Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2005 Earnings Presentation
29 slides from Insurance Australia's earnings presentation, Aug 19, 2005
Slide 1: Financial results Full year ended 30 June 2005
Financial results Full year ended 30 June 2005 Michael Hawker, Chief Executive Officer George Venardos, Chief Financial Officer 19 August 2005 iNsumAnee yi, 5 - “WE any Insurance Australa Group Lirnited nia scio ggg (cau Cee Stare ABN 60 090 735-998 Good morning. Welcome to the Insurance Australia G
Slide 2: Agenda
Agenda © IAG Results and operating conditions Michael Hawker Capital position Dividends Segmental analysis George Venardos Investment strategy/activities Capital IFRS Outlook Michael Hawker Conclusion & questions ag. + f “WA ssa Insurance Australa Group Lirnited NEMA SGIO Saig (cou Bown wa ABN 60 09
Slide 3: Michael Hawker
Michael Hawker yi, 5 - “WE any Insurance Australa Group Lirnited nia scio ggg (cau Cee Stare ABN 60 090 735-998 iNsumAnee
Slide 4: Record performance
Record performance © IAG * Net profit to all shareholders increased 14.3% to $760m — Increase of 25% excluding 2004 profit on sale of ClearView « Continued strong margin performance by all divisions combined with high returns from equity markets « Insurance margin of 16.3% up from 13.5% for FY04 — F
Slide 5: Financial results overview
Financial results overview Financial Results/Ratios Jun 04 GWP (ASm} d $6,427 6,673, <— Profit attributable fo all shareholders (ASm) 3665 Reported ROE % (Average Equity) to ordinary shareholders oa : 21.1% Normatised ROE % (Average Equity) to ordinary shareholdere pa ; 15.4%) ee Net cash flow from
Slide 6: Industry premium growth only 1.7%
Industry premium growth only 1.7% q@) (Australia) nd Yie Mar-04 Yie Mar-05 Australian Premiums em $'m Growth industry gross premium revenue 22,153 22,529 1.7% IAG gross written premium 5,516 5,647 24% IAG share of the market 24.9% 25.1% 8.2% industry data per APRA Insights, exciuding inwards reinsur
Slide 7: Increased storm activity - Australia
Increased storm activity - Australia The storm which crossed SE Australia in early February ranks 13th largest in terms of insured losses in Australia ‘Top 20 Australian Ineurance Disasters at July 2005 Lass In July 2005 $4 Note mie yar the event occurred é see above each har. Source: insuranve Disa
Slide 8: Increased storm activity - NZ
increased storm activity - NZ © New Zealand also experience its 13’ largest event in terms of insured losses IAG in May 2005 “oats Top 20 NZ Insurance Disasters at July 2005 e 400 i = 300 g oo 20 p= Z 100 0 ' 4 = = SS. eS s tide seabed ip o OG ty SEEPS Mig ‘hh Not to yar the event octave en above ea
Slide 9: Continued growth in contribution from operations
Continued growth in contribution from@ y operations nd Components of IAG EBITDA (exc! OE) 1,600 $4,410 1.400 $1,278m 4,200 i 4.000 800 600 400 200 Asm (z00} (400} FYGt Fyoz FOS FYo4 FY0S. insurance rosuit 34 snvestment ratum on sharwholder finds §g Non-inscwance margin’ i xNowe-cecurfing tems AAD, f
Slide 10: Key insurance ratios improved
Key insurance ratios improved q@) Expense ratio Loss ratio $4,501%0 81,0760 ovine Lose Rovio memmmiereises? Loos cat Insurance margin (before tax} Free FrO4 mam Cet Rtn emits « Continued improvement in annual performance Insurance Australia Group Limited Psrate MG ABN 60 090 729 923 10 nama scio ggi
Slide 11: Portfolio income (pre-tax)
Portfolio income {pre-tax} and inct. darivatives Sharenolds fannis 4 a 44M 2 14.6% ABS — —e Total investment income 1% ES 9.0%: St 19.0% "Returns for ihe hail years are annualised. * The yietds are stated bufore expenses, the dollar returns are stated net of expenses * The FYO5 technical reserves re
Slide 12: A range of drivers for premium
A range of drivers for premium * Volume grew by 152,000 risks in force (1.1%) — Continued high retention rates — Growth in targeted segments — eg Landlords, Home@50 and particular SME segments « Gross written premium growth was 3.8% in FYO5 * Net earned premium growth was 4.8% in FY05 * Prices in CT
Slide 13: Improving customer experience
Improving customer experience [ [thing caonerconptinisheow avai nioamsinoriate | | Cala onc ad wavicn Chains sxfinfaction Ifotor & hosne fait channels) ban Sestoing high catomer foto ovale | | Inpro Brand overtone Retetition rates wa Brand Health, sete ’ ; “WA ssa, Insurance Australia Group Limited
Slide 14: Improving shareholder returns and capital strength
Improving shareholder returns and capital strength Retum on Equity Benchmark MCR 1.60x + Since listing: MCR Multipte (times) - Average normalised ROE of 13.1% ~ Average actual ROE of 10.7% 30-Jun-03 30-Jun-04 30-Jun-05 BT! Non-hybrid capil == aeHybrid =a TZ mRES Insurance Australia Group Limited WA
Slide 15: Improving shareholder returns and capital strength
Improving shareholder returns and @ capital strength nd Retum on Equity 182% Bonchmark MCR 1.60x + Since listing: MCR Multipie (times) - Average normalised ROE of 13.1% ~ Average actual ROE of 10.7% Wdun-03 BOJuN-04 BOJUA-OS TT Aon-bybrig capital Le ttybrid ale eRes Insurance Australia Group Limited
Slide 16: Double digit dividend growth — 20%
Double digit dividend growth — 20% © IAG « Dividends for FY05 represent: — 55% of reported earnings for soo the year P — 65% of normalised earnings gm for the year « Since listing, cumulative dividend payout is 63% of cash earnings (oo) . All earings pre-goodwill amortisation and post evo Fvn2 Fvos
Slide 17: George Venardos
George Venardos yi, 5 - “WE any Insurance Australa Group Lirnited nia scio ggg (cau Cee Stare ABN 60 090 735-998 iNsumAnee Thanks Mike. Good morning.
Slide 18: Australian personal lines
Australian personal lines Half-year Half-year Half-year| Australian Personal Lines ended ended — ended Full-year Full-year ended ended Jun 04 Jun 05) Juno4 = Dec 04 Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense Underwriting pr
Slide 19: Australian commercial lines
Australian commercial lines Half-year Half-year Half-year[m Full-year Full-year ended ended = ended ended ended N04 Decdd —_ Jun 05| jun 04 dun 05 ‘Gross earned premium z 7 837 "EOS Reinsurance expense (100) £700), Net premium revenue 7 731 708 Net ciaims expense ) (518) Commission expense (90) 7) U
Slide 20: International businesses
International businesses Half-year z Full-year international operations ended ended Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense Underwriting profit Q Investment income on technical reserves Insurance profit China Automobile
Slide 21: NZ performance improved
NZ performance improved Half-year Half-year Half-year[ll Full-year New Zealand Operations ended ended Jun 04 Jun 04 sii p om Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense Underwriting profit ‘i Investment income on technical r
Slide 22: Reducing investment volatility
Reducing investment volatility Equities as a %ot Total FUM Equities as 2 “of Total Shareholders Fund rvs Prine Pres yd pos rar Ne a8 Pye Byes * Relative equity exposure has continued to reduce * Demonstrated capacity to take additional action when poor market conditions aligned with a challenging pe
Slide 23: Continued improvement in balance of risk and expected returns
Continued improvement in balance of © risk and expected returns « Equity overlay in technical reserves added $23m pre-tax (plus franking an credits} — Net exposure of technical reserve investments remains in the nature of fixed income, primarily invested in high quality fixed income securities — Dur
Slide 24: Coverage of regulatory capital requirements
Coverage of regulatory capital requirements Insurance Australia Group Tier 1 capital Paid-up ordinary shares Hybrid equity Reserves Retained earnings’? Excess technical provisions (net of tax} Less: deductions Tier 2 capital Term subordinated notes Capital base Minimum capital requirements {MCR}: Au
Slide 25: IFRS — Minimal impact on reported profits
IFRS — Minimal impact on reported © profits AG Net profit before tax as reported under Australian GAAP Write-back of goodwill amortisation Movement in defined benefit plans Share based payment expense Capitalisation of software development costs Valuation of property Net profit before tax under A-IF
Slide 26: Outlook
Outlook ten 5 MRAEA SGIO — iNsumAnee gaig (cou Bok Ce wa Insurance Australia Group Limited ABN 60 090 734 923 26
Slide 27: Outlook for FY06
Outlook for FY06 @ IAG * Strategy remains unchanged — focus on optimising our franchise in Australia and New Zealand and seeking investment opportunities to supplement future earnings — A number of opportunities continue to be explored « In terms of our existing business — GWP growth will be challen
Slide 28: Share price performance since listing
Share price performance since listing @ IAG IAG Retative Shace Price Performance YS NRSV DRE AUS Une emt INSIRARACE BE « TSR from listing to 30 June 2005 was at 82"4 percentile relative to the entities in the ASX100 Pans + f “WA ssa Insurance Australa Group Lirnited NRMA = SGIO Saig \ecu Bow. Psrare
Slide 29: Questions
Questions yi, 5 - “WE any Insurance Australa Group Lirnited nia scio ggg (cau Cee Stare ABN 60 090 735-998 iNsumAnee
Insurance Australia Group — FY2005 Earnings Presentation on 6ix