Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Presentation (March 2007)
162 slides from Insurance Australia's investor presentation, Mar 30, 2007
Slide 1: Cover letter: Investor presentation on UK operations
29 March 2007 Manager, Company Announcements Office Australian Stock Exchange Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam INSURANCE AUSTRALIA GROUP LIMITED (‘IAG’) INVESTOR PRESENTATION ON UK OPERATIONS We enclose a copy of a presentation which is being made to a
Slide 2: Business and UK Market Overview
Business and UK Market Overview im) equity Hastings pirect INSURANCE GROUP March 2007
Slide 3: Important notice
Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited C1AG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does n
Slide 4: Introduction & Agenda
introduction & Agenda @ IAG Insurarice London AM eeaals + Market Overview John Castagno + Overview of the Businesses Neil Utley - Equity ~ Hastings - Advantage + Underwriting Keith Charlton « Claims Phil Anderson Colchester PM + Direct Broking Peter Connell + Branch Broking Nick Potts * Tour of the
Slide 5: Equity Insurance Group
© IAG Insurarice Australia Group Equity Insurance Group
Slide 6: Business Overview - EIG
Business Overview - EIlG y Underwriting IAG Insurarice Australia Distribution * UK’s 5" largest motor insurer and the largest motorcycle insurer « The largest motor syndicate at Lioyd’s; $.218 « GWP of more than £550m (1,400mAUD) for 2006 * 38 year track record of unbroken profitability « Upper quar
Slide 7: Business and Revenue Model - EIG
Business and Revenue Model - EIG Approximately 19% of the premium underwritten by s.218 is derived from the Group's own insurance . gd : Australia direct and branch distribution Group : Revenue Streams Business Owned Distribution « Broking Profits a 12.6% of ERS Premiums 6.3% of ERS Premiums F Owned
Slide 8: Equity Red Star
Equity Red Star
Slide 9: Acquisition History
Acquisition History qd) IAG Acquisitions Acquisition of ti z i 1976 Lion/Charter Motor Synd. 495 Right to Renew 1978 Kinloch Motor Syndicate 82 4994 Service Motor Syndicate 979 1982 Trinity Motor Syndicate 999 4995 Dominion Insurance Co. 1987 Red Star Motor Syndicate 675 4995 Lion Insurance Co. 1987
Slide 10: Performance against the Market (1)
Performance against the Market (1) y 2003 - 2005 combined shows Equity with the market leading Combined Ra e Australia Group ‘ r 30 Market average = 99.5% ¢ : i RBS + ° H F 25 ‘ i : F20 2 : & a i g : ri5 Aviva sz * t Resa thd . : zurich F 10 H a Co-op, i Allian: L5 ° AXA @ Livvig _,, Fattise . eneu
Slide 11: Performance against the Market (2)
Performance against the Market (2) @ IAG Insurarice % outperformance by Equity against market Australia Median = 15% over 25 years Group % 30 5 1980 1985 1990 4995 2000 2005 *2006 assumes a market combined ratio of 106% 410 Source: B&W Deloitte, Equity
Slide 12: Claims Development
Claims Development Motor - Net incurred toss Ratio Progression Australia Group 120 100 80 95 94 x 60 93 40 20 ° 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Quarter Quarter 1993 1994 moon 1995 1996 1997 1998 4999 wom 2000 2004 2002 2003 2004 i 2005 41
Slide 13: Distribution
12 Distribution © IAG Insurarice Australia Group
Slide 14: Business Model
Business Model y Customers Distribution channel Manufacturing 13 Note: Percentages reflect 2006 IAG Insurance Telephone and Internet Face-to-face v ¥v Direct Marketing first direct -}4 Affinity Alexander Forhes| Transfers ERS 86% ssi Panel 14% Branches
Slide 15: Direct Marketing
14 Direct Marketing agan 169 Direct mail: Renewal dated Re-solicitation Advertising: Yellow Pages Specialist press On-line banners On-line aggregators
Slide 16: Key Affinity Partners
15 Key Affinity Partners : _ | Motor Manufacturers Lo So SUBARL. INSURER wo ame Alliance Leicester y IAG Insurarice Australia Group
Slide 17: Growth of Branch Network
16 Growth of Branch Network 87 7 100 7h + 90 i 5 Me T° Mela E 6 & $7 a & = oO a a L 6 & 4 §0 5 8 34 ee + 30 ot r 20 | LC c f” > _ Ea, aa. | ' ' ' ' 0 2000 2001 2002 2003 2004 2005 2006 @— No of Branches * Growth in 2003/2005 led by Bennetts and JMW acquisitions (20 and 8 branches respectively) + ODI
Slide 18: Branch Locations
: } Branch Locations y [AG Insurarice Austra’ BALLYMENA Group BELFAST 63) a COLERAINE (22) DUNGIVEN (x2) eae LEY NORTHERN REGION (29 BRANCHES) LONDONDERRY (2) MAGHERAFELT ALFRETON MOIRA BELPER NEWTOWNARDS {x2} (1) BIRSTALL LURGAN (iy BISHOPS STORTFORD BULWELL BURTON BURTON ON TRENT i) COVENTRY BASIN
Slide 19: 2006 Highlights
18 2006 Highlights @ : : t ne Direct Broking hastale Group . Launch of new schemes for first direct, Renault and Alliance & Leicester + Development of new online quote and buy sites for Ryanair, first direct, Alliance & Leicester, Skipton Building Society and insure.co.uk * — Inclusion of insure.co.
Slide 20: Hastings Direct and Advantage
19 Hastings Direct and Advantage Hastings Direct advantage [gy insurance | UM Egy | company | a ir
Slide 21: Business Model - Hastings Direct
Business Model — Hastings Direct @ IAG Insurarice Hastings pirect Rea Telephone internet — 548k Policies 213k Policies 304k Policies Note: Hannover ceased in 2007, we expect Advantage to write the majority of this business
Slide 22: Business Model - Advantage
24 Business Model - Advantage advantage insurance | company 9 Hastings pirect © IAG Insurarice Australia Group
Slide 23: Introduction to Hastings
22 Introduction to Hastings . Hastings Insurance Services Limited ~ a personal lines insurance broker launched in January 1997 2 Trading Divisions ~ Hastings Direct and Peoples Choice (acquired in July 2003) Hastings offers a totally integrated panel solution of over 40 insurers with 60 products, gi
Slide 24: Key Facts
23 Key Facts + 1,417 staff in 3 locations / Contact Centres ~ Bexhill-on-Sea, Leicester and Manchester * The Group received just over 4.6 million calls during 2006 (2.5 mill sales calls) » Nearly 900,000 policyholders + The Company administered £200 million gross written premium in 2006 * In 2006 tu
Slide 25: Highlights and Unique Selling Points
24 Highlights and Unique Selling Points @ . Hastingspiesct.co numbers Strong and distinctive brand identity, including Harry and 1066 telephone IAG Insurarice Australia Group Hastings was the first insurance provider to validate claims history at point of sale (as opposed to point of claim) using th
Slide 26: Distribution
Distribution @ IAG % Quotes % Quotes % Policies ‘%h Policies psuranice Offline Online Offline Online Group 2006 57% 43% 81% 19% 2007 40% 60% 72% 28% (expected) Private Car Motorcycle Travel Private Car Motorcycle Commercial Vehicle Commercial Vehicle
Slide 27: Claims
26 Claims © IAG Insurarice Australia Group
Slide 28: Claims: Locations & Staff
Claims: Locations & Staff @ Group Management AD & TPD P.i. & Litigation Total 27 IAG Manchester AD & TPD 27 FTE’S Pi & Litigation ~ 16 FTE’S Swansea Operations Centre 225 FTE’s Brentwood Group 14 FTE's P.1. & Litigation 41 FTE's Colchester Group 23 FTE's PI. & Litigation 30 FTE's Bexhill Group 5 FTE
Slide 29: People
28 People © IAG Insurarice Australia Group
Slide 30: Our People
29 Our People * Headcount February 2007 was 3,028 * The workforce is split47% to 53% Male/Female respectively * The average age of the workforce is 33 years old * The average length of service is 4.5 years © IAG Insurarice Australia Group
Slide 31: Our Behaviours
30 Our Behaviours Analytical Commercial Improvement y IAG Insurarice Australia Group
Slide 32: 2006 Highlights
31 2006 Highlights @ * IAG . insurance Strengthening of management team pata ~ Richard Brewster arene ~ Phil Anderson Strategic owner following the sale to [AG Large Affinity wins ~ Alliance & Leicester ~ First Direct ~ Renault Launch of the new Insure site / White Label site / Hastings Direct site
Slide 33: UK Market Overview
© IAG Insurarice Australia Group UK Market Overview March 2007
Slide 34: Important notice
Important notice The information contained in these presentations is intended to provide an overview of certain information relating to the businesses operated by Insurance Australia Group Limited (‘IAG’) in the United Kingdom and Gibraltar and the markets in which those businesses operate. It does
Slide 35: Market Statistics
Market Statistics
Slide 36: The UK Car Parc
The UK Car Parc ©) [ACs insurance + There are over 30 million cars on the road in the UK Group * The rate of growth in cars on the road over the past five years is 9.7% + 72% of all households own one or more cars * By 2011 itis estimated that the will be 33.6m cars on the road but the adult populat
Slide 37: The UK Motorist
The UK Motorist y IAG * 32 million people in the UK hold driving licences « Prevalence is among 35 — 64 year olds * Number of licence holders under 30 has been declining, partly because: ~ Introduction of the theory test ~ Economics of running a car at younger ages « As aresult of the ageing populat
Slide 38: The Age of our Cars
The Age of our Cars ~ IAG + Effectively half the cars on the road are less than six years old Group 2001-1999 23.3% "7,901,719 ae oe ee | pout be ‘4.394,708 Less than three TOU OF2 6,118,064 | Nioyears old years, old th 5 . Source: Society of Motor Manufacturers and Traders 2006
Slide 39: The Type Of Cars We Buy
The Type Of Cars We Buy © Insurance Australia * Those increasing market share between 1996 and 2005: Group ~ Minis and Super minis now make up over 60% of all new registrations but currently only 31% of the entire market ~ §UVs and multi purpose vehicles have each at least doubled market share but:
Slide 40: Fleet and Commercial Vehicles
Fleet and Commercial Vehicles © Insurance Australia * Company cars make up 36.3% of the commercial market Group » Light goods vehicles make up 40.9% of the market and has shown the most significant growth + New fleet registrations have been rising each year from just above 1m in 2000 to 1.184m in 20
Slide 41: Motorcycles
Motorcycles @ IAG Insurance Australia + 1,2 million motorcycles, scooters and eee mopeds licensed in the UK but 1.1m insured units Motorcycle stock by engine size, cc + Scooters/Mopeds and larger bikes are on the increase + Five times more likely to be an cher 1,000 additional mode of transport in a
Slide 42: Trends
410 Trends IAG + Environmental interest ~ Manufacturers have reduced emissions in most segments ~ Consumers are opting for mini or super mini cars ~ Hybrids are starting to appear and are being encouraged by exemption from Congestion Charging in London + The cost of motoring in the UK - Additional t
Slide 43: Market Structure
41 Market Structure
Slide 44: Motor insurance market
Motor insurance market IAG + Mature and competitive market Insurance Australia Group * Total Motor GWP approx. £13bn in 2005 + Private Motor insurance accounts for the largest percentage of total motor GWP + The top 5 insurers controlled more than 65% of premiums earned in 2005 Motor GWP by sector F
Slide 45: Private Motor Insurance
) Private Motor Insurance © Insurance Australia + Private motor market was worth £9.224bn GWP in 2005 Group + Growth of 3.7% over the period 2000 - 2005 + This was driven by growth in comprehensive cover as non comprehensive cover remained relatively static Private Motor Market Growth 2000-2005 @ No
Slide 46: Fleet Insurance
14 Fleet Insurance © IAG + Fleet market saw 1.4% growth in 2005 to £2.24bn GWP + The top 3 insurers ~ R&SA, Norwich Union and Zurich — share 59% of the market » Predominantly it is distributed by brokers » Leading brokers include: ~ Aon ~ Marsh ~ Willis - HSBC — Towergate ~ THB ~ RL Davison - Smart
Slide 47: Commercial Vehicle Insurance
15 Commercial Vehicle Insurance IAG + Commercial vehicle market was worth £1.62bn GWP in 2005 + NFU Mutual was the leading provider at £175.6m GWP + — Norwich Union’s market share has steadily decreased from 25% since 2000 + Of the top ten only R&SA and Axa showed significant year-on-year GWP growth
Slide 48: Motorcycle Insurance
16 Motorcycle Insurance Motorcycle insurance market was worth £187m GWP in 2005 Equity Red Star had nearly 30% at £55m Nearest competitor is Norwich Union at £32m New entrants to the market are rare but EBike entered in 2005 Competitive pressure kept growth low in 2005 at 2.5% but 2004 saw an overal
Slide 49: Average car insurance premium trends
y IAG - - Insurance The cost of an average car insurance premium rose sharply over the last quarter of 2006 to Australia wee Be its highest ever level Group Pricing movement The average quoted premium rose by 4.35% to £805.70 (up 1.24% over the previous quarter) Premiums have risen 5.7% year-on-year
Slide 50: Market Performance
y IAG Insurance Market Performance Australia . . Group Combined Ratio and Market Share ‘ r 30 Market average = 99.5% ¢ H i Res { ° L 25 H i : -20 2 : g a ' @ H b 15 a 1 oD Aviva sz ° ft Resa iad . : zurich F 10 : H H ng OO Co-op, i Allian: L5 ° AXA @ Livvig _,, Fattise . eneu HBos® . Highway Groupgm
Slide 51: Major Insurance Groups/Players
19 Major Insurance Groups/Players IAG Insurance Retail Broker Affinity Partner Ausralia Aviva y NORWICH UNION rac J NORWICH UNION 7 NORWICH UNION . r RBSI Haag 22 te NG w<e FARTNERSHIPS es R&SA : ew SUNALLIANCE AXA ) “Se swiftcavercos ie ae | HBOS Allianz Allianz Gi) Cornhill Allianz Gi) Cornhill .
Slide 52: Royal Bank of Scotland Insurance
y Royal Bank of Scotland Insurance - IAG Insurance Australia Group RBS brand strategy x€RBS ee oo aE HP Loo ee * Gren Fiy church! EES . a 8 “ privilege Devitt i ay ae oes TRAGHER wow, TRAGRER. Cia. Business insurance Senice Source: Datamonitor 2006
Slide 53: Direct Line
y IAG Insurance Asastea lia Group Direct Line ey C Split of book 2005 Personal we Household pecupiangless 17.6% Private moter 6a.8% 24 Source: Datamonitor 2006
Slide 54: Churchill
y IAG Insurance a Australia Group Churchill Split of book 2005 Perscal pecuniary lose 43% Household 441% Private motor 56.8% 22 Source: Datamonitor 2006
Slide 55: UK Insurance
UK Insurance y IAG Insurance Axastea lia Groug Split of book 2005 Tavel Household a8 15.0% Personal fecundary oss ae - —— Bae PARTMERSHIPS TESCO Finance & Insurance a a Private moter oF Oh 23 Source: Datamonitor 2006
Slide 56: Norwich Union
Norwich Union lnsuranice Australia Itametes ‘Be eawpordie Patnes 15% Split of adve: g spend 20 Horne emergency, 4.4% ins range, 3.1% Pet, 0.8% Travel, 5.3% Heath, 7.3%, Motor, 82.4% Home, 26.7% 24 Source: Datamonitor 2006
Slide 57: Royal & Sun Alliance
Royal & Sun Alliance - g spend in 2005 R&SA Split of book 2005 Generallcombined pet a. gog, Other range 5.5% / 42% Home 18.9% Household 44.4% Motor 724% 25 Source: Datamonitor 2006
Slide 58: Allianz
y IAG Insurance Anastealia Group Allianz Legal Expenses, 27.5 pal ones ie Alkane Cornhill Allianz Commit Speciality Personal 26 Source: Datamonitor 2006
Slide 59: Personal
Personal. 43.9% P Sa swittcover: om Commercial 56.1% 27 Source: Datamonitor 2006
Slide 60: Gross written premium
y IAG lnsuranice Australia Group Gross written premium, 2008 Othe: Mater Repayment (Third partys Household Repayment (Group businesst 28 Source: Datamonitor 2006
Slide 61: Zurich
y AG Zurich | | Insurance Australia Group Split of book 2005 Strategy @ ZURICH Our responce ition aiket competi intensifying m: “a t c E = = 6 & = rd 2 z # = € 8 c a e o fr Total perserial leading broker postion proven partnership cap abllit rvdirect in profitable seq ments - Leverag: 32.4% es Expio
Slide 62: Top UK Personal Lines Brokers
Top UK Personal Lines Brokers IAG Insurance 1404 120 4 80 4 60 4 404 ‘| a | | 0 | i a - & a + The combined UK business is now the 3" largest personal lines broker in the UK + Previously 5 (Hastings), 8 (Equity) and 15 (ODIS) Australia Group 2005 Brokerage (£m) rod & IAG (UK) Budget (ex. Branches) En
Slide 63: Broker Distribution
31 Broker Distribution Direct Face to Face Direct and Affinity Insuraiice (Telephone + Internet) Face to Face Partners Groun " “ > Hastings pirect opesrinec @w.. ad ge Sant PEOPLE BUDGET SMART PEOPLE Bu DGET Junction aS GR BN Ce *RIAS eguenne fr de eee Se ones ME es. insane
Slide 64: Distribution ownership
Distribution ownership © Insurance Australia + £418.6m of Brokerage (52% of largest 15 personal lines brokers) is Growe now owned and controlled by Insurers * Remainder of personal lines broking market still largely independently owned * Commercial lines remains largely independent (but Axa acquired
Slide 65: AA
AA y LAC Insurance Australia Group 33 Source: Datamonitor 2006
Slide 66: Swinton/Budget
y IAG Insurance Australia Group Swinton/Budget 34 Source: Insurance Times Top 50 Brokers July 2006, Equity
Slide 67: Endsleigh
y IAG _«SSRaETCE 2) Austealia Group Endsleigh 35 Source: Datamonitor 2006, Endsleigh
Slide 68: RIAS
y LAG Insurance Asaatealia Group #RIAS lewareace lor the Gwes ls 36 Source: Datamonitor 2006, RIAS
Slide 69: Kwikfit
Kwikfit y [AG Insurance Agstea lia Group 37 Source: Datamonitor 2006, Kwilfit
Slide 70: A-Plan
y IAG Insurance Agstea lia Group a-plan lasurance 38 Source: insurance Times Top 50 Brokers July 2006, Equity, A-Pian
Slide 71: Allen & Allen
Allen & Allen y Aves om leisueraeice y Austealia eroun 39 Source: insurance Times Top 50 Brokers July 2006, Equity, Allen & Allen
Slide 72: Carole Nash
Carole Nash y aCe Insurance Austealia Group 40 Source: Insurance Times Top 50 Brokers July 2006, Equity, Datamonitor 2006
Slide 73: Broker profile
a4 y IAG & masterquole Source: insurance Times Top 50 Brokers July 2006, BBML Insurance Australia _ Group 5
Slide 74: Highway
y IAG Insurance Australia Group A2 Source: Highway
Slide 75: Outright
Outright Insurance Austea lia y Group OutRight imahe (ngnraned your nent meee product AuUTOg | direct SC PES BP “TORE 43 Source: Insurance Times Top 50 Brokers July 2006, Outright
Slide 76: Market Developments
a4 Market Developments
Slide 77: How Consumers Buy
How Consumers Buy © ; . . . haseala + The internet is now the second most common way of arranging motor insurance Grous + Consumers also use the internet as a research tool and therefore this platform plays a more important role than is indicated simply by sales figures + Datamonitor predict that 29
Slide 78: Online sales and aggregators
y IAG Insurance + 17% of motor insurance sales now on-line and rising Australia Groug + 8.1% of household insurance sales now on-line and rising . Growth of this method of research and purchase has led to the growth of the aggregators . Price is cited as the most influential factor in the purchase o
Slide 79: Telematics and insurance
a7 Telematics and insurance © Insurance Australia Norwich Union Pay As You Drive Group * Two products: Young drivers (18-23); Low mileage drivers (24-65) ¢ Mobile phone style bills with: —A tariff for each type of road and price per mile that increases for after 11 pm and in the morning rush hour. -
Slide 80: Telematics and insurance
48 Telematics and insurance © IAG Insurance Australia MoreTh>n DriveTime Group . . . . Aimed at young drivers (18-25). Looking for 2,000 for pilot. Offer is a 40% discount for not driving between 11 pm and 6 am. Any mileage recorded between these hours incurs an automatic £25 additional charge for e
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Insurance Australia Group — Investor Presentation (March 2007) on 6ix