Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2020 Earnings Presentation
26 slides from Insurance Australia's earnings presentation, Feb 12, 2020
Slide 1: Financial results: Half year ended 31 December 2019
For personal use only Financial results Half year ended 31 December 2019 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 12 February 2020 This release has been authorised by the IAG Board
Slide 2: Overview
For personal use only Overview 1H20 financial results 12 February 2020 2
Slide 3: 1H20 highlights
1H20 highlights Strong underlying performance, in line with expectations held at outset of year For personal use only GWP growth Underlying performance in line with Provision for customer refunds expectations • $82m net post-tax cost, excluded from • GWP growth of 1.4% (like-for-like cash earnings 4
Slide 4: Operational scorecard
Operational 1H20 activities 2H20 priorities scorecard Customer • Marketing campaigns launched to positive • Supporting customers and communities in their For personal use only response: NRMA Insurance, Every home is worth rapid recovery from recent bushfire and hailstorm protecting, and CGU small bu
Slide 5: Financials
For personal use only Financials 1H20 financial results 12 February 2020 5
Slide 6: Financial summary
1H19 1H20 Change For personal use only GWP ($m) 5,881 5,962 1.4% Insurance profit* ($m) 496 501 1.0% Underlying insurance margin (%) 16.2 16.9 70bps Financial Reported insurance margin (%) 13.7 13.5 20bps summary Shareholders’ funds income ($m) (7) 50 nm Cash ROE of 12.1% Net profit after tax ($m) 5
Slide 7: GWP growth
GWP growth Reported GWP growth Largely rate-driven For personal use only Reported GWP growth of 1.4% FY20 guidance of ‘low single digit’ • In line with full year guidance of ‘low GWP growth reaffirmed 6.3% single digit’ growth • 2H20 growth expected to be similar to • Net drag from combination of: 1
Slide 8: Insurance margin
Insurance margin Underlying margin ~1.4% ~0.7% Underlying improvement vs. 1H19 For personal use only 16.9% Higher underlying margin of 16.9% Lower reported margin of 13.5% 16.2% • Further realisation of net benefits from • Reconciliation to underlying margin: optimisation program • High perils incid
Slide 9: Reserve releases
Reserve releases 9.0 Net outstanding claims liability ($bn) 1% of NEP run rate expected in 2H20 For personal use only 6.0 Lower than anticipated 1H20 net prior Significant reduction in net claim period reserve releases (0.1% of NEP) reserves since FY14 • Stronger claim development and • ~55% reducti
Slide 10: Natural perils
Natural perils FY20 net perils assumption increased to $850m For personal use only 1H20 perils ~$100m above allowance FY20 net natural perils estimate • Severely impacted by bushfire events (over $180m) $951m (pre-stop loss) • Significant reinsurance recoveries, including ~$280m $532m under calendar
Slide 11: Calendar 2020 gross catastrophe reinsurance program
Calendar 2020 gross catastrophe reinsurance program - as at 1 January 2020 Reinsurance $m 10,000 Main catastrophe cover For personal use only renewed 1 January 2020 Calendar 2020 catastrophe renewal • Similar structure to prior years • Increased gross protection of $10bn – provides additional comfor
Slide 12: Expenses
Expenses Optimisation benefits delivered For personal use only Gross operating costs Optimisation program tracking 1H20 annualised to plan ~$30m • ~$80m reduction in gross operating ~$40m costs in 1H20 vs. 1H19 ~$70m ~$2,250m ~$90m • Majority of 1H20 improvement in ~$160m Claims claims handling expe
Slide 13: Australia
Australia Improved underlying performance vs. 1H19 For personal use only Like-for-like GWP growth of Higher underlying margin of Solid performance expected around 2% 16.1% compared to 1H19 in 2H20 Australia - insurance margin $9,081m • Flat reported growth • Further optimisation • GWP trends similar
Slide 14: New Zealand
New Zealand Strong performance maintained For personal use only NZ$ GWP growth of 4.2% Lower 1H20 underlying Strong performance New Zealand - GWP growth / underlying margin margin compared to 1H19 expected in 2H20 • Predominantly rate-driven 20.0% • Volume growth in private • Largely reflected highe
Slide 15: Fee income
Fee income FY20 loss of up to $50m pre-tax expected For personal use only Increased fee-based income loss expected in FY20 1H20 fee-based loss of $2m pre-tax (1H19: $5m Increased loss in 2H20 expected, reflecting: profit), comprising: • Accelerated spend on: • Absence of prior period income in Victo
Slide 16: Capital
Capital Strong capital position For personal use only 0.12 (0.20) 1.31 (0.09) 1.15 1.06 1H20 financial results 12 February 2020 16
Slide 17: Outlook
For personal use only Outlook 1H20 financial results 12 February 2020 17
Slide 18: Climate Action Plan
Climate Action Plan Delivering against plan For personal use only Prepare Reduce our Invest Rethink Think big risk our people emissions responsibly Climate change On track to achieve Shifting investment Climate Risk and considerations Science Based to companies that Opportunity incorporated into Tar
Slide 19: FY20 outlook
FY20 outlook GWP guidance reaffirmed, reported margin guidance lowered for peril and reserve release effects For personal use only FY20 guidance measures Underlying assumptions GWP growth Low single digit Reported insurance margin 12.5-14.5% 1 Net losses from 2 Reserve releases of 3 No material move
Slide 20: Our value proposition
Our value proposition For personal use only Delivering strong Investment case Value drivers Shareholder value shareholder returns • Leading player with scale advantage in Australia and Customer Through-the-cycle targets • Cash ROE 1.5x WACC New Zealand (low single digit growth) • High dividend (60-8
Slide 21: For personal use only
For personal use only Australia mia scio SSE cou MT ENN New Zealand omy | NA Lumley
Slide 22: Appendix – Group results
Appendix – Group results For personal use only 1H19 2H19 1H20 GROUP RESULTS A$m A$m A$m Gross written premium 5,881 6,124 5,962 GWP ($M) / UNDERLYING INSURANCE MARGIN (%) Gross earned premium 5,984 5,958 6,105 6,124 Reinsurance expense (2,373) (2,331) (2,396) 5,881 5,962 Net earned premium 3,611 3,6
Slide 23: Appendix – Group ratios and key metrics
Appendix – Group ratios and key metrics For personal use only Insurance Ratios - Continuing Business 1H19 2H19 1H20 Loss ratio 65.3% 62.3% 65.6% Immunised loss ratio 64.6% 59.5% 65.6% Expense ratio 23.8% 23.7% 23.1% Commission ratio 9.0% 9.7% 9.1% Administration ratio 14.8% 14.0% 14.0% Combined rati
Slide 24: Appendix – Australia
Appendix – Australia GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 4,725 1H19 2H19 1H20 4,606 4,608 For personal use only AUSTRALIA RESULTS A$m A$m A$m 16.2% 16.1% Gross written premium 4,606 4,725 4,608 Gross earned premium 4,698 4,625 4,739 Reinsurance expense (1,864) (1,807) (1,859) 14.8% Net earned
Slide 25: Appendix – New Zealand
Appendix – New Zealand GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 1,392 1,348 1,268 For personal use only 20.0% 18.9% 18.9% 1H19 2H19 1H20 NEW ZEALAND RESULTS A$m A$m A$m Gross written premium 1,268 1,392 1,348 Gross earned premium 1,277 1,327 1,357 Reinsurance expense (503) (520) (533) Net earned p
Slide 26: Important information
Important information For personal use only This presentation contains general information current as at 12 February 2020 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 inform
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