3%	51.1% 18.5% 35.0% 104.5%

FY23 reconciliation between underlying profit after tax and reported loss after tax

$ million FY23 restated underlying profit	Non-underlying items (1) Management expense reclasses (2) Discontinued operations (3) Reclass of reinsurance expenses (4) Reclass of reinsurance & other recovery revenues (5) FY23 reported loss
Gross written premium 526.8 Insurance revenue 487.6 Reinsurance expense (69.5)	(5.0) (10.0) 472.6 69.5
Net insurance revenue 418.1	(5.0) (10.0) 69.5
Net claims expense - BAU (230.2) Net claims expense - large events (38.2) Large event reinsurance reinstatement (17.4) Management and sales expenses (123.9) Net commission expense (10.1)	(0.7) (25.5) (12.7) (204.0) 17.4 (6.5) 24.3 (12.9) 10.1
Net insurance service expense (419.8) Net income from reinsurance contracts held -	(7.2) (1.2) 25.4 17.4 (219.5) (604.9) (8.2) (86.9) 219.5 124.4
Insurance service result (1.7) Net investment income 14.3 Net insurance finance expense (1.3) Other income and expenses 0.2	(12.2) (1.2) 7.1 (7.9) 14.3 (1.3) 1.3 1.2 2.7
Underlying profit before tax 11.5 Income tax expense (4.4) Profit after tax from discontinued operations -	(10.9) 7.1 1.2 (1.9) (5.2) 1.6 (5.2) (3.6)
Underlying net profit after tax (NPAT) 7.1 Canterbury impact (net of tax) (0.5) All other non-underlyingcosts (net of tax) (7.6)	(8.1) 0.5 7.6
Reported loss after tax (1.0)	(1.0)

• (1) Non-underlying items include the net impact of Canterbury earthquake valuation changes, customer remediation provisions, regulatory and compliance projects (such as the adoption of IFRS 17), gain on sale of operations and building, and a prior period tax adjustment

• (2) Reclassification of claims handling expenses from management expenses to claims expense; and FX gains/losses from other income to management expenses

• (3) Operations sold during FY23 and held for sale at 30 September 2023 are treated as discontinued operations for statutory purposes

Underlying and reported (loss)/profit:

• “Net insurance revenue”, net insurance service expense” and “underlying profit” do not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently, they may not be comparable to similar measures presented by other reporting entities and are not subject to audit or independent review

Tower uses underlying profit as an internal reporting measure as management believes it provides a better measure of Tower’s underlying performance than reported (loss)/profit, as it excludes large or non-recurring items that may obscure trends in Tower’s underlying performance, and is useful to investors as it makes it easier to compare Tower’s financial performance between periods

• Tower has applied a consistent approach to measuring which items are excluded from underlying profit in the current and comparative periods

• “Reported (loss)/profit after tax” is calculated and presented in accordance with GAAP

• (4) Reclassification of reinsurance expenses to present as net income from reinsurance contracts held for statutory purposes

• (5) Reclassification of reinsurance and other recoveries to present as net income from reinsurance contracts held for statutory purposes

HY23 reconciliation between underl in loss after tax and re orted loss after tax y g p

$ million HY23 restated underlying profit	Underlying and reported (loss)/profit: • “Net insurance revenue”, net insurance service expense” and “underlying profit” do not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently, they may not be comparable to similar measures presented by other reporting entities and are not subject to audit or independent review • Tower uses underlying profit as an internal reporting measure as management believes it provides a better measure of Tower’s underlying performance than reported (loss)/profit, as it excludes large or non-recurring items that may obscure trends in Tower’s underlying performance, and is useful to investors as it makes it easier to compare Tower’s financial performance between periods • Tower has applied a consistent approach to measuring which items ldd f dli fit Non-underlying items (1) Management expense reclasses (2) Discontinued operations (3) Reclass of reinsurance expenses (4) Reclass of reinsurance & other recovery revenues (5) HY23 reported loss (2.5) (5.4) 226.0 32.2 (2.5) (5.3) 32.2 (0.9) (13.4) (43.9) (231.0) 3.4 (1.2) 12.5 (6.5) 5.0 (2.1) (0.9) 41.1 3.4 (276.4) (445.7) (25.6) (35.6) 276.4 215.2 (4.6) (0.9) 10.2 (4.5) 6.3 (0.7) 1.0 0.9 1.0 (3.6) 10.2 (0.1) (2.8) (2.0) 2.2 (7.4) (5.1) (1.4) 0.6 0.8 (5.1)
Gross written premium 245.0 Insurance revenue 233.8 Reinsurance expense (32.2)
Net insurance revenue 201.7
Net claims expense - BAU (103.0) Net claims expense - large events (33.9) Large event reinsurance reinstatement (3.4) Management and sales expenses (64.7) Net commission expense (5.8)
Net insurance service expense (210.8) Net income from reinsurance contracts held -
Insurance service result (9.1) Net investment income 6.3 Net insurance finance expense (0.7) Other income and expenses (0.9)
Underlying loss before tax (4.4) Income tax expense 0.8 Profit after tax from discontinued operations -
Underlying net loss after tax (NPAT) (3.7) Canterbury impact (net of tax) (0.6) All other non-underlyingcosts (net of tax) (0.8)
Reported loss after tax (5.1)

• “Net insurance revenue”, net insurance service expense” and “underlying profit” do not have a standardised meaning under Generally Accepted Accounting Practice (GAAP). Consequently, they may not be comparable to similar measures presented by other reporting entities and are not subject to audit or independent review

• Tower has applied a consistent approach to measuring which items are excluded from underlying profit in the current and comparative periods

• (1) Non-underlying items include the net impact of Canterbury earthquake valuation changes, customer remediation provisions, regulatory and compliance projects (such as the adoption of IFRS 17), gain on sale of operations and building, and a prior period tax adjustment

• (2) Reclassification of claims handling expenses from management expenses to claims expense; and FX gains/losses from other income to management expenses

• “Reported (loss)/profit after tax” is calculated and presented in accordance with GAAP

• (3) Operations sold during FY23 and held for sale at 31 March 2023 are treated as discontinued operations for statutory purposes

• (4) Reclassification of reinsurance expenses to present as net income from reinsurance contracts held for statutory purposes

• (5) Reclassification of reinsurance and other recoveries to present as net income from reinsurance contracts held for statutory purposes

Disclaimer

This presentation has been prepared by Tower Limited to provide shareholders with information on Tower’s business. It contains summary information about Tower as at 30 September 2023 and 31 December 2023, and earlier periods, 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. The information in this presentation does not constitute financial advice.

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 re-negotiation 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.

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.