Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2019 Earnings Presentation
27 slides from Insurance Australia's earnings presentation, Feb 6, 2019
Slide 1: Financial results: Half year ended 31 December 2018
For personal use only Financial results Half year ended 31 December 2018 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 6 February 2019
Slide 2: Overview
For personal use only Overview 1H19 financial results 6 February 2019 2
Slide 3: 1H19 highlights
1H19 highlights Improved underlying performance, FY19 guidance reaffirmed For personal use only GWP Growth Underlying improvement in line with Reduced Asian footprint expectations • Sale of Thailand operations completed: • GWP growth of 4.1% largely rate- >$200m net profit recognised 4.1% driven • I
Slide 4: Three strategic priorities
For personal use only Strategy Three strategic priorities Optimise our core insurance business while creating Eleven future growth capabilities options 1H19 financial results 6 February 2019 4
Slide 5: Operational scorecard
Operational 1H19 activities 2H19 priorities scorecard Customer • Enhancement of customer digital experiences, including • Make customer decisions more rapidly, efficiently and For personal use only redesign of motor and home claim processes flexibly by continuing to move IAG’s data to the cloud • La
Slide 6: Financials
For personal use only Financials 1H19 financial results 6 February 2019 6
Slide 7: Financial summary
1H18 1H19 Change For personal use only GWP ($m) 5,649 5,881 4.1% Insurance profit ($m) 745 496 33.4% Underlying insurance margin (%) 13.0 16.2 320bps Financial Reported insurance margin (%) 17.9 13.7 420bps summary Shareholders’ funds income ($m) 129 (7) nm Cash ROE of 9.8% Net profit after tax ($m)
Slide 8: GWP growth
GWP growth Largely rate-driven For personal use only GWP growth of 4.1% FY19 GWP growth guidance of 2-4% maintained • Short tail personal line rate increases at least matching claims inflation • Growth at slightly more subdued pace GWP Growth in 2H19 • Ongoing growth in average commercial • Further
Slide 9: Insurance margin
Insurance margin Underlying margin improvement, as reported margin bears increased net peril costs For personal use only Higher underlying margin of 16.2% Lower reported margin of 13.7% • ~70bps improvement vs. 1H18, ex- • Adverse movement vs. 1H18 of over Underlying Margin quota share 700bps from c
Slide 10: Natural perils
Natural perils FY19 perils assumption retained – $101m of stop-loss cover available For personal use only 1H19 net perils $110m above Calendar 2019 catastrophe renewal allowance • Similar structure to prior years Natural perils vs allowance • $414m net cost in line with • Increased gross protection
Slide 11: Reserve releases
Reserve releases Beginning to trend down For personal use only Lower prior period reserve release contribution Prior Period Reserve Releases (% of NEP) • Near-$40m net reduction vs. 1H18 4.2% • Still above 2% of NEP • Absence of 1H18 strengthening in New Zealand 1.3% • Relatively benign inflationary
Slide 12: Expenses
Expenses Optimisation benefits emerging, some offset from increased regulatory and compliance costs For personal use only Optimisation program tracking to plan 1H19 Gross Operating Costs Annualised Gross Operating Costs • ~$40m net benefit in 1H19 gross costs ~$70m (~$80m annualised) ~$1,190m ~$30m
Slide 13: Australia
Australia Sound Consumer returns, further Business improvement For personal use only Australia – GWP Growth GWP growth of 3.4% Higher underlying margin of Sound performance 14.8% expected in 2H19 • Rate-driven growth of 4-5% $9,081m in short tail personal lines • Improvement of nearly • Ongoing GWP
Slide 14: New Zealand
New Zealand Strong performance continues For personal use only NZ$ GWP growth of 5.5% in Higher 1H19 underlying Strong performance New Zealand - GWP Growth / Underlying Margin 1H19 margin expected in 2H19 • Largely rate-driven, at lower • Earn-through of rate • Solid GWP growth, with pace than FY18
Slide 15: Capital
Capital Strong capital position For personal use only 1H19 financial results 6 February 2019 15
Slide 16: Outlook
For personal use only Outlook 1H19 financial results 6 February 2019 16
Slide 17: FY19 outlook
FY19 outlook Guidance measures reaffirmed For personal use only FY19 guidance measures Underlying assumptions GWP growth 2–4% Reported insurance margin 16–18% 1 Net losses from 2 Reserve releases of 3 No material natural perils of $608m, around 2% movement in foreign in line with allowance exchange
Slide 18: Our value proposition
Our value proposition For personal use only Delivering strong Investment case Value drivers Shareholder value shareholder returns • Leading player with scale advantage in Australia and Customer Through-the-cycle targets • Cash ROE 1.5x WACC New Zealand (low single digit growth) • High dividend (60-8
Slide 19: For personal use only
For personal use only Australia mie scio SBE cou MTT INN New Zealand CV NA umiey®
Slide 20: Appendix – Group results
Appendix – Group results 1H18 2H18 1H19 For personal use only GROUP RESULTS A$m A$m A$m Gross written premium 5,649 5,998 5,881 GWP ($M) / UNDERLYING INSURANCE MARGIN (%) Gross earned premium 5,780 5,742 5,984 Reinsurance expense (1,613) (2,238) (2,373) Net earned premium 4,167 3,504 3,611 5,998 5,8
Slide 21: Appendix – Group ratios and key metrics
Appendix – Group ratios and key metrics For personal use only Insurance Ratios - Continuing Business 1H18 2H18 1H19 Loss ratio 60.1% 60.3% 65.3% Immunised loss ratio 60.9% 60.1% 64.6% Expense ratio 25.0% 23.9% 23.8% Commission ratio 9.3% 9.1% 9.0% Administration ratio 15.7% 14.8% 14.8% Combined rati
Slide 22: Appendix – divisional performance
Appendix – divisional performance For personal use only 1H18 1H19 GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Australia 4,453 (0.7) 18.8 11.4 4,606 3.4 10.7 14.8 Consumer 3,052 (0.3) 23.0 13.9 3,143 3.
Slide 23: Appendix – Australia
Appendix – Australia GWP ($M) / UNDERLYING INSURANCE MARGIN (%) For personal use only 1H18 2H18 1H19 AUSTRALIA RESULTS A$m A$m A$m 4,453 4,691 4,606 Gross written premium 4,453 4,691 4,606 14.8% 14.7% Gross earned premium 4,612 4,519 4,698 11.4% Reinsurance expense (1,285) (1,762) (1,864) Net earned
Slide 24: Appendix – Australia Consumer
Appendix – Australia Consumer GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 3,052 3,162 3,143 For personal use only 1H18 2H18 1H19 17.5% 17.3% AUSTRALIA CONSUMER RESULTS A$m A$m A$m 13.9% Gross written premium 3,052 3,162 3,143 Gross earned premium 3,092 3,035 3,174 Reinsurance expense (878) (1,208) (1
Slide 25: Appendix – Australia Business
Appendix – Australia Business 1,401 GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 1,529 1,463 For personal use only 1H18 2H18 1H19 10.0% 9.3% AUSTRALIA BUSINESS RESULTS A$m A$m A$m Gross written premium 1,401 1,529 1,463 Gross earned premium 1,520 1,484 1,524 6.5% Reinsurance expense (407) (554) (591)
Slide 26: Appendix – New Zealand
Appendix – New Zealand GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 1,296 For personal use only 1H18 2H18 1H19 1,268 NEW ZEALAND RESULTS A$m A$m A$m 1,190 20.0% Gross written premium 1,190 1,296 1,268 17.4% 17.8% Gross earned premium 1,160 1,214 1,277 Reinsurance expense (323) (471) (503) Net earned p
Slide 27: Important information
Important information For personal use only This presentation contains general information current as at 6 February 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 informa
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