Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Debt Investor Presentation (November 2016)
32 slides from Insurance Australia's debt investor presentation, November 2016
Slide 1: Insurance Australia Group Limited Capital Notes Offer
November 2016 Insurance Australia Group Limited Capital Notes Offer (and CPS Reinvestment Offer) This presentation is not an offer of, or invitation to apply for, Capital Notes and applications for Capital Notes are to be made under the Prospectus. Investors should read and consider the Prospectus i
Slide 2: Contents
Contents Group Overview and Offer Summary Page 3 IAG and FY16 Results Page 6 Capital and Investments Page 13 Key Features of the Capital Notes Page 19 Reinvestment Offer Page 25 Offer Process Page 28 Contact Directory Page 30 IAG Capital Notes Page 2
Slide 3: Group Overview and Offer Summary
Group Overview and Offer Summary
Slide 4: Group overview
Group overview General insurance group listed on ASX • An ASX-listed general insurance group (Group) offering personal and commercial insurance products through: – Leading and established brands across its home markets of Australia and New Zealand – A presence in Asia • Gross written premium (GWP) o
Slide 5: IAG Capital Notes: Offer summary
IAG Capital Notes Offer summary Offer • Offer by Insurance Australia Group Limited (IAG) of Capital Notes Offer size • $300 million with the ability to raise more or less Term • Perpetual unless Converted, Redeemed, Resold or Written-Off • Optional Exchange on 15 June 2023 or following a Tax Event o
Slide 6: IAG and FY16 Results
IAG and FY16 Results
Slide 7: The Group and what it does
The Group and what it does Geographical presence and portfolio of products GROUP GEOGRAPHIC PRESENCE GROUP PRODUCT PORTFOLIO % of GWP for FY16 % of GWP for FY16 4% 3% 3% 5% 19% 8% 32% 51% 22% 26% 27% Australia - Consumer Motor Home Australia - Business Short-tail Commercial CTP/Motor liability New Z
Slide 8: Operating brands
Operating brands More than 90% of GWP from home markets (Australia & New Zealand) Ownership details are available at www.iag.com.au/about-us/what-we-do IAG Capital Notes Page 8
Slide 9: Berkshire Hathaway
Berkshire Hathaway Strategic relationship established June 2015 • A long-term strategic relationship established with Berkshire Hathaway Inc, one of the world’s largest and most successful companies • Enables both parties to draw on each other’s strengths to better meet customer needs and deliver su
Slide 10: Group financial summary – FY16
Group financial summary – FY16 Cash ROE of 13.0% FY15 FY16 CHANGE GWP ($M) 11,440 11,367 0.6% INSURANCE PROFIT ($M) 1,103 1,178 6.8% UNDERLYING MARGIN (%) 13.1 14.0 90bps REPORTED MARGIN (%) 10.7 14.3 360bps SHAREHOLDERS’ FUNDS INCOME ($M) 223 97 56.5% NET PROFIT AFTER TAX ($M) 728 625 14.1% CASH EA
Slide 11: Underlying insurance margin
Underlying insurance margin Quota share uplift of c.250bps INSURANCE MARGIN (REPORTED VS. UNDERLYING) • Underlying margin of 14.0% (2H16: 13.7%) • Favourable Berkshire Hathaway quota share effect of approximately 250bps • Pressure on commercial lines in soft market 14.2% 14.0% environment 13.1% 12.5
Slide 12: Group results
Group results Divisional performance Source: IAG Investor Report FY16 IAG Capital Notes Page 12
Slide 13: Reinsurance
Reinsurance Key element of approach to capital management 2016 CATASTROPHE REINSURANCE PROGRAMME • Calendar 2016 catastrophe cover: $m As at 30 June 2016 −$7 billion of gross protection, placed to 80% (to reflect 7000 quota share) −Maximum Event Retention (MER) of $200 million (post quota share) −Fo
Slide 14: Capital and Investments
Capital and Investments
Slide 15: Group capital
Group capital Strong reported and pro forma position as at 30 June 2016 PCA¹ MULTIPLE CET1² MULTIPLE APRA target = 1.0 APRA target = 0.6 IAG target = 1.4-1.6 IAG target = 0.9-1.1 (0.10) (0.15) 0.09 1.72 1.56 1.06 0.97 1.62 1.47 1.47 Jun-16 reported Off-market share buy- Buy-back of CPS, $300m Capita
Slide 16: Debt and hybrid capital
Debt and hybrid capital Active capital management As at 30 June 2016 Principal Margin/ Optional call/ m $m coupon exchange date IAL Subordinated term notes1 $350 350 +2.8% Margin Mar 19 Subordinated fixed rate notes2 £100 178 5.625% Fixed Dec-16 Redeeming in Dec 2016 Subordinated fixed rate bonds2 N
Slide 17: Investments
Investments Conservative mix and high credit quality characteristics unchanged • Total investments of $12.9 billion as at 30 GROUP ASSET S/HOLDERS' CREDIT June 2016 ALLOCATION FUNDS MIX QUALITY − Technical Reserves = $8.7 billion − Shareholder’s Funds = $4.2 billion 16% 52% 14% 22% • Over 84% of inv
Slide 18: Key features of the Capital Notes
Key features of the Capital Notes
Slide 19: Key features: Distributions
Key features Distributions Distributions • Non-cumulative based on a floating rate (3 month Bank Bill Rate) • Expected to be fully franked • If a Distribution is not fully franked, the cash amount of the Distribution will be increased to compensate holders for the unfranked portion of the Distributi
Slide 20: Key features: Ranking in a winding-up
Key features Ranking of Capital Notes in a winding-up of IAG Ranking Illustrative examples Preferred and secured Liabilities preferred by law including employee entitlements and secured Higher debt creditors Unsubordinated and Bonds and notes, trade and general creditors unsecured debt Subordinated
Slide 21: Key features: Summary of events
Key features Summary of events that may affect the Capital Notes Issue Date Potentially Optional Exchange Date Mandatory Conversion Date 22 Dec 2016 perpetual Each Distribution Payment Date 15 June 2023 16 June 2025 after 16 June 2025 If Conversion does not occur on 16 If IAG chooses, and certain co
Slide 22: Mandatory Conversion on Mandatory Conversion Date
Key features Mandatory Conversion on Mandatory Conversion Date • On 16 June 2025, subject to satisfaction of the Mandatory Conversion Conditions illustrated below, Capital Notes will Mandatorily Convert into a variable number of Ordinary Shares at a 1% discount to the 20 day VWAP1, unless previously
Slide 23: Automatic Conversion on a Non-Viability Trigger Event
Key features Automatic Conversion on a Non-Viability Trigger Event Non-Viability • APRA has provided a written determination to IAG that: Trigger Event − conversion or write off of Relevant Securities (including the Capital Notes) is necessary because, without it, APRA considers that IAG would becom
Slide 24: Optional Exchange and Conversion on Acquisition Event
Key features Optional Exchange and automatic Conversion on Acquisition Event Optional IAG may choose to: Exchange • Exchange all or some Capital Notes on 15 June 2023; • Exchange all or some Capital Notes after a Tax Event or a Regulatory Event; or • Convert all Capital Notes after a Potential Acqui
Slide 25: Reinvestment Offer
Reinvestment Offer <q
Slide 26: Reinvestment Offer to Eligible IAG CPS Holders
IAG Capital Notes Reinvestment Offer to Eligible IAG CPS Holders What is the • An offer by IAG to Eligible CPS Holders to reinvest their CPS in Capital Notes Reinvestment • Participating CPS will be bought back early on 22 December 2016 for $100 each and have the buy-back proceeds Offer? (i.e. $100
Slide 27: Comparison of Capital Notes to CPS
IAG Capital Notes Comparison of Capital Notes to CPS Issue differences shaded in blue Capital Notes CPS Legal form Unsecured subordinated note Preference share ASX code Expected to trade under IAGPD IAGPC Margin Expected to be in the range of 4.70% - 4.90% 4.00% Distribution rate Floating rate, quar
Slide 28: Offer Process
Offer Process <q
Slide 29: Key dates
IAG Capital Notes Key dates1 Key dates for the Offer Lodgement of this Prospectus with ASIC 21 November 2016 Bookbuild to determine the Margin 28 November 2016 Announcement of the Margin 29 November 2016 Opening Date and lodgement of the replacement Prospectus with ASIC 29 November 2016 Closing Date
Slide 30: Contacts
IAG Capital Notes Contacts Issuer IAG Alan Cazalet Mark Gold +61 2 9292 8451 +61 2 9292 2353 Arranger and Joint Lead Manager UBS Andrew Buchanan Enrico Musso +61 2 9324 2617 +61 2 9324 2985 Joint Lead Managers National Australia Bank Danny Fischer William Gillespie + 61 2 8908 6374 +61 2 9936 4835 W
Slide 31: We make your world a safer place
We make your world a safer place IAG Capital Notes Page 31
Slide 32: Disclaimer
Disclaimer The information contained in this presentation (collectively, “Information”) has been prepared by Insurance Australia Group Limited (ABN 60 090 739 923) (IAG) in connection with a proposed offer of IAG Capital Notes (Capital Notes) (Offer). The Offer is being made under a prospectus which
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