Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 FY2007 Earnings Presentation
28 slides from Insurance Australia's earnings presentation, Feb 22, 2007
Slide 1: Financial results - Half year ended 31 December 2006
Financial results Half year ended 31 December 2006 Michael Hawker, Chief Executive Officer George Venardos, Chief Financial Officer 22 February 2007 Inavrance Australia Group Limited ABN 60 040 739 423 Good morning. Welcome to the Insurance Australia Group results briefing on our results for the six
Slide 2: Agenda
Agenda » Results and operating conditions » Dividends » UK update * Segmental analysis * Capital * Outlook »* Conclusion & questions IAG Michael Hawker George Venardos Michael Hawker Insurance Austraka Group Limded ABN 60090724923 2
Slide 3: Michael Hawker
Michael Hawker Inavrance Australia Group Limited ABN 60 040 739 423
Slide 4: NPAT up 15.8% with return to growth in 1H07
NPAT up 15.8% with return to growth q in 1H07 i rd * Relative to 2HO6 A ~ Net profit to holders of ordinary shares increased 15.8% to $345m ~ Earnings per share of 21.42 cps up 14.4% * GWP up 2.9% to $3,324m relative to 2H06 * Insurance margin of 13.3% (2H06 12.4%) ~ Soft cycie in commercial lines,
Slide 5: Segment results
Segment results Results by area Ausirctia New Zealand Asia Europe invesmeni on shareholders’ funds : (52%) (t 5%) Other (60) BY ayy (7%) (22% Net profit before tax 544 RR 502 a6 (28%) 5% Tax oxperise & minority intersts (201) eye t204y ie) 33% 10% Net profit after tax 343 asl 298 Bab (25%) 16% * Ope
Slide 6: Normalised ROE in-line with target
Normalised ROE in-line with target Return on Equity {annualised} 30% 25% 20% Average Normalised 14.5% 18%, 10% 5% O% 2H0S 1HO6 2H06 1HOF ¥& ROE (Actual) attributabie to holders of ordinary shares & ROE (Normalised) attributable to holders of ordinary shares + ROE has been calculated excluding the eq
Slide 7: Dividend maintained
Dividend maintained 50.05 Dividends per share 40.55 FYOt FYO2 Fyo3 FYO4 FYOS FYOB. 1HO7 Id Intecin dividend B Final dividend @ Special dividend * Interim dividend increased from $215m in 1HO6 to $237m * Represents 68.7% of reported earnings and 79.5% of normalised earnings * Since listing, the cumul
Slide 8: Financial results overview
Financial results overview y Hnancial Results /Ratios Holt-year Half-year Haif-year ended ended = ended Decds Jun 06 Financial Overview inory share Age ty EQquily Pa folders of orsinesry 15 OF Irom operations (A$my vis} Basic: EP: DPS te special dividend) Group General insurance GWP (AS nSUraCS orot
Slide 9: Strong insurance ratios in a competitive market
Strong insurance ratios ina © competitive market A Loss ratio 88.5% 64.3% 66.4% 88.4% ne wis? 652 Sutin eemmiperunisad Loss rate Combined ratio insurance margin {bofore fax} » 92.2% 94.7% 94.4% 93.2% 2H88 pars aree we? pag Oorivtiod Rote eemm krerunised Combined Feria Insurance Austraka Group Limded
Slide 10: Operating expenses kept flat
Operating expenses kept flat q@ IAG Operating Expenses {A$m)} Actual 1,657 4,645 4,660 Inflated 1,657 1,723 4,792 2,090 +800 4.600 4,400 4.200 $ 4.000 800 600 400 200 FYO7 tHO7 Annuatised we Aust &.NZ Rest of w ord se Aust 8 NZ {inflation 438, YOY } « Allowing for seasonality (higher expenditure in
Slide 11: Recovery strategy delivering in NSW
Recovery strategy delivering in NSW q IAG personal lines NSW Comprehensive Car & Home RIF Feb-06 ar-O8 prog Jun-06 Jul-06 ee Car wom HOME, During 2H06, we rebased pricing to be more competitive, improved supplier relationships and, leading into 1HO7, introduced more focused product marketing. This i
Slide 12: Customer service levels improved
Customer service levels improved q) IAG ¢ The Customer Service Index for direct personal lines distributed by the Group increased from 80 to 83 during 1HO7 ¢ Renewal rates in indirect personal lines portfolio increased from 82% to 85% during 1HO7 « In CGU renewal rates remained above 80% despite the
Slide 13: Progressing our offshore expansion - Hastings and Equity in the UK
Progressing our offshore expansion — q Hastings and Equity in the UK nd Hastings pirect ri Underwriter « * Own two leading broking brands. Combined, they rank third in the UK market for personal lines brokers! * Control two insurance underwriters which, combined, are the fourth largest underwriter o
Slide 14: Hastings and Equity UK premium flows
£200m Hastings orect £64m Advantage mela Equity Red Star * Based on calendar 2006 — pro-farma as IAG owned throughout 2006. insurance Austraka Group Limaed ABN 6004072092314 This diagram attempts to capture the flows of premium through the Group's UK businesses. The figures are drafts for the whole
Slide 15: Growth opportunities in the UK
Growth opportunities in the UK q) AA British insurance Premium Index IAG Markat average trends since 1994 * Premium rises in the UK motor insurarice market have started to gain traction ° Hastings has an excellent website and growing usage of it —- over 40% of quotes and almost 20% of policies * Equ
Slide 16: George Venardos
George Venardos Inavrance Australia Group Limited ABN 60 040 739 423 16
Slide 17: Australian General Insurance
Australian General Insurance Half-year Half-year Haif-year Australia ended ended ended Dec 05 Jun 06 Gross wriffen premium 2.8435 2,71 oan Gross earned premium 2,753 2,706 © Reinsurance expense (267} (152) (4s Nei premium revenue 2,586 3 2,565 Net claims expense (1.727}5 {UaS) (1.616) Commission exp
Slide 18: Australian Personal Lines
Australian Personal Lines © Haif-year Half-year Kalf-year Half-year’ Australian Personal Lines ended ended ended dun 05 Dec 05 Dec 06 written premium Gross eamed premium Reinsurance expense Net premium revenve q E Net claims expense ‘ : { : (1,227) 5 aa Commission expense : 4 {124} 5 (22): Undeewrit
Slide 19: Australian Commercial Lines
Australian Commercial Lines @) Hall-year Half-year —_‘Haif-year Australian Commercial tines ended ended ended Jun 05 Dec 05 Jun 06 Gross written premium - BOT a —_ Gross earned premium 803 B23 - Reinsurance expense (93} Biy {(76} 5 Net premium revenue 710 1S V2 Net claims expense (95) ay (388) 6 Com
Slide 20: International businesses
International businesses Hall-year Half-year Halt-year international ended ended = ended Jun05 Dec 05 ‘Sn Gross written premium Gross eared premium : Reinsurarice expense : f 455] Nel premium revenue : 457 Ne? claims expense ee 4800): Commission expense : 144) Underwriting expense : 183) Underwitiin
Slide 21: IAG New Zealand
IAG New Zealand half-year Half-year Half-year Half-year New Zealand Operations ended ended ended ended Dec 05 dun 66 Dec 06 Gross written premium Gross earned premium Reinsurance expense Net premium revenue Net claims expense 68 {281} 8 Commission expense 5 4). (39) : Underwriting expense E 178) (77
Slide 22: Asian operations
Asian operations Haif-year Asian operations ended gun 05 Hall-year ended Dec 05 Hialf-year Half-year ended dun 06 Gross written premium Gross earned premium Reinsurance expense Nel premium revenve Net ck Conan loins expense sion expense Underw Underwriting profit score: ng expense technica reserves
Slide 23: Investment performance
investment performance Poitfotle income {pre-tax} Halt -yeer Half -yeor Haif-year Halt -year and inci. Derlvatives ended Jun 05 ended Dec 05 ended Jun 08 ended Dec 06 i « y fi i i i tiiihi? onic Shorerol iS ‘Tatatinvestmant mcome Actual B'mark Actuat ——B'mark Actual Bark Actuat Asset Class retin ret
Slide 24: IAG Consolidated Insurance Australia capital
[AG Consolidated insurance Australia Lid tier 1 capital : Paid-up ordinary shares AD ecsury shares t SO): at (10) ied 1,997: sas arts ie HENRY: nen (1,307) Tier 2 capital Subordinated detst Capital base Minimum capital requirements (MCR): Australian general insurance businesses 1olional insurance bu
Slide 25: Michael Hawker
Michael Hawker Inavrance Australia Group Limited ABN 60 040 739 423
Slide 26: FY07 Outlook
FY07 Outlook @ IAG « Continue to grow and diversify our earnings — Deliver the targeted synergy benefits for Hastings & Equity — Maintain pipeline of potential acquisitions — 1H07 interim dividend to be underwritten to fund future growth « Generate GWP growth of 12-14% — From organic business and ac
Slide 27: TSR performance since listing
TSR performance since listing Returns using 3 base index af #90 400.90 360.90 200.90 260.90 200.90 190.00 190.90 50.00 0.90 Total Shareholder Returns ~ Since Listing = ‘SEPIASK ANT Orainaring Accumulation lnsox t—| —sapiasx 100 Aecumutation indo — AG tare Pica including Hoinvostment of Livigende 32
Slide 28: Questions
Questions Inavrance Australia Group Limited ABN 60 040 739 423
Insurance Australia Group — H1 FY2007 Earnings Presentation on 6ix