Insurance Australia Group Ltd · ASX:IAG

Insurance Australia — Investor Presentation (March 2007)

162 slides from Insurance Australia's investor presentation, Mar 29, 2007

  1. Slide 1: ASX cover letter: Investor presentation on UK operations

    Insurance Australia Group Limited ABN 60 090 739 923 388 George Street Sydney NSW 2000 Telephone 02 9292 9222 iag.com.au 29 March 2007 Manager, Company Announcements Office Australian Stock Exchange Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam INSURANCE AUSTRALIA

  2. Slide 2: Business and UK Market Overview

    Business and UK Market Overview March 2007 1

  3. Slide 3: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  4. Slide 4: Introduction & Agenda

    Introduction & Agenda London AM • Market Overview John Castagno • Overview of the Businesses Neil Utley – Equity – Hastings – Advantage • Underwriting Keith Charlton • Claims Phil Anderson Colchester PM • Direct Broking Peter Connell • Branch Broking Nick Potts • Tour of the Colchester operation Joh

  5. Slide 5: Equity Insurance Group

    © IAG Insurance Australia Group Equity Insurance Group equity INSURANCE GROUP

  6. Slide 6: Business Overview - EIG

    Business Overview - EIG Underwriting Distribution • UK’s 5th largest motor insurer and the largest • The UK’s 7th largest personal lines intermediary motorcycle insurer business (including ODIS) • The largest motor syndicate at Lloyd’s; s.218 • The largest broker in Northern Ireland • GWP of more th

  7. Slide 7: Business and Revenue Model - EIG

    Business and Revenue Model - EIG Approximately 19% of the premium underwritten by s.218 is derived from the Group’s own direct and branch distribution Revenue Streams Business Owned Distribution • Broking Profits Direct Branch 12.6% of ERS Premiums 6.3% of ERS Premiums Syndicate 218 (ERS) External B

  8. Slide 8: Equity Red Star

    Equity Red Star 7

  9. Slide 9: Acquisition History

    Acquisition History Acquisitions Acquisition of 1976 Lion/Charter Motor Synd. 495 “Right to Renew” 1978 Kinloch Motor Syndicate 82 1994 Service Motor Syndicate 979 1982 Trinity Motor Syndicate 999 1995 Dominion Insurance Co. 1987 Red Star Motor Syndicate 675 1995 Lion Insurance Co. 1987 Barbican Mot

  10. Slide 10: Performance against the Market (1)

    Performance against the Market (1) 2003 - 2005 combined shows Equity with the market leading Combined Ratio 30 Market average = 99.5% RBS 25 20 Market Share % 15 Aviva R&SA Zurich 10 Co-op Allianz 5 AXA Fortis Liv Vic NFU Highway Groupama HBOS MMA HSBC Provident Brit 0 130 120 110 100 90 80 70 2003-

  11. Slide 11: Performance against the Market (2)

    Performance against the Market (2) % outperformance by Equity against market Median = 15% over 25 years % 30 25 20 15 2006* 10 5 0 1980 1985 1990 1995 2000 2005 *2006 assumes a market combined ratio of 106% 10 Source: B&W Deloitte, Equity

  12. Slide 12: Claims Development

    Claims Development Motor - Net Incurred loss Ratio Progression 120 100 99 97 96 04 98 80 03 95 02 00 01 94 % 60 93 40 05 20 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Quarter Quarter 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 11

  13. Slide 13: Distribution

    Distribution 12

  14. Slide 14: Business Model

    Business Model Customers Telephone and Internet Face-to-face Distribution channel Direct Marketing Affinity Transfers Branches Manufacturing Panel ERS 86% 48% ERS 52% Panel 14% 13 Note: Percentages reflect 2006

  15. Slide 15: Direct Marketing

    Direct Marketing Advertising: Yellow Pages Specialist press On-line banners Direct mail: Renewal dated Re-solicitation On-line aggregators 14

  16. Slide 16: Key Affinity Partners

    Key Affinity Partners Motor Manufacturers Financial Services Other 15

  17. Slide 17: Growth of Branch Network

    Growth of Branch Network 8 100 90 7 80 6 70 Number of Branches Profit (£m) 5 60 4 50 40 3 30 2 20 1 10 0 0 2000 2001 2002 2003 2004 2005 2006 EIB ODIS No of Branches • Growth in 2003/2005 led by Bennetts and JMW acquisitions (20 and 8 branches respectively) • ODIS will significantly increase scale i

  18. Slide 18: Branch Locations

    Branch Locations NORTHERN IRELAND (17 BRANCHES) BALLYMENA BELFAST (x3) (1) COLERAINE (x2) DUNGIVEN (x2) GLENGORMLEY LISBURN NORTHERN REGION (29 BRANCHES) LONDONDERRY (x2) MAGHERAFELT MOIRA ALFRETON NEWTOWNARDS (x2) (1) BELPER LURGAN (1) BIRSTALL BISHOPS STORTFORD BULWELL SOUTHERN REGION (30 BRANCHES

  19. Slide 19: 2006 Highlights

    2006 Highlights Direct Broking • Launch of new schemes for first direct, Renault and Alliance & Leicester • Development of new online quote and buy sites for Ryanair, first direct, Alliance & Leicester, Skipton Building Society and insure.co.uk • Inclusion of insure.co.uk on confused.com aggregator

  20. Slide 20: Hastings Direct and Advantage

    Hastings Direct and Advantage 19

  21. Slide 21: Business Model – Hastings Direct

    Business Model – Hastings Direct Direct Distribution Intermediary Distribution Telephone Internet 548k Policies 213k Policies 304k Policies Hastings Direct Panel Advantage 2006 Hannover Advantage 26% 24% Panel 50% 20 Note: Hannover ceased in 2007, we expect Advantage to write the majority of this bu

  22. Slide 22: Business Model - Advantage

    Business Model - Advantage UK Administration Direct Distribution Intermediary (62%) Distribution – AA, Budget etc (38%) 21

  23. Slide 23: Introduction to Hastings

    Introduction to Hastings • Hastings Insurance Services Limited – a personal lines insurance broker launched in January 1997 • 2 Trading Divisions – Hastings Direct and Peoples Choice (acquired in July 2003) • Hastings offers a totally integrated panel solution of over 40 insurers with 60 products, g

  24. Slide 24: Key Facts

    Key Facts • 1,417 staff in 3 locations / Contact Centres – Bexhill-on-Sea, Leicester and Manchester • The Group received just over 4.6 million calls during 2006 (2.5 mill sales calls) • Nearly 900,000 policyholders • The Company administered £200 million gross written premium in 2006 • In 2006 turno

  25. Slide 25: Highlights and Unique Selling Points

    Highlights and Unique Selling Points • Strong and distinctive brand identity, including Harry and 1066 telephone numbers • Hastings was the first insurance provider to validate claims history at point of sale (as opposed to point of claim) using the Claims and Underwriting Exchange Register (CUE) an

  26. Slide 26: Distribution

    Distribution % Quotes % Quotes % Policies % Policies Offline Online Offline Online 2006 57% 43% 81% 19% 2007 40% 60% 72% 28% (expected) Telephone Internet Private Car Motorcycle Private Car Motorcycle Travel Home Commercial Vehicle Commercial Vehicle Coming Soon: Travel and Pet 25

  27. Slide 27: Claims

    Claims 26

  28. Slide 28: Claims: Locations & Staff

    Claims: Locations & Staff Group Management 42 Manchester AD & TPD 436 AD & TPD 27 FTE’S PI & Litigation – 16 FTE’S P.I. & Litigation 114 ============================== Total 592 Swansea Operations Centre 225 FTE’s Brentwood Group 14 FTE’s P.I. & Litigation 41 FTE’s Colchester Group 23 FTE’s P.I. & L

  29. Slide 29: People

    People 28

  30. Slide 30: Our People

    Our People • Headcount February 2007 was 3,028 • The workforce is split 47% to 53% Male/Female respectively • The average age of the workforce is 33 years old • The average length of service is 4.5 years 29

  31. Slide 31: Our Behaviours

    30 Our Behaviours Analytical Commercial Improvement

  32. Slide 32: 2006 Highlights

    2006 Highlights • Strengthening of management team – Richard Brewster – Phil Anderson • Strategic owner following the sale to IAG • Large Affinity wins – Alliance & Leicester – First Direct – Renault • Launch of the new Insure site / White Label site / Hastings Direct site • Full roll out of TV adve

  33. Slide 33: UK Market Overview

    UK Market Overview March 2007 1

  34. Slide 34: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  35. Slide 35: Market Statistics

    Market Statistics 3

  36. Slide 36: The UK Car Parc

    The UK Car Parc • There are over 30 million cars on the road in the UK • The rate of growth in cars on the road over the past five years is 9.7% • 72% of all households own one or more cars • By 2011 it is estimated that the will be 33.6m cars on the road but the adult population will only grow by 3

  37. Slide 37: The UK Motorist

    The UK Motorist • 32 million people in the UK hold driving licences Male Licence Holders UK • Prevalence is among 35 – 64 year olds 100% 90% • Number of licence holders under 30 80% 70 plus 70% 60 to 69 has been declining, partly because: 60% 50 to 59 – Introduction of the theory test 50% 40 to 49 4

  38. Slide 38: The Age of our Cars

    The Age of our Cars • Effectively half the cars on the road are less than six years old 26.2% 23.3% 20.3% 15.5% 14.6% 6 Source: Society of Motor Manufacturers and Traders 2006

  39. Slide 39: The Type Of Cars We Buy

    The Type Of Cars We Buy • Those increasing market share between 1996 and 2005: – Minis and Super minis now make up over 60% of all new registrations but currently only 31% of the entire market – SUVs and multi purpose vehicles have each at least doubled market share but: • Are still under 10% each •

  40. Slide 40: Fleet and Commercial Vehicles

    Fleet and Commercial Vehicles • Company cars make up 36.3% of the commercial market • Light goods vehicles make up 40.9% of the market and has shown the most significant growth • New fleet registrations have been rising each year from just above 1m in 2000 to 1.184m in 2005 • New commercial vehicle

  41. Slide 41: Motorcycles

    Motorcycles • 1.2 million motorcycles, scooters and mopeds licensed in the UK but 1.1m insured units Motorcycle stock by engine size, cc • Scooters/Mopeds and larger bikes are 1400 on the increase 1200 • Five times more likely to be an 1000 additional mode of transport in a Over 1,000 701-1,000 800

  42. Slide 42: Trends

    Trends • Environmental interest • Telematics – Manufacturers have reduced – Developments in telematics emissions in most segments are being used for pay-as- – Consumers are opting for mini you-drive insurance and or super mini cars commercial fleet management – Hybrids are starting to appear and pre

  43. Slide 43: Market Structure

    Market Structure 11

  44. Slide 44: Motor insurance market

    Motor insurance market • Mature and competitive market • Total Motor GWP approx. £13bn in 2005 • Private Motor insurance accounts for the largest percentage of total motor GWP • The top 5 insurers controlled more than 65% of premiums earned in 2005 Motor GWP by sector Top 10 Motor Insurers Fleet, 17

  45. Slide 45: Private Motor Insurance

    Private Motor Insurance • Private motor market was worth £9.224bn GWP in 2005 • Growth of 3.7% over the period 2000 - 2005 • This was driven by growth in comprehensive cover as non comprehensive cover remained relatively static Private Motor Market Growth 2000-2005 10,000 9,000 8,000 7,000 6,000 Non

  46. Slide 46: Fleet Insurance

    Fleet Insurance • Fleet market saw 1.4% growth in Fleet Market Share 2005 2005 to £2.24bn GWP Others Royal & Equity 16% SunAlliance • The top 3 insurers – R&SA, 4% 24% Norwich Union and Zurich – share HSBC 1% 59% of the market Groupama • Predominantly it is distributed by 1% brokers Highway 2% • Lea

  47. Slide 47: Commercial Vehicle Insurance

    Commercial Vehicle Insurance • Commercial vehicle market was Commercial Vehicle Market Share 2005 worth £1.62bn GWP in 2005 NFU Mutual Others • NFU Mutual was the leading 17% 15% provider at £175.6m GWP • Norwich Union’s market share has Equity steadily decreased from 25% 7% QBE 14% since 2000 NIG 4

  48. Slide 48: Motorcycle Insurance

    Motorcycle Insurance • Motorcycle insurance market was Motorcycle Insurance Market Share 2005 worth £187m GWP in 2005 • Equity Red Star had nearly 30% at £55m • Nearest competitor is Norwich Union at £32m • New entrants to the market are rare but EBike entered in 2005 • Competitive pressure kept gro

  49. Slide 49: Pricing movement

    Pricing movement • The cost of an average car insurance premium rose sharply over the last quarter of 2006 to its highest ever level • The average quoted premium rose by 4.35% to £805.70 (up 1.24% over the previous quarter) • Premiums have risen 5.7% year-on-year • The trend over the last quarter is

  50. Slide 50: Market Performance

    Market Performance Combined Ratio and Market Share 30 Market average = 99.5% RBS 25 20 Market Share % 15 Aviva R&SA Zurich 10 Co-op Allianz 5 AXA Fortis Liv Vic NFU Highway Groupama HBOS MMA HSBC Provident Brit 0 130 120 110 100 90 80 70 2003-2005 Combined Ratio % (FSA / GAAP basis) 18 Note: HBOS in

  51. Slide 51: Major Insurance Groups/Players

    Major Insurance Groups/Players Retail Broker Affinity Partner Aviva RBSI R&SA AXA HBOS Allianz Zurich IAG 19 Admiral

  52. Slide 52: Royal Bank of Scotland Insurance

    Royal Bank of Scotland Insurance FACTS RBS brand strategy • £5.2bn GWP in 2005 • Accounts for 20% 0f RBS income • 91% of business is personal lines • Multi-brand strategy • Also owns Tracker, a vehicle tracking device provider • 12.2% of total General Insurance Market • Sells motor insurance in Spai

  53. Slide 53: Direct Line

    Direct Line FACTS • £1.68bn GWP in 2005 – £1.167bn GWP in 2005 from motor insurance – £296m in 2005 from household insurance • Seventh largest general insurer on its own • Direct to consumer brand through above the line and below the line marketing • Used to be price champion brand • Latest position

  54. Slide 54: Churchill

    Churchill FACTS • £1.23bn GWP in 2005 – £622m GWP from motor insurance in 2005 – £541m GWP from household insurance in 2005 • Acquired by RBS in 2003 • Direct to consumer brand through above the line and below the line marketing • Major above the line campaign in force – Challenge Churchill Split of

  55. Slide 55: UK Insurance

    UK Insurance FACTS • £1.35bn GWP in 2005 – £776m GWP from motor insurance in 2005 – £203m GWP from household insurance in 2005 • Operates through affinities, such as Tesco Personal Finance, Nationwide and Saab Split of book 2005 23 Source: Datamonitor 2006

  56. Slide 56: Norwich Union

    Norwich Union FACTS • £6.1bn net written premium in 2005 • 64.9% of business is personal lines • Combined ratio of 92% in H1, 2006 • Owns RAC brand with c. 2.2m motor breakdown customers • Distributes direct, through corporate partners (Abbey, ASDA, Saga, Lloyds TSB) and brokers • Biggest advertisin

  57. Slide 57: Royal & Sun Alliance

    Royal & Sun Alliance FACTS • International general insurance group that derives 50% of premium income from the UK • Direct, broker and affinity distribution (Halfords, Land Rover, Volvo) • Direct brand is More Th>n that wrote £432m NWP in 2005. • Advertising spend for More Th>n in 2005 was £22.7m Sp

  58. Slide 58: Allianz

    Allianz FACTS • Allianz Group showed a £3 billion net income in 2005 • Personal lines is 33% of business • Pecuniary loss book larger than motor and household combined • Expanding motor proposition into vintage and veteran cars Split of book 2005 26 Source: Datamonitor 2006

  59. Slide 59: AXA

    AXA FACTS • UK and Ireland contributed 23% of E18.9bn general insurance earnings of the group in 2005 • £1.07bn GWP in UK and Ireland in 2005 in personal lines and £1.365bn in commercial lines • Distributes through corporate partners (Capital One, Egg, Portman Building Society), intermediaries and d

  60. Slide 60: HBOS

    HBOS FACTS • Owns St Andrews, ESure, Sheila’s Wheels and First Alternative • £1.977bn GWP in 2005 • St Andrews is the largest underwriter in the Group • £327m GWP from motor insurance in 2005 • £507m GWP from household insurance in 2005 • ESure’s motor insurance book was £237m GWP in 2005 and househ

  61. Slide 61: Zurich

    Zurich FACTS • £2.6bn GWP in UK in 2005 (£848.6m in personal lines and £1.773bn in commercial lines) – £442m GWP from private motor insurance in 2005 – £367.7m GWP from household insurance in 2005 • Motor book has been growing at 1.1% compound since 2000 but private motor book has decreased by 3.8%

  62. Slide 62: Top UK Personal Lines Brokers

    Top UK Personal Lines Brokers 200 180 160 2005 Brokerage (£m) 140 120 100 80 60 40 20 0 Carole Nash BDML IAG (UK) RIAS Endsleigh A Plan Group Outright Highway Retail Budget (ex. Kwik-Fit Budget branches) AA Allen & Allen Branches) Swinton (incl • The combined UK business is now the 3rd largest perso

  63. Slide 63: Broker Distribution

    Broker Distribution Direct Face to Face Direct and Affinity (Telephone + Internet) Face to Face Partners Junction 31

  64. Slide 64: Distribution ownership

    Distribution ownership • £418.6m of Brokerage (52% of largest 15 personal lines brokers) is now owned and controlled by Insurers • Remainder of personal lines broking market still largely independently owned • Commercial lines remains largely independent (but Axa acquired Stuart Alexander & Layton B

  65. Slide 65: AA

    AA FACTS • Largest motor breakdown organisation in the UK c. 15 million members • £188.6m in brokerage • Broker proposition that behaves like a direct writer • Significant above the line marketing spend of £12.3m on car insurance in 2005 33 Source: Datamonitor 2006

  66. Slide 66: Swinton/Budget

    Swinton/Budget FACTS • Largest chain of brokers in the UK – 260 branches • Owned by MMA • Swinton purchased Budget branches only • £151.8m brokerage from Swinton and Budget branches • £2m advertising spend in 2005 • Budget (non branch) brokerage in 2005 was £88.4m – Strong affinity deals through Jun

  67. Slide 67: Endsleigh

    Endsleigh FACTS • Originally positioned as a student specialist broker founded by the National Union of Students • £60.1m in brokerage • Now owned by Zurich • Education union affinities (NASUWT and USU), NUMAST and Association of Optometrists, as well as direct to consumers 35 Source: Datamonitor 20

  68. Slide 68: RIAS

    RIAS FACTS • Targeting the SAGA market-place and a growing brand • £49.2m in brokerage • Direct to consumer proposition • 850,000 customers • Part of Fortis Group 36 Source: Datamonitor 2006, RIAS

  69. Slide 69: Kwikfit

    Kwikfit FACTS • Launched in 1995 by leading tyre and exhaust fitting service • £41.3m in brokerage • 300,000 policyholders • Kwikfit has been private equity owned since 1999 (PAI Partners in September 2005 from CVC) 37 Source: Datamonitor 2006, Kwikfit

  70. Slide 70: A-Plan

    A-Plan FACTS • Independent leading personal lines and motorcycle specialist • £33m in brokerage in 2005 • 54 branches in the South of England – within a 100 mile radius of Oxford • Branch and telephone driven marketing • Focused on mid to high net worth market • On-line quotes through Motorcycle Dir

  71. Slide 71: Allen & Allen

    Allen & Allen FACTS • Specialist in performance cars and higher risk • £18.3m in brokerage • Hyperformance, Prestige and MyMotorQuote.com brands • Telephone and Internet based • Began trading in 1968 and trading as Allen & Allen in 1975 39 Source: Insurance Times Top 50 Brokers July 2006, Equity, Al

  72. Slide 72: Carole Nash

    Carole Nash FACTS • Motorcycle insurance specialism • £25.3m in brokerage • Recently purchased by Groupama • On-line and telephone based service 40 Source: Insurance Times Top 50 Brokers July 2006, Equity, Datamonitor 2006

  73. Slide 73: BDML

    BDML FACTS • Intermediary and third party administrator • Used by Norwich Union (and it’s partners Asda and Barclays) and RAC • £19.9m in brokerage • Owned by Capita • Administers over 500,000 policies • Own brand to consumers through masterquote.co.uk 41 Source: Insurance Times Top 50 Brokers July

  74. Slide 74: Highway

    Highway FACTS • Stock exchange listed • £16.5m in brokerage • 600,000 customers • Marketed predominantly through intermediaries 42 Source: Highway

  75. Slide 75: Outright

    Outright FACTS • £14m in brokerage • Owned by Fortis • Manages schemes, books of business and operates through AutoDirect brand 43 Source: Insurance Times Top 50 Brokers July 2006, Outright

  76. Slide 76: Market Developments

    Market Developments 44

  77. Slide 77: How Consumers Buy

    How Consumers Buy • The internet is now the second most common way of arranging motor insurance • Consumers also use the internet as a research tool and therefore this platform plays a more important role than is indicated simply by sales figures • Datamonitor predict that 29% of all motor insurance

  78. Slide 78: The broker of the future

    The broker of the future • 17% of motor insurance sales now on-line and rising • 8.1% of household insurance sales now on-line and rising • Growth of this method of research and purchase has led to the growth of the aggregators • Price is cited as the most influential factor in the purchase of motor

  79. Slide 79: Telematics and insurance

    Telematics and insurance Norwich Union Pay As You Drive • Two products: Young drivers (18-23); Low mileage drivers (24-65) • Mobile phone style bills with: —A tariff for each type of road and price per mile that increases for after 11 pm and in the morning rush hour. —A tariff per daily mileage for

  80. Slide 80: Telematics and insurance

    Telematics and insurance MoreTh>n DriveTime • Aimed at young drivers (18-25). • Looking for 2,000 for pilot. • Offer is a 40% discount for not driving between 11 pm and 6 am. • Any mileage recorded between these hours incurs an automatic £25 additional charge for each night that it happens (i.e. 4 n

  81. Slide 81: Ecoinsurance

    Ecoinsurance • Offsets 20% of the car's CO2 emissions by investing in projects like reforestation, renewable energy sources and third world education schemes • 10% discount available for cars in tax band A - those that emit less than 100g of CO2 per kilometre • Eco-friendly repair network – they pay

  82. Slide 82: Working with Aggregators

    Working with Aggregators Utilising the marketing spend of the aggregators to generate business for insure.co.uk as part of the panel in motor and household insurance • Live on screen-scrape technology with: – Insurancewide – Confused – Moneysupermarket – Quote detective • In screen-scrape build phas

  83. Slide 83: Telematics and Insurance

    Telematics and Insurance • Investigating a joint venture with a producer of the blackbox technology • Currently developing: – Proposal for the joint venture model – Product requirements – 200 car market research project with existing renewing customers to start in May 2007 – Evaluating marketing pro

  84. Slide 84: Eco-insurance

    Eco-insurance • Evaluating the market size • Looking at and weighting the potential ‘green’ opportunities to be factored in • Starting to generate ‘green’ motoring attitudinal research to create media stories • Developing the proposition and business case for approval 52

  85. Slide 85: Equity Red Star

    Equity Red Star 29 March 2007 1

  86. Slide 86: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  87. Slide 87: Agenda

    Agenda • ERS today • Acquisition History • Key Personnel • Locations • Underwriting Control Structure • Breakdown of Business • Specialist areas • Broker Sales & Marketing 3

  88. Slide 88: Equity Red Star

    Equity Red Star Equity Red Star – the origins • Equity Motor Policies was established in 1946 underwriting less than £200,000 annual income. • Until the “merger” with Red Star in 1987, annual income was c £20m. Following the creation of Equity Red Star income moved to over £40m. • Income was close t

  89. Slide 89: Acquisition History

    Acquisition History Acquisitions Acquisition of 1976 Lion/Charter Motor Synd. 495 “Right to Renew” 1978 Kinloch Motor Syndicate 82 1994 Service Motor Syndicate 979 1982 Trinity Motor Syndicate 999 1995 Dominion Insurance Co. 1987 Red Star Motor Syndicate 675 1995 Lion Insurance Co. 1987 Barbican Mot

  90. Slide 90: Key Underwriting Personnel

    Key Underwriting Personnel Volume Underwriting Bespoke Underwriting Keith Charlton John Josiah Class Underwriters Class Underwriters Stuart Heath Non Motor Sally Cole Special Risks Andrew Hill Motorcycle Steve Nethercoat Fleet (Provincial) Alan Partlett Private Car Mike O’Mahoney Fleet (London Mkt)

  91. Slide 91: Key Underwriters join through acquisition

    Key Underwriters join through acquisition HGP Motor Syndicate - Ken Lambert Deputy Underwriter Alan Partlett Private Car Class Underwriter Shead Motor Syndicate - Andy Hill Motor Cycle Class Underwriter Mike O’Mahoney London Market Fleet Dominion Insurance Co. - John Josiah, Joint Underwriter Steve

  92. Slide 92: Locations

    Locations Brentwood • Head Office • Motor Underwriting Carrickfergus • Accident & Health • NI P Car Underwriting • Household Underwriting (Broker Services) • Breakdown Recovery • Sales & Marketing Colchester • Direct Referral Underwriters • Reinsurance London • London Market Fleet • Non Motor India

  93. Slide 93: Underwriting Control Structure

    Underwriting Control Structure "Auditor" Audit carried out Auditor reports to Report sent to Underwriting Division Auditor Individual Underwriting Class Underwriter Class Underwriter within the Department Quality Assurance Team Quarterly Underwriting Deputy Underwriter Underwriter within each Divisi

  94. Slide 94: Breakdown of Business

    Breakdown of Business • Broker Private Car Agricultural 3% PA 2% Household 8% Private car broker 21% Roadside Rescue • Direct 3% • Motor Cycle Private car direct • Fleet Fleet 22% 9% • Special Risks Motorcycles 12% • Agricultural Vehicle Special Risks 20% • Household • Personal Accident • Motor Brea

  95. Slide 95: Specialist Areas: From learner bike to Super Sports

    Specialist Areas From learner bike to Super Sports • ERS is the largest motor cycle insurer in the UK • In 2006 Equity Red Star insured nearly one in every three motor cycles in the UK • ERS cover the whole range of motor cycles from “Learner Bike” to “Super Sports Bike” • ERS were the first UK insu

  96. Slide 96: Specialist Areas: Fleet – Relationship driven

    Specialist Areas Fleet – Relationship driven • On larger fleets, an ERS underwriter will visit the policyholder regularly creating a three way relationship with the Broker • This approach helps establish long term relationships • Dodds Transport has been insured with us 60 years • The Chief Executiv

  97. Slide 97: Specialist Areas: Special Risks mix of business

    Specialist Areas Special Risks mix of business Motor Trade 4% Taxi Specialist 15% Vehicle 18% Minibus & Coach Vans 7% 27% Bespoke P Car 13% Haulage Misc CV 14% 2% Special Risks Income 2006 13

  98. Slide 98: Autonational Rescue Website

    Autonational Rescue Website 14

  99. Slide 99: Brokers

    Brokers • Approx 3,500 brokers • 40+ agencies with annual premium income over £1m • 250 agencies with annual premium income between £50,000 and £1m • 150 agencies with annual premium income between £25,000 and £50,000 Types of Broker National Aon, Marsh, Willis Networks Broker Network, Cobra Wholesa

  100. Slide 100: Broker Sales & Marketing

    Broker Sales & Marketing Equity Team • Head of Sales & Marketing - David Grant • Sales Managers - Scotland North Midlands South West South East • Agency Manager - Agency team of 6 in Brentwood providing sales and agency support Towergate Towergate Underwriting Agency Management undertake sales activ

  101. Slide 101: Relationship Management

    Relationship Management Categorisation of Brokers Categorisation of Brokers is being introduced to drive sales activity and to assist broker relationship management Star Brokers Significant value - major contributor to one class or several. Key relationship likely to be with Class Underwriter Target

  102. Slide 102: Underwriting approach tailored to suit Broker’s needs

    Underwriting approach tailored to suit Broker’s needs • Equity’s focussed underwriting approach to development provides specialist underwriters, who are able to use their knowledge to develop relationships with broker partners. This specialisation helps a continual revision of underwriting parameter

  103. Slide 103: Broker Marketing Activity

    Broker Marketing Activity • Product Support 2007 will see the launch of three key products for Equity. Each will be supported by its own unique campaign under the “delivery” theme (Orchid, Coral and Vans) • Product Promotional Literature • Conferences & Briefings Representation at the leading indust

  104. Slide 104: Equity Red Star product brochures

    20 equity REDSTAR Minibus Motorcycle Come on board with us Minibus insurance from Equity Red Star Equi Red Sarisone of the leading motor insurers nthe UK and a bnchmatk fo + Breakdown recovery cover + Special benefits for charities and schools + Underwriting excellence + Technical expertice + Cover

  105. Slide 105: Equity Red Star product brochures

    21 equity REDSTAR Minibus Assist Private car c equity

  106. Slide 106: Equity Claims - Introduction

    Equity Claims - Introduction 29th March 2007 IAG Investor Presentation London Phil Anderson Managing Director

  107. Slide 107: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  108. Slide 108: Agenda

    Agenda • Introduction to Claims • Process & Performance • Management Control • Strategy 3

  109. Slide 109: Introduction: Purpose & Values

    Introduction: Purpose & Values FINANCIAL BUSINESS SUSTAINABILITY Control SPEND to deliver optimised • Reputation settlements – appropriate and equitable. • Risk Self-manage OPERATING COSTS • Environmental improving efficiency and productivity (whilst • Social not harming spend control, customer serv

  110. Slide 110: Introduction: Senior Management

    Introduction: Senior Management Phil Anderson Managing Director (Brentwood) Fergus Curran Group Claims Manager (Brentwood) Pat Griffin Eddie Phillips Nigel Ward Liability Claims Deputy Group Claims Deputy Group Claims Manager Manager Manager (Colchester) (Brentwood) (Brentwood) • Phil Anderson (Mana

  111. Slide 111: Introduction: Locations & Staff

    Introduction: Locations & Staff Group Management 42 Manchester AD & TPD 436 AD & TPD 27 FTE’S P.I. & Litigation 114 PI & Litigation – 16 FTE’S ============================== Total 592 Swansea Operations Centre 225 FTE’s Brentwood Group 14 FTE’s P.I. & Litigation 41 FTE’s Colchester Group 23 FTE’s P.

  112. Slide 112: Introduction: Experience Acquisition/Merger & Run-off

    Introduction: Experience Acquisition/Merger & Run-off In addition to servicing Equity, claims from the following companies have been managed or absorbed into Equity Claims : ABSORBED MANAGED • Trinity • Dominion • Kinloch • Equitas • Mitre • MIB • Barbican • Chiyoda • Trojan • Norwich Union • Crowe

  113. Slide 113: Introduction: Scale Per Annum

    Introduction: Scale Per Annum • Claims Paid: approaching £350,000,000 • Operational Expenditure: £18,000,000 • New Claims Total: 196,000 – Travel & PA 4,000 – Home 12,000 – Motor 180,000 8

  114. Slide 114: Introduction: Scale Motor: Per Annum

    Introduction: Scale Motor: Per Annum CLAIMS REPORTED 180,000 TP INJURY AD TP DAMAGE (&TECHNICAL) 92,000 40,000 13,500 NO AD CLAIM / REPAIRABLE TOTAL LOSS WINDSCREEN TPF&T COVER 76,000 16,000 44,000 40,500 APPROVED NON APPROVED APPROVED NON APPROVED REPAIRER SUPPLIER SUPPLIER SUPPLIER 16,000 60,000 2

  115. Slide 115: Process & Performance: Process Overview

    Process & Performance: Process Overview In House Processes New Claims Incident SpecialistAreas Notification Management Liability Claims Claims P.I. / Litigation / Helpline Claims Handled in Legal (45%) Swansea / Brentwood & AD Colchester. Total Loss / Theft / Recovery HELPLINE Paper Teams split by m

  116. Slide 116: Process & Performance: Accidental Damage Overview

    Process & Performance: Accidental Damage Overview Volumes Repairs 76,000 Total Loss (instructions) 16,000 Salvage (Cleared) 13,000 Windscreen 40,500 Engineers 54,000 All totals provided are for 2006 totals, unless otherwise stated 11

  117. Slide 117: Process & Performance: Accidental Damage - Repair

    Process & Performance: Accidental Damage - Repair Approach: • Unique average price deal leverages recoverable expenditure against non recoverable expenditure. Opportunity: • Enhance process surrounding paper FNOL to increase approved repairer rate. • Explore shared commissions with brokers. • Get be

  118. Slide 118: Process & Performance: Accidental Damage – Total Loss

    Process & Performance: Accidental Damage – Total Loss Approach: • Valuation & Negotiation process • Early identification of total losses with a view to quick settlements. • Streamlines process for quick dispute resolution. Opportunity: • TLSS Scheme – Increase Volumes, Decrease Timeline Renegotiate

  119. Slide 119: Process & Performance: Accidental Damage – Salvage

    Process & Performance: Accidental Damage – Salvage Approach: • Two suppliers, 1 x motorcycle, 1 x all other classes of business Opportunity: • Hastings account opens opportunities for enhanced salvage deals. • Opportunities for a sole supplier deal. 14

  120. Slide 120: Process & Performance: Accidental Damage – Windscreen

    Process & Performance: Accidental Damage – Windscreen Approach: • Bulk Purchase agreement with preferred supplier. Opportunity: • Increase use of preferred suppliers – squeeze brokers. • Review Autoglass – (use of IAG worldwide) Volumes Trend: Approved Supplier – v – Non Approved Suppliers 28,730 30

  121. Slide 121: Process & Performance: AD & TP Claims – Engineers

    Process & Performance: AD & TP Claims – Engineers Approach: • Desktop inspections carried out with Approved repairers, where cases are non-fault. • Fault cases are not inspected if they are within the Approved scheme, but have physical inspections otherwise. • Non approved repairer cases requiring i

  122. Slide 122: Process & Performance: External Subrogation Schemes

    Process & Performance: External Subrogation Schemes Approach: • Pursue recoveries vigorously, and litigate as soon as appropriate. • Litigation handled by 2 suppliers, Proddow McKay on all non EIBL claims, Destiny on all EIBL claims. Opportunity: • Further specialisation. • Set up in house solicitor

  123. Slide 123: Process & Performance: Third Party Damage (overview)

    Process & Performance: Third Party Damage (overview) Approach: • Third Party intervention scheme. • Non adversarial approach where reasonable. • Settle quickly Opportunity: • Better analysis of newly available data – identify streams and patterns. • Improve intervention rates. • Target critical area

  124. Slide 124: Process & Performance: Revenue Generation

    Process & Performance: Revenue Generation Approach: • Maximise commissions on all areas. Opportunity: • Extend into fleets. • Extend into the broker market. • Application of alternative revenue models e.g. credit repair. 19

  125. Slide 125: Management Controls: Key Performance Indicators

    Management Controls: Key Performance Indicators Examples: FINANCIALS New Claims Volumes BUSINESS SUSTAINABILITY Average Incurred / Settled Total Operational Expenses • Risk Drivers & Controls Operational Expense per Claim Headcount / Overtime / New Claims per FTE Systems PEOPLE CUSTOMERS SLA’s Objec

  126. Slide 126: Management Controls: Process

    Management Controls: Process Review Report Mo Executive: nth Exec /Q Committee • Commentary tr • MI Pack Mo Managing • Meeting Minutes nth Director • Balanced Business We Scorecard Senior Feed Feed ek Management Team Operational: • Departmental Reports – Group Claims AD, IT, TP, QAD, Non- Da motor y

  127. Slide 127: Management Controls: Risk Management

    Management Controls: Risk Management Drivers & Controls SPEND SPEND SPEND SPEND SPEND OPERATING OPERATING OPERATING OPERATING Backlog COSTS COSTS Ineffective Inappropriate COSTS COSTS Spend Inefficient SLA Driver Exception Manage Failures Segregation Reporting Resource Increased Spend Of Duties Perf

  128. Slide 128: Strategy

    Strategy STRENGTHS: Highly Experienced & Well managed - Broad mix of Industry Backgrounds - Reputation in the market for quality - History of low Inflation - Quality Assurance & Audit Controls - Supplier terms / rates Review and respond to paid claim performance Reserving aligned to Group philosophy

  129. Slide 129: Hastings Direct: Scale Per Annum

    Hastings Direct: Scale Per Annum • Claims Paid: approx £145,000,000 • New Claims Total: 119,000 – Windscreens 36,500 – Technical (PI & Litigation) 7,000 – 53% Advantage (Insured) – 47% Delegated Authority (Serviced) • Staff – 259 FTE • 216 Bexhill • 43 Manchester 24

  130. Slide 130: Integration Objectives: What success looks like

    Integration Objectives: What success looks like FINANCIAL CUSTOMERS • Equity & Advantage claims spend is managed & • Service Levels are met. controlled. • Complaints ratio stable or reduced. • Synergies with suppliers have been achieved and savings are realised. • Levels of customer satisfaction are

  131. Slide 131: Integration: Approach

    Integration: Approach Integrate the 2 businesses Bottom Up: Top Down: Leverage Natural Synergies Build a Foundation for the future Supplier rates T’s and C’s Organisational Design Management Information Cost / Profit Model Productivity Ratios Commercial Opportunities Process Harmonisation Build a fo

  132. Slide 132: Thank You

    CLAIMS Thank You

  133. Slide 133: Hastings Direct and Equity Insurance Brokers Overview

    HASTINGS INSURANCE SERVICES Hastings DIRECT equity INSURANCE BROKERS Overview March 2007

  134. Slide 134: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  135. Slide 135: Company Background

    Company Background • Hastings Insurance Services Limited – a Personal Lines insurance broker launched in January 1997. • 2 Trading Divisions – Hastings Direct and Peoples Choice (acquired in July 2003). • 1,450 staff in 3 locations / Contact Centres – Bexhill-on-Sea, Leicester and Manchester. • Hast

  136. Slide 136: Dimensions

    Dimensions • The Group handled just over 6.4 million calls during 2006 (2.5 million sales calls). • Nearly 900,000 policyholders. • The Company administered £200 million gross written premium in 2006. • In 2006 turnover increased to £64 million, from £55 million in 2005. • Ranked in the top 5 Person

  137. Slide 137: Premises

    Premises Square Footage Conquest House 80,000 Bexhill-on-Sea Senlac House 30,000 Leicester 55 King Street 23,000 Manchester 2nd and 4th Floors 5

  138. Slide 138: Current Products

    Current Products Telephone Internet Private Car Motorcycle Private Car Motorcycle Classic Car Commercial Vehicle Home Travel Commercial Vehicle 6

  139. Slide 139: Brand

    Brand • Strong and distinctive brand identity, including Harry and 1066 telephone numbers. • Current core message ‘Conquering Car Insurance’ is designed to create image of Harry / Hastings Direct being on the side of the customer. • Consistent messages built around the USP of being cheapest car insu

  140. Slide 140: Brand (2)

    Brand (2) • The Hastings Direct current brand identity will develop further to sustain its customer appeal and to increase differentiation against other insurance providers. • New TV creative, for March 2007, to introduce Harry Junior. • Creating a family for Harry reflects target customer’s lifesty

  141. Slide 141: Marketing

    Marketing % Quotes Offline % Quotes Online 2006 57% 43% 2007 40% 60% (expected) • Leads are generated through a combination of mass lead generation and targeted direct marketing programmes including directory advertising, national press and magazine advertising, direct mailings, sponsorship and a gr

  142. Slide 142: Direct Marketing

    Direct Marketing Advertising: Direct mail: Yellow Pages Renewal dated Specialist press Resolicitation On-line banners On-line aggregators 10

  143. Slide 143: Online

    Online • Aim to become a ‘broker of the future’ with core dominant in-house underwriter and panel to provide depth and breadth of coverage. • A new Hastings Direct branded website was launched in late September 2006. • The site is designed around optimum functionality whilst considering the delicate

  144. Slide 144: Hastings Direct Private Car Panel 2006

    Hastings Direct Private Car Panel 2006 Chaucer HSBC 1% 1% RSA NIG 1% Service Sabre 1% Others 2% 2% 8% Highw ay 2% AXA 4% Fortis 4% Advantage/Hannover 74% 12

  145. Slide 145: Insurer Support Programme

    Insurer Support Programme • National Address Register. • DVLA Database. • No Claim Bonus Proof Validation. • Proposal Form Completion. • Claims History Validation at Point of Sale using the Claims and Underwriting Exchange Register (CUE). 13

  146. Slide 146: Bought-in Leads

    Bought-in Leads 2006 • 27% of non-internet quotes (249,733) sourced from partners. 2007 • Current Partners – More Th>n, Diamond, AA, Call Connections and Lancaster. More Th>n contract due for renewal in July 2007. • Pilot with CIS from March 2007. • Phasing out Call Connections and AA. The Future •

  147. Slide 147: Key Affinity Partners

    Key Affinity Partners Motor Manufacturers Financial Services Other 15

  148. Slide 148: 2006 Highlights

    2006 Highlights Equity Direct Broking • Launch of new schemes for first direct, Renault and Alliance & Leicester • Development of new online quote and buy sites for Ryanair, first direct, Alliance & Leicester, Skipton Building Society and insure.co.uk • Inclusion of insure.co.uk on confused.com aggr

  149. Slide 149: Sustainability – Carbon Neutral

    Sustainability – Carbon Neutral • Hastings / Equity are committed to achieving Carbon Neutral Status by 2012. • Project Carbon initiated on 1st February across all UK sites • Baseline being established in key areas i.e. energy utilisation, paper usage, car and air travel mileage, recycling and CO2 e

  150. Slide 150: Introduction to Equity Insurance Brokers Limited Branch Network

    Introduction to Equity Insurance Brokers Limited Branch Network 29 March 2007

  151. Slide 151: Important notice

    Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does

  152. Slide 152: Agenda

    Agenda • Top UK Personal Lines Brokers • Ownership of Personal Lines Distribution • Broking Business Model • 2006 Key Facts/Highlights • Distribution Channels & Business Mix • Branch Headcount by Location • Growth of Branch Network • Branch Locations • Branch Acquisition Rationale • Increasing Share

  153. Slide 153: Top UK Personal Lines Brokers

    Top UK Personal Lines Brokers 200 180 160 Branches Budget 2005 Brokerage (£m) 140 120 100 ODIS Branch 80 EIBL Direct EIBL 60 40 Hastings 20 0 Carole Nash BDML IAG (UK) RIAS Endsleigh A Plan Group Outright Highway Retail Budget (ex. Kwik-Fit Budget branches) AA Allen & Allen Branches) Swinton (incl S

  154. Slide 154: Ownership of Personal Lines Distribution

    Ownership of Personal Lines Distribution Insurer Owned Swinton MMA EIBL/Hastings/ODIS IAG £188.6m Endsleigh Zurich RIAS Fortis Carole Nash Groupama Highway Retail Highway £418.6m £33m Outright Fortis £18.3m Non-Insurer Owned £149.6m AA CVC/Pemira Budget Capricorn/Mgt Kwik-Fit CVC/Pemira A Plan Group

  155. Slide 155: Business Model

    Business Model Customers National Local Telephone and Internet Distribution channel Direct Face-to- Marketing Affinity Transfers Face Servicing/ Contact centres Branch network Administration Manufacturing ERS 86% Panel ERS 48% 52% Panel 14%

  156. Slide 156: Distribution Channels & Business Mix

    Distribution Channels & Business Mix Split of Business by Distribution Split of Business by Class Channel (2006 Commission Income) (2006 GWP) Other 0.8% Northern Ireland 14.4% ODIS 36.7% Commercial 24.3% South 17.3% Travel 0.3% Motorcycles 1.3% Private Car 66.2% Household 7% North 16.2% Acquisitions

  157. Slide 157: Broking FTE Headcount by Location

    Broking FTE Headcount by Location 250 ODIS 26% Branch Network - 200 North 30% 150 100 Branch Network - NI 11% 50 Branch Network - South 33% 0 Branch Network - North Branch Network - South Branch Network - NI EIB ODIS • Total FTE Headcount 516 (including ODIS 136) • North FTE 151 • South FTE 171 • NI

  158. Slide 158: Growth of Branch Network

    Growth of Branch Network 8 100 90 7 80 6 70 Number of Branches Profit (£m) 5 60 4 50 40 3 30 2 20 1 10 0 0 2000 2001 2002 2003 2004 2005 2006 EIB ODIS No of Branches • Less competition following closure of Hill House Hammond and Budget’s sale of branches to Swinton. • Competition for personal lines

  159. Slide 159: Branch Locations

    Branch Locations NORTHERN IRELAND (17 BRANCHES) NORTHERN REGION (29 BRANCHES) BALLYMENA ALFRETON BELFAST (x3) (1) BELPER COLERAINE (x2) BIRSTALL DUNGIVEN (x2) BISHOPS STORTFORD GLENGORMLEY BULWELL LISBURN BURTON LONDONDERRY (x2) BURTON ON TRENT (1) MAGHERAFELT COVENTRY MOIRA DONCASTER (1) NEWTOWNARD

  160. Slide 160: Branch Acquisition Rationale

    Branch Acquisition Rationale • Opportunity continues as market consolidates • Limited (and declining) competitor activity • Increases ownership of distribution/customers • Low acquisition cost • Certainty of acquisition cost – Only pay on business retained. • Strong retention of customers – Loyal to

  161. Slide 161: Percentage of Branch Private Car Business with ERS

    Percentage of Branch Private Car Business with ERS 60 Percentage of GWP with ERS 50 40 30 20 10 0 2002 2003 2004 2005 2006 ERS Penetration Typical ERS Penetration of Personal Lines Broker's book • ERS penetration of Branch Private Car business has increased from 6.4% in 2002 to 47.9% in 2006 (Decemb

  162. Slide 162: Branch Network 2006 Highlights

    Branch Network 2006 Highlights Highlights • 21 acquisitions (11 branches; 10 infills) with estimated annualised GWP of £17m and 37k policies • Agreement to acquire Open + Direct Insurance Services (£46m GWP; 90k policies) – completed 17 January 2007. Now largest broker in Northern Ireland. • 52% of

Insurance Australia Group — Investor Presentation (March 2007) on 6ix