Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2009 Earnings Presentation
24 slides from Insurance Australia's earnings presentation, Aug 21, 2009
Slide 1: Financial results Year ended 30 June 2009
For personal use only Financial results Year ended 30 June 2009 Michael Wilkins, Managing Director & Chief Executive Officer Nicholas Hawkins, Chief Financial Officer 21 August 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 • Group results Michael Wilkins Segment analysis • Investments Nicholas Hawkins Balance Sheet & Capital Reinsurance Dividend • Outlook Michael Wilkins PAGE 3 FY09 Financial Results Presentation
Slide 4: Group results & segment analysis
For personal use only Group results & segment analysis Michael Wilkins
Slide 5: The year in summary: improved performance in year of rebuilding
THE YEAR IN SUMMARY Improved performance in year of rebuilding For personal use only • Delivered on all immediate strategic priorities set in July 2008 – Moved to a devolved operating model – Achieved targeted $130m pre-tax, run-rate cost savings in Australia – Narrowed focus in UK to profitable, sp
Slide 6: The year in summary: FY09 financial performance
THE YEAR IN SUMMARY FY09 financial performance For personal use only Financial performance FY08 FY09 Gross written premium $7,793m $7,842m - GWP grew 0.6% (guidance 0-2%) - Underlying* GWP grew 4% (guidance 3-5%) Insurance profit $392m $515m - Increased 31% Insurance margin 5.4% 7.1% - Ongoing busin
Slide 7: Insurance margin
INSURANCE MARGIN Visible improvement in operating performance For personal use only +3.1% -2.6% +1.5% -0.3% +0.7% -0.7% 7.1% 5.4% FY08 Reserve Natural Perils Credit DAC/LAT Running Yield Operational FY09 Reported Releases Spreads Improvement Reported Margin Margin PAGE 7 FY09 Financial Results Prese
Slide 8: Key insurance ratios
KEY INSURANCE RATIOS Trending in the right direction For personal use only Expense ratio Loss ratio 40% 35.0% 90% 70.6% 70.9% 35% 29.9% 29.0% 80% 72.0% 71.1% 70.7% 29.6% 30.2% 29.9% 29.4% 30.0% 70.3% 30% 70% 2.7% 3.4% 3.1% 3.0% 3.4% 25.0% 3.8% 60% 25% 20.0% 8.9% 9.1% 9.7% 9.0% 9.6% 50% 83.8% 20% 9.5
Slide 9: Divisional results
DIVISIONAL RESULTS For personal use only Insurance profit FY08 FY09 $m $m Australia Direct 316 373 Australia Intermediated (CGU) 134 48 New Zealand 12 0 United Kingdom (retained) 53 113 Asia (11) 9 Total retained 504 543 Discontinued business (112) (28) TOTAL 392 515 PAGE 9 FY09 Financial Results Pr
Slide 10: Australia Direct
AUSTRALIA DIRECT Positive GWP and margin momentum For personal use only AUSTRALIA DIRECT 2H08 2H09 FY08 FY09 FINANCIAL PERFORMANCE A$m A$m A$m A$m Key points Gross written premium 1,580 1,729 3,096 3,379 • GWP growth of 9.1% Insurance profit/(loss) 210 179 316 373 – Across all portfolios and states
Slide 11: Australia Intermediated
AUSTRALIA INTERMEDIATED Turnaround progressing, but still a way to go For personal use only AUSTRALIA INTERMEDIATED FINANCIAL PERFORMANCE 2H08 A$m 2H09 A$m FY08 A$m FY09 A$m Key points Gross written premium 1,231 1,198 2,398 2,357 • GWP down 1.7% Insurance profit/(loss) 1 55 134 48 – Price disciplin
Slide 12: New Zealand
NEW ZEALAND Return to profit in 2H09 For personal use only NEW ZEALAND 2H08 2H09 FY08 FY09 FINANCIAL PERFORMANCE A$m A$m A$m A$m Key points Gross written premium 491 483 974 965 • GWP up more than 4% in local currency Insurance profit/(loss) 14 17 12 - • Return to profitability in 2H09 aided by: Ins
Slide 13: United Kingdom – Retained Business
UNITED KINGDOM – RETAINED BUSINESS Equity Red Star continues to perform well For personal use only UK RETAINED BUSINESS FINANCIAL PERFORMANCE 2H08 A$m 2H09 A$m FY08 A$m FY09 A$m Key points Gross written premium 389 398 806 787 • GWP up 1% in FY09 and 4.4% in 2H09 in Insurance profit/(loss) 47 36 53
Slide 14: Asia
ASIA Medium to long term strategy on track For personal use only ASIA FINANCIAL PERFORMANCE 2H08 A$m 2H09 A$m FY08 A$m FY09 A$m Key points Gross written premium 85 101 174 193 • GWP up 2% in local currency Insurance profit/(loss) (5) - (11) 9 • Participation in regional GWP pool in excess of $400m I
Slide 15: Investments, capital, reinsurance and dividend
For personal use only Investments, capital, reinsurance and dividend Nicholas Hawkins
Slide 16: Investments
INVESTMENTS Conservative mix and high credit quality For personal use only Group Investment Asset Allocation - $10.6bn Group Fixed Interest & Cash - $10.0bn Growth < "A" 6% 1% "A" 5% "AAA" "AA" 48% Fixed 46% Interest & Cash 94% • Total portfolio value of $10.6bn • Asset mix remains conservative – lo
Slide 17: Investment returns
INVESTMENT RETURNS Impacted by sharp market movements For personal use only Investment income on technical reserves ($m) Investment income on shareholders' funds ($m) 800 100 700 80 600 60 500 40 400 20 300 0 1H08 1H08 2H08 1H09 2H09 200 2H09 (20) A$m A$m A$m A$m A$m A$m 100 (40) 0 (60) 1H08 2H08 1H
Slide 18: Balance sheet
BALANCE SHEET Strong capital position For personal use only As at 30 June 2009 CAPITAL MIX 1H08 2H08 1H09 2H09 A$m A$m A$m A$m • Increased MCR multiple of 1.79 Shareholder equity 4,920 4,351 4,135 4,836 Intangibles and goodwill (2,941) (2,460) (2,353) (2,278) – $534m capital raising Tangible shareho
Slide 19: Reinsurance protections
REINSURANCE PROTECTIONS Reducing earnings volatility For personal use only • The upper limit of the Group’s catastrophe programme is $4.1bn • Maximum event retentions (MER): – Victorian fires reached first event MER of $126m in Australia – For six months from 1 July 2009: MER reduces to: $100m in
Slide 20: Corporate & other expenses
CORPORATE & OTHER EXPENSES For personal use only EXPENSES 1H09 2H09 FY09 A$m A$m A$m Net corporate expense (77) 55 (22) Income tax expense 17 (82) (65) Amortisation and impairment (30) (35) (65) • Net corporate expenses of $22m (2H09: profit of $55m) – $38m profit on sale of interest in life busines
Slide 21: Dividend
DIVIDEND In line with revised policy For personal use only 1H09 2H09 FY09 Dividend, fully franked (cps) 4.0 6.0 10.0 • 10cps full year dividend – Equates to a payout ratio of 71.5% of cash earnings, in line with policy to pay approximately 50–70% of cash earnings • Cash earnings defined as net profi
Slide 22: Group outlook
For personal use only Group outlook Michael Wilkins
Slide 23: FY10 Outlook
FY10 OUTLOOK Platform for further improvement For personal use only • FY10 operating performance expected to improve further, driven by: – Higher premiums, including earned effect of rate rises implemented in FY09 – Ongoing operating efficiencies across the Group – Improved underwriting discipline,
Slide 24: Our business model and brands
OUR BUSINESS MODEL AND BRANDS For personal use only DIRECT INTERMEDIATED ONLINE DIRECT DIRECT INTERMEDIATED INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE 2 3 UNITED KINGDOM NEW ZEALAND AUSTRALIA INTERMEDIATED INTERMEDIATED ASIA INSURANCE INSURANCE OTHER 1 ACTIVE PORTFOLIO MANAGEMENT &
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