Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2022 Earnings Presentation
25 slides from Insurance Australia's earnings presentation, Feb 11, 2022
Slide 1: Financial results
This release has been authorised by the IAG Board Financial results Nick Hawkins Managing Director and Half year ended 31 December 2021 Chief Executive Officer 11 February 2022 Michelle McPherson Chief Financial Officer 1 1H22 Results | 11 February 2022
Slide 2: Overview
Overview Nick Hawkins Managing Director and Chief Executive Officer 2 1H22 Results | 11 February 2022
Slide 3: 1H22 results overview
1H22 results overview GWP Underlying margin Reported margin $6.6bn 15.1% 7.1% Strong premium growth, particularly in Underlying margin expansion Reported margins impacted by perils commercial lines compared to FY21 and reserve strengthening Cash earnings CET1 ratio FY22 guidance $176m 1.02x GWP upgr
Slide 4: 1H22 highlights robust GWP trends and stable underlying margin performance
1H22 highlights robust GWP trends and stable underlying margin performance GWP growth Insurance margin 17.9% 8.9% 8.3% 15.9% 15.1% 6.2% 13.5% 9.1% 3.3% 7.1% Group Direct Insurance Intermediated New Zealand 1H21 2H21 1H22 Australia Insurance Reported margin Underlying margin Australia 4 1H22 Results
Slide 5: Divisional highlights
Divisional highlights Direct Insurance Intermediated Insurance New Zealand Australia (DIA) Australia (IIA) • >1% GWP volume growth in • ~9% premium rate increases • Notable GWP momentum personal short tail • Rate-driven underlying margin • Large claims increase after benign 1H21 • Pricing for short
Slide 6: Recap: strategic focus
Recap: Purpose Strategy We make your world a safer place Create a stronger, more resilient IAG strategic Focus Approach Outcomes focus Grow with Deliver unparalleled personalised service More customers, more our customers when our customers need us the most products and greater scale Focus on underw
Slide 7: Delivering our strategy: sample of initiatives
Delivering our strategy execution phase well advanced 1H22 Progress 2H22 Focus • Launch Customer Loyalty Program through NRMA app • NRMA Insurance named Australia’s 5th strongest brand and highest Grow with • DIA personal lines targeted propositions and roll out of our ranked in financial services b
Slide 8: IAG's five year ambition: one million new customers
NT Customer WA target QLD IAG’s five year SA Grow across Australia 400K ambition one NSW million new VIC ACT Capture the attention of the younger generation 250K customers & $400m of TAS Direct SME (Australia) 100K value1 New Zealand (Consumer) 250K 8 1H22 Results | 11 February 2022 Note (1) Five ye
Slide 9: Enterprise Platform powering efficient, secure, informed experiences
Enterprise Platform Consistent products and services to customers wherever Single, core insurance platform underpins our digital ambitions powering they are – from wherever our to enable >80% of interactions people are across digital channels efficient, secure, informed experiences Support for all t
Slide 10: Financials
Financials Michelle McPherson Chief Financial Officer 10 1H22 Results | 11 February 2022
Slide 11: Financial summary
1H21 1H22 Change GWP ($m) 6,188 6,570 6.2% NEP ($m) 3,723 3,963 6.4% Insurance profit1 ($m) 667 282 57.7% Underlying insurance margin2 (%) 15.9 15.1 80bps Reported insurance margin (%) 17.9 7.1 1080bps Financial Net (loss)/profit after tax ($m) (460) 173 nm summary Cash earnings ($m) 462 176 61.9% D
Slide 12: Favourable market environment rate increases underpinning GWP momentum
Favourable market environment rate increases underpinning GWP momentum Group GWP growth Strong rate rises to counter inflation, perils allowance & underperforming lines 0.6% DIA rate increases: >4% in Motor & Home, 9% in IIA 0.8% 6.2% >1% volume growth across direct short 3.8% 3.9% tail personal lin
Slide 13: Stable underlying trend as rate increases earn through to margins
Stable underlying trend as rate increases earn through to margins Underlying margin Underlying margin ex. COVID-19 benefit ~1.2% (~0.2%) (~1.4%) 1.7% (~0.4%) 1.5% 15.9% 15.1% 14.2% 13.6% 1H21 Lower COVID Perils allowance Discount rate Other 1H22 1H21 1H22 benefit headwind timing difference Estimated
Slide 14: Positive underlying claims trend managing inflationary pressures
Positive underlying claims trend managing inflationary pressures Premium rate increases earn through Group adjusted underlying claims ratio Reduced motor claims frequency ~2.0% COVID Elevated inflationary pressures benefit impacting average claims costs ~2.0% COVID 54.5% benefit 52.8% Conservative a
Slide 15: Operating cost increases reflect investment in future transformation
Operating cost increases reflect investment in future transformation Claims handling and Gross operating costs fee-based $413m -4.6% Expense ratios $1,303m +4.4% 24.0% 23.6% Gross underwriting 2.3% expenses $890m +9.2% 2.0% Add Levies – ESL & 9.1% 8.8% TEPLA $135m Underwriting expenses Commission ex
Slide 16: Managing expense trade-offs to constrain operating cost growth
Managing expense trade-offs to constrain operating cost growth Costs to transform 1H22 + 22.1% ~$250m Gross operating costs Increased technology spend, ~$2,500m 1H22 + 4.4% compliance and FY21 FY22 FY23 governance costs Costs to maintain ~$2,250m 1H22 + 2.7% Reduction in fee based expenses owing to
Slide 17: Full year perils estimate maintained with solid 2H22 reinsurance protection
Full year perils estimate maintained with solid 2H22 reinsurance protection Natural perils vs. allowance $681m $350m $169m $1,045m aggregate cover protection in FY22 (gross basis) $255m $1,045m MER of $257m $382m estimate implies 2H22 perils costs slightly below $95m Net perils Allowance Estimate at
Slide 18: Reserving and additional matters
Reserving and additional matters Additional matters No significant change to Prior period reserve movements business interruption provision $1,222m $18m $1m $18m $1m $8m ($34m) ($28m) $485m ($17m) Maintain no net exposure ($85m) to trade credit insurance No further charges associated with customer r
Slide 19: Strong capital position above mid-point of targeted range
Strong capital position above mid-point of targeted range Movement in CET1 ratio 19 1H22 Results | 11 February 2022
Slide 20: Guidance & Value Proposition
Guidance & Value Proposition Nick Hawkins Managing Director and Chief Executive Officer 20 1H22 Results | 11 February 2022
Slide 21: Upgraded GWP growth guidance, reported margin on track
Upgraded GWP Features of FY22 guidance growth guidance GWP reported margin ‘Mid single-digit growth’1 for the full year (previously ‘low single-digit’) on track Reported margin Margin impact Initial FY22 reported margin guidance 13.5-15.5% $55-$65m net positive COVID-19 impact ~75bps (~150bps 1H22 i
Slide 22: Our value proposition
Our value proposition Medium-term margin target Our strengths Our strategy Key value drivers Our aspirations • Leading brands • Grow with our customers • Customer growth • “Create a stronger, • Scale and reach • Build better businesses • Claims management more resilient IAG” • Superior customer expe
Slide 23: Investor Relations
Investor Relations James Coghill Nigel Menezes Mobile. +61 (0)412 426 272 Mobile. +61 (0)411 012 690 Email. james.coghill@iag.com.au Email. nigel.menezes@iag.com.au Media Amanda Wallace Mobile. +61 (0)422 379 964 Email. amanda.wallace@iag.com.au Insurance Australia Group Limited ABN 60 090 739 923 L
Slide 24: Appendix 1: FY22 Guidance and Outlook
Appendix 1: FY22 Guidance and Outlook Following stronger than expected GWP growth in 1H22 and ongoing supportive economic o Net natural perils claim costs of $1,045m, in line with the 2 November 2021 increase of conditions, IAG is upgrading GWP guidance and reaffirming reported insurance margin appr
Slide 25: Important information
Important information This presentation contains general information current as at 11 February 2022 (unless Any forward-looking statements, opinions and estimates in this presentation are based otherwise stated) and is not a recommendation or advice in relation to or any product on assumptions and c
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