Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2019 Earnings Presentation
28 slides from Insurance Australia's earnings presentation, Aug 8, 2019
Slide 1: Financial results Full year ended 30 June 2019
For personal use only Financial results Full year ended 30 June 2019 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 8 August 2019
Slide 2: Overview
For personal use only Overview FY19 financial results 8 August 2019 2
Slide 3: FY19 highlights
FY19 highlights GWP growth Further underlying improvement, in line with guidance For personal use only Underlying improvement in line with Asian divestments progressed expectations • Sale of Thailand completed • GWP growth over 3% • Indonesia / Vietnam completion 3.1% • Higher underlying margin of 1
Slide 4: Simplification well-advanced; FY19 activities and FY20 priorities
Simplification FY19 activities FY20 priorities well-advanced Customer • Enhanced customer digital experiences, via • Meet changing customer needs by For personal use only simpler motor and home claim processes accelerating investment in data, artificial intelligence and innovation, to build out new
Slide 5: Financials
For personal use only Financials FY19 financial results 8 August 2019 5
Slide 6: Financial summary
FY18 FY19 Change GWP ($m) 11,647 12,005 3.1% For personal use only Insurance profit ($m) 1,407 1,224 13.0% Underlying insurance margin (%) 14.1 16.6 250bps Financial Reported insurance margin (%) 18.3 16.9 140bps summary Fee based business ($m) (12) (9) nm Shareholders’ funds income ($m) 165 227 37.
Slide 7: GWP growth
GWP growth Mid-point of guidance range For personal use only GWP growth of 3.1% FY20 guidance of ‘low single digit’ GWP growth FY19 GWP growth • Short tail personal line rate increases broadly matching claims inflation • Sound growth expected from short tail • Relatively flat short tail personal lin
Slide 8: Insurance margin
Insurance margin Reported margin in line with guidance, embracing sound underlying improvement For personal use only Higher underlying margin of 16.6% Reported margin of 16.9% Underlying margin movement • Full year increase of ~250bps • At mid-point of 16-18% guidance range +1.25% • ~125bps uplift f
Slide 9: Reserve releases
Reserve releases Trending down For personal use only Lower prior period reserve release contribution Prior period reserve releases (% of NEP) • Outcome broadly in line with FY19 guidance of around 2% of NEP • ~$180m net reduction vs. FY18 • Lower CTP releases 5.6% • Long tail Australia Business rele
Slide 10: Natural perils
Natural perils Use of FY19 stop-loss cover reduces perils overrun to $19m For personal use only Natural perils vs allowance FY19 net perils outcome $19m above FY20 perils allowance of $641m allowance • Gross allowance (100%) increased • Two contrasting halves: ~5.5% to $950m $101m • 1H19 $110m above
Slide 11: Expenses
Expenses Optimisation benefits emerging to plan – partial offset from increased regulatory costs For personal use only Gross operating costs Optimisation program tracking to plan ~$30m • ~$90m reduction in gross operating ~$2,370m ~$50m costs ~$70m ~$90m ~$845m ~$160m • On target to achieve ~$250m c
Slide 12: Australia
Australia Strong Consumer result, encouraging progress in Business Australia - GWP / insurance margin For personal use only $9,331m $9,144m GWP growth of 2.0% Higher underlying margin of Positive FY20 outlook 15.5% 19.6% • Rate increases of 4-5% in • Further improvement in short tail personal lines
Slide 13: New Zealand
New Zealand Strong performance maintained For personal use only NZ$ GWP growth of 5.2% Higher FY19 underlying Sound GWP growth outlook New Zealand - GWP growth / underlying margin • Consumer growth of ~5% margin of 19.5% • GWP growth expected from • Largely rate-driven • ~65bps improvement, ex- both
Slide 14: Margin impact
Margin impact FY19 reported margin 16.9% For personal use only FY20 net underlying improvement • Realisation of ~$160m incremental optimisation benefits • Up to $50m increase in regulatory and compliance costs Up to 180bps FY20 • Earn through of rate increases • Adverse impact of lower interest rate
Slide 15: Capital
Capital Strong CET1 capital position For personal use only FY19 financial results 8 August 2019 15
Slide 16: Dividend
Dividend High end of targeted payout ratio range For personal use only Dividends (cps) Consistent dividend policy applied • 60-80% of cash earnings in any one financial year 77.9% 79.4% • Recent history of paying to top end of range 5.5 Reduced franking capacity • Final dividend franked to 70% • In
Slide 17: Outlook
For personal use only Outlook FY19 financial results 8 August 2019 17
Slide 18: FY20 outlook
FY20 outlook Further improvement in underlying performance expected For personal use only FY20 guidance measures Underlying assumptions GWP growth Low single digit Reported insurance margin 16–18% 1 Net losses from 2 Reserve releases of 3 No material natural perils of $641m, around 1% movement in fo
Slide 19: Our value proposition
Our value proposition For personal use only Delivering strong Investment case Value drivers Shareholder value shareholder returns • Leading player with scale advantage in Australia and Customer Through-the-cycle targets • Cash ROE 1.5x WACC New Zealand (low single digit growth) • High dividend (60-8
Slide 20: Australia / New Zealand brands
For personal use only Australia mia scio SSE cou MT ENN New Zealand omy | NA Lumley
Slide 21: Appendix – Group results
Appendix – Group results For personal use only 1H18 2H18 1H19 2H19 FY18 FY19 GROUP RESULTS A$m A$m A$m A$m A$m A$m Gross written premium 5,649 5,998 5,881 6,124 11,647 12,005 Gross earned premium 5,780 5,742 5,984 5,958 11,522 11,942 Reinsurance expense (1,613) (2,238) (2,373) (2,331) (3,851) (4,704
Slide 22: Appendix – Group ratios and key metrics
Appendix – Group ratios and key metrics For personal use only Insurance Ratios - Continuing Business 1H18 2H18 1H19 2H19 FY18 FY19 Loss ratio 60.1% 60.3% 65.3% 62.3% 60.2% 63.8% Immunised loss ratio 60.9% 60.1% 64.6% 59.5% 60.5% 62.0% Expense ratio 25.0% 23.9% 23.8% 23.7% 24.5% 23.7% Commission rati
Slide 23: Appendix – divisional performance
Appendix – divisional performance For personal use only FY18 FY19 GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Australia 9,144 0.7 19.6 12.9 9,331 2.0 14.9 15.5 Consumer 6,214 1.6 24.0 15.5 6,355 2.3 17
Slide 24: Appendix – Australia
Appendix – Australia GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 9,331 For personal use only 16.2% 9,144 1H18 2H18 1H19 2H19 FY18 FY19 15.5% 14.7% 14.8% AUSTRALIA RESULTS A$m A$m A$m A$m A$m A$m 12.9% Gross written premium 4,453 4,691 4,606 4,725 9,144 9,331 11.4% Gross earned premium 4,612 4,519 4,6
Slide 25: Appendix – Australia Consumer
Appendix – Australia Consumer GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 6,214 6,355 For personal use only 17.5% 17.3% 18.0% 17.5% 1H18 2H18 1H19 2H19 FY18 FY19 15.5% AUSTRALIA CONSUMER RESULTS A$m A$m A$m A$m A$m A$m 13.9% Gross written premium 3,052 3,162 3,143 3,212 6,214 6,355 3,052 3,162 3,143
Slide 26: Appendix – Australia Business
Appendix – Australia Business GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 12.2% 2,930 2,976 For personal use only 11.1% 1H18 2H18 1H19 2H19 FY18 FY19 10.0% 9.3% AUSTRALIA BUSINESS RESULTS A$m A$m A$m A$m A$m A$m Gross written premium 1,401 1,529 1,463 1,513 2,930 2,976 1,401 1,529 1,463 1,513 7.8% 6.
Slide 27: Appendix – New Zealand
Appendix – New Zealand GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 2,486 2,660 For personal use only 1H18 2H18 1H19 2H19 FY18 FY19 20.0% 19.5% NEW ZEALAND RESULTS A$m A$m A$m A$m A$m A$m 18.9% 17.4% 17.8% 17.6% 1,392 Gross written premium 1,190 1,296 1,268 1,392 2,486 2,660 1,190 1,296 1,268 Gross ea
Slide 28: Important information
Important information For personal use only This presentation contains general information current as at 8 August 2019 and is not a recommendation or advice in relation to Insurance Australia Group Limited (IAG) or any product or service offered by IAG’s subsidiaries. It presents financial informati
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