Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Presentation (November 2020)
37 slides from Insurance Australia's investor presentation, Nov 20, 2020
Slide 1: Business interruption judgment response and capital raising
Business interruption judgment response This release has been authorised by the IAG CEO NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES and capital raising Nick Hawkins Michelle McPherson Managing Director and Chief Financial Officer Chief Executive Officer 20 November 2020 Media Investor Relat
Slide 2: Disclaimer
Disclaimer This document (the Presentation) is dated 20 November 2020 and has been prepared and authorised by Insurance Australia Group Limited (ABN 60 090 739 923 18) (the Company or IAG) in connection with IAG’s proposed capital raising (the Capital Raising ), comprising: • an institutional placem
Slide 3: Business interruption judgment response and capital raising
Business interruption judgment response and capital raising Adverse business • Adverse test case judgment on Quarantine Act wording issues – intended exclusions found not to be effective interruption test case • IAG is recognising an associated claims provision – ~$805m adverse impact on post-tax FY
Slide 4: Business interruption insurance
Business interruption insurance Test case on Quarantine Act wording issue has found that intended exclusion does not apply IAG’s position • Policy wordings explicitly exclude business interruption coverage in pandemic situations • Introduced post-SARS • Common industry-wide approach to circumstances
Slide 5: Provisioning for business interruption
Provisioning for business interruption Detailed bottom-up assessment of exposure and expected loss Policies at-risk • Approximately 76k policies with business interruption coverage • Policy categories reviewed and potential losses estimated Insured risk • The insured risk is the operating margin and
Slide 6: Business interruption exposure
Business interruption exposure Estimated potential FY21 P&L impact of $805m at 31 October 2020 Quarantine Act Biosecurity Act Total Total Estimated exposure (business interruption + (prevention of access) (pre-quota share) (post 32.5% quota share) prevention of access) Insured risk (~$bn) 13.0 2.0 1
Slide 7: Trading update
Trading update 1Q21 update provided at AGM, potential 1H21 pre-tax charge of $70-90m Trading update to 31 October 2020 • Low single digit gross written premium growth, despite adverse foreign currency translation effect from New Zealand • An underlying margin performance similar to 14.1% reported in
Slide 8: Capital position
Capital position Capital raising maintains CET1 position above the upper end of benchmark range Additional 31 October 4 months to Proposed 31 October 30 June 31 October business 2020 post Capital position 31 October capital 2020 2020 2020 interruption reserving pro 2020 raising² pro forma reserving¹
Slide 9: Key business interruption related risks
Key business interruption related risks Quarantine Act exposure beyond 31 October 2020 Key risks beyond 31 October 2020 • IAG has presented an estimated exposure at 31 October 2020 • Assumptions include 8-9 months recovery period post-lockdown • No allowance has been made for potential material futu
Slide 10: Details of the Offer
Details of the Offer • Fully underwritten institutional Placement to raise approximately $650m Placement size and structure • Approximately 128.7m New Shares to be issued, representing ~5.6% of IAG’s existing ordinary shares on issue Use of proceeds • Maintain CET1 ratio above the upper end of targe
Slide 11: Offer timetable
Offer timetable Event Date • Record date for SPP Thursday, 19 November 2020 (7pm AEDT) • Trading halt Thursday, 19 November 2020 • Announcement of Placement and SPP Friday, 20 November 2020 • Placement bookbuild Friday, 20 November 2020 • Placement completion announcement Monday, 23 November 2020 •
Slide 12: Appendix 1: Key risks
Appendix 1: Key risks RISK FACTORS You should be aware that there are risks involved with participating in the Placement or SPP and being issued ordinary shares (“New Shares”) in Insurance Australia Group Limited ("IAG"). Certain of these risks are specific to an investment in IAG and certain others
Slide 13: Appendix 1: Key risks
Appendix 1: Key risks Coronavirus (COVID-19) (continued) Moreover, changes in interest rates, reduced liquidity or a continued slowdown in Australia, New Zealand, Asia or global economic conditions may also adversely affect IAG’s business, financial condition, results of operations, liquidity or pro
Slide 14: Appendix 1: Key risks
Appendix 1: Key risks Global market and economic environment There is a risk that the financial performance of IAG is significantly affected by changes in investment markets and economic conditions both globally and in the jurisdictions where it conducts business (i.e., Australia, New Zealand and As
Slide 15: Appendix 1: Key risks
Appendix 1: Key risks Mergers, acquisitions and divestments (continued) Depending on the type of transaction, it could take a substantial period of time for IAG to realise the financial benefits of the transaction, if any. During the period following this type of transaction, IAG’s operating results
Slide 16: Appendix 1: Key risks
Appendix 1: Key risks Market position and risks relating to competition (continued) The insurance industry is highly competitive with IAG facing competition from both established operators as well as non-traditional new market entrants. The emergence of new entrants into the industry (such as “insur
Slide 17: Appendix 1: Key risks
Appendix 1: Key risks Reputational risk There are risks which may cause harm to the reputation of IAG or its group members among customers, investors and others, including those relating to legal and regulatory requirements, sales, claims handling, investment and advisory practices, potential confli
Slide 18: Appendix 1: Key risks
Appendix 1: Key risks Adverse foreign exchange rate movements There is a risk of IAG sustaining losses through adverse movements in foreign exchange rates. Such movements can impact IAG’s financial position and performance and the level of capital supporting IAG’s businesses. From an operational per
Slide 19: Appendix 1: Key risks
Appendix 1: Key risks Operational factors There are operational risks that IAG is exposed to which may result in significant losses, increased costs and reputational damage. These may be due to inadequate or failed internal processes, people and systems or from external events. Operational risk type
Slide 20: Appendix 1: Key risks
Appendix 1: Key risks Litigation and regulatory proceedings (continued) On 6 October 2020, IAG agreed to a settlement of the class action brought against its subsidiaries, Swann Insurance (Aust) Pty Ltd (Swann) and Insurance Australia Limited. IAG exited these business areas with the sale of Swann’s
Slide 21: Information security, including cyber-attacks and data security breaches
Appendix 1: Key risks Information security, including cyber-attacks and data security breaches Consumer data rights and protection continue to require greater investment in processes and systems to achieve compliance with current and proposed legislation. IAG processes and stores a large volume of p
Slide 22: Recruit and retain appropriate staff
Appendix 1: Key risks Recruit and retain appropriate staff The success of IAG is highly dependent on the quality of its workforce. The rapidly evolving technology and regulatory landscape impacting the insurance sector across the geographies in which IAG operates means that the recruitment and reten
Slide 23: Prudential regulation
Appendix 1: Key risks Prudential regulation There is a risk that the position of shareholders may be adversely affected due to IAG (and its related entities) being subject to prudential regulation. In Australia, as a prudentially regulated authorised non operating holding company, IAG is subject to
Slide 24: Risks relating to the new shares
Appendix 1: Key risks RISKS RELATING TO THE NEW SHARES Market price of ordinary shares will fluctuate There have been significant fluctuations and volatility in the prices of equity securities in recent months, which may have been caused by general rather than company-specific factors, including the
Slide 25: Taxation
Appendix 1: Key risks Taxation Any change to the current rate of company income tax in jurisdictions where IAG operates may impact on shareholder returns. Any changes to the current rates of income tax applying to shareholders, whether they are individuals, trusts or companies may similarly impact o
Slide 26: Appendix 2: International selling restrictions
Appendix 2: International selling restrictions International Offer Restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and th
Slide 27: International selling restrictions
Appendix 2: International selling restrictions European Union This document has not been, and will not be, registered with or approved by any securities regulator in the European Union. Accordingly, this document may not be made available, nor may the New Shares be offered for sale, in the European
Slide 28: International selling restrictions
Appendix 2: International selling restrictions New Zealand This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The New Shares are not being offered or sold in New Zealand (or allotted with
Slide 29: International selling restrictions
Appendix 2: International selling restrictions Switzerland The New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange or on any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing
Slide 30: Underwriting Agreement key terms
Appendix 3: Underwriting Agreement key terms The Underwriter will be the sole lead manager, bookrunner and underwriter of the Placement. IAG has entered into a Placement Agreement with the Underwriter in respect of the Placement ("Underwriting Agreement"). Key terms of Underwriting Agreement The Und
Slide 31: Underwriting Agreement key terms
Appendix 3: Underwriting Agreement key terms • a condition precedent to the Underwriting Agreement is not satisfied by IAG or waived by the Underwriter by its applicable deadline; • any event specified in the Timetable is delayed for more than 1 business day without the prior written approval of the
Slide 32: Underwriting Agreement key terms
Appendix 3: Underwriting Agreement key terms • any one of the following occurs in relation to IAG or any Material Subsidiary: a) an order is made, a resolution is passed or steps are taken, for its winding-up, dissolution, official management or administration; b) it institutes any proceedings or ar
Slide 33: Disclaimer
Disclaimer Forward-looking statements This Presentation contains certain "forward-looking statements" that are based on management's beliefs, assumptions and expectations and on information currently available to management. Forward-looking statements can generally be identified by the use of forwar
Slide 34: Disclaimer
Disclaimer Summary information This Presentation contains summary information about the Group and its activities which are current as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete, nor does it contain all information
Slide 35: Disclaimer
Disclaimer Financial data All currency amounts are in Australian dollars unless stated otherwise. Prevailing exchange rates have been used to convert local currency amounts into Australian dollars, where appropriate. This Presentation includes certain historical financial information extracted from
Slide 36: Disclaimer
Disclaimer In connection with the Placement, one or more investors may elect to acquire an economic interest in the New Shares (Economic Interest), instead of subscribing for or acquiring the legal or beneficial interest in those securities. The Underwriter (or its affiliates) may, for their own res
Slide 37: Australia
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