Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2018 Earnings Presentation
29 slides from Insurance Australia's earnings presentation, Feb 14, 2018
Slide 1: Financial results Half year ended 31 December 2017
For personal use only Financial results Half year ended 31 December 2017 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 14 February 2018
Slide 2: Overview
For personal use only Overview Peter Harmer Managing Director and Chief Executive Officer
Slide 3: 1H18 highlights
1H18 highlights Encouraging improvement in underlying performance GWP GROWTH 9.5% For personal use only • Like-for-like GWP growth of nearly 4% ○ Short tail rate response to claims inflation ○ Ongoing momentum in commercial lines 3.9% 2.7% • Reported margin of 17.3% ○ Favourable peril, reserve relea
Slide 4: Operational scorecard
Operational scorecard Customer, partnering and simplification activities tracking to plan For personal use only 1H18 activities 2H18 priorities • Deployed brand positioning in line with core customer • Extend customer model and customer research segments to New Zealand • Delivered modernised pricing
Slide 5: Strategy
Strategy Optimise our core insurance Three strategic business while For personal use only priorities creating future growth options Eleven capabilities 1H18 Results | 14 February 2018 5
Slide 6: Financials
For personal use only Financials Nick Hawkins Chief Financial Officer
Slide 7: Financial summary
1H17 1H18 CHANGE For personal use only GWP ($m) 5,802 5,834 0.6% Insurance profit ($m) 571 743 30.1% Underlying margin (%) 12.6 12.6 Flat Financial Reported margin (%) 13.5 17.3 380bps summary Shareholders’ funds income ($m) 105 138 31.4% Income tax expense ($m) 109 213 95.4% Net profit after tax ($
Slide 8: GWP growth
GWP growth Rate-driven growth – like-for-like improvement of around 4% For personal use only GWP GROWTH VS 1H17 Underlying growth of around 4% • Rate increases addressing claims inflation, notably motor 0.7% • Ongoing momentum in commercial rates • Overall relatively steady volumes – growth in motor
Slide 9: Insurance margin
Insurance margin Improvement in underlying margin performance over 2H17 For personal use only MARGIN TRENDS – 1H17-1H18 Improved underlying margin of 12.6% (vs 2H17) • Reduced pressure on motor profitability as increased rates earn through 17.3% • Maintained improvement seen in 2H17 in NSW CTP, foll
Slide 10: Natural perils
Natural perils 1H18 outcome below allowance owing to aggregate protection For personal use only NATURAL PERILS EXPERIENCE VS ALLOWANCE 1H18 net perils $78m below allowance $88m • ~$120m of reinsurance protection from $37 calendar 2017 aggregate cover • Three events, including Melbourne hailstorm, ca
Slide 11: Reserve releases
For personal use only Reserve $24m $41m releases $155m $135m $134m $121m Higher than originally expected outcome (2.8% of NEP) 1H17 1H17 -$4m 1H18 1H18 -$53m Around 3% expected -$1m in FY18 Group Consumer Business New Zealand Asia 1H18 Results | 14 February 2018 11
Slide 12: Australia
Australia Positive underlying growth and margin trends For personal use only AUSTRALIA – GWP GROWTH Underlying GWP growth of nearly 3% $79m $23m • Largely rate-driven growth of 4.9% in personal motor, $121m countering claims inflation $49m • 2.9% growth in home prior to ESL collection change effect
Slide 13: New Zealand
New Zealand Strong GWP growth and underlying margin For personal use only Strong local currency GWP growth of 9.5% NEW ZEALAND - GWP GROWTH / UNDERLYING MARGIN • Personal lines momentum from mix of rate and volume maintained, led by motor 17.4% • Strong rate increases in commercial lines with some o
Slide 14: Asia
Asia Strategic review announced For personal use only EARNINGS CONTRIBUTION BY COUNTRY* ($m) Higher earnings contribution of $15m (1H17: $2m) • Return to profit in Thailand – absence of large commercial losses 30 • Improved Malaysian result driven by tighter pricing and underwriting 25 actions, plus
Slide 15: Capital
Capital Strong capital position For personal use only CET1 MOVEMENT SINCE 30 JUNE 2017 CET1 of 1.19 – 1 above benchmark range 0.16 0.02 0.21 (0.9-1.1) 0.04 0.01 0.12 1 PCA of 1.81 – above benchmark range 1 (1.4-1.6) 1.19 1.09 Proforma CET1 1.07 ratio at upper end 1 of benchmark range post interim di
Slide 16: Margin impacts
For personal use only Margin impacts FY18 Reported Initial FY18 reported margin guidance 12.5-14.5% Margin Guidance 12.5% quota shares from 1 January 2018 (full year 250bps impact) +125bps 13.75-15.75% Increased reserve release assumption of around 3% ~100bps Raised to 15.5-17.5% (originally ‘at lea
Slide 17: Outlook
For personal use only Outlook Peter Harmer Managing Director and Chief Executive Officer
Slide 18: FY18 outlook
FY18 outlook Further underlying improvement expected in 2H18 For personal use only FY18 guidance Underlying assumptions GWP growth Low single digit 1Net losses from 2Reserve releases 3No material natural perils of of around 3% movement in $627m, in line with foreign exchange Reported Range of allowa
Slide 19: Our value proposition
Our value proposition Delivering strong shareholder returns For personal use only Investment Value drivers Shareholder case value Through-the-cycle targets • Leading player with scale • Cash ROE 1.5x WACC advantage in Australia and New Zealand (low single digit growth) • High dividend (60-80% of cas
Slide 20: We make your world a safer place
For personal use only For ownership details, see www.iag.com.au We make your world a safer place 1H18 Results | 14 February 2018 20
Slide 21: Appendix – Group Results
Appendix – Group Results 1H17 2H17 1H18 For personal use only GROUP RESULTS A$m A$m A$m Gross written premium 5,802 6,003 5,834 Gross earned premium 5,868 5,824 5,966 Reinsurance expense (1,624) (1,603) (1,663) Net earned premium 4,244 4,221 4,303 Net claims expense (2,625) (2,638) (2,591) Commissio
Slide 22: Appendix – Group Ratios and Key Metrics
Appendix – Group Ratios and Key Metrics Insurance Ratios 1H17 2H17 1H18 For personal use only Loss ratio 61.9% 62.5% 60.2% Immunised loss ratio 63.9% 61.6% 60.9% Expense ratio 25.6% 26.1% 25.5% Commission ratio 9.8% 10.0% 9.8% Administration ratio 15.8% 16.1% 15.7% Combined ratio 87.5% 88.6% 85.7% I
Slide 23: Appendix – Divisional Performance
Appendix – Divisional Performance For personal use only 1H17 1H18 GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Australia 4,483 5.1 16.5 12.2 4,453 (0.7) 18.8 11.4 Consumer 3,060 7.4 21.5 14.1 3,052 (0.3
Slide 24: Appendix – Australia
Appendix – Australia 1H17 2H17 1H18 GWP ($M) / INSURANCE MARGIN (%) For personal use only AUSTRALIA RESULTS A$m A$m A$m Gross written premium 4,483 4,598 4,453 Gross earned premium 4,530 4,487 4,612 18.5% 18.8% Reinsurance expense (1,254) (1,225) (1,285) 16.5% Net earned premium 3,276 3,262 3,327 Ne
Slide 25: Appendix – Australia Consumer
Appendix – Australia Consumer GWP ($M) / INSURANCE MARGIN (%) 1H17 2H17 1H18 For personal use only 23.0% AUSTRALIA CONSUMER RESULTS A$m A$m A$m 21.5% 22.1% Gross written premium 3,060 3,059 3,052 Gross earned premium 2,980 3,021 3,092 Reinsurance expense (837) (849) (878) Net earned premium 2,143 2,
Slide 26: Appendix – Australia Business
Appendix – Australia Business 1H17 2H17 1H18 GWP ($M) / INSURANCE MARGIN (%) For personal use only AUSTRALIA BUSINESS RESULTS A$m A$m A$m Gross written premium 1,423 1,539 1,401 Gross earned premium 1,550 1,466 1,520 Reinsurance expense (417) (376) (407) Net earned premium 1,133 1,090 1,113 11.3% 10
Slide 27: Appendix – New Zealand
Appendix – New Zealand 1H17 2H17 1H18 GWP ($M) / INSURANCE MARGIN (%) For personal use only NEW ZEALAND A$m A$m A$m 14.2% Gross written premium 1,128 1,211 1,190 10.8% Gross earned premium 1,143 1,144 1,160 Reinsurance expense (311) (321) (323) 1,128 1,211 1,190 Net earned premium 832 823 837 Net cl
Slide 28: Appendix – Asia Division
Appendix – Asia Division For personal use only 1H17 2H17 1H18 ASIA GWP 1H18 - ASIA A$m A$m A$m PROPORTIONAL BASIS Gross written premium 182 184 185 Gross earned premium 186 185 186 Thailand Indonesia 46% Reinsurance expense (53) (52) (50) <1% Net earned premium 133 133 136 Vietnam 2% Net claims expe
Slide 29: Important information
Important information For personal use only This presentation contains general information current as at 14 February 2018 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 inform
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