Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2013 Earnings Presentation
31 slides from Insurance Australia's earnings presentation, Aug 22, 2013
Slide 1: Financial Results Full Year Ended 30 June 2013
22 August 2013 ABN 60 090 739 923 For personal use only FINANCIAL RESULTS FULL YEAR ENDED 30 JUNE 2013 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 22 August 2013. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International F
Slide 3: Group Results
For personal use only GROUP RESULTS Mike Wilkins Managing Director and Chief Executive officer
Slide 4: Key Highlights: Strong Performance and Positive Outlook
KEY HIGHLIGHTS STRONG PERFORMANCE AND POSITIVE OUTLOOK For personal use only STRONG UNDERLYING Gross written premium (GWP) growth of 11.8%, 8.7% ex-AMI PERFORMANCE Underlying margin of 12.5% - exceeds ROE target Individual business units performing well – Strong result from Australia Direct, d
Slide 5: Financial Summary
FINANCIAL SUMMARY SIGNIFICANT UPLIFT ACROSS ALL KEY MEASURES For personal use only FY12 FY13 CHANGE GWP ($M) 8,495 9,498 11.8% NET EARNED PREMIUM ($M) 7,346 8,318 13.2% INSURANCE PROFIT ($M) 845 1,428 69% REPORTED MARGIN (%) 11.5 17.2 570bps NET PROFIT AFTER TAX ($M) 207 776 275% CASH NPAT ($M) 583
Slide 6: FY13 Reported Insurance Margin
FY13 REPORTED INSURANCE MARGIN BOOSTED BY FAVOURABLE CONDITIONS For personal use only REPORTED INSURANCE MARGIN – FY13 VS FY12 KEY POINTS 17.2% 0 Strong reported margin of 17.2% 180 (FY12: 11.5%) 0 194 Improved underwriting performance of 104 17 nearly $300m, sourced from all divisions 0 296 11.
Slide 7: Divisional Performance
For personal use only DIVISIONAL PERFORMANCE Refer to slide 25 for ownership details
Slide 8: Australia Direct
AUSTRALIA DIRECT CONTINUES TO PERFORM STRONGLY For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 4,584 6.6% GWP growth of 6.6% Insurance result ($m) 822 51.1% – Primarily rate, supplemented by volume Underlying margin (%) 13.5 170bps – Growth in all states and mos
Slide 9: Australia Direct: CTP Developments
AUSTRALIA DIRECT CTP DEVELOPMENTS For personal use only FY13 CTP GWP - BY SCHEME CTP represents 20% of Australia Direct’s premium base - c.$900m in FY13 6% NSW (39% market share) 16% – Scheme currently under review – Initial draft legislation withdrawn Unsatisfactory performance of Queensland
Slide 10: Australia Intermediated (CGU)
AUSTRALIA INTERMEDIATED (CGU) DELIVERS UNDERLYING DOUBLE DIGIT MARGIN For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 3,028 9.7% Strong GWP growth of 9.7% - rate and volume Insurance result ($m) 470 82.2% Significantly improved underlying margin of 11.2% Under
Slide 11: New Zealand
NEW ZEALAND MAINTAINS STRONG UNDERLYING PERFORMANCE For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 1,575 30.2% GWP growth of 30.2% (local currency 26.8%) Insurance result ($m) 115 11.7% – Full year contribution from AMI (FY12: 3 months) Underlying margin (%) 11
Slide 12: Asia: Moving from Development to Delivery
ASIA MOVING FROM DEVELOPMENT TO DELIVERY For personal use only FINANCIAL CONTRIBUTION BY COUNTRY KEY POINTS GWP now around 7% of Group (proportional basis) PROPORTIONAL EARNINGS – Participating in a gross premium pool of $1.3bn GWP CONTRIBUTION – Significant growth in Thailand, post FY12 floods FY
Slide 13: Capital and Investments
For personal use only CAPITAL AND INVESTMENTS Nick Hawkins Chief Financial Officer
Slide 14: Investment Portfolio
INVESTMENT PORTFOLIO CONSERVATIVE MIX AND HIGH CREDIT QUALITY For personal use only TOTAL INVESTMENT GROUP ASSET ALLOCATION SHAREHOLDERS’ FUNDS PORTFOLIO – $13.6BN $4.2bn 14% 22% 54% 24% $9.4bn 86% Technical Reserves Shareholders' Funds Fixed Interest and Cash Growth Fixed Interest and Cash Equities
Slide 15: Investment Returns
INVESTMENT RETURNS STRONG PERFORMANCE, AIDED BY MARKET MOVEMENTS For personal use only INVESTMENT INCOME ($M) TECHNICAL RESERVES RETURNS Lower returns reflecting mark-to-market capital losses (FY12: capital gains) Positive impact of $110m from narrower credit spreads Continued to achieve over
Slide 16: Reserve Releases
RESERVE RELEASES FAVOURABLE EXPERIENCE IN LONG TAIL CLASSES For personal use only GROUP RESERVE RELEASES (% NEP) KEY POINTS 7% Higher than expected FY13 releases of $212m (FY12: $195m), equivalent to 2.5% of NEP 6% – Driven by favourable experience in 5% Australian long tail classes 4% – CGU outco
Slide 17: Natural Perils Experience
NATURAL PERILS EXPERIENCE FAVOURABLE RESULT FOLLOWING BENIGN FIRST HALF For personal use only NATURAL PERILS – IMPACT ON MARGIN KEY POINTS 2% Favourable overall FY13 experience – 1.9% positive margin impact, vs. 1% allowance 0% 2H13 slightly above allowance FY08 FY09 FY10 FY11 FY12 FY13 – Ex-Tro
Slide 18: Reinsurance Expense
REINSURANCE EXPENSE RATIO HAS STABILISED For personal use only GROUP REINSURANCE EXPENSE KEY POINTS 17% increase in FY13 reinsurance expense to 8.2% 8.6% 9 $817m (FY12: $700m), reflects: 7.4% 8 – Full year of AMI 6.3% 6.3% 6.5% 6.3% 7 6.2% 6.2% 6.2% – Overall business growth 6 5 – Higher rates ass
Slide 19: Catastrophe Reinsurance
CATASTROPHE REINSURANCE PARTIAL AGGREGATE EROSION AT 30 JUNE 2013 For personal use only 2013 CATASTROPHE PROGRAMME – AS AT 30 JUNE KEY POINTS Aggregate erosion of $105m at 30 June 2013 - $145m deductible remains Next catastrophe renewal 1 January 2014 Additional cover purchased in respect of F
Slide 20: Strong Capital Position
STRONG CAPITAL POSITION IN LINE WITH BENCHMARKS For personal use only 30 JUNE 2013 KEY POINTS Strong regulatory capital position PCA – PCA multiple of 1.67 (benchmark 1.4-1.6) – CET1 multiple of 1.09 (benchmark 0.9-1.1) Modest movement against pro forma 31 December CET1 2012 position, reflecting
Slide 21: Dividend
DIVIDEND POLICY OF 50-70% OF CASH EARNINGS For personal use only DIVIDEND – CENTS PER SHARE 1 KEY POINTS 9 Consistent application of dividend policy from FY09 8 71.5% 70.8% – 50-70% of cash earnings 67.1% 64.7% 7 60.5% – Provides sufficient flexibility to fund 6 growth and bolt-on acquisitions 5 (
Slide 22: Outlook
For personal use only OUTLOOK Mike Wilkins Managing Director and Chief Executive Officer
Slide 23: FY14 Outlook
FY14 OUTLOOK For personal use only GUIDANCE FY14 GWP growth 5-7% Insurance margin 12.5-14.5% GUIDANCE FOR FY14 ASSUMES: Net losses from natural perils in line with budgeted allowance of $640m Reserve releases 1-2% of NEP No material movement in foreign exchange rates and investment markets FY1
Slide 24: Questions
For personal use only QUESTIONS
Slide 25: For personal use only
100% owned unless indicated. 1 RACV is via a distribution relationship and underwriting joint venture with RACV Limited. For personal use only 2 IAG holds 98.6% voting rights in Safety Insurance, based in Thailand. 3 4 IAG owns 49% of the general insurance arm of Malaysian-based AmBank Group, AmGene
Slide 26: Appendix - Group Performance
APPENDIX - GROUP PERFORMANCE 1H12 2H12 1H13 2H13 FY12 FY13 Insurance Ratios (Continuing Operations) 1H12 2H12 1H13 2H13 FY12 FY13 For personal use only GROUP RESULTS A$m A$m A$m A$m A$m A$m Loss ratio 78.7% 69.1% 59.5% 60.3% 73.8% 59.9% Gross written premium 4,045 4,450 4,593 4,905 8,495 9,498 Immun
Slide 27: Appendix - Divisional Performance
APPENDIX – DIVISIONAL PERFORMANCE For personal use only FY12 FY13 Insurance Insurance Insurance Insurance GWP GWP Profit/(Loss) Margin Profit Margin DIVISIONAL PERFORMANCE A$m A$m % A$m A$m % Australia Direct 4,299 544 14.3 4,584 822 19.7 Australia Intermediated 2,759 258 10.8 3,028 470 17.8 New Zea
Slide 28: Appendix - Australia Direct
APPENDIX – AUSTRALIA DIRECT 1H12 2H12 1H13 2H13 FY12 FY13 GWP ($M) / INSURANCE MARGIN (%) For personal use only A$m A$m A$m A$m A$m A$m Gross written premium 2,080 2,219 2,264 2,320 4,299 4,584 21.9% Gross earned premium 1,996 2,076 2,199 2,246 4,072 4,445 19.7% Reinsurance expense (130) (132) (134)
Slide 29: Appendix - Australia Intermediated (CGU)
APPENDIX – AUSTRALIA INTERMEDIATED (CGU) 1H12 2H12 1H13 2H13 FY12 FY13 GWP ($M) / INSURANCE MARGIN (%) For personal use only A$m A$m A$m A$m A$m A$m Gross written premium 1,330 1,429 1,433 1,595 2,759 3,028 23.1% Gross earned premium 1,307 1,326 1,428 1,458 2,633 2,886 Reinsurance expense (121) (124
Slide 30: Appendix - New Zealand
APPENDIX – NEW ZEALAND 1H12 2H12 1H13 2H13 FY12 FY13 GWP ($M) / INSURANCE MARGIN (%) For personal use only A$m A$m A$m A$m A$m A$m Gross written premium 538 672 751 824 1,210 1,575 Gross earned premium 517 623 739 785 1,140 1,524 Reinsurance expense (63) (86) (113) (124) (149) (237) 13.0% Net earned
Slide 31: Appendix - Asia
APPENDIX – ASIA 1H12 2H12 1H13 2H13 FY12 FY13 ASIA GWP MIX FY13 - For personal use only Gross written premium A$m 94 A$m 125 A$m 137 A$m 158 A$m 219 A$m 295 PROPORTIONAL BASIS Gross earned premium 92 101 122 145 193 267 Reinsurance expense (19) (21) (25) (22) (40) (47) Net earned premium 73 80 97 12
Insurance Australia Group — FY2013 Earnings Presentation on 6ix