Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2022 Earnings Presentation
23 slides from Insurance Australia's earnings presentation, Aug 12, 2022
Slide 1: Financial results
This release has been authorised by the IAG Board Financial results Nick Hawkins Full year ended 30 June 2022 Managing Director and Chief Executive Officer Michelle McPherson Chief Financial Officer 12 August 2022 1 FY22 Results | 12 August 2022
Slide 2: Important information
Important information This report contains general information current as at 12 August 2022 and is not a recommendation or In addition, there are particular risks and uncertainties associated with implementation of IAG’s strategy advice in relation to any product or service offered by Insurance Aust
Slide 3: Overview
Overview Nick Hawkins Managing Director and Chief Executive Officer 3 FY22 Results | 12 August 2022
Slide 4: FY22 results overview
FY22 results overview GWP Underlying margin Reported margin $13.3bn 14.6% 7.4% Strong rate increases and customer Positive underlying margin Impacted by natural perils, reserve growth momentum strengthening and investment markets Net profit after tax CET1 ratio FY23 guidance $347m 0.97x Strong momen
Slide 5: FY22 group highlights strong GWP trends and steady underlying margin performance
FY22 group highlights strong GWP trends and steady underlying margin performance GWP growth Insurance margin1 14.4% 7.4% 13.8% 1.7% 13.5% 4.4% 0.6% 7.4% 5.7% 3.8% FY21 FY22 FY21 FY22 Reported margin Adjusted underlying margin Estimated COVID-19, ESL, FX and IAL exit impacts (1)IAG defines its underl
Slide 6: Divisional highlights
Divisional highlights Direct Insurance Intermediated Insurance New Zealand Australia (DIA) Australia (IIA) • ~100k additional customers in direct brands • ~9% premium rate increases • Positive GWP momentum • Pricing for claims inflation, higher peril • IAL exit (FY22: GWP ~$140m impact) with • NZ$ G
Slide 7: Delivering our strategy execution phase on track
Delivering our strategy execution phase on track FY22 Progress FY23 Focus • ~100k additional customers in DIA with national1 launch of • Target under-represented areas using pricing and product Grow with NRMA capability our customers • Positioned NZ for direct brand growth through marketing, • Redes
Slide 8: Financials
Financials Michelle McPherson Chief Financial Officer 8 FY22 Results | 12 August 2022
Slide 9: Financial summary
FY21 FY22 Change GWP ($m) 12,602 13,317 5.7% NEP ($m) 7,473 7,909 5.8% Insurance profit1 ($m) 1,007 586 41.8% Underlying insurance margin2 (%) 14.7 14.6 10bps Financial Reported insurance margin (%) 13.5 7.4 610bps summary Net (loss)/profit after tax ($m) (427) 347 nm Cash earnings ($m) 747 213 71.5
Slide 10: Strong premium momentum retention continuing to increase
Strong premium momentum retention continuing to increase Group GWP growth Strong rate rises to counter inflation, perils allowance, reinsurance costs & underperforming lines >1% volume growth across direct short tail personal lines in Australia Adjusting for COVID-19, ESL and IAL exit, underlying GW
Slide 11: Stable underlying margin trends pricing for claims inflation
Stable underlying margin trends pricing for claims inflation Underlying margin Underlying margin ex. COVID-19 and discount rate timing impact 14.0% 14.8% 1H22 2H22 11 FY22 Results | 12 August 2022
Slide 12: Stable underlying claims trend managing inflationary pressures
Stable underlying claims trend managing inflationary pressures Premium rate increases earn through Group adjusted underlying claims ratio Reduced motor claims frequency during COVID lockdowns Increasing inflationary pressures ~2.0% COVID impacting average claims costs benefit ~2.0% COVID 54.5% benef
Slide 13: Managing expense trade-offs to constrain operating cost growth
Costs to transform Managing expense trade-offs to constrain $315m $239m +31.8% operating cost growth Gross operating costs $2,503m $2,531m FY21 FY22 Costs to maintain $1,303m $1,228m $2,264m -2.1% $2,216m -5.8% FY21 1H22 2H22 FY22 FY21 FY22 13 FY22 Results | 12 August 2022
Slide 14: Catastrophe reinsurance protection with increased perils allowance to $909m in FY23
Catastrophe reinsurance protection with increased perils allowance to $909m in FY23 $m Gross catastrophe reinsurance 10,000 $350m Main Catastrophe Program FY23 aggregate cover (gross basis) $1,119m $100m 500 FY22 net perils $354m above allowance FY23 drop-down cover 250 CY22 Drop-down Cover* (gross
Slide 15: Reserve strengthening, actions to mitigate future impacts
IIA prior period strengthening Reserve strengthening, actions to 2H22 strengthening driven by commercial mitigate future impacts liability due to: • Late reported medium to large claims, notably worker injury claims in 2017 and Prior period reserve movements ($m) 2018 accident years • High levels of
Slide 16: Investments timing impact from transition to higher yields
Investments timing impact from transition to higher yields Technical reserves market impacts ~$12bn Investment Portfolio 2.4% 1.3% ~$7.7bn technical reserves invested in fixed 1.2% 1.1% interest & cash - Loss of $238m 51 • Driven by risk-free rate movements and 26 18 widening credit spreads (14) (63
Slide 17: Solid capital position near mid-point of targeted range
Solid capital position near mid-point of targeted range Movement in CET1 ratio Positive impact from partial release of BI provision Higher insurance concentration risk charge, lower asset risk charge AmGeneral sale completed July 2022 17 FY22 Results | 12 August 2022
Slide 18: Guidance & Value Proposition
Guidance & Value Proposition Nick Hawkins Managing Director and Chief Executive Officer 18 FY22 Results | 12 August 2022
Slide 19: GWP growth and reported margin guidance
Features of FY23 guidance GWP GWP growth and ‘Mid-to-high single digit growth’1 for the full year reported margin guidance Reported margin demonstrate FY22 underlying margin Margin impact 14.6% strong business Discount rate timing impact momentum (Negative impact in FY22) ~50bps COVID-19 impact (~70
Slide 20: Our value proposition
Our value proposition Medium-term margin and ROE targets Our strengths Our strategy Key value drivers Our aspirations • Leading brands • Grow with our customers • Customer growth • “Create a stronger, • Scale and reach • Build better businesses • Claims management more resilient IAG” • Superior cust
Slide 21: Investor Relations
Investor Relations Mark Ley Nigel Menezes Mobile. +61 (0)411 139 134 Mobile. +61 (0)411 012 690 Email. mark.ley@iag.com.au Email. nigel.menezes@iag.com.au Media Amanda Wallace Mobile. +61 (0)422 379 964 Email. amanda.wallace@iag.com.au Insurance Australia Group Limited ABN 60 090 739 923 Level 13, T
Slide 22: Appendix 1: FY23 Guidance and Outlook
Appendix 1: FY23 Guidance and Outlook IAG’s confidence in its strong underlying business is reflected in upgraded guidance for FY23 These goals are subject to assumptions and dependencies, including that there are no material which includes: adverse developments in macro-economic conditions and disr
Slide 23: Appendix 2: Reconciliation of reported to underlying to adjusted margins
Appendix 2: Reconciliation of reported to underlying to adjusted margins 1H21 2H21 1H22 2H22 FY21 FY22 INSURANCE MARGIN IMPACTS - Continuing Business A$m A$m A$m A$m A$m A$m Reported insurance margin 17.9% 9.1% 7.1% 7.7% 13.5% 7.4% Reserve releases/(strengthening) 0.4% 1.8% 0.9% 3.4% 1.1% 2.2% Natur
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