Helia Group Limited · ASX:HLI
Helia — Investor Presentation (May 2023)
28 slides from Helia's investor presentation, May 25, 2023
Slide 1: AASB 17 pro forma historical financial statements
AASB 17 pro forma historical financial statements Investor briefing 25 May 2023
Slide 2: Disclaimer
Disclaimer 2 This presentation contains general information in summary form which is current as at the date of this presentation. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Repo
Slide 3: Agenda
3 Agenda 1 Overview 2 AASB 1023 & AASB 3 AASB 17 pro forma financial 17 comparison statements (unaudited) Pages 4-5 Pages 6-12 Pages 13-23 4 Appendix 5 Glossary Pages 24-25 Pages 26-27
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director AASB 17 pro forma
Slide 5: No change to underlying business economics
5 No change to underlying business economics Financial results and returns Capital • Lifetime profits unchanged • Minimal change to current regulatory capital requirements or level of surplus capital • Not expected to materially change magnitude of average profit • Profit expected to be less volatil
Slide 6: AASB 1023 & AASB 17 comparison
AASB 1023 & AASB 17 comparison Michael Cant Chief Financial Officer AASB 17 pro forma
Slide 7: Key AASB 17 impacts
7 Key AASB 17 impacts Balance Sheet Income Statement • AASB 1023 unearned premium liability (UPL) is replaced by AASB 17 • AASB 17 insurance revenue replaces earned premium and reflects: liability for remaining coverage (LRC) - expected emergence of cash flows (claims and expenses) that have been re
Slide 8: Profile of revenue recognition
8 Profile of revenue recognition1 AASB 1023 AASB 17 August 2023 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years since underwrite 1. Indicative for new policies written during 2022. AASB 17 pro forma
Slide 9: FY22 Balance Sheet
9 FY22 Balance Sheet ($ millions) AASB 1023 AASB 17 Movement commentary: Assets • No separate DAC asset under AASB 17 Cash 23.8 23.8 Cash Accrued investment income • Increase in DTA primarily reflects tax effect of opening 21.8 21.8 Accrued investment income adjustment to insurance contract liabilit
Slide 10: Insurance contract liabilities
10 Insurance contract liabilities LRC Unearned premium • LRC $312m larger than UPL (net of DAC). This accounts for 1,650 (after tax) nearly all the change in net assets 1,350 665.9 • LRC is greater than UPL due to: 1,050 750 - different (later) timing of recognition of past $m revenue and profit rec
Slide 11: FY22 Income Statement
11 FY22 Income Statement ($ millions) AASB 1023 AASB 17 Movement commentary: Gross earned premium 488.3 466.6 Insurance revenue • Insurance revenue replaces gross earned premium. 2022 Outwards reinsurance expense (60.6) (60.5) Net expense from reinsurance contracts revenue for AASB 1023 was inflated
Slide 12: FY22 Regulatory capital
12 FY22 Regulatory capital ($ millions) AASB 1023 AASB 17 Movement commentary: Capital base • Net assets reduced due to AASB 17 opening balance sheet adjustment Common equity Tier 1 capital – net assets 1,421.1 1,205.7 • Net surplus relating to insurance liabilities increase offsets Regulatory adjus
Slide 13: AASB 17 pro forma financial statements (unaudited)
AASB 17 pro forma financial statements (unaudited) Michael Cant Chief Financial Officer The Pro forma Financial Statements reflect the retrospective application of AASB 17 Insurance Contracts, and consequently the amounts are different from previously published. For Information on adoption of AASB 1
Slide 14: AASB 17 Income Statement
14 AASB 17 Income Statement ($ millions) 31 Dec 21 31 Dec 22 % Movement commentary: Insurance revenue 462.9 466.6 0.8 • Insurance revenue flat, but with some changes in composition Insurance service expense (70.9) (105.3) 48.5 • Insurance service expense lower due to low total incurred Net expense f
Slide 15: Insurance revenue
15 Insurance revenue • Expected incurred represents the allowance in the premium for ($ millions) 31 Dec 21 31 Dec 22 claims and non-acquisition expenses. This emerges as revenue via release of a part of the LRC Expected insurance service expenses incurred 198.4 172.7 • Premium experience variations
Slide 16: Insurance service expense
16 Insurance service expense ($ millions) 31 Dec 21 31 Dec 22 • Current year claims incurred were light for both 2021 and 2022, Incurred claims from current period 57.4 60.7 reflecting low number of new delinquencies Changes to liabilities for prior incurred claims (77.1) (62.4) • Both years had sub
Slide 17: Analysis of insurance services result
17 Analysis of insurance services result • CSM recognised plus release of risk adjustment less reinsurance ($ millions) 31 Dec 21 31 Dec 22 expense represents the “expected profit” Contractual service margin recognised 166.6 164.4 • Experience variations are the main driver of the variability of res
Slide 18: Net financial result
18 Net financial result ($ millions) 31 Dec 21 31 Dec 22 • 2022 returns on technical funds (i.e., assets backing the insurance liabilities) was negative due to the impact of rising interest rates Investment revenue / (loss) on technical funds (34.0) (84.6) • Insurance contract liabilities are calcul
Slide 19: Balance Sheet
19 Balance Sheet ($ millions) 31 Dec 21 31 Dec 22 Movement commentary: Assets • Investments fall primary reflects unrealised investment Cash 76.7 23.8 losses, together with dividends and share buy-backs Accrued investment income 16.8 21.8 • Equity-accounted investees include OSQO and Household Finan
Slide 20: Insurance and reinsurance contract liabilities
20 Insurance and reinsurance contract liabilities LRC: ($ millions unless otherwise stated) 31 Dec 21 31 Dec 22 Present value (PV) claims, refunds and expenses 851.9 755.3 • PV of claims, refunds and expenses reduced over the year, Risk adjustment 195.2 178.4 primarily due to declining in-force volu
Slide 21: Movement in CSM
21 Movement in CSM Changes in $ millions assumptions Revenue recognised Discount New business unwind Opening CSM Closing CSM • Approach similar to Life Insurance Margin on Services (MoS), which recognises planned profit in line with services provided • CSM is determined at inception for each group o
Slide 22: Key financial measures
22 Key financial measures Continuing Changed New Income Statement Income Statement Income Statement • Statutory NPAT • Underwriting result, akin to • Insurance revenue Balance Sheet insurance service result • CSM release • NTA per share • Loss ratio • Experience variations Capital & returns Total in
Slide 23: Key take-outs
23 Key take-outs • Timing of revenue recognition is different but lifetime profits unchanged • FY23 opening net assets reduced by $215m • The reduction in opening net assets is caused by higher opening liabilities on transition. In turn this reflects a later recognition of revenue and profit relatin
Slide 24: Appendix
* Helia. Appendix ‘AASB 1 proforma
Slide 25: Reconciliations
25 Reconciliations Trailing 12-month statutory ROE Trailing 12-month underlying ROE ($ millions) Dec 21 Dec 22 ($ millions) Dec 21 Dec 22 Statutory NPAT 217.5 201.2 Underlying NPAT 226.6 232.6 Average equity1 1,230.4 1,266.6 Average equity1 1,230.4 1,266.6 Statutory ROE (%) 17.7% 15.9% Underlying RO
Slide 26: Glossary
* Helia. Glossary ‘AASB 1 proforma
Slide 27: Glossary
27 Glossary AASB 17 Australian Accounting Standards Board AASB 17 Insurance Contracts establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. AASB 1023 Australian Accounting Standards Board AASB 1023 General Insurance Contracts. CSM (contra
Slide 28: Investor materials can be found at: Helia.com.au
Investor materials can be found at: Helia.com.au For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Head of Investor Relations D: +61 499 088 640 E: investorrelations@helia.com.au The release of this announcement was authorised by the Board. 25 May