Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2020 Earnings Presentation
20 slides from Insurance Australia's earnings presentation, Aug 7, 2020
Slide 1: Financial results Full year ended 30 June 2020
For personal use only Financial results Full year ended 30 June 2020 Peter Harmer Nick Hawkins Managing Director and Deputy Chief Executive Officer Chief Executive Officer Michelle McPherson Acting Chief Financial Officer 7 August 2020 This release has been authorised by the IAG Board
Slide 2: FY20 highlights
FY20 highlights GWP growth in line with guidance, softer 2H20 underlying margin For personal use only Challenging 2H20 environment Progress on Asian divestments FY20 GWP growth • Low single-digit GWP growth • Sale of interest in SBI General in India 3.5% • Modest negative COVID-19 effect realising $
Slide 3: COVID-19 comprehensive operating response
COVID-19 Customers • Deferred premium payments for home, motor and Partners • Reduced payment times for suppliers Comprehensive operating small business customers experiencing financial For personal use only • Working with supply chain partners to ensure hardship response • Offered options such as p
Slide 4: Financial summary
FY19 FY20 Change GWP ($m) 12,005 12,135 1.1% For personal use only Insurance profit* ($m) 1,224 741 39.5% Underlying insurance margin (%) 16.6 16.0 60bps Financial Reported insurance margin (%) 16.9 10.1 680bps summary Fee-based business ($m) (9) (23) nm Shareholders’ funds income ($m) 227 (181) nm
Slide 5: Australia
Australia Improving GWP trend, softer underlying profitability from long tail classes and investment returns For personal use only GWP growth of 0.4% Lower underlying margin of 14.9% (FY19: 15.5%) Australia - insurance margin • Improving 2H20 trend (+0.7%) despite ~$60m COVID-19 impact • Small net n
Slide 6: New Zealand
New Zealand Strong performance maintained For personal use only NZ$ GWP growth of 2.4% Strong underlying margin of 18.6% (FY19: 19.5%) New Zealand - GWP growth / underlying margin • Strong Business growth >5% • Higher volume in all key • Small net positive impact on commercial classes underwriting p
Slide 7: GWP growth
GWP growth 2H20 growth impacted by COVID-19 effect on new business volumes For personal use only FY20 GWP growth of 1.1% • ~$80m COVID-19 adverse impact on 2H20 – lower new GWP growth business volumes • Absorption of lower CTP pricing and business exit effects Recent pricing patterns • Rate increase
Slide 8: Underwriting profit: 2H20 COVID-19 impacts
Underwriting profit 2H20 COVID-19 impacts For personal use only Largely offsetting COVID-19 impacts Positive (~$150m) Negative (~$150m) Claims Claims • Lower motor claim frequency, particularly in April and May • ~$100m provision for potential COVID-19 claim cost impacts • Partial offset from claims
Slide 9: Prior period reserving
Prior period reserving Negligible net movement expected in FY21 For personal use only Second half net reserve strengthening of $53m Prior period reserve movements • Driven by strengthening of Australian commercial long tail classes • Liability (over $40m), predominantly in silicosis and molestation
Slide 10: Natural perils
Natural perils Significant peril activity mitigated by reinsurance For personal use only Natural perils vs allowance Severe peril activity in FY20 FY21 perils allowance of $658m $904m • Full year outcome $263m above • Gross allowance (100%) increased allowance ~2.5% to $975m $127m $67m • Significant
Slide 11: Reinsurance
Reinsurance $m 10,000 Gross catastrophe cover as at 1 July 2020 Strengthened protection For personal use only Transition to financial year basis for aggregate cover • Additional aggregate cover purchased for 12 months to 30 June 2021 • Avoids renewal at time of peak period Main Catastrophe Program c
Slide 12: Investments
Investments Reduced growth assets weighting of ~25% in shareholders’ funds For personal use only Technical reserves Shareholders' funds portfolio - 30 June 2020 • $5.8bn in fixed interest and cash • Significant impact from lower running yield in FY20 • Matched duration of ~2 years Shareholders’ fund
Slide 13: Capital
Capital CET1 capital position comfortably above benchmark For personal use only FY20 financial results 7 August 2020 13
Slide 14: Dividend
Dividend Consistent dividend policy applied For personal use only FY20 dividend FY20 • Full year dividend of 10 cents per share (FY19: 32cps) CASH EARNINGS A$m • Interim dividend of 10 cents paid in March Net profit after tax 435 • No final dividend Acquired intangible amortisation and impairment 30
Slide 15: For personal use only
For personal use only Australia mia scio SSE cou MT ENN New Zealand omy | NA Lumley
Slide 16: Appendix – Group results
Appendix – Group results For personal use only 1H19 2H19 1H20 2H20 FY19 FY20 GROUP RESULTS A$m A$m A$m A$m A$m A$m Gross written premium 5,881 6,124 5,962 6,173 12,005 12,135 Gross earned premium 5,984 5,958 6,105 6,059 11,942 12,164 Reinsurance expense (2,373) (2,331) (2,396) (2,405) (4,704) (4,801
Slide 17: Appendix – Group ratios and key metrics
Appendix – Group ratios and key metrics For personal use only Insurance Ratios - Continuing Business 1H19 2H19 1H20 2H20 FY19 FY20 Loss ratio 65.3% 62.3% 65.6% 70.5% 63.8% 68.0% Immunised loss ratio 64.6% 59.5% 65.6% 68.6% 62.0% 67.1% Expense ratio 23.8% 23.7% 23.1% 24.7% 23.7% 23.8% Commission rati
Slide 18: Appendix – Australia
Appendix – Australia GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 1H19 2H19 1H20 2H20 FY19 FY20 16.2% 9,331 9,367 For personal use only 16.1% AUSTRALIA RESULTS A$m A$m A$m A$m A$m A$m 14.8% Gross written premium 4,606 4,725 4,608 4,759 9,331 9,367 13.9% 15.5% 14.9% Gross earned premium 4,698 4,625 4,7
Slide 19: Appendix – New Zealand
Appendix – New Zealand GWP ($M) / UNDERLYING INSURANCE MARGIN (%) 2,660 2,754 For personal use only 1H19 2H19 1H20 2H20 FY19 FY20 20.0% 18.9% 18.9% 19.5% 18.6% NEW ZEALAND RESULTS A$m A$m A$m A$m A$m A$m 18.3% Gross written premium 1,268 1,392 1,348 1,406 2,660 2,754 1,268 1,392 1,348 1,406 Gross ea
Slide 20: Important information
Important information For personal use only This presentation contains general information current as at 7 August 2020 and is not a recommendation or advice in relation to Insurance Australia Group Limited (IAG) or any product or service offered by IAG’s subsidiaries. It presents financial informati
Insurance Australia Group — FY2020 Earnings Presentation on 6ix