Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2009 Earnings Presentation
28 slides from Insurance Australia's earnings presentation, Feb 26, 2009
Slide 1: Financial results Half-year ended 31 December 2008
For personal use only Financial results Half-year ended 31 December 2008 Michael Wilkins, Managing Director & Chief Executive Officer Nicholas Hawkins, Chief Financial Officer 26 February 2009 ABN 60 090 739 923
Slide 2: Important Information
IMPORTANT INFORMATION For personal use only The information in this presentation is an overview and does not contain all information necessary to an investment decision. The information contained in this presentation and accompanying materials has been prepared in good faith by IAG. No representatio
Slide 3: Agenda
AGENDA For personal use only 1 Group results Michael Wilkins Segment analysis 2 Reinsurance Nicholas Hawkins Investments Corporate expenses Dividend Capital management 3 Outlook Michael Wilkins PAGE 3 HY09 Financial Results Presentation
Slide 4: Group results and segment analysis
For personal use only 1 Group results and segment analysis Michael Wilkins ABN 60 090 739 923
Slide 5: First half in summary
FIRST HALF IN SUMMARY Sound progress made during a year of rebuilding For personal use only • Delivered on strategic initiatives – Moved to a simpler operating model – Sale of non-core businesses – Strengthened presence in Asia through strategic investments – Appointed CEO of Australia Direct • Stea
Slide 6: 1H09 Financial performance
1H09 FINANCIAL PERFORMANCE Sound progress made during a year of rebuilding For personal use only Financial performance 1H08 2H08 1H09 Gross written premium $3,851m $3,942m $3,922m Insurance profit $190m $202m $227m Insurance margin 5.1% 5.6% 6.2% Profit/(loss) attributable to IAG shareholders $110m
Slide 7: 1H09 Insurance margin
1H09 INSURANCE MARGIN Adjusted for material external impacts For personal use only 1.1% 2.3% 0.7% 10.3% 6.2% 1H09 Reported Natural Perils (net Credit Spreads DAC/LAT 1H09 Adjusted Margin of allowances) Margin PAGE 7 HY09 Financial Results Presentation
Slide 8: Segment results
SEGMENT RESULTS For personal use only Insurance Profit 1H08 2H08 1H09 A$m A$m A$m Australia Direct 106 210 194 Australia Intermediated (CGU) 133 1 (7) New Zealand (2) 14 (17) United Kingdom retained business 6 47 77 United Kingdom discontinued business (40) (54) (23) Asia (6) (5) 9 External reinsura
Slide 9: Australia Direct
AUSTRALIA DIRECT Strong GWP growth and improved insurance margin For personal use only AUSTRALIA DIRECT FINANCIAL PERFORMANCE 1H08 A$m 2H08 A$m 1H09 A$m Key points Gross written premium 1,516 1,580 1,650 • GWP growth of 8.8% Insurance profit/(loss) 106 210 194 8 – Rate increases across the portfolio
Slide 10: Australia Intermediated
AUSTRALIA INTERMEDIATED Rebuilding process progressing well For personal use only 2 AUSTRALIA INTERMEDIATED 1H08 2H08 1H09 1 Key points FINANCIAL PERFORMANCE A$m A$m A$m Gross written premium 1,167 1,231 1,159 • GWP down 0.7% -% Insurance profit/(loss) 133 1 (7)% – Average rate increases of 6% Profi
Slide 11: New Zealand
NEW ZEALAND Disappointing first half result For personal use only NEW ZEALAND 1H08 2H08 1H09 Key points FINANCIAL PERFORMANCE A$m A$m A$m Gross written premium 483 491 482 • GWP flat Insurance profit/(loss) (2) 14 (17) – Local currency GWP up 4.7% Profit/(loss) from fee based business - - 1 – Rate r
Slide 12: United Kingdom – Retained Business
UNITED KINGDOM – RETAINED BUSINESS Equity Red Star continues to perform well For personal use only UK RETAINED BUSINESS 1H08 2H08 1H09 Key points FINANCIAL PERFORMANCE A$m A$m A$m 8 • GWP down 6.7% Gross written premium 417 389 389 6 Insurance profit/(loss) 6 47 77 – Local currency GWP down 2.2% Pro
Slide 13: United Kingdom – Divested Business
UNITED KINGDOM – DIVESTED BUSINESS Loss-making non-core businesses divested For personal use only 1 UK DISCONTINUED BUSINESS FINANCIAL PERFORMANCE 1H08 A$m 2H08 A$m 1H09 A$m Key points 1 Gross written premium 168 151 143 • GWP down 14.9% % Insurance profit/(loss) (40) (54) (23) 5 – Local currency GW
Slide 14: Asia
ASIA Medium to long term strategy on track For personal use only ASIA 1H08 2H08 1H09 Key points FINANCIAL PERFORMANCE A$m A$m A$m • GWP growth of 3.4% Gross written premium 89 85 92 – Local currency GWP up 2.5% Insurance profit/(loss) (6) (5) 9 Profit/ (loss) from fee based business (2) (2) (1) – Ec
Slide 15: Reinsurance, investments, corporate expenses, dividends and capital management
For personal use only 2 Reinsurance, investments, corporate expenses, dividends and capital management Nicholas Hawkins ABN 60 090 739 923
Slide 16: 1H09 Results overview
1H09 RESULTS OVERVIEW For personal use only INSURANCE AUSTRALIA GROUP 1H08 2H08 1H09 FINANCIAL PERFORMANCE A$m A$m A$m Gross written premium 3,851 3,942 3,922 Gross earned premium 3,923 3,842 3,931 Reinsurance expense (214) (256) (248) Net premium revenue 3,709 3,586 3,683 Net claims expense (2,644)
Slide 17: Reinsurance protections
REINSURANCE PROTECTIONS Reducing earnings volatility For personal use only • The upper limit of the Group’s catastrophe programme remains at $4bn • Maximum event retentions (MER): – For a first event: $126m in Australia; $105m in NZ; $53m in UK Claims cost from Victorian fires expected to reach ME
Slide 18: Investment returns
INVESTMENT RETURNS Impacted by sharp market movements For personal use only Investment returns on technical reserves ($m) Investment returns on shareholders’ funds ($m) 732 76 224 208 1H08 2H08 1H09 1H08 2H08 1H09 -52 -72 • Higher income in 1H09 reflects: • Returns on shareholders’ funds adversely i
Slide 19: Investments
INVESTMENTS Mix stable and high credit quality maintained For personal use only Group Investment Asset Exposure - $10.6bn Group Fixed Interest and Cash - $9.8bn Bonds < Bonds 'A' 'A'/ Unrated 2% Cash Growth 1% 8% 8% Banks, Risk Free Financial Assets Institutions 'AAA' & Other 34% Bonds 'AA' Fixed 41
Slide 20: Corporate & other expenses
CORPORATE & OTHER EXPENSES For personal use only 1H08 2H08 1H09 $m $m $m Net corporate expenses - (69) (77) Income tax (expense) / benefit (78) (12) 17 Amortisation (32) (375) (30) • Net corporate expense reflects: – A $115 million loss on sale of non-core mass market operations in the UK, closure o
Slide 21: Interim dividend
INTERIM DIVIDEND In line with revised policy For personal use only • Interim dividend of 4¢ per share – Dividend reinvestment plan remains in place • Revised policy for dividends on ordinary shares maintained – 50-70% of reported cash earnings – 1H09 dividend equivalent to around 70% of cash earning
Slide 22: Capital management
CAPITAL MANAGEMENT Initiatives undertaken to improve mix and provide financial flexibility For personal use only • Completed institutional placement to raise $450m, upsized from $400m – Completed on 18 February 2009 – Price of $3 per share • Share purchase plan to raise approximately $100m – To be c
Slide 23: Balance sheet
BALANCE SHEET Remains strong For personal use only 1H08 2H08 1H09 1H09 As at 31 December 2008 Capital Mix A$m A$m A$m Proforma (1) Shareholder equity 4,920 4,351 4,135 4,735 • Aiming to have debt to total Intangibles and goodwill (2,941) (2,460) (2,353) (2,353) tangible capitalisation in the Tangibl
Slide 24: Regulatory capital position
REGULATORY CAPITAL POSITION MCR multiple increased on a proforma basis For personal use only 0.05 0.10 0.23 1.69 1.51 31 December $450m $100m Share Sub-debt Proforma MCR 2008 MCR Institutional Purchase Plan Repurchase post Capital Placement Raising PAGE 24 HY09 Financial Results Presentation
Slide 25: Group outlook
For personal use only 3 Group outlook Michael Wilkins ABN 60 090 739 923
Slide 26: 2H09 Outlook
2H09 OUTLOOK Further improvement in operating performance expected For personal use only • 2H09 operating performance expected to improve further, driven by: – Full realisation of announced cost savings in Australia, at annualised rate of $130m (pre tax) – Higher premiums including earned affect of
Slide 27: FY09 Outlook
FY09 OUTLOOK For personal use only Group gross written premium growth FY091 Group GWP growth 0-2% - In line with previous guidance Underlying GWP growth 3-5% - In line with previous guidance Group insurance margin FY091 Previous guidance 10%+ Less : Credit spreads (1.2%) DAC impairment (0.6%) Natura
Slide 28: Our business model and brands
OUR BUSINESS MODEL AND BRANDS For personal use only DIRECT INTERMEDIATED DIRECT DIRECT INTERMEDIATED INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE UNITED KINGDOM eVENTURES NEW ZEALAND INTERMEDIATED INTERMEDIATED AUSTRALIA INSURANCE INSURANCE ASIA * ACTIVE PORTFOLIO MANAGEMENT & GOVERNANCE (CORPO
Insurance Australia Group — H1 2009 Earnings Presentation on 6ix