Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2013 Earnings Presentation
35 slides from Insurance Australia's earnings presentation, Feb 21, 2013
Slide 1: Financial Results Half Year Ended 31 December 2012
21 February 2013 ABN 60 090 739 923 For personal use only FINANCIAL RESULTS HALF YEAR ENDED 31 DECEMBER 2012 Mike Wilkins Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer
Slide 2: Important Information
IMPORTANT INFORMATION For personal use only This presentation contains general information in summary form which is current as at 21 February 2013. It presents financial information on both a statutory basis (which has been prepared in accordance with Australian accounting standards, which comply wi
Slide 3: Group Results
For personal use only GROUP RESULTS Mike Wilkins Managing Director and Chief Executive Officer
Slide 4: Highlights
HIGHLIGHTS STRONG UNDERLYING AND REPORTED PERFORMANCE For personal use only STRONG UNDERLYING Gross written premium (GWP) growth of 13.5%, 9.5% ex-AMI PERFORMANCE Underlying margin of 12.1% - delivers on ROE target Individual business units performing well – Strong result from Australia Direct
Slide 5: Financial Summary
FINANCIAL SUMMARY IMPROVEMENT IN ALL FINANCIAL MEASURES For personal use only 1H12 1H13 CHANGE GWP ($M) 4,045 4,593 13.5% NET EARNED PREMIUM ($M) 3,581 4,095 14.4% INSURANCE PROFIT ($M) 276 815 195% REPORTED MARGIN (%) 7.7 19.9 1,220bps NET PROFIT AFTER TAX ($M) 144 461 220% CASH NPAT ($M) 155 684 3
Slide 6: Group Underlying Insurance Margin
GROUP UNDERLYING INSURANCE MARGIN MEETS ROE TARGET For personal use only UNDERLYING INSURANCE MARGIN KEY POINTS Further improvement in underlying margin Underlying margin presented on ongoing operations basis (ex-UK) 1H12 outcome adjusted for even phasing of natural peril allowances (as per FY
Slide 7: 1H13 Reported Insurance Margin
1H13 REPORTED INSURANCE MARGIN BUSINESS IMPROVEMENT AND FAVOURABLE CONDITIONS For personal use only REPORTED INSURANCE MARGIN – 1H13 VS 1H12 KEY POINTS 900 19.9% Strong reported margin of 19.9% 800 (1H12: 7.7%) 700 170 Continued strength in underlying business performance supplemented by: 600 –
Slide 8: Natural Perils
NATURAL PERILS BENIGN 1H13 EXPERIENCE For personal use only NATURAL PERILS – IMPACT ON MARGIN KEY POINTS Benign 1H13 experience 5% – 4.4% positive margin impact, vs. allowance 4% – Absence of any major events 3% Significant peril activity in Australia in opening 2% weeks of 2H13 1% – Ex-Tropical
Slide 9: Strong Rise in Reported Net Profit
STRONG RISE IN REPORTED NET PROFIT SIGNIFICANT INCREASE IN INTERIM DIVIDEND For personal use only STRONGER EQUITY MARKET Shareholders’ funds return of $201m INCOME – Significant turnaround against 1H12 ($30m loss) – Reflection of stronger local equity market UK TREATED AS Overall loss of $182m c
Slide 10: Strategy Delivering Results
STRATEGY DELIVERING RESULTS FURTHER PROGRESS For personal use only ACCELERATE PROFITABLE Strong GWP growth in Australia Direct and CGU GROWTH IN AUSTRALIA AND Implementation of new operating model aiding further improvement in NEW ZEALAND underlying margin in CGU AMI integration progressing to
Slide 11: Divisional Performance
For personal use only DIVISIONAL PERFORMANCE 1 RACV is via a distribution relationship and underwriting joint venture with RACV Limited. 2 RACV has a 30% interest in The Buzz Insurance. Refer to slide 28 for ownership details
Slide 12: Australia Direct
AUSTRALIA DIRECT STRONG RESULT For personal use only KEY METRICS 1H13 CHANGE KEY POINTS GWP growth of 8.8% Gross written premium ($m) 2,264 8.8% – Mix of rate and volume Insurance result ($m) 453 97.0% Insurance margin of 21.9% (1H12: 12.3%) Insurance margin (%) 21.9 960 bps – Lower net natural
Slide 13: Australia Direct NSW CTP Update
AUSTRALIA DIRECT NSW CTP UPDATE For personal use only AUSTRALIA DIRECT – 1H13 GWP SPLIT CTP represents 19% of Australia Direct’s premium base - c.$900m per annum Bulk of exposure relates to NSW CTP (c.$700m per annum) – Over 40% market share – Regulated pricing CTP 19% – Average liability durati
Slide 14: Australia Intermediated (CGU)
AUSTRALIA INTERMEDIATED (CGU) ON TRACK FOR FY13 DOUBLE DIGIT UNDERLYING MARGIN For personal use only KEY METRICS 1H13 CHANGE KEY POINTS GWP growth of 7.7% Gross written premium ($m) 1,433 7.7% – Improved momentum, ex-acquisitions Insurance result ($m) 301 281.0% Significantly improved underlying
Slide 15: New Zealand
NEW ZEALAND SOLID RESULT, AMI INTEGRATION PROGRESSING WELL For personal use only KEY METRICS 1H13 CHANGE KEY POINTS Strong GWP growth Gross written premium ($m) 751 39.6% – Full six-month contribution from AMI (1H12: nil) Insurance result ($m) 52 57.6% – Ex-AMI growth of 8.4%, largely rate-driven
Slide 16: Asia
ASIA NEARLY 6% OF GROUP GWP, ON TRACK FOR SMALL PROFIT For personal use only ASIA GWP POOL KEY POINTS GWP nearly 6% of Group (proportional basis) 1,100 7.0% – High growth in Thailand, post-floods 1,000 6.0% – Malaysian JV boosted by Kurnia 900 – Full six months of China and Vietnam 800 5.0% 700 –
Slide 17: Capital and Investments
For personal use only CAPITAL AND INVESTMENTS Nick Hawkins Chief Financial Officer
Slide 18: Reinsurance
REINSURANCE CATASTROPHE COVER STRENGTHENED For personal use only $m 5000 Additional earthquake cover Australia/NZ Earthquake (year 2 of 3-year deal) 4500 Main Catastrophe Programme Buy-down arrangement reduces maximum cost of second event to $200m Lower layer of $250m 500 excess of $250m (year 2 of
Slide 19: Reinsurance Expense
REINSURANCE EXPENSE RATIO EXPECTED TO STABILISE For personal use only GROUP REINSURANCE EXPENSE KEY POINTS 1H13 reinsurance expense of $399m (1H12: 800 10.0% $335m), reflects: 8.7% 8.2% 9.0% 700 – Six-month inclusion of AMI 7.4% 8.0% 600 6.3% 6.3% 6.5% 6.3% 7.0% – General business growth 6.2% 6.2%
Slide 20: Reserve Releases
RESERVE RELEASES FY13 EXPECTATION MAINTAINED AT 1-2% OF NEP For personal use only GROUP RESERVE RELEASES (% NEP) KEY POINTS 10% 1H13 releases of $90m (1H12: $83m) – 9% equivalent to 2.2% of NEP 8% Driven by favourable experience in 7% Australian long tail classes 6% CGU outcome (6.1% of NEP) i
Slide 21: Regulatory Capital
REGULATORY CAPITAL STRONG POSITION, UNDER NEW AND OLD REGIMES For personal use only 31 DECEMBER 2012 KEY POINTS Stronger regulatory capital position compared to 30 June 2012 MCR LAGIC – MCR multiple of 1.80 (up from 1.74) PCA - 1.69 – Strong earnings performance – Further unwind of peril effects
Slide 22: Capital Management
CAPITAL MANAGEMENT GEARING IN MIDDLE OF TARGETED RANGE For personal use only 1H12 2H12 1H13 KEY POINTS CAPITAL MIX $m $m A$m Debt to total tangible capitalisation of Shareholder equity 4,513 4,524 4,768 34.9%, at middle of 30-40% target range Intangibles and goodwill (1,887) (1,850) (1,838) Cont
Slide 23: Investment Portfolio
INVESTMENT PORTFOLIO CONSERVATIVE MIX AND HIGH CREDIT QUALITY For personal use only TOTAL INVESTMENT GROUP ASSET ALLOCATION SHAREHOLDERS’ FUNDS PORTFOLIO – $13.1BN $4.0bn 13% 18% 57% 25% $9.1bn 87% Technical Reserves Shareholders' Funds Fixed Interest and Cash Growth Fixed Interest and Cash Equities
Slide 24: Investment Returns
INVESTMENT RETURNS REFLECTING MARKET MOVEMENTS For personal use only INVESTMENT INCOME ($M) TECHNICAL RESERVES RETURNS 500 473 Lower 1H13 performance reflecting reduced running 441 yield and lower capital gains 400 Positive impact of $90m from narrower credit spreads 300 Continue to target 100
Slide 25: Outlook
For personal use only OUTLOOK Mike Wilkins Managing Director and Chief Executive Officer
Slide 26: FY13 Outlook
FY13 OUTLOOK STRONG UNDERLYING PERFORMANCE For personal use only FY13 GUIDANCE PREVIOUS CURRENT GWP growth 9-11% 9.5-11.5% Insurance margin 11-13% 12.5-14.5% Guidance for FY13 restated on ongoing operations basis (ex-UK) Consistent with previous guidance, bar incorporation of 1H13 credit spread
Slide 27: Questions
For personal use only QUESTIONS
Slide 28: Ownership of Business Units
100% owned unless indicated. 1 RACV is via a distribution relationship and For personal use only underwriting joint venture with RACV Limited. 2 IAG holds 98.6% voting rights in Safety Insurance, based in Thailand. 3 4 IAG owns 49% of the general insurance arm of Malaysian-based AmBank Group, AmG In
Slide 29: Appendix - Group Performance
APPENDIX - GROUP PERFORMANCE 1H12 2H12 1H13 Insurance Ratios (Continuing Operations) 1H12 2H12 1H13 For personal use only GROUP RESULTS $m $m $m Loss ratio 78.7% 69.1% 59.5% Gross written premium 4,045 4,450 4,593 Immunised loss ratio 70.1% 64.1% 61.6% Gross earned premium 3,916 4,130 4,494 Expense
Slide 30: Appendix - Divisional Performance
APPENDIX - DIVISIONAL PERFORMANCE For personal use only 1H12 1H13 Insurance Insurance Insurance Insurance GWP GWP Profit/(Loss) Margin Profit Margin DIVISIONAL PERFORMANCE A$m A$m % A$m A$m % Australia Direct 2,080 230 12.3 2,264 453 21.9 Australia Intermediated 1,330 79 6.7 1,433 301 23.1 New Zeala
Slide 31: Appendix - Australia Direct
APPENDIX - AUSTRALIA DIRECT 1H12 2H12 1H13 GWP ($M) / INSURANCE MARGIN (%) For personal use only FINANCIAL RESULTS $m $m $m Gross written premium 2,080 2,219 2,264 21.9% Gross earned premium 1,996 2,076 2,199 16.2% Reinsurance expense (130) (132) (134) 12.3% Net earned premium 1,866 1,944 2,065 2,26
Slide 32: Appendix - Australia Intermediated (CGU)
APPENDIX - AUSTRALIA INTERMEDIATED (CGU) 1H12 2H12 1H13 GWP ($M) / INSURANCE MARGIN (%) For personal use only FINANCIAL RESULTS $m $m $m 23.1% Gross written premium 1,330 1,429 1,433 Gross earned premium 1,307 1,326 1,428 Reinsurance expense (121) (124) (124) 14.9% Net earned premium 1,186 1,202 1,3
Slide 33: Appendix - New Zealand
APPENDIX – NEW ZEALAND 1H12 2H12 1H13 GWP ($M) / INSURANCE MARGIN (%) For personal use only FINANCIAL RESULTS $m $m $m Gross written premium 538 672 751 Gross earned premium 517 623 739 Reinsurance expense (63) (86) (113) Net earned premium 454 537 626 Net claims expense (298) (303) (399) Commission
Slide 34: Appendix - Asia
APPENDIX – ASIA 1H12 2H12 1H13 IAG ASIA GWP MIX 1H13 – For personal use only FINANCIAL RESULTS $m $m $m PROPORTIONAL BASIS Gross written premium 94 125 137 Gross earned premium 92 101 122 Reinsurance expense (19) (21) (25) Net earned premium 73 80 97 Net claims expense (114) (41) (56) Commission exp
Slide 35: Appendix - Asia (Contribution by Country)
APPENDIX – ASIA (CONTRIBUTION BY COUNTRY) For personal use only Gross GWP Proportional GWP Earnings Contribution 1H12 1H13 1H12 1H13 1H12 1H13 A$m A$m A$m A$m A$m A$m Thailand 94 137 94 137 (63) 9 Malaysia 99 192 49 94 7 10 Established markets 193 329 143 231 (56) 19 India 24 66 6 17 (2) (2) China -
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