Tower Limited (TWR) Earnings Call Transcript

[Foreign Language] and good morning, everyone. Nice to see a few old faces that we've seen before. So for those of you who aren't in the room, there are very few people here. So it's a very different feel for us. Anyway, thank you for making the time to join us this morning. My name is Michael Stiassny. I'm Chairman of Tower. And as it's past 10:00 a.m., I'm pleased to open our Annual Meeting for Tower shareholders. On behalf of my fellow directors, welcome to our shareholders and guests here at the LSC Event Center as well as those who have joined us online via the Lumi platform. This is your meeting, and we appreciate you making the effort to be here. With me today on stage are my fellow directors, Steve Smith and Graham Stuart and Blair Turnbull; and Jeff Wright; Blair, our CEO; and Jeff, our CFO. And joining us by Video Link due to COVID-19, travel restrictions, are your directors, Warren Lee, Wendy Thorpe and Marcus Nagel. Marcus is the one with the different background. The other 2 are Australians, and they're still feeling a bit sore after the cricket last night. Also joining us in person today, as I've said, are Blair & Jeff, and seated in the front row, are our executive leadership team and our auditors, PricewaterhouseCoopers. As today's meeting is also being held online via Lumi, we have shareholders, proxies and guests attending the meeting virtually. And in addition, shareholders and proxies can ask questions and submit votes. It's a first for Tower and a first for many companies around the world, and we are delighted to have made this meeting accessible to as many shareholders as possible without the need for travel. For those here in the room, I appreciate your patience as I run through the question and voting protocols for our online participants. Questions can be submitted by Lumi at any time. [Operator Instructions] Please note that while you can submit questions from now on, we will not address these until the allocated question time at the end of the meeting. In addition, your questions may be moderated or if we receive multiple questions on a topic, they may be amalgamated. However, I would like to note the questions will not be censored unless they are unseemly or rude. If we run out of time to answer all online questions in the course of this meeting, we will answer them directly via e-mail and post these responses on our website. For those of you voting today will be conducted by way of a poll on all items of business. To provide online participants with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. If you make a mistake or wish to change your vote after listening to me or anyone else speak, you can do so by repeating this process until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time, and I will give you a warning before I move to close the voting. For everyone, today's meeting agenda is on the screen. We will provide you with an update on last year's performance, our strategy and the transformation work underway, as well as the progress we've made at Tower in recent months. Following Blair's presentation, we will move to the formal resolution set out in the notice of meeting. All shareholders are welcome to ask general questions at the end of the meeting, and to ask specific questions on the resolutions to be considered as each is put forward. For those asking questions in person here today, please raise your hand and wait for the microphone to be handed to you before asking your question. This will enable all those both in the meeting and online to hear the question being asked and subsequent answer. I remind any media present that while you're welcome, this is a meeting for shareholders, and Blair and I will be happy to talk to you after the meeting. Before we start the presentation, some housekeeping matters. Please ensure you have signed into the venue using your COVID-tracer app or completing the sign-in form. If you haven't, please do so once the meeting comes to an end. If you have a cell phone, please switch it off. If you need to evacuate this room for any reason, there are exits through the doors to my right and the entrance you came through. In the event of an emergency, please listen to the instructions from the Ellerslie Racecourse staff. Bathroom facilities are located along the corridor towards the lifts. And if you are feeling unwell, please advise one of our Tower team who will assist you. Finally, please join us for refreshments at the conclusion of the meeting. So let's now move on to the formal part of the meeting. Firstly, apologies. Are there any apologies? Thank you. Our constitution specifies a quorum of 25 shareholders. I'm sure you can see, but I can confirm by Computershare that this requirement has been met. In addition to those attending in person today, 531 shareholders holding a total of 224,355,523 shares have appointed, including -- appointed proxies, including proxies instructed to abstain. The appointed proxies represent 53% of proxy holders. In my capacity as Chairman of the meeting and in my own name, I hold proxies for 423 shareholders, representing 222,036,307 shares. I intend to vote all undirected proxies I have received in favor of resolutions 1, 2A and 2B. In other words, all resolutions. The annual report was made available on our website on 21 December 2020. Hard copies of the annual report are available in the registration area. And I propose that we take the annual report and notice of meeting as read. Last year, I spoke about nearing the end of the transformation that we have been undertaking to build a modern Tower with a clear vision and strategy for a strong and sustainable future. The work hasn't been without its challenges, and I would like to acknowledge the confidence you, as shareholders, have shown in Tower. It has not been in vain. The business is on an increasingly strong footing and performing well. Therefore, I'm pleased to announce, on behalf of the Tower Board, our intention to confirm payment of an interim dividend with our half year results in May 2021. I'm sure this news will be well received by you all, and I will provide further details shortly. Over the past year, we've made significant progress in creating the Tower of the future and solidifying the foundations of our business. I'd like to welcome our new CEO, Blair Turnbull, who joined us in August last year and is driving the company's digital and data strategy forward at pace. The business continues to achieve solid growth and more customers choosing Tower and using our online offering. Our underlying profit for the 2020 full year was good and at the top end of our guidance. At that time, we noted that we would be accelerating our push into digital and data. Today, you will see and hear evidence of this acceleration from Blair. But perhaps the most symbolic, especially in light of yesterday and significant of our recent achievements, is the settlement of our receivable with the EQC. Tower received $42.1 million after disbursement to reinsurer and costs. While it did impact our full year profit last year, it was an important milestone to have passed. We've been progressively removing legacy risks from the business, and this one was significant. The management team now has clear area to move the business forward. Having received the funds from EQC, our capital position has been further strengthened and provides us with a solid foundation to keep driving growth and innovation and disrupting the insurance industry. In short, the business is performing well. And after the -- and the Tower Board firmly believe that you, our shareholders should share in our success. And what has been a challenging year for many people and businesses, our digital-first strategy has positioned Tower well. Tower has emerged from the initial response to the COVID pandemic strong and resilient. Ensuring we put people first, the Tower team remains safe whilst continuing to meet the needs of all our customers. And in the recent Auckland lockdown, the business was able to remain fully operational, whilst also compliant with government guidance. The team is to be congratulated for leading the business so well. However, we do not underestimate the continuing impact of the pandemic on both their physical and mental well-being, and remain vigilant to meeting their needs, along with those of our customers. We were very pleased to be the first general insurer to refund customers to the tune of $7.2 million for the lower car claims due to the COVID-19 lockdown. We strongly believed this was the right thing to do. Our recent settlement with the EQC has further strengthened our capital base, providing us with a very strong position from which to continue to grow the business. The Board and management are determined to create value for you, our short shareholders and have ranked our capital priorities accordingly. Our first priority will always be to ensure we maintain a strong solvency position and ensure Tower is well placed and sustainable for the future. Our second priority is to take a consistent and stable approach to ordinary dividends. In this regard, we have updated our dividend policy, which I'll speak to shortly. We are firmly committed to growing our business for the benefit of all. Therefore, our third priority is to actively pursue opportunities that deliver growth at scale using our digital and data platform. Blair will talk about the activity we currently have underway in this regard. We're constantly reviewing the capital position against these priorities, and it is our imperative that we will always seek to optimize capital. We are also clear that we will not hold capital unnecessarily. And in such situations, will consider a return of capital as appropriate. As I noted earlier, we intend to reestablish dividend payments this financial year, an indicative interim dividend of $0.025, in other words, $0.025 per share is expected to be confirmed with our 2021 half year results. This figure is based on Tower's updated dividend policy which allows for dividends to be paid on the basis of between 60% and 80% of cash earnings, we're prudent to do so. Cash earnings is defined as reported full year net profit after-tax, adjusted for acquisition, amortization and unusual items. Pending the achievement of our 2021 guidance and the continuation of the positive trends that are being seen in the business, an indicative combined full and half year dividend would be $0.06 per share, which will be confirmed with our full results in November 2021. Directors' fees at Tower have not increased for a decade. The Tower Board recently engaged Ernst & Young to conduct a review of current nonexecutive directors fees practices based on a range of appropriate comparator groups. The report indicates that Tower is well behind comparator and market rates. Over time, this disparity can have an adverse effect on being able to attract and retain high-caliber directors and support best governance practice. Given the business performance has stabilized, the Board believes it is timely and prudent to begin addressing the scale. The Board has therefore agreed to raise directors' fees to $100,000 for non-executive directors, including committee fees, $110,000 for committee chairs and $180,000 for the chair. The directors fee pool stands at $900,000 and only $607,850 was drawn down in the FY 2020 year. So while the fee increase does not require a shareholder vote, disclosure at this time ensures we are transparent with our shareholders, and that, in our view, is important. In the same vein, and in accordance with best practice, being upfront about the remuneration and incentives we have agreed with Blair is equally important. The Tower Board supports transparency of CEO remuneration, and this is disclosed comprehensively each year in our annual report. The Board's approach to remuneration is to provide market-based remuneration packages, comprising a blend of fixed and variable remuneration, with clear links between individual and company performance and reward. The Board is comfortable that Blair is appropriately incentivized with the mix of secure and at-risk components in its current package. It comprises a fixed annual base pay of $650,000 and a maximum short-term incentive of $325,000 and a maximum long-term incentive, $975,000. There is a clear linkage to long-term sustainability and total shareholder return performance relative to the performance of companies within the NZX 50 Index. In closing, I'd like to reiterate the significance of being in the position today to restore dividend payments in a prudent and appropriately cautious manner. It's been a hard road for Tower, and you as our shareholders, to get to this point, and we acknowledge and welcome your continued support. On behalf of the Board, I'd like to thank Blair as well as our previous CEO, Richard Harding, our management team and everyone else in our organization for their resilience and sustained focus on delivering good outcomes for customers and improving profitability, which is a benefit to all of us as shareholders. I'll now hand over to Blair, who will take you through the results and our plans for the business before we take questions.

[Foreign Language] and thank you, Michael. A warm welcome to everybody joining us today. I'm delighted to be here in sharing with you a very good set of full year 2020 results, as well as some of our more recent successes delivered in the first 4 months of the new 2021 financial year. As well as updating you on our performance, I would also like to take this opportunity to give you an overview of Tower's plans to continue growing and innovating in the future. But first, I would like to show you a short video which highlights some of the work we have undertaken and the impact we're having on our customers' lives. [Presentation]

As you can see, we're taking some big steps forward in creating the Tower of the future. We achieved good results in 2020. They were at the top end of expectations despite some headwinds and challenges. As we move into a new era of Tower, the business will look and behave very differently. And to be clear, we don't just want to be a smaller version of a big global insurer. It's not the path we choose. At Tower, we're choosing a direction that leads to higher growth through a relentless focus on our customers. We're more determined than ever. We're energized than ever. And over the coming months, we'll be demonstrating we're far more dynamic than ever before. The recent outcomes we've achieved and everything we do moving forward is guided by a Southern Star, or a common purpose. It's our purpose to deliver beautifully simple and rewarding experiences that our customers rave about every time. We have a clear and focused set of strategic priorities that enable us to deliver against this Southern Star. We will relentlessly focus on our customers, deepening our relationships through rewards, new products, and other offerings that make sense and drive value. You will have already seen evidence of this with our partnership with Club Marine, a new driving app GoCarma, which rewards and encourages safe drivers and their bundle builder, which offers discounts for holding multiple policies with us. We will take our new cloud-based platform and leverage its full capability, using data and digital to attract more customers and partners to Tower, by creating personalized and tailoring offerings that are unique in the market. And importantly, we will find the best people and companies to partner with and to get their help to keep innovating and delivering. These 3 pillars will contribute significantly to our higher growth and innovation ambitions. Agile. Agile means to test and learn, to work in short, sharp sprints, so that we are constantly delivering value for the business, not waiting until the end of a large traditional type project. Our shift to working in this agile way is well underway and this regular cadence of delivery has seen us move forward in leaps and bounds. And importantly, we are committed to maintaining a strong capital and solvency structure, demonstrating we're a stable business that delivers value for our shareholders. The next step in our journey is a logical one, it's the same path we've been on, but faster, more focused, more energetic and more creative. Turning to our FY '20 results. When you exclude the impact of large events, you can see that our underlying business performed strongly, up 23% on the prior year to $34.7 million. We grew the business while closely managing claims, underwriting and operating expenses. Importantly, underlying net profit after tax or NPAT surpassed the top end of our guidance at $28.4 million, and our combined operating ratio was steady at 88.5%, demonstrating the strength of our core insurance fundamentals. The EQC settlement was an important step forward for us. It allows us to focus fully on driving growth and value. Reported profit was $12.3 million, including the $9.5 million impact from the EQC settlement of $42.1 million. This was a good set of 2020 results for Tower, and demonstrates our ability to deliver consistent growth and profitability. Our continued focus on customers and building a compelling digital offering saw our customer numbers increase to 300,000, up 11% on the prior year. The growth in customer numbers drove a strong gross written premium, GWP, result of $385 million, up 8% on the prior year, and this helped to increase our market share in New Zealand personal lines grow to 9.1%, up from 8.3% in the prior year. As of today, migration of our Tower Direct and Youi New Zealand customers to our new cloud platform is almost complete. And thanks to positive retention, Youi New Zealand contributed around $12.6 million in GWP to our overall total of $385 million in FY '20. As a result of more effective and efficient marketing, we saw steady increases in the number of people using us online. And this combined with competitive pricing, plain language products and MyTower self-servicing offering, helped us to continue driving customer growth. Our task is to further engage with our customers, to build deeper relationships by leveraging data and providing more personalized offers. Claims. Claims sits at the very heart of everything we do, and it's a core insurance fundamental alongside underwriting, product and pricing. In 2020, we took significant steps forward in improving the way we underwrite business, which delivered improved results. Key actions include a continued focus on claims leakage and recoveries, refinement of our plain language products that provide clarity to customers at times of claim, implementation of new data practice to support risk selection and to enable us to monitor our portfolio more accurately, refinement of our online claims capability that saw 45% of our claims lodged online in September up from 27% at the same time last year. And the launch of straight-through claims processes that enable low-value, low-risk claims straight through to our suppliers, enabling us to reduce cost and customer wait times. And the result of all of this work was an improvement in our claims ratio, excluding large events to 46%, 2% lesser than prior year. This was a favorable sign that Tower is on a path to sustainable profitability. Our recently formed Tower Direct business is our best example of what we can be -- or what can be achieved through our new generation insurance business. In Tower Direct, nearly all of the work is completed on the cloud platform, which delivers significant efficiencies and sees us operating at a management expense ratio of 34% versus our overall Tower expense ratio of 39%. And this continued digital and data push has seen us increase the effectiveness of our marketing, where we have reduced a cost to acquire a customer to 13% of net earned premium, 2% lower than the prior year. Our digital platform is transforming and enabling agility in the way we do business and engage with our customers and course of this capability is our agile cadence. Our ability to make improvements and put these live quickly, we more than doubled the number of digital releases in 2020 to 117. And in 2020, over 90% of all of our Tower Direct customers were on our EIS cloud-based platform. And as of today, that figure is almost 100%. Over 70% of our workloads are now cloud-based, which means less ongoing management effort and expenses required to maintain and upgrade our technology systems. In 2020, 4 legacy systems were decommissioned with another 4 to be decommissioned this year, leaving us with only 2 to complete beyond that. And this consistency of systems in the use to the cloud means that all our team members are now on the same operating system, enabling sharing of work across locations to drive efficiency. We're now leveraging our Pacific hub in Fiji to support claims and service operations for New Zealand direct and partnerships, which supports workload flexibility, demand spikes and a lower cost to serve. Turning now to our trading results for the first 4 months of our 2021 financial year. Our ongoing focus to create a more agile and digital business model has helped us weather several large events in the first 4 months to the financial year, while still maintaining a focus on growth and innovation. In the 4 months to 31 January 2021, we achieved $129 million gross written premium, which represented growth of 6% on the same period last year, thanks to our ongoing focus on delivering for customers. This growth, including the addition of the Youi New Zealand portfolio, has seen our market share increase to 9.2% in December 2020, up from 8.4% at the same time last year. As well as growing our business, more and more customers are signing up to use our online self-service portal MyTower. And since launching just over a year ago, over 65,000 customers have registered. MyTower customers are able to make payments, excess rewards, add new policies or modify existing ones, all through a few clicks of a button. Migration of all Tower Direct customers to our new digital and data platform is almost complete with over 270,000 Tower customer policies now on our leading cloud-based digital and data platform. The ability for customers to self-service and the ongoing removal of legacy technology from our business has supported a further improvement in our management expense ratio, reducing to 37% for the 4 months to 31 January 2021, a 2% improvement on the same period last year, and this is moving closer to our flagship digital-first Tower Direct model where MER is around 34%. The growth of our flagship Tower Direct business in New Zealand has been supported by the efforts of our partnership and Pacific business teams. Tower's partnership business has been actively engaging with new partners, and we continue to expand our distribution model with recent referral partnership agreements signed with AIA, the Auckland Council and New Zealand Defence. As the Pacific business is performing well, considering product rationalization and portfolio derisking, we recently launched MyTower quote to buy in Fiji and early take-up has been very positive. Fiji will now act as a blueprint as we expand our digital and data platform across all of our Pacific countries, creating consistency and long-term sustainability of our business. Our role as an insurer is to be there to help people when they need us most. And as you saw earlier, we have experienced several large events, and their team have been on hand to help. The large events expense for Lake Ohau fire and [indiscernible] floods have resulted in a $10 million large events expense year-to-date, which will impact Tower's FY '21 underlying impact. Tower's aggregate reinsurance cover is triggered at $14 million. There is no change to Tower's FY '21 underlying impact guidance of at least a 5% improvement on FY '20 underlying NPAT, which was $28.4 million. Although falling investment returns and large events have placed some pressure on FY '21. This is based on the current level of actual large events. As a born and bred Kiwi insurer, with teams across 8 Pacific Island countries, we have a unique role to play in the community when it comes to sustainability and climate change. Whilst we have always considered climate risk in our strategy and our products, we know we need to do more, and lead the way to a more sustainable future. There is no denying that the climate is changing, and we see the effects of this daily in the claims we pay and the data we have. At Tower, we firmly believe that it is our role to use what we have to help mitigate and prepare for things like rising temperatures, changing sea levels, increased chances of flooding and more volatile weather patterns. We are a strong supporter of mandatory reporting requirements, which will help increase transparency around what actions are being been taken by businesses to prepare for these risks and increase the resilience of our communities and the economy. This year, we will be developing our climate action plan that includes clear, measurable outcomes that will be reported on annually. Our current area of focus and recent activity includes: Committing to reducing our carbon footprint. We're currently conducting a carbon audit so that we have a baseline measure to report against annually. And this will be published along with an annual reduction target in 2021. We joined the Sustainable Business Council to share our progress and learn from others who are achieving good results in this area. And we are moving our Auckland office to a new 6 Green Star-rated building at 136 Fanshawe Street. This is a world-leading building that will enable us to significantly increase our digital and data capability while reducing our carbon footprint. Increasing the transparency of our data, we will be sharing information with customers, communities, counsels and stakeholders, so that they can understand the impacts of climate change on insurance in more detail. And as I mentioned earlier, we will be developing a climate action plan that outlines clear deliverables and actions, and this will include compliance with task force for climate-related financial disclosure requirements and engaging a whole value chain to support the move to a reduced carbon future. Transforming our business into a leading digital and data player is not just about the technology. We put in place, but having a diverse team of people who are relentlessly focused on customers can find creative ways to do things and are energized to take on the big challenges. And it's pleasing to see that gender diversity across our business is strong, especially in our senior leadership positions and that our people recognize our efforts to encourage and celebrate diversity. This is evident by our reaccreditation of the Rainbow Tick, recognizing that people are valued and supported no matter who they love or how they identify. And our partnership with Shine to help educate and support our team members who may be impacted by domestic violence. Our ongoing digitization has enabled us to increase the flexibility and agility of our workforce, and all our team members were able to continue working throughout the recent lockdown in Auckland. Our 3 core support locations of Auckland, Rotorua and Suva provide significant continuity benefit for us. We also continue to explore ways to increase work sharing across locations to manage workloads and improve our customer experience. Tower is in a good position, where we have strong capital and solvency, no debt, a growing and innovative business and consistent profitability. We have the opportunity to accelerate our progress through a number of sensible investments. You've seen evidence of these bolt-on investments already with our acquisition of the Youi New Zealand portfolio, an agreement with Club Marine. Our customer migration blueprint means we can transfer these customers onto our existing systems in a way that is customer-focused and wherever possible, automated. It is about making it seamless for the customer and enhancing our retention rates. Yesterday, we announced a new agreement with ANZ New Zealand to end our existing arrangements and to bring this portfolio into the Tower Direct business. Historically, we provided insurance for ANZ and National Bank customers, between 1990 and 2005, and we continue to cover over 23,000 people under the existing legacy agreement. This agreement delivers positive value for Tower and its shareholders by ending all future ANZ commission payments on the portfolio, which contributed $40 million to Tower GWP in FY '20. This deal also enables the migration of these customers to Tower's leading cloud-based digital platform, which delivers operational efficiencies for the company and offers customers a more expensive and modern product range. We will continue to seek bolt-on investments, which are aligned to our personal and small to medium-sized commercial lines of business and which offer attractive returns. This year, we are also taking our cloud-based digital and data platform that has been so successful in New Zealand to our Pacific business, and this will help achieve total consistency across our entire group. Driving scale benefits as well as increasing access to insurance across the Pacific and supporting our ambition to achieve growth in our domestic portfolios. New products are under development that support our growth and innovation, and these include electric vehicles and scooters, pit and travel insurance offerings. And these new products help us to build deeper and stronger connections with our customers. As well as new products and deepening our relationships with customers, we want to increase our engagement with them also. So insurance isn't just seen as a once a year activity. Recent innovations like GoCarma app allow our customers and, in fact, all Kiwis, to understand their driving behavior and be rewarded for driving safely. We have had over 65,000 GoCarma trips recorded so far. We're also looking to help our customers better understand risks, such as earthquakes, flooding and cyclones, so that our customers can be better prepared for large-scale natural events. In closing, I'd like to reiterate what I said earlier. I'm thrilled to be here in front of you, leading Tower into this next phase of its journey. I'd like to thank our Board for their support, the entire Tower team for the focus, energy and creativity they bring to work every single day, as well as all of you, our shareholders, for your continued interest and support and what is truly an iconic Kiwi and Pacific Company. We are creating a new exciting Tower, and I look forward to continuing to share a success story with you.

Thanks, Blair. I now propose to move to the next item of business, which is the first resolution before the meeting. As noted earlier, voting has always -- or has already opened online and will close shortly after discussions on the resolutions are completed, so that everyone, either in person or online has the opportunity to cast their votes. For those here at Ellerslie, we will now undertake a formal vote on the resolutions. If you wish to vote, you will either have the voting proxy form sent to you with the notice of meeting or a voting form given to you by Computershare when you entered the meeting. When you cast your vote, please tick one box, either for, against or to abstain alongside each resolution. Please ensure that you sign the form once your vote has been cast. If you are here as a proxy on behalf of the shareholder, you will need to cast that shareholder's vote in order for them to be counted. If you do not have a voting form, please raise your hand and a representative from Computershare will assist. So Resolution 1, auditor remuneration. Companies Act provides that a company's auditor is automatically reappointed unless there is a resolution or other reason for the auditor not to be reappointed. The company wishes PricewaterhouseCoopers to continue as the company's auditor and PricewaterhouseCoopers has indicated its willingness to do so. The company's Act provides that the fees and expenses of the auditor are to be fixed by the company or in the manner that the company determines at the annual meeting. The Board proposes that consistent with past practice, the auditor's fees will be fixed by the Board. I therefore record that the auditors, PricewaterhouseCoopers, are automatically reappointed as auditors of the company. And move that the Board be authorized to determine the auditors' fees and expenses for the 2021 financial year. At this point, however, I would also like to note that the New Zealand Shareholders' Association policy and international best practice is that the audit firm should not serve more than 10 years and that the lead audit partner should be rotated at 5 years to ensure the appropriate degree of independence is maintained. We agree with this view and will note audit firm tenure and lead audit partner rotation information in our next annual report. Is there any discussion or questions from the room? Any questions online?

There are no questions online relating to resolution 1.

Thank you. So I now move to the reelection of directors. Wendy Thorpe retires by rotation and being eligible, offers herself for reelection. I now invite Wendy to address this meeting on her proposed reelection.

Thank you, Michael, and good morning, ladies and gentlemen. My name is Wendy Thorpe, and I am very disappointed not to be able to be with you today due to the COVID travel restrictions in place. I joined the Tower Board 3 years ago after an executive career in financial services, focused on insurance, banking and wealth management. My particular areas of expertise are in technology, operations and change leadership. And that has been a helpful background as Tower has progressed its digital ambitions. In addition to my role at Tower, I am also Chair of Online Education Services and a Director of Ausgrid, Epworth HealthCare, People's Choice Credit Union and Very Special Kids in Australia. It's been very pleasing to see the strong progress made at Tower, through addressing long-running issues, and through a transformation to position ourselves well to take advantage of our digital assets while focusing very much on our customers. I'm very excited and positive about Tower's future. And look forward to working with my Board colleagues to support the management team to deliver on our strategy. I would welcome and very much appreciate your support today. Thank you.

I will now move that Wendy Thorpe, who retires on rotation in accordance with NZX Listing Rule 2.71, be reelected as a Director of Tower Limited. Is there any questions or discussions from the room? Are there any questions online?

No questions online.

Thank you. So I now move to the next resolution, Steve Smith retiring by rotation and being eligible, offers himself for reelection. I do note here that if reelected, Steve will have served 12 years at the end of this term. Because it is internationally recognized that the director ceases to be independent after they have served 12 years, Steve and the Board will likely agree his retirement and introduce a new director during this term. I now invite Steve to address the meeting on his proposed reelection.

Thank you, Michael, and thank you for letting me know that. Just kidding. [Foreign Language] Greetings to you all. Thanks for the opportunity to present myself for reelection for the Tower -- to the Tower Board. I will start by summarizing my background for those of you that don't know me. I've been a professional director for the last 17 years, prior to which I was at PWC for 14 years, where I was a partner in the corporate finance area. I have a Commerce degree, and I am a fellow of the New Zealand Institute of Directors. I have reduced my number of boards over the last 3 to 4 years to 3 commercial boards plus the National Foundation for the Deaf and Hard of Hearing. My other 2 boards involve -- my current boards involve large-scale dairy farming businesses. Some of my other boards over the last 10 years have included Hellaby Holdings Limited, Hulton Hogan Limited and privately owned Spanbild Holdings Limited, which is on -- which owns the versatile and total spend, building businesses. And my family is an investor in Tower, holding 110,000 shares. I joined the Board -- the Tower Board in May 2012, almost 9 years ago, that seems like an eternity, sometimes. And this will be the last time I seek reelection to the Tower Board. How I see Tower? Our experience with Tower over the last 9 years has been challenging, to say the least. For the Board, for shareholders and for all of our people. In 2012, the true impact of the earthquakes was not as apparent as it is with the benefit of hindsight today. This is true for all of the New Zealand general insurers and certainly for the EQC as well. Since then, the Board has simplified the business, selling several business units to focus on being the best general insurer in New Zealand and the Pacific. We have invested a lot in this, including in technology and IT systems. And there is still some distance to travel to fully achieve our ambition. We also now have a significantly higher level of regulatory oversight to work with than existed 9 years ago, but we have pivoted our approach and managed this as well. It is very pleasing to be wrapping up the Christchurch earthquakes process. The Board took a moment yesterday to reflect on the tenth anniversary of the largest Christchurch earthquake and the people that were impacted so much. Settling with EQC last November on our additional claims was a very big moment for Tower. So it is the future that we are focused on now. The Board and management share our ambition for Tower. We have made good progress, and there's still a lot to do to achieve the excellent standards that we aspire to, and to meet the full expectations of our customers, our shareholders and our people. So I respectively, -- I respectfully ask you to support my reelection as I feel I still have a part to play in ensuring that Tower delivers on this opportunity and its ambition. [Foreign Language], thank you.

Thank you, Steve. And my apologies, I forgot to say that the Board unanimously supports both the reelection of Wendy and Steve as directors. So I will now move that Steve Smith, who retires on rotation in accordance with NZX Listing Rule 2.7.1, be reelected as a Director of Tower. Is there any discussion or questions from the room? There being none, are there any on the -- online?

No questions online.

Thank you. So that concludes our discussion on the items of business. So if you haven't already done so, could you please cast your votes? [Voting]

I will then ask Computershare to collect the voting papers. Voting online will close in 2 minutes. And the voting will then be counted under the scrutiny of our auditor. So -- thank you. So if we can then move on and the final item on our agenda, I'll leave it here -- is questions and general business. So are there any matters of general business or any questions that anyone would like to raise? We will also answer questions next door over a cup of tea, and there should be plenty of sausage rolls this time.

Graham Wakefield, shareholder. Just a question for you, Chair. Can you comment to the meeting about whether or not there are imputation credits to attach to the dividend? And also whether the Board has given any consideration to a dividend reinvestment program?

I'll let Jeff deal with the imputation credits. We have given consideration to this, and this is -- sorry, to the idea of a reinvestment plan. And it's part of this bundle of opportunities with capital that we keep looking at. But as we have said in the presentation, our first priority is to use as much capital as we can efficiently to generate wealth for us all. If that is something that is exceedingly difficult to achieve, then I think we will be looking at capital differently, including the reinvestment plan. I think we all know this has been unusual that we are now sitting on an exceptional amount of cash and whilst that seems good from a solvency point of view, it also comes at a cost. And the cost is that, one, it is -- we have very low investment rates. So the cost is that management are now under the pump, so to speak, to produce opportunities that are worthwhile. And the Board's job and management job is to ensure that we are only looking at positive opportunities, because I think we all know that in the past, some people have run off and done things that aren't that useful, but we have cash. So whilst it's almost a godsend to have the cash, but it also comes with certain responsibilities, and we will take that very seriously. But, do you want to deal with the imputation?

Yes, the imputation credits at the moment is essentially nil, and that comes into play in our thinking in regards to the surplus capital and how we can most effectively, if the time were to come, ensure that the interest of shareholders are most protected there. So it will have an impact in that regard, if there were any returns. We do have from the -- as you'll see from the annual report, a fair balance of deferred tax assets still, that we would expect the moment to be running for the next 1 to 2 years, before you would start to get into a position of imputation credits.

That's a much better answer than I would have given.

Thanks, Mr. Chairman, Allen Best. I've got the honor of casting votes for about 1,000 shareholders this time. But most of them pretty small and as I am. We -- I was interested to see that the solvency margin is $98 million and it's about $48 million above what the reserve bank guideline would be. And I was wondering how that's calculated, because of course, it weighs on the return on funds, and the cash, which you've already mentioned. So could you give us an idea of just how that is worked out, please?

I'll leave Blair...

Okay. Look, without going into the RBNZ solvency standards. Essentially, there is a minimum amount of capital, which we refer to as the MSC, the minimum solvency capital, which you'll see from the report at September 30 was $52 million for the New Zealand business. What we then do is determine our actual solvency capital, which is essentially our net assets, once we have stripped out several items. The items we strip out include intangible assets, the deferred tax asset. So we're only talking about tangible assets in that calculation. You'll also note in the presentation, the $98 million surplus as at the 30th of September has now been increased by the $42 million from the EQC, which has now been received as cash. So in fact, in total, we're up to $140 million above the minimum solvency requirement.

My question, perhaps to Blair, is -- does the company have any exposure under its business interruption policies to the statutory lockdowns that have occurred as a result of COVID? And my question, perhaps to the Chair is, can you comment briefly updating the situation with outstanding earthquake claims?