Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Deutsche Bank Asia Pacific Financial Services Conference 2003
23 slides from Insurance Australia's conference presentation, Jul 7, 2003
Slide 1: Presentation to Deutsche Bank Asia Pacific Financial Services Conference
Insurance Australia Group George Venardos Chief Financial Officer Presentation to Deutsche Bank – Asia Pacific Financial Services Conference London, 7 July 2003 Insurance Australia Group Limited ABN 60 090 739 923
Slide 2: Important information
Important information The information in this presentation is an overview and does not contain all information necessary to an investment decision. Any pro forma financial information is intended for informational purposes only, and does not purport to be indicative of the results that actually woul
Slide 3: Leading general insurance group in Australia and New Zealand
Leading general insurance group in Australia and New Zealand • Market leader (by gross written premium) in each of Australia & New Zealand • Owns leading direct and intermediated brands Insurance Australia Group Limited ABN 60 090 739 923
Slide 4: History of growth and diversification
History of growth and diversification Gross Written Premium By Business 56% $6.0bn 40% 42% 42% 3% 34% 5% $3.8bn 3% 21% $3.6bn 10% 20% 3% 12% $3.1bn 8% 11% 1% 21% $2.6bn 4% 1% $2.2bn 4% 4% 17% 17% $1.8bn 4% 3% 5% 19% 9% 22% 2% 6% 9% $1.7bn 23% 3% 5% 18% 20% 28% 17% 30% 2% 4% 26% 16% 1% 1% 16% 2% 17%
Slide 5: Improving insurance margins & components
Improving insurance margins & components Expense Ratio Loss Ratio 22.5% 95.0% 90.0% One-off impacts 85.0% 20.0% 80.0% 1.3% 4.0% 90.2% 21.1% 20.8% 75.0% 20.1% 19.7% 80.9% 19.2% 19.2% 80.1% 17.5% 77.5% 76.8% 70.0% 74.3% 65.0% 15.0% 60.0% 2H00 1H01 2H01 1H02 2H02 1H03 2H00 1H01 2H01 1H02 2H02 1H03 Comb
Slide 6: Delivering on our five year strategy announced in May 2002
Delivering on our five year strategy announced in May 2002strategy Reinvigorate Goals customer focus Core operations Top quartile total shareholder return Extend scale in general insurance Deliver earnings ROE 13 – 15% Leverage core Double gross capabilities Build capability written premium by FY 20
Slide 7: Our strategic focus over time
Our strategic focus over time Progress Progressing this will depend Generation of on being able to show international internationally applicable growth and core competencies profitability Generation of domestic organic growth and profitability We believe that there are substantial opportunities loca
Slide 8: CGU and NZI acquisition
CGU and NZI acquisition Insurance Australia Group Limited ABN 60 090 739 923
Slide 9: CGU/NZI acquisition – summary
CGU/NZI acquisition – summary • Purchased Australia & New Zealand general insurance business of Aviva plc – Announced 18 October 2002 – Completed on 2 January 2003 • Acquired for $1.85bn – Gross premium income stream of $2.3bn – Ongoing operations with a combined ratio of <98% – Leading intermediate
Slide 10: Provides market leading position in core products
Provides market leading position in core products Market share – Australia Market share – NZ Based on gross premium revenue Based on gross written premium 50% 47% IAG CGU 60% IAG NZ NZI 45% 9% 40% 48% 40% 50% 45% 38% 20% 35% 30% 27% 40% 14% 34% 30% 21% 7% 25% 27% 18% 30% 20% 21% 20% 23% 14% 20% 15%
Slide 11: More balanced geographic spread
More balanced geographic spread NT New Zealand also more GWP $9m IAG 13% QLD balanced between North WA IAG&CGU 13% and South Islands GWP $345m GWP $434m IAG 3% (Auckland & Wellington) IAG 19% IAG&CGU 15% IAG&CGU 29% GWP $410m IAG 21% GWP $2,525m IAG&CGU 51% IAG 24% SA NSW/ACT IAG&CGU 29% GWP $1,081m
Slide 12: Full range of distribution channels
Full range of distribution channels IAG pre CGU & NZI IAG including CGU & NZI Please insert the last two pie charts side by side from page 18 of the prospectus (the two under distribution channels) Insurance Australia Group Limited ABN 60 090 739 923 1
Slide 13: Delivery of synergy benefits on track
Delivery of synergy benefits on track Synergy realisation schedule 2H03 1H04 2H04 A$m A$m A$m Cumulative run-rate per annum Personal lines 6 41 75 Commercial 4 14 30 IT, shared services & overheads 8 26 35 Australia sub-total 18 81 140 International - New Zealand 3 16 20 Total synergies in run-rate
Slide 14: Capital raising for CGU/NZI acquisition successfully completed
Capital raising for CGU/NZI acquisition successfully completed Share USD sub- Domestic purchase debt Dividend Insto sub-debt plan (hedged) Reinvest RPS2 Ord equity $955 200 Hybrid $200 75 75 Sub-debt $710 410 410 Total $1,865 410 380 380 380 380 300 300 300 300 300 500 500 500 500 500 500 Capital mi
Slide 15: Costs of acquisition funding lower than business case
Costs of acquisition funding lower than business case Business Achieved Annual funding costs case outcome Savings Interest on subordinated debt (53.2) (46.7) 6.5 Tax credit 16.0 14.0 (2.0) Net annual expense (37.2) (32.7) 4.5 Dividend payable RPS2 (11.3) (9.0) 2.3 Effect on profits available for ord
Slide 16: Short term operating outlook
Short term operating outlook • 2H03 will include the impact of – Net expenditure on integration – estimated to be A$43m – A$70m in claims (net of reinsurance) for Canberra fires – Ongoing weakness in equity markets – Still targeting a combined ratio of <98% • FY04 should benefit from – Net income fr
Slide 17: Capital management
Capital management Insurance Australia Group Limited ABN 60 090 739 923
Slide 18: Financial position
Financial position • Capitalisation of $5.8bn as at 30 June 2003 – Ranked among 25 largest Australian listed companies • Pro forma balance sheet for 31 December 2002 – Total assets of $16.3bn – Net assets of $4.1bn (net tangible assets of $2.3bn) • Group distributable reserves of $550m at 31 Decembe
Slide 19: Capital management
Capital management • Capital actively managed on three parameters – Risk of ruin of 1 in 750 years – AA rating – A group risk-weighted minimum capital requirement ('MCR') multiple range of 1.35-1.65 times (set applying APRA principles to ALL operations) • Supported by – Conservative claims reserving
Slide 20: Exposure to equities significantly reduced
Exposure to equities significantly reduced • All exposure to equities removed from technical reserves • Shareholders’ funds benchmark still over 90% in equities: – 65 – 70% Australian equities – 25% International equities – Balance in fixed interest and cash • Equities exposure of shareholders’ fund
Slide 21: Conclusion
Conclusion Insurance Australia Group Limited ABN 60 090 739 923
Slide 22: Questions
Questions Insurance Australia Group Limited ABN 60 090 739 923
Slide 23: Curriculum vitae – George Venardos
Curriculum vitae GEORGE VENARDOS Chief Financial Officer George Venardos has over 24 years experience in the financial services industry. In his current role with the Insurance Australia Group (‘IAG’) – which he has held since 1998 - George controls all financial aspects of the Groups operations inc
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