Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2021 Earnings Presentation
21 slides from Insurance Australia's earnings presentation, Aug 11, 2021
Slide 1: Financial results
This release has been authorised by the IAG Board Financial results Full year ended 30 June 2021 Nick Hawkins Michelle McPherson Managing Director and Chief Executive Officer Chief Financial Officer Investor Relations Media Insurance Australia Group Limited James Coghill Nigel Menezes Amanda Wallace
Slide 2: FY21 results overview
FY21 results overview • Underlying financial results sound and resilient • Solid cash earnings of $747m supporting dividend payments • Addressing challenges that contributed to FY21 reported loss • New organisational structure to embed accountability and drive performance • Progress towards achievin
Slide 3: FY21 highlights
FY21 highlights FY21 GWP growth 5.6% Sound performance, guidance reintroduced 4.3% 3.8% Improving GWP growth, resilient underlying • Additional $238m pre-tax charge for business performance customer refunds, increasing the • 3.8% GWP growth, largely rate driven component for uncertainty in the provi
Slide 4: Divisional highlights
DIA - GWP growth Divisional highlights 6.8% 5.7% 4.3% Solid underlying trends 3.6% 2.3% DIA Motor Home CTP Commercial Total GWP • GWP growth of 4.3%, included volume growth of over 1% IIA - GWP growth / underlying margin • Rate increases in line with claims inflation and underlying perils allowance
Slide 5: Financial summary
FY20 FY21 Change GWP ($m) 12,135 12,602 3.8% Insurance profit1 ($m) 741 1,007 35.9% Underlying insurance margin2 (%) 16.0 14.7 130bps Reported insurance margin (%) 10.1 13.5 340bps Shareholders’ funds income ($m) (181) 306 nm Financial Net profit/(loss) after tax ($m) 435 (427) nm summary Cash earni
Slide 6: GWP growth
GWP growth Solid momentum continued Growth of around 4% across FY21 • Achieving strong rate increases where required GWP growth Recent trends • ~$50m adverse COVID-19 impact in 1H21, with no 0.8% 0.4% material COVID-19 impact experienced in 2H21 • DIA growth driven by volume and higher rates across
Slide 7: Underlying margin
Underlying margin movement (FY21 vs FY20) Underlying margin (1.0%) ~0.9% (1.2%) Motor frequency benefits mainly a 1H21 feature Lower FY21 underlying margin of 14.7% (FY20: 16.0%) 16.0% 14.7% • ~$60m-70m net COVID-19 benefit in FY21 (vs. neutral impact in FY20) • Nil reserve release assumption (vs. 1
Slide 8: Underlying claims
Underlying claims Encouraging claims trends Underlying claims ratio of 54.5% in 2H21 Group adjusted underlying claims ratio • Represents working claims • Excludes peril costs, prior year reserve changes and discount rate effects ~1.2% COVID • Improving performance in recent halves ex-COVID-19 impact
Slide 9: Expenses
Expenses Relatively flat underlying trend 2H21 vs 1H21 Expenses • Gross underwriting expenses ex levies up 5.6% vs FY20 • Increase in compliance, governance and corporate insurance costs; one-off costs from operating model and property consolidation (~$30m pre-quota share) • Excluding one-offs and C
Slide 10: Prior period reserving
Prior period reserving Further net reserve strengthening $81m net strengthening (1.1% of NEP) Prior period reserve movements • Systemic issues in IIA where mixed economic conditions have enhanced focus on personal $18m $1m $18m $1m injury compensation and increased average claim sizes ($34m) ($48m)
Slide 11: Natural perils
Natural perils Adverse FY21 perils outcome Natural perils vs allowance FY21 net perils cost of $742m $742m $67m • $84m above allowance $135m • Unfavourable outcome in DIA and IIA, with New Zealand perils slightly below allowance • Assisted by ~$100m of aggregate cover recoveries $241m in 1H21 $765m
Slide 12: Additional key matters
Additional key matters $200m pre-tax charge in the second half Business interruption provision • No change to provision since 20 November 2020 • Extensive scenario testing of the adequacy of the provision • Comparison of actuarial estimates to client advised loss estimates for lodged claims 1H21 2H2
Slide 13: Capital
Capital Above mid-point of target benchmark range at 30 June 2021 • Increase in risk charges is attributed to a higher asset risk charge (from higher investment assets), a higher insurance risk charge (stemming from increased claims reserves) and a slightly higher insurance concentration risk charge
Slide 14: Dividend
Dividend Return to payment of interim and final dividend CASH EARNINGS FY21 A$m Net profit/(loss) after tax (427) Cash earnings of $747m Acquired intangible amortisation and impairment 111 Unusual items: • Excludes net corporate expense and amortisation & impairment - Business interruption provision
Slide 15: Recap: Strategic focus
Recap: Strategic focus Purpose Strategy We make your world a safer place Create a stronger, more resilient IAG Focus Approach Outcomes Grow with Deliver unparalleled personalised service when our More customers, more products and our customers customers need us the most greater scale Build better Fo
Slide 16: Delivering our strategy
Delivering our strategy Execution is underway, with momentum building FY21 Progress FY22 Focus • 75,000 more direct brand customers across Australia & New Zealand, growing at ~2x the population growth rate (>1% customer growth) • At least system growth for DIA personal lines through targeted Grow wi
Slide 17: FY22 guidance
Margin impact FY21 reported margin 13.5% FY22 guidance1 FY22 net underlying improvement • An improvement in the underlying margin on a like- for-like basis ~100bps up to ~300bps Forecast ‘Low single digit’ GWP growth • Mainly driven by earn through of rate increases, improvement particularly in IIA
Slide 18: Our Value Proposition
Our Value Proposition Delivering strong shareholder returns Key value Our strengths Our strategy Our aspirations drivers • Leading brands • Grow with our customers • Customer growth • “Create a stronger, more resilient IAG” • Scale and reach • Build better businesses • Claims management • Sustainabl
Slide 19: Appendix 1: FY22 Guidance and Outlook
Appendix 1: FY22 Guidance and Outlook The following detail on FY22 Guidance and Outlook has been provided in the FY21 Investor Report: IAG is reintroducing guidance given the sound underlying financial performance in FY21, the new operating model now embedded with new executive responsibilities and
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Slide 21: Important information
Important information This presentation contains general information current as at 11 August 2021 and is not a recommendation or advice in relation to or any product or service offered by Insurance Australia Group Limited (IAG) or its subsidiaries. It presents financial information on both a statuto
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