Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2024 Earnings Presentation
31 slides from Insurance Australia's earnings presentation, Feb 16, 2024
Slide 1: Financial Results
This release has been authorised by the IAG Board Financial Results Half year ended 31 December 2023 16 February 2024 Results Presentation | 16 February 2024
Slide 2: Important information
Important information This presentation contains general information current as at 16 February 2024 (unless otherwise stated) environment). This may cause actual results, outcomes, conditions or circumstances to differ from those and is not a recommendation or advice in relation to any product or se
Slide 3: Introduction
Nick Hawkins Chief Executive Officer Introduction Introduction 3 Results Presentation | 16 February 2024
Slide 4: Acknowledgement of Country
Acknowledgement of Country IAG acknowledges Traditional Owners of Country throughout Australia and recognises the continuing connection to lands, waters and communities. We pay our respect to Aboriginal and Torres Strait Islander cultures and to Elders past and present. 4 Results Presentation | 16 F
Slide 5: Making the world a safer place for our customers
Making the world a safer place for our customers Transactional NPS improved to +49.5 in Australia and +49 in New Zealand Supporting customers Focus on improvements Strength in leading brands • Paid ~$6 billion in claims • Increased claims employees by over • Strong retention rates (%): ~90 in DIA •
Slide 6: Delivering on our strategy
Delivering on our strategy We make your world Create a stronger, Our people are the difference: bringing our Purpose a safer place Strategy more resilient IAG People purpose to life and delivering our strategy Strategic Pillars Evidence Retention rates (%): ~90 in DIA Home & Motor, mid-to-high 90s i
Slide 7: 1H24 results overview
1H24 results overview Net profit after tax Insurance profit GWP $407m $614m $7.9bn Represents ROE of 12.2% Increase of 75% Up 12.5% Reported margin Strong capital position Interim dividend 13.7% 1.16x CET1 10cps In line with underlying margin Up to $200m on-market buyback 40% franked announced 7 Res
Slide 8: Direct Insurance Australia
Direct Insurance Australia Key highlights • Strong GWP growth driven by Motor 384 351 (14%) and Home (16%) 333 o Short-tail volumes broadly flat, with some growth in RACV in Victoria 247 248 o CTP volume growth in NSW and SA • Earnix pricing engine deployment 167 13.3% resulting in improved pricing
Slide 9: Intermediated Insurance Australia
Intermediated Insurance Australia Key highlights • Reported profit of $162m and on track to 160 162 deliver on target of at least $250m in FY24 insurance profit 133 135 • Improvement in reported insurance margin to 11.4% (1H23: 3.6%) and 16.2% underlying insurance margin to 9.5% 76 (1H23: 5.7%) • Co
Slide 10: New Zealand
New Zealand Key highlights • Strong NZ$ GWP growth of 18.8% o Local underlying currency growth of 204 ~16% 146 o A$ GWP growth of 21.1% 136 128 • Strong turnaround in profitability due to 118 18.8% underlying insurance margin 15.3% improvement and benign perils outcome • Improvement in reported insu
Slide 11: Financials
William McDonnell Chief Financial Officer Financials 11 Results Presentation | 16 February 2024
Slide 12: Financial summary
Financial summary 1H23 1H24 Change GWP ($m) 7,061 7,947 12.5% NEP ($m) 4,113 4,496 9.3% Administration expense ratio (%) 14.0 14.4 40bps Reported insurance profit ($m) 350 614 75.4% Reported insurance margin (%) 8.5 13.7 520bps Underlying insurance profit ($m) 439 614 39.9% Underlying insurance marg
Slide 13: Strong top-line growth
Strong top-line growth Group GWP vs GEP growth Reported GWP growth of 12.5%: • Strong premium increases reflecting claims 14% inflation, higher reinsurance costs and increased perils allowance 12% • Strong retention rates across direct distribution 10% • Overall moderate volume reduction 8% o Flat o
Slide 14: Underlying insurance margin
Underlying insurance margin Strong NEP growth of 9.3% drives improvement in underlying insurance margin to 13.7% (1H23: 10.7%): • Increased perils allowance to $549m (1H23: $454m) • 260bps claims ratio improvement; • Expense ratio increase to 23.7% (1H23: 22.9%), driven by higher levies and commissi
Slide 15: Improvement in underlying claims ratio
Improvement in underlying claims Underlying claims ratio ratio Rate increases implemented over the last year -260bps continuing to earn through Decline in second-hand car prices and expanded network capacity assisting improvement in DIA 58.2% Portfolio management initiatives in IIA, partially 55.3%
Slide 16: Strong reinsurance protection for calendar 2024
Strong reinsurance protection for calendar 2024 Gross catastrophe reinsurance program $m 10,500 2024 catastrophe reinsurance program • Greater reinsurance protection than originally anticipated Main Catastrophe Program • Maximum event retention for first event of $236m (67.5% of $350m) FY24 reinsura
Slide 17: Favourable perils experience with revised FY24 allowance
Favourable perils experience with Natural perils vs allowance revised FY24 $49m allowance $521m net perils, $28m below revised 1H24 allowance $521m $24m $1,098m • Relatively benign until November, December storm and floods across East $169m Coast of Australia $152m $549m • Absence of large perils ev
Slide 18: Expenses
Expenses Administration expenses ex-levies 10bps increase in admin ratio ex- 955 levies as we invest for the future 890 879 879 862 • Increased technology spend including associated amortisation o Enterprise Platform rollout 12.9% 12.5% o Commercial enablement in IIA 12.1% 11.9% 12.2% • Additional r
Slide 19: Ongoing improvement in investment yields
Ongoing improvement in investment yields Investment yield on technical reserves 5.0% 5.9% ~$12.4bn Investment Portfolio 3.7% 2.4% $7bn technical reserves invested in fixed interest & cash 56 1.1% • Gain of $290m driven by the higher investment yield 29 31 18 and narrowing of credit spreads • ~220bps
Slide 20: Strong CET1 capital position
Strong CET1 capital position 0.9 to 1.1 CET1 target range 20 Results Presentation | 16 February 2024
Slide 21: Closing
Nick Hawkins Chief Executive Officer Closing Introduction 21 Results Presentation | 16 February 2024
Slide 22: FY24 guidance
1 FY24 guidance GWP growth of ‘low double digit’ Reported insurance margin of 13.5% to 15.5% % $ FY24 Underlying insurance margin drivers • Net Earned Premium growth • Stable claims inflation • Strong investment income • Perils allowance of $1,098m FY24 Reported margin/insurance profit 13.5 to 15.5
Slide 23: Strategic Focus
Strategic Focus Purpose Strategy People We make your world a safer place Create a stronger, more resilient IAG Our people are the difference: bringing our purpose to life and delivering our strategy Focus Approach Ambitions1 Aspirational goals1 Grow with our Deliver outstanding personalised service
Slide 24: Financial Results
Financial Results Half year ended 31 December 2023 16 February 2024 Results Presentation | 16 February 2024
Slide 25: Investor Relations
Investor Relations Mark Ley Nigel Menezes Mobile. +61 (0)411 139 134 Mobile. +61 (0)411 012 690 Email. mark.ley@iag.com.au Email. nigel.menezes@iag.com.au Media Amanda Wallace Katherine Jimenez Mobile. +61 (0)422 379 964 Mobile. +61 (0)411 011 117 Email. amanda.wallace@iag.com.au Email. katherine.ji
Slide 26: Appendix 1: FY24 Guidance and Outlook
Appendix 1: FY24 Guidance and Outlook IAG’s financial performance in the first six months of FY24 and confidence in the strength of its underlying business is reflected in FY24 guidance which remains: • GWP growth of ‘low double digits’. This will be primarily rate driven to cover claims inflation,
Slide 27: Appendix 2: Group Profit & Loss
Appendix 2: Group Profit & Loss 1H23 2H23 1H24 GROUP RESULTS A$m A$m A$m Gross written premium 7,061 7,668 7,947 Gross earned premium 6,853 6,985 7,550 Reinsurance expense (2,740) (2,772) (3,054) Net earned premium 4,113 4,213 4,496 Net claims expense (2,911) (2,955) (3,108) Commission expense (366)
Slide 28: Appendix 3: Group Insurance Ratios
Appendix 3: Group Insurance Ratios Insurance Ratios 1H23 2H23 1H24 Loss ratio 70.8% 70.1% 69.1% Immunised loss ratio 72.1% 71.2% 68.5% Expense ratio 22.9% 23.5% 23.7% Commission ratio 8.9% 9.4% 9.3% Administration ratio 14.0% 14.1% 14.4% Combined ratio 93.7% 93.6% 92.8% Immunised combined ratio 95.0
Slide 29: Appendix 4: DIA Profit & Loss and Insurance Ratios
Appendix 4: DIA Profit & Loss and Insurance Ratios 1H23 2H23 1H24 DIRECT INSURANCE AUSTRALIA A$m A$m A$m Gross written premium 3,219 3,421 3,647 Gross earned premium 3,097 3,190 3,439 Reinsurance expense (1,223) (1,266) (1,349) Net earned premium 1,874 1,924 2,090 Net claims expense (1,443) (1,300)
Slide 30: Appendix 5: IIA Profit & Loss and Insurance Ratios
Appendix 5: IIA Profit & Loss and Insurance Ratios 1H23 2H23 1H24 INTERMEDIATED INSURANCE AUSTRALIA A$m A$m A$m Gross written premium 2,303 2,502 2,436 Gross earned premium 2,270 2,221 2,402 Reinsurance expense (923) (863) (977) Net earned premium 1,347 1,358 1,425 Net claims expense (916) (834) (93
Slide 31: Appendix 6: NZ Profit & Loss and Insurance Ratios
Appendix 6: NZ Profit & Loss and Insurance Ratios 1H23 2H23 1H24 NEW ZEALAND A$m A$m A$m Gross written premium 1,539 1,745 1,864 Gross earned premium 1,486 1,574 1,709 Reinsurance expense (593) (643) (728) Net earned premium 893 931 981 Net claims expense (551) (822) (570) Commission expense (99) (1
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