Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Presentation (October 2009)
104 slides from Insurance Australia's investor presentation, Oct 30, 2009
Slide 1: Investor Briefing: Progressing to Plan
INVESTOR BRIEFING: PROGRESSING TO PLAN 30 OCTOBER 2009 Insurance Australia Group Limited ABN 60 090 739 923
Slide 2: Group Strategy and Priorities
1 GROUP STRATEGY AND PRIORITIES MIKE WILKINS MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER
Slide 3: Group Strategy and Priorities: A Clear Direction
GROUP STRATEGY AND PRIORITIES A CLEAR DIRECTION OUR Deliver superior performance by actively managing our portfolio STRATEGY and driving operational performance and execution • Improve our performance in Australia and New Zealand OUR PRIORITIES • Pursue selective general insurance growth opportuniti
Slide 4: Executing the Strategy Agenda
EXECUTING THE STRATEGY AGENDA 08:30-08:45 Welcome and Group Strategy Mike Wilkins Improving our performance in Australia and New Zealand 08:45-09:15 Australia Direct Andy Cornish 09:15-09:45 Australia Intermediated (CGU) Duncan West 09:45-10:15 New Zealand Ian Foy Pursuing selective general insuranc
Slide 5: Progressing to Plan: FY09, A Year of Rebuilding
PROGRESSING TO PLAN FY09: A YEAR OF REBUILDING PRIORITY STATUS Move to a simpler operating model 3 Deliver $130m in annualised pre-tax cost savings 3 Strengthened Executive team 3 Pursue select growth opportunities in Asia 3 Scale back operations in the UK 3 Focus on driving performance and optimisi
Slide 6: Progressing to Plan but More to Do
PROGRESSING TO PLAN BUT MORE TO DO Improving our performance in Australia and New Zealand AUSTRALIA DIRECT • Building on a strong base CGU • Focusing on the fundamentals NEW ZEALAND • Improving our performance Pursuing selective general insurance growth options UNITED KINGDOM • Strengthening our spe
Slide 7: Executive Team: The Right Team to Drive Performance
EXECUTIVE TEAM THE RIGHT TEAM TO DRIVE PERFORMANCE MIKE WILKINS MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER JUSTIN BREHENY JACKI JOHNSON CHIEF EXECUTIVE OFFICER, CHIEF EXECUTIVE OFFICER, ASIA THE BUZZ ANDY CORNISH LEONA MURPHY CHIEF EXECUTIVE OFFICER, GROUP EXECUTIVE, DIRECT INSURANCE CORPORATE OFFI
Slide 8: Australia Direct
2 AUSTRALIA DIRECT Building on a strong base ANDY CORNISH CHIEF EXECUTIVE OFFICER
Slide 9: Business Overview: Leading Market Positions in NSW & Victoria
BUSINESS OVERVIEW LEADING MARKET POSITIONS IN NSW & VICTORIA AUSTRALIA DIRECT Western Australia Queensland GWP % Total 4.7% GWP % Total 6.7% GWP Growth ~10% GWP Growth ~25% New South Wales/ACT GWP % Total 66.7% GWP Growth ~10% South Australia/Tasmania * Victoria GWP % Total 2.2% GWP % Total 19.8% GW
Slide 10: Market Environment: Competitive Market, but Rational Pricing
MARKET ENVIRONMENT COMPETITIVE MARKET, BUT RATIONAL PRICING AUSTRALIA DIRECT Motor Home Motor Asset Base Growth Home Asset Base Growth 4% 2.5% 3% 2.0% 1.5% 2% 1.0% 1% 0.5% 0% 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: AAI Source:
Slide 11: Our Competitive Advantage: Combination of Strengths
OUR COMPETITIVE ADVANTAGE COMBINATION OF STRENGTHS AUSTRALIA DIRECT Customer value proposition Competitive Advantage Product breadth, service & price offering Business model Affinity of brand with insurance Brand strength Scale PAGE 12
Slide 12: Our Competitive Advantage: Customer Value Proposition
OUR COMPETITIVE ADVANTAGE CUSTOMER VALUE PROPOSITION AUSTRALIA DIRECT “Never on your own – there when you need us” Value Proposition Always relevant A fair go Being there • Flexible • Community spirited • Consistent • Simple/easy • Fair/equitable • Accessible How • Fast • Humanistic • Safe/certain D
Slide 13: Strategic Priorities: Building on a Strong Base
STRATEGIC PRIORITIES BUILDING ON A STRONG BASE AUSTRALIA DIRECT Enhancing our customer insights and delivery – Further developing our knowing our customers’ industry leading risk needs and ensuring all our selection and pricing products and services are geared towards fulfilling ng those needs g i i
Slide 14: Progress Against Strategy: Customer
PROGRESS AGAINST STRATEGY CUSTOMER AUSTRALIA DIRECT • Review and enhance customer measurement methodologies Enhancing our • Review and refine product suite in line customer insights with customer insights and delivery – • Review and refine processes to knowing our ensure alignment with customer cust
Slide 15: Progress Against Strategy: Pricing
PROGRESS AGAINST STRATEGY PRICING AUSTRALIA DIRECT • Benchmarking best practice pricing methodologies through international Further developing search our industry leading • Identifying opportunities for risk selection and improvements and refining existing pricing practices • Implementing enhancemen
Slide 16: Progress Against Strategy: Cost
PROGRESS AGAINST STRATEGY COST AUSTRALIA DIRECT • Cost base benchmarking • Rationalised number of projects underway and improved project governance Ensuring our products and services • Reviewing supply chain strategy – e.g. are delivered at the tendered preferred towing appropriate cost arrangements
Slide 17: Progress Against Strategy: Culture
PROGRESS AGAINST STRATEGY CULTURE AUSTRALIA DIRECT • Organisational redesign completed - new people in roles, organisational layers reduced Reinvigorating our • Accountability clearly defined culture to further • Redesigned incentive program strengthen our customer focus and • Rolling out balanced s
Slide 18: Outlook: Further GWP Growth, Increased Margin
OUTLOOK FURTHER GWP GROWTH, INCREASED MARGIN AUSTRALIA DIRECT • Australia Direct is expecting to achieve further GWP growth and an increased insurance margin in FY10, derived from: – The full benefit of price increases implemented in FY09 – Further rate increases – Benefits from past and ongoing eff
Slide 19: Australia Intermediated (CGU)
3 AUSTRALIA INTERMEDIATED (CGU) Focusing on the fundamentals DUNCAN WEST CHIEF EXECUTIVE OFFICER
Slide 20: Business Overview: Leading Intermediated Insurer
BUSINESS OVERVIEW LEADING INTERMEDIATED INSURER CGU • One of Australia's largest intermediated general insurers FY09 GWP by Class – GWP ~$2.4bn Other Commercial – Major employer ~3,500 FTEs Short Tail Workers' Comp • Large SME portfolio with growing capability in the corporate market • Australia's l
Slide 21: Business Overview: Diverse Distribution Footprint
BUSINESS OVERVIEW DIVERSE DISTRIBUTION FOOTPRINT CGU • Diverse distribution channels - brokers, authorised representatives, financial institutions, affinity partners and motor dealers • Strong market share across intermediated business in all states FY09 GWP BY CHANNEL FY09 GWP BY STATE WA Motor Dea
Slide 22: Business Overview: Devolved Business Structure
BUSINESS OVERVIEW DEVOLVED BUSINESS STRUCTURE CGU • CGU restructured into five autonomous businesses in August 2008 • Structure based around end customers • Four support business units provide centralised core shared services CGU Strategic Business Units Workers’ Swann FI&A Retail Corporate Compensa
Slide 23: Market Environment: Gradually Hardening, but Patchy
MARKET ENVIRONMENT GRADUALLY HARDENING, BUT PATCHY CGU • Commercial market remains competitive – Aggressive competition for market share – Rates gradually hardening, but increases still patchy – SME business typically supporting increases of ~3-5% • Workers’ compensation rates beginning to harden •
Slide 24: Competitive Advantage: Strong Brand, Network and Partnerships
COMPETITIVE ADVANTAGE STRONG BRAND, NETWORK AND PARTNERSHIPS CGU Likelihood of Recommending • Strong brand with 150-year heritage • National network of 76 branches • Strong authorised representative network • Strong relationships with key brokers Brokers Authorised Reps CGU Competitors (Avg.) Net Pr
Slide 25: Strategic Priorities: Focusing on the Fundamentals
STRATEGIC PRIORITIES FOCUSING ON THE FUNDAMENTALS CGU Underwriting Pricing discipline and risk selection Management Claims Reducing indemnity and claims handling Management costs Customer Focused customer value propositions & Brand and rebuilding brand awareness Business Transformation of business p
Slide 26: Progress Against Strategy: Underwriting Discipline and Risk Selection
PAGE 27 Risk Selection Risk Acceptance Risk Accumulation Monitoring Coverage Quotes & Renewal Invites Referral process Premium Rating IV. CASE UNDERWRITING Placement of Reinsurance (limited applicability to Personal Lines) Claim Interactions Data Management Statistical Rates I. GOAL CLARITY Portfoli
Slide 27: Progress Against Strategy: Claims Management and Handling Costs
PROGRESS AGAINST STRATEGY CLAIMS MANAGEMENT AND HANDLING COSTS CGU • Already delivering cost savings – Improved recoveries – Better utilisation of preferred smash repair networks – More effective use of loss adjusters • Additional future benefits from new business models – Loss adjuster – Builder –
Slide 28: Progress Against Strategy: Customer Value Propositions
PROGRESS AGAINST STRATEGY CUSTOMER VALUE PROPOSITIONS CGU • Customer Value Propositions (CVPs) developed for all strategic business units and niche offers • Current focus on refining, embedding and applying CVPs Review Customer Customer Build & Test Design & Deliver Product & & Market Value Discover
Slide 29: Progress Against Strategy: Rebuilding Brand Awareness
PROGRESS AGAINST STRATEGY REBUILDING BRAND AWARENESS CGU • National campaign launched March 2009 • Supported key June renewal period • Focused on building brand awareness and increasing consideration to buy from CGU • Strong increases achieved in both brand awareness and consideration SME Brand Awar
Slide 30: Progress Against Strategy: Business Processes and Technology
PROGRESS AGAINST STRATEGY BUSINESS PROCESSES AND TECHNOLOGY CGU • Historic underinvestment in technology • Transformation of business processes commencing in FY10 – Comprehensive series of IT upgrades – Improving interactions with intermediaries, partners and customers – Delivering efficiencies thro
Slide 31: Progress Against Strategy: People Capability and Driving Results
PROGRESS AGAINST STRATEGY PEOPLE CAPABILITY AND DRIVING RESULTS CGU Attract, Source, Recruit and Retain Recognise Develop and Reward Capabilities Performance Employer of Choice Engaged People Lead for Drive for Performance Performance More than 90% of employees believe strongly in CGU’s goals PAGE 3
Slide 32: Outlook: Positive Momentum Building
OUTLOOK POSITIVE MOMENTUM BUILDING CGU • Steady improvement in underlying profitability expected in FY10 – Past and ongoing rate increases – Ongoing focus on underwriting discipline, claims management and costs • FY10 reported profitability expected to be impacted by: – Reduced prior period reserve
Slide 33: New Zealand
4 NEW ZEALAND Improving our performance IAN FOY CHIEF EXECUTIVE OFFICER
Slide 34: Business Overview: New Zealand's Largest General Insurer
BUSINESS OVERVIEW NEW ZEALAND’S LARGEST GENERAL INSURER NEW ZEALAND • IAG NZ is the largest general insurer in New Zealand – GWP NZ$1.2bn – 2,000 FTE – Market share ~35% (ICNZ Statistics June 2009) • Broad base of customers across three major channels (Direct, Broker and Business Partners) Product P
Slide 35: Market Environment: Recovering Economy
MARKET ENVIRONMENT RECOVERING ECONOMY NEW ZEALAND Market Annual GWP Growth Market Annual Combined Operating Ratio 7.0% 106% 104% 6.0% 102% 5.0% 100% 98% 4.0% 96% 94% 3.0% 92% 2.0% 90% 88% 1.0% 86% 0.0% 84% Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun
Slide 36: Competitive Advantage: Strength of Franchise
COMPETITIVE ADVANTAGE STRENGTH OF FRANCHISE NEW ZEALAND IAG NZ is New Zealand’s largest general insurer with 1.2 million customers and 2.7 million polices 50% New Zealand’s oldest insurance 31% brand celebrating 150 years in 25% 15% 13% 6% business in May 2009 0% IBANZ insurer of the year, 3 of the
Slide 37: Strategic Priorities: Improving Our Performance
STRATEGIC PRIORITIES IMPROVING OUR PERFORMANCE NEW ZEALAND Return on Risk- Delivering an acceptable return to shareholders Based Capital (support Group’s ROE target of >1.5x WACC) Portfolio Pricing Ensuring portfolios match price with risk Segmentation Understanding our customers and risks better Pr
Slide 38: Progress Against Strategy: Return on Risk-Based Capital
PROGRESS AGAINST STRATEGY RETURN ON RISK-BASED CAPITAL NEW ZEALAND Our Vision Return on Risk- “To be New Based Capital Zealand’s insurer of choice” • Move towards risk-based capital allocation for all New Zealand product classes • Pricing and profitability of product classes and Business Units becom
Slide 39: Progress Against Strategy: Portfolio Pricing
PROGRESS AGAINST STRATEGY PORTFOLIO PRICING NEW ZEALAND Our Vision “To be New Portfolio Pricing Zealand’s insurer of choice” • Implementing price and excess increases to drive portfolio level profitability • Rating strength measures extended across all product classes and large accounts • Focus on c
Slide 40: Progress Against Strategy: Segmentation
PROGRESS AGAINST STRATEGY SEGMENTATION NEW ZEALAND Our Vision “To be New Segmentation Zealand’s insurer of choice” Risk-Based Pricing Customer Segmentation Moving from 25 geographical • Refinement of enterprise-wide rating zones to over 4,000 brand architecture and customer Example Zone 1 segmentati
Slide 41: Progress Against Strategy: Process & Decisions
PROGRESS AGAINST STRATEGY PROCESS & DECISIONS NEW ZEALAND Our Vision “To be New Process & Zealand’s insurer Decisions of choice” • Claims leakage processes review including industry benchmarking for each channel • Review of delegated underwriting authorities model and underwriting disciplines • Intr
Slide 42: Outlook: Turnaround Is on Track
OUTLOOK TURNAROUND IS ON TRACK NEW ZEALAND • Economic conditions weak but signs of improvement • Insurance cycle has 18-24 months further hardening • Focus continues on: – Responsible price increases – Better risk selection and pricing – Tightening of underwriting disciplines – Claims control initia
Slide 43: Break
BREAK Presentation will resume shortly
Slide 44: United Kingdom
5 UNITED KINGDOM Specialist underwriter NEIL UTLEY CHIEF EXECUTIVE OFFICER
Slide 45: Business Overview: Specialist Motor Insurer
BUSINESS OVERVIEW SPECIALIST MOTOR INSURER UNITED KINGDOM IAG UK’s core capability is its underwriting strength which is distributed by specialist and commercial brokers, and affinity partners • 6th largest UK motor insurer • c.4% share of total motor market, 25% of motorcycle market “1st Class” Und
Slide 46: Business Overview: Specialist Motor Insurer
BUSINESS OVERVIEW SPECIALIST MOTOR INSURER UNITED KINGDOM EquitySpecialist Red StarMotor FY09Led GWPGeneral Insurer • Refocused to specialist underwriting Product – Divestment of mass market businesses Other Private Car - Broker – Business moving from low margin personal Private Car - Direct Househo
Slide 47: Market Environment: Market Hardening
MARKET ENVIRONMENT MARKET HARDENING UNITED KINGDOM • UK underwriting • Effect on profitability and growth – Challenging for a number of years – Economic downturn is likely to help the market harden – Few with CORs below 100% – Less prior year releases available - – Some hardening of private car rate
Slide 48: Competitive Advantage: Core Capabilities in Underwriting
COMPETITIVE ADVANTAGE CORE CAPABILITIES IN UNDERWRITING UNITED KINGDOM • ERS continues to outperform the market – Expertise of people - specialist knowledge and strong broker relationships – Niche strategy – Ruthless attention to detail – Bespoke claims service with expertise for each class of busin
Slide 49: Competitive Advantage: Core Capabilities in Underwriting
COMPETITIVE ADVANTAGE CORE CAPABILITIES IN UNDERWRITING UNITED KINGDOM • Specialised and customised – Tight control and strong market reputation – Group specialised owned distribution – Specialist units in underwriting and claims • Access to decision makers – Larger broker relationships owned by sen
Slide 50: Strategic Priorities: Growth in Target Classes (Specialist Underwriting)
STRATEGIC PRIORITIES GROWTH IN TARGET CLASSES UNITED KINGDOM 1 Specialist underwriting y Divestment of mass market Streamline operations and refocus on specialist underwriting − Divestment completed y Growth in fleet and special risks Establish position as top 3 insurer for chosen markets − Growth d
Slide 51: Strategic Priorities: Growth in Target Classes (Specialist Distribution)
STRATEGIC PRIORITIES GROWTH IN TARGET CLASSES UNITED KINGDOM 2 Specialist distribution y Simplify and grow affinity Review EDBL cost base and achieve growth broking through new partnerships − Cost base addressed − Strong growth boosted by new partnerships y Increase bike broking Separate and special
Slide 52: Strategic Priorities: Growth in Target Classes (Strategic Stakes)
STRATEGIC PRIORITIES GROWTH IN TARGET CLASSES UNITED KINGDOM 3 Strategic stakes y Growth in existing strategic Support innovative start-ups to drive better stakes quality underwriting to ERS − Increased shareholding in IDL to 50.1% − Continued support of Arista (25% holding) PAGE 53
Slide 53: Progress Against Strategy: Growth in Target Classes
PROGRESS AGAINST STRATEGY GROWTH IN TARGET CLASSES UNITED KINGDOM FY10 FY11 FY12 FY13 FY14 Initiative H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Time-frame Divestment of the mass market Complete Divestment in distribution businesses mass market Efficiency savings Short Growth in Fleet growth through market Mediu
Slide 54: Outlook: Specialist Underwriter and Distribution
OUTLOOK SPECIALIST UNDERWRITER AND DISTRIBUTION UNITED KINGDOM General Market Hardening rates Satellite Preferred ERS Underwriting Offices Brokers Key growth area Strategic Stakes IAG UK IDL - Commercial IAG UK Specialist IAG UK Specialist Commercial underwriting agency Affinity Motorcycle Broker Ar
Slide 55: Asia
6 ASIA Growth opportunities for the future JUSTIN BREHENY CHIEF EXECUTIVE OFFICER
Slide 56: Business Overview: Snapshot of Our Current Businesses
BUSINESS OVERVIEW SNAPSHOT OF OUR CURRENT BUSINESSES ASIA Thailand Thailand Malaysia India China • 5th largest motor • Commercial • JV with AmBank, • JV with India’s • Roadside insurer insurance Malaysia’s 3rd largest largest bank, assistance bank State Bank of provider and • IAG purchased • Operati
Slide 57: Asia Strategy: Portfolio of High Growth, Profitable Personal Line Businesses
ASIA STRATEGY DEVELOP A PORTFOLIO OF HIGH GROWTH, PROFITABLE AND PREDOMINANTLY PERSONAL LINE BUSINESSES IN SELECT MARKETS ASIA We create value in each country in four ways: Capture Capture system system • Position our existing businesses to fully capture the growth growth favourable growth profile o
Slide 58: Strategic Priorities: Focus Evolves from Initial Entry to Operational
STRATEGIC PRIORITIES FOCUS EVOLVES FROM INITIAL ENTRY TO OPERATIONAL ASIA HORIZON 1 HORIZON 2 HORIZON 3 Building the platform Consolidating & returns Newly emerging & consolidating • NZI • Operational excellence • 1st Safety uplift to 96% • M&A: new acquisitions • CAA uplift to 100% • Capitalising o
Slide 59: Execution of Acquisitions: Disciplined Approach to New Market Entry
EXECUTION OF ACQUISITIONS A DISCIPLINED APPROACH TO NEW MARKET ENTRY ASIA Buy into a What we Scan Asia to Build Diagnose Integrate & Develop market local company identify Understand relationships issues & Build local consolidate need to entry/acquisition as markets to the market with owners & develo
Slide 60: Thailand: Market Environment
THAILAND: MARKET ENVIRONMENT DIFFICULT POLITICAL AND ECONOMIC ENVIRONMENT ASIA Thailand GWP (Non-Life) Political & Economic 120,000 100,000 16.00% 14.00% • Political environment remains volatile, resulting in: 80,000 12.00% 10.00% – Curtailed public spending 60,000 8.00% 40,000 6.00% 4.00% – Depress
Slide 61: Thailand: Business Snapshot
THAILAND: BUSINESS SNAPSHOT TWO OPERATIONS: SAFETY & NZI ASIA Safety – underwrites NZI – underwrites large personal lines commercial risks Marine Fire Fire Other Innovative Engineering Motor Private Accident Marine Motor Accident Competitive Advantage - Low cost operating model, Competitive Advantag
Slide 62: Malaysia: Market Environment
MALAYSIA: MARKET ENVIRONMENT A STABLE, WELL-REGULATED INSURANCE MARKET ASIA Malaysia GWP (Non-Life) Political & Economic 12,000 10.00% 11,500 8.00% • Increase in political risk in past 12 months but stable 11,000 10,500 6.00% 4.00% • GFC, slowing exports and higher unemployment have seen GDP growth
Slide 63: Malaysia: Business Snapshot
MALAYSIA: BUSINESS SNAPSHOT LARGELY MOTOR FOCUS, WITH ESTABLISHED DISTRIBUTION ASIA AmG – motor insurer Malaysia GI Ranking (by GWP) 2008 AmG is No.2 in Motor policies by GWP Personal Accident Other Liability Fire Kurnia AmG + Allianz MSIG Etiqa AmG Tokio Lonapc AIG Berjaya Uni Asia MAA MAA Marine S
Slide 64: India: Market Environment
INDIA: MARKET ENVIRONMENT GDP GROWTH EXPECTED TO RECOVER TO 9-10% ASIA India General Insurance GWP & growth 35000 30000 25% Political & Economic 20% 25000 • Incumbent government re-elected in May 2009 - Crores 20000 15% 15000 10% enhances the likelihood of economic reform 10000 5000 5% • Likely intr
Slide 65: India: State Bank of India Joint Venture
INDIA: STATE BANK OF INDIA JOINT VENTURE KEY REGULATORY APPROVALS HAVE BEEN OBTAINED ASIA SBI General Insurance State Bank of India • Joint venture signed November 2008 • Largest commercial bank in India • All Reserve Bank of India approvals • SBI and six associate banks have over 16,000 have been o
Slide 66: India: State Bank of India Joint Venture on Track
INDIA: STATE BANK OF INDIA JOINT VENTURE ON TRACK TO COMMENCE FIRST HALF CALENDAR 2010 ASIA People Systems • IAG – project team of 9 full time and 2 part • Selection of a general insurance IT time specialists in distribution, claims, solution in process of finalisation underwriting, actuarial, reins
Slide 67: China: Business Development Update
CHINA: BUSINESS DEVELOPMENT UPDATE A CAUTIOUS APPROACH TO ENTRY OPTION ASIA • Stable market fundamentals − First calendar half 2009 GWP growth of 19% and forecast to grow at 15- 20% over next 5 years − CIRC improving industry supervision, including stress testing and strengthening solvency positions
Slide 68: Outlook: Operational Improvement and Business Development
OUTLOOK FURTHER OPERATIONAL IMPROVEMENT AND CONTINUED BUSINESS DEVELOPMENT ASIA Operational performance • Further improvement in underlying performance of existing businesses: − Modest GWP growth in Thailand and Malaysia − Further improvement in NZI, Safety and AmG underwriting performance − Sustain
Slide 69: The Buzz
7 THE BUZZ New on-line business JACKI JOHNSON CHIEF EXECUTIVE OFFICER
Slide 70: Market Environment: A Fast-Changing Environment
MARKET ENVIRONMENT A FAST-CHANGING ENVIRONMENT THE BUZZ 1 Changing consumer behaviour and demographic 2 Switching behaviour changing 3 Competitor activity 100 Reasons for switching insurers in NSW* 90 80 70 60 50 % 40 30 20 10 0 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Price Service/Product Clai
Slide 71: Creating The Buzz: Brought to Market Inside 12 Months
CREATING THE BUZZ BROUGHT TO MARKET INSIDE 12 MONTHS THE BUZZ May 2008 July 2008 Sept 2008 CEO and Customer Board review Dec 2008 Feb 2009 small team insight of strategy Board Board appointed sessions and plan update update 15 May Launch June 2008 Aug 2008 Nov 2008 16 April Silicon Valley eVentures
Slide 72: Business Overview: Low Cost On-line Business
BUSINESS OVERVIEW LOW COST ON-LINE BUSINESS, TARGETING 25-54 YR OLDS THE BUZZ Pricing Sales Customer Loyalty & & Claims Strategy & Renewal Product Distribution • On-line • Good referral lodgement & rate tracking • Low • Windscreen cancellations repair • Strong testimonials PAGE 73
Slide 73: Business Overview: Ease, Transparency, Speed
BUSINESS OVERVIEW EASE, TRANSPARENCY, SPEED THE BUZZ PAGE 74
Slide 74: Business Overview: Low Cost On-line Business
BUSINESS OVERVIEW LOW COST ON-LINE BUSINESS, TARGETING 25-54 YR OLDS THE BUZZ Pricing Sales Customer Loyalty & & Claims Strategy & Renewal Product Distribution • On-line • Good referral lodgement & rate tracking • Low • Windscreen cancellations repair • Strong testimonials PAGE 75
Slide 75: Competitive Advantage: Differentiation and Low Cost
COMPETITIVE ADVANTAGE DIFFERENTIATION AND LOW COST, TECHNOLOGY-ENABLEDTHE BUZZ • Customer led design Differentiation • Culture of innovation, governance & focus • Agility • Scaleable • Self-serve Low Cost • Targeted marketing • Customers as advocates PAGE 76
Slide 76: Strategic Priorities: Establish Brand and Continue to Innovate
STRATEGIC PRIORITIES ESTABLISH BRAND AND CONTINUE TO INNOVATE THE BUZZ • Brand awareness and driving the right traffic to the site • Customer engagement in ongoing developments • Customers as advocates and strongest referral sources • Underwriting and claims management discipline • Social media stra
Slide 77: Progress Against Strategy: Hard Launch in September 2009
PROGRESS AGAINST STRATEGY HARD LAUNCH IN SEPTEMBER 2009 THE BUZZ • Site optimisation • Paid search Soft Launch • Banner ads – testing proposition • Building our “tribe” • Transitioning our community • Cinema ads • Outdoor ads • Launch of 60 seconds competition Hard Launch • PR activity • Social medi
Slide 78: Measures for Success
MEASURES FOR SUCCESS ROI FROM GROWTH WITH DISCIPLINED UNDERWRITING THE BUZZ • Lead indicators: – Traffic is in target demographic and relevant for time of purchase (low bounce rate) – Conversion rate – full policy to purchase – Customer advocacy – referral rate and retention – Low expense rate – cla
Slide 79: Outlook: Deliver on Strategic Benefits
OUTLOOK DELIVER ON STRATEGIC BENEFITS THE BUZZ • Growth of internet transactors will continue and will drive customer expectations of general insurers • The Buzz expects to: − Provide a positive Return on Investment by year 3 − Secure 1% of motor GWP by targeting specific segments − Continue to evol
Slide 80: Strategic and Cultural Alignment
8 STRATEGIC AND CULTURAL ALIGNMENT LEONA MURPHY GROUP EXECUTIVE, CORPORATE OFFICE
Slide 81: Group Strategy & Priorities: A Clear Direction
GROUP STRATEGY & PRIORITIES A CLEAR DIRECTION OUR Deliver superior performance by actively managing our portfolio STRATEGY and driving operational performance and execution • Improve our performance in Australia and New Zealand OUR PRIORITIES • Pursue selective general insurance growth opportunities
Slide 82: Active Portfolio Management: Strategic and Operational
ACTIVE PORTFOLIO MANAGEMENT STRATEGIC AND OPERATIONAL Active portfolio management Strategic portfolio Operational portfolio management management “Deciding where to compete “Maximising operational and invest” performance” (including current and potential new businesses) PAGE 83
Slide 83: Alignment at IAG: Governance and Strategy Oversight
ALIGNMENT AT IAG GOVERNANCE AND STRATEGY OVERSIGHT BSC = Balanced scorecard PAGE 84
Slide 84: Achieving Strategic Alignment: Tools and Discipline
ACHIEVING STRATEGIC ALIGNMENT THE TOOLS AND DISCIPLINE THAT MAKE IT HAPPEN Strategy Development / Strategy Map Target Setting (BSC) Refinement Strategic Objectives Measures Targets Initiatives Revenue Cost F1 - Improve returns • Return on • +10% • Finance 2000 F2 - Broaden revenue mix investment • -
Slide 85: Group Strategy Map FY10
GROUP STRATEGY MAP FY10 THE LINK BETWEEN STRATEGY AND TARGETS FINANCIAL Secure position within Top quartile Return on Equity chosen industry Total Shareholder (ROE) > 1.5 X WACC and classes Return (TSR) CUSTOMER Creating superior customer experiences INTERNAL . Strategy Business Sustainability Capit
Slide 86: Achieving Strategic Alignment: From Performance to Reward
ACHIEVING STRATEGIC ALIGNMENT RIGHT THROUGH FROM PERFORMANCE TO REWARD STRATEGY How we will compete STRATEGY MAP Mapping value creation BALANCED SCORECARD Measuring implementation SHORT TERM INCENTIVE Rewarding aligned performance PAGE 87
Slide 87: Achieving Cultural Alignment: Embedding What We Value
ACHIEVING CULTURAL ALIGNMENT EMBEDDING WHAT WE VALUE Division Culture specific Division Behaviours Processes specific Symbols Systems Rituals Consistent At IAG we value: across the PERFORMANCE, INTEGRITY, RESPECT and a Group CONSIDERED SENSE OF URGENCY Source: Adapted from Carolyn Taylor Walking the
Slide 88: Measuring the Outcomes: High Employee Engagement
MEASURING THE OUTCOMES HIGH EMPLOYEE ENGAGEMENT IAG overall vs. Towers Watson’s Global High Performance Norm Category Scores Ranked By Difference From Benchmark Favourable Scores Differences From Benchmark Risk Culture 82 5 Engagement 83 1 0 25 50 75 100 -10 -5 0 5 10 Coloured Difference Bars indica
Slide 89: Aligning Our Leaders: Talent and Succession Management
ALIGNING OUR LEADERS TALENT AND SUCCESSION MANAGEMENT Executive Tier Group talent and succession framework applied with tailored IAG CEO components Divisional CEO / Group Executive Managed by the IAG Board ‘Heads Of’ / General Managers Top Tier Group talent and succession Emerging Talent framework a
Slide 90: Aligning Our Leaders: Talent and Succession Management
ALIGNING OUR LEADERS TALENT AND SUCCESSION MANAGEMENT PAGE 91
Slide 91: Driving Our Long Term Success: Business Sustainability
DRIVING OUR LONG TERM SUCCESS BUSINESS SUSTAINABILITY PAGE 92
Slide 92: Capital, Reinsurance & Investments
9 CAPITAL, REINSURANCE & INVESTMENTS NICK HAWKINS CHIEF FINANCIAL OFFICER
Slide 93: Capital Position: Risk-Based Capital Allocation Methodology
CAPITAL POSITION RISK-BASED CAPITAL ALLOCATION METHODOLOGY • Long term target range 1.45 – 1.50 times MCR − Based on internally determined capital requirements − Current group requirement approximately $3bn • Current position (30 June 2009) 1.79 times MCR − Approximately 20% overweight • Risk-based
Slide 94: ROE Target of >1.5x WACC
ROE TARGET OF >1.5X WACC A ‘THROUGH THE CYCLE’ TARGET • Cash ROE target of at least 1.5 times WACC through the cycle − Based on net profit after tax, adjusted for amortisation of intangibles and unusual items • Equates to: − An ROE of at least 15%, based on an estimated WACC of c.10% − An insurance
Slide 95: Capital Mix: Revised Target Mix Based on Net Tangible Equity
CAPITAL MIX REVISED TARGET MIX BASED ON NET TANGIBLE EQUITY • Revised capital mix target introduced from FY09 − Based on net tangible equity (i.e. after deduction of goodwill and intangibles) − Accords with approach taken by both the regulator and the rating agencies • Targeted mix − Ordinary equity
Slide 96: Ongoing Capital Management: RES Proposal
ONGOING CAPITAL MANAGEMENT RES PROPOSAL WILL FURTHER STRENGTHEN CAPITAL POSITION • Proposal to amend RES into on-balance sheet Tier 1 instrument − Strengthens capital position – pro forma MCR multiple of 2.03 − Pro forma debt to total tangible capitalisation rises to approximately 39% − Provides fle
Slide 97: Reinsurance Strategy: Key Element of Capital Management
REINSURANCE STRATEGY KEY ELEMENT OF CAPITAL MANAGEMENT IAG CATASTROPHE COVER - 1 JULY-31 DECEMBER 2009 $m 4100 • High quality and diversified counterparty risk profile • Integrated catastrophe programme with three key Main Catastrophe Programme (Prepaid elements Reinstatement 2nd Event) • Next major
Slide 98: Reserving Approach: Reduced Release Outlook
RESERVING APPROACH REDUCED RELEASE OUTLOOK • Adequacy of reserving maintained − 90% probability of adequacy − Bulk of releases in FY09 from central estimate − Increase in risk margin to 19.1% in FY09 (from 18.7%) driven by business mix • Level of reserve releases continuing to diminish − Residual ef
Slide 99: Investment Portfolio: Conservative Asset Mix
INVESTMENT PORTFOLIO CONSERVATIVE ASSET MIX • Two distinct categories, with differing strategies Group Investment Asset Allocation - $10.6bn • Technical reserves (c.$8bn) Growth 6% − Backing outstanding claims and unearned premium liabilities − 100% fixed interest and cash − Duration matched – c.2.8
Slide 100: Investment Strategies: Increasing Growth Assets
INVESTMENT STRATEGIES INCREASING GROWTH ASSETS WITHIN SHAREHOLDERS’ FUNDS • Shareholders’ funds’ exposure to growth assets had fallen to 22% by 30 June 2009 − No rebalancing in face of equity market falls − Capital raising proceeds invested entirely in fixed interest • Long term target of 30-50% of
Slide 101: Group Outlook
10 GROUP OUTLOOK MIKE WILKINS MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER
Slide 102: Group Strategy and Priorities: A Clear Direction
GROUP STRATEGY AND PRIORITIES A CLEAR DIRECTION OUR Deliver superior performance by actively managing our portfolio STRATEGY and driving operational performance and execution OUR • Improve our performance in Australia and New Zealand PRIORITIES • Pursue selective general insurance growth opportuniti
Slide 103: Improvement Continues in 1Q, On Track for FY10 Guidance
IMPROVEMENT CONTINUES IN 1Q ON TRACK FOR FY10 GUIDANCE • Improvement continues in 1Q driven by: – Higher premiums, including earned effect of rate rises implemented in FY09 – Full benefit of operating efficiencies in Australia and ongoing cost control across the Group – Improved performance from CGU
Slide 104: Our Business Model and Brands
OUR BUSINESS MODEL AND BRANDS DIRECT INTERMEDIATED ONLINE DIRECT DIRECT INTERMEDIATED INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE **** ** *** UNITED KINGDOM NEW ZEALAND AUSTRALIA INTERMEDIATED INTERMEDIATED ASIA INSURANCE INSURANCE OTHER * ACTIVE PORTFOLIO MANAGEMENT & GOVERNANCE (CO
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