Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Debt Investor Presentation (May 2016)
32 slides from Insurance Australia's debt investor presentation, May 2016
Slide 1: New Zealand Retail Offer of Subordinated Notes
May 2016 New Zealand Retail Offer of Subordinated Notes The notes are complex financial products that are not suitable for many investors. If you do not fully understand how they work or the risks associated with them, you should not invest in them. You should read the Product Disclosure Statement f
Slide 2: Important information
Important information This presentation has been prepared by Insurance Australia Group Limited (ABN 60 090 739 923) (IAG) in relation to a potential issue by IAG of subordinated notes (Notes). This presentation contains general information in summary form which is current as at 5 May 2016. It presen
Slide 3: Group overview
Group overview General insurance group listed on ASX • An ASX-listed general insurance group offering personal and commercial insurance products through: – Leading and established brands across its home markets of Australia and New Zealand – A presence in Asia • Annual Gross Written Premium (GWP) ov
Slide 4: Issuer & Terms
Issuer & Terms New Zealand Subordinated Notes
Slide 5: IAG Subordinated Notes: Offer terms
IAG Subordinated Notes Offer terms Offer size Up to NZ$250 million plus up to NZ$100 million oversubscriptions Margin • The Margin will be set on the Rate Set Date (18 May 2016) • Indicative Margin range 2.60 – 2.90% per annum Early bird interest 4.00% per annum Re-investment Offer Current Holders o
Slide 6: IAG Subordinated Notes: Summary of offering
IAG Subordinated Notes Summary of offering • • Multiple Australian precedents (including Insurance Australia Limited 2014 Issue) IAG NZ$ Subordinated Notes Page 6
Slide 7: IAG Subordinated Notes: Key terms
IAG Subordinated Notes Key terms (full terms available in the PDS) Issuer Insurance Australia Group Limited Description Unsecured subordinated convertible notes (Notes). Depending on the circumstances, the Notes may be repaid, Converted into IAG ordinary shares (Ordinary Shares) or Written-Off Inter
Slide 8: Re-investment Offer
Re-investment Offer Opportunity for holders of IAG’s existing NZ$325m issue (2011 NZ$ Bonds) • 2011 NZ$ Bond holders can request all or some 2011 NZ$ Bonds be purchased by IAG on the Issue Date for re-investment in the Notes subject to availability • No separate payments for Notes issued under the R
Slide 9: IAG Bond Offer: Comparable instruments in New Zealand
IAG Bond Offer Comparable instruments in New Zealand IAG Notes BNZ Tier 2 IAL Notes Mighty River Power (NZ$ Retail) (BNZ090) (A$ Wholesale) (MRP010) Ranking Subordinated Subordinated Subordinated Subordinated Currency NZ$ NZ$ A$ NZ$ Issued 2016 2015 2014 2014 Payment of Interest Deferred if Interest
Slide 10: Overview and 1H16 Group Results
Overview and 1H16 Group Results
Slide 11: IAG's geographic presence
IAG’s geographic presence More than 90% of GWP from home markets (Australia & New Zealand) 1-7 - For ownership details, see www.iag.com.au IAG NZ$ Subordinated Notes Page 11
Slide 12: IAG's strategy
IAG’s strategy Delivering great customer experiences and creating value IAG NZ$ Subordinated Notes Page 12
Slide 13: Berkshire Hathaway
Berkshire Hathaway Strategic relationship established June 2015 • IAG has established a long-term partnership with Berkshire Hathaway Inc, one of the world’s largest and most successful companies • Enables both parties to draw on each other’s strengths to better meet customer needs and deliver super
Slide 14: Group financial summary - 1H16
Group financial summary - 1H16 Cash ROE of 14.7% 1H15 1H16 CHANGE GWP (A$M) 5,603 5,543 1.1% NET EARNED PREMIUM ($M) 5,154 4,102 20.4% INSURANCE PROFIT ($M) 693 610 12.0% UNDERLYING MARGIN (%) 13.3 14.2 90bps REPORTED MARGIN (%) 13.4 14.9 150bps SHAREHOLDERS’ FUNDS INCOME ($M) 137 38 72.3% NET PROFI
Slide 15: Underlying insurance margin
Underlying insurance margin Quota share uplift of c.250bps Insurance margin (reported vs. underlying) • Higher underlying margin of 14.2% (1H15: 13.3%) from blend of: − Favourable Berkshire Hathaway quota 14.2% 14.2% share effect of approximately 250bps 13.1%% 11.4% 12.0% 12.5% − Maintenance of stro
Slide 16: Divisional performance
Divisional performance 1H15 1H16 GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Consumer Division 2,802 4.3 16.0 14.0 2,848 1.6 24.6 15.5 Business Division 1,514 43.9 6.6 10.7 1,419 (6.3) 8.4 10.7 New Zea
Slide 17: Capital, Reinsurance and Investments
Capital, Reinsurance and Investments
Slide 18: Debt and hybrid capital
Debt and hybrid capital Active capital management 31 December 2015 Principal Margin/ Reset/ Issuer m A$m coupon maturity IAG Fixed rate subordinated £100 203 5.625% Fixed Dec-16 IAL Wholesale subordinated FRN $350 350 +2.8% Margin Mar 19 IAG Fixed rate subordinated NZ$325 305 7.50% Fixed Dec-16 Tota
Slide 19: Capital
Capital Strong capital position, in excess of benchmarks PCA movement since 30 June 2015 • Stronger capital position • Favourable quota share effect – skewed to front half of FY16 • Modest earthquake effect: − Settlement of claims − Gross strengthening • Ongoing intent to manage within stated benchm
Slide 20: Capital and dividend
Capital and dividend Strong position, as quota share benefits flow Regulatory capital Interim dividend 62.7% 60.0% 50.0% 10.0 46.6% 40.0% 30.0% 1.80 FY15 1.70 20.0% 1.23 1H16 13.0 13.0 1.14 10.0% 0.0% PCA CET1 1H15 1H16 Target benchmark range Interim dividend (¢) Special dividend (¢) Interim cash pa
Slide 21: Reinsurance
Reinsurance Key element of approach to capital management 2016 catastrophe reinsurance programme • Calendar 2016 catastrophe cover $m 7000 − A$7bn of gross protection, placed to 80% (to reflect quota share) − Maximum Event Retention (MER) of A$200m Main Catastrophe Programme − Favourable market cond
Slide 22: Investments
Investments Lower technical reserves as a result of quota share effects Asset allocation – 31 December 2015 • Total investments of A$14bn (FY15: A$15.5bn): − Conservative mix and high credit quality characteristics unchanged − Progressive effect of quota share on technical reserves position − Growth
Slide 23: Investments: Conservative investment mandate
Investments Conservative investment mandate Group asset allocation Credit quality 31 December 2015 31 December 2015 14% 11% 9% 'AAA' Fixed interest and 43% cash 'AA' 'A' Growth < 'A' 37% 86% IAG NZ$ Subordinated Notes Page 23
Slide 24: IAG Bond Offer - timetable
IAG Bond Offer - timetable Key dates for the Offer Roadshow 10 - 12 May 2016 Firm application bids due 18 May 2016 (Wednesday (noon)) Rate set and firm allocations advised 18 May 2016 (Wednesday) Opening date 19 May 2016 (Thursday) Closing date 10 June 2016 (Friday) Issue date 15 June 2016 (Wednesda
Slide 25: IAG contacts
IAG contacts Alan Cazalet Mark Gold Dan Coman Group Treasurer Deputy Group Treasurer Deputy Chief Financial Officer + 61 2 9292 8451 + 61 2 9292 2353 + 61 2 9292 3000 acazalet@iagam.com.au mgold@iagam.com.au dan.coman@iag.com.au
Slide 26: We make your world a safer place
We make your world a safer place IAG NZ$ Subordinated Notes Page 26
Slide 27: Appendix 1 – 1H16 Group results
Appendix 1 – 1H16 Group results 1H15 2H15 1H16 Insurance Ratios 1H15 2H15 1H16 GROUP RESULTS A$m A$m A$m Loss ratio 67.5% 66.9% 63.1% Gross written premium 5,603 5,837 5,543 Immunised loss ratio 63.7% 67.0% 62.7% Gross earned premium 5,805 5,720 5,734 Expense ratio 27.3% 27.9% 26.2% Reinsurance expe
Slide 28: Appendix 2 – Consumer Division
Appendix 2 – Consumer Division 1H15 2H15 1H16 GWP ($M) / INSURANCE MARGIN (%) CONSUMER DIVISION RESULTS A$m A$m A$m Gross written premium 2,802 2,812 2,848 24.6% Gross earned premium 2,814 2,780 2,834 16.0% 15.9% Reinsurance expense (365) (279) (818) Net earned premium 2,449 2,501 2,016 2,802 2,812
Slide 29: Appendix 3 – Business Division
Appendix 3 – Business Division 1H15 2H15 1H16 GWP ($M) / INSURANCE MARGIN (%) BUSINESS DIVISION RESULTS A$m A$m A$m Gross written premium 1,514 1,678 1,419 Gross earned premium 1,673 1,594 1,597 1,678 1,419 Reinsurance expense (122) (90) (413) 1,514 Net earned premium 1,551 1,504 1,184 Net claims ex
Slide 30: Appendix 4 – New Zealand
Appendix 4 – New Zealand GWP ($M) / INSURANCE MARGIN (%) 1H15 2H15 1H16 19.2% NEW ZEALAND RESULTS A$m A$m A$m Gross written premium 1,116 1,151 1,070 1,116 1,151 1,070 Gross earned premium 1,148 1,151 1,101 Reinsurance expense (143) (151) (340) Net earned premium 1,005 1,000 761 Net claims expense (
Slide 31: Appendix 5 – Asia
Appendix 5 – Asia IAG ASIA GWP 1H16 - 1H15 2H15 1H16 PROPORTIONAL BASIS A$m A$m A$m Gross written premium 164 189 197 Gross earned premium 163 187 193 Indonesia Reinsurance expense (19) (22) (57) Thailand 1% Net earned premium 144 165 136 50% Vietnam Net claims expense (84) (106) (75) 2% Commission
Slide 32: Appendix 6 – Berkshire Hathaway quota share
Appendix 6 – Berkshire Hathaway quota share Reducing earnings volatility and capital requirement CHANGE 1H16 (VS 1H15) QUOTA SHARE IMPACT GWP ($M) 5,543 1.1% None REINSURANCE EXPENSE ($M) 1,632 150.7% Includes 20% of GWP attributable to BH NET EARNED PREMIUM ($M) 4,102 20.4% Reflects higher reinsura
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