Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2017 Earnings Presentation
30 slides from Insurance Australia's earnings presentation, Aug 23, 2017
Slide 1: Financial results Full year ended 30 June 2017
For personal use only Financial results Full year ended 30 June 2017 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 23 August 2017
Slide 2: Overview
For personal use only Overview Peter Harmer Managing Director and Chief Executive Officer
Slide 3: FY17 highlights
FY17 highlights Robust performance in challenging claims environment For personal use only • GWP growth of 3.9% in line with guidance GWP growth Insurance margin (like-for-like 4%+) • Reported margin of 14.9% – upper end of updated $11,805m 14.9% $11,367m 14.3% guidance range • Lower underlying marg
Slide 4: Strategic priorities
Strategic priorities Supported by two themes of Leading and Fuelling For personal use only FY17 Results | 23 August 2017 4
Slide 5: Operational scorecard
Operational scorecard Customer, partnering and simplification activities tracking to plan For personal use only FY17 activities FY18 priorities • Single enterprise data hub created • Extend customer model and customer research • Needs-based Australian customer model implemented to New Zealand and As
Slide 6: Financials
For personal use only Financials Nick Hawkins Chief Financial Officer
Slide 7: Financial summary
FY16 FY17 CHANGE For personal use only GWP ($m) 11,367 11,805 3.9% Insurance profit ($m) 1,178 1,258 6.8% Underlying margin (%) 14.0 11.9 210bps Financial Reported margin (%) 14.3 14.9 60bps summary Shareholders’ funds income ($m) 97 249 156.7% Income tax expense ($m) 218 329 50.9% Net profit after
Slide 8: GWP growth
GWP growth Rate-driven growth – like-for-like improvement of over 4% For personal use only GWP growth vs FY16 Underlying growth of over 4% • Rate increases addressing claims inflation, notably motor 0.2% 0.6% • Ongoing rate increase momentum and higher 0.2% than expected retention in Business 1.1% 0
Slide 9: Insurance margin
Insurance margin Underlying margin includes 70bps adverse impact from higher perils allowance For personal use only Margin trends – FY16-FY17 Lower underlying margin of 11.9% (FY16: 14.0%) • 70bps adverse effect of higher perils allowance 14.2% 13.7% • Significantly adverse commercial large loss exp
Slide 10: Claims inflation
Claims inflation Adverse commercial large losses, ongoing pressure in short tail motor For personal use only Flat year-on-year underlying claims ratio, Underlying claims ratio* – FY16-FY17 masking several adverse outcomes: • Elevated Australian commercial large loss experience, particularly in 2H17
Slide 11: Natural perils
Natural perils Strong reinsurance position heading into 1H18 For personal use only Natural perils experience vs. allowance FY17 net perils $142m above allowance $822m • Three $100m+ events $154m $104m • FY17-specific $96m cover exhausted, $140m+ $96m protection from 2016/2017 aggregate covers $138m
Slide 12: Reserve releases
$1m $93m For personal use only $16m $86m $457m Reserve $254m $365m $207m releases FY16 FY16 FY17 FY17 -$2m Higher than originally -$149m expected outcome (5.4% of NEP) Group Consumer Business New Zealand Asia At least 2% expected in FY18 FY17 Results | 23 August 2017 12
Slide 13: Consumer
Consumer Solid growth and lower underlying margin, reflecting claim pressures in motor For personal use only Consumer GWP growth GWP growth of 5.5% $38m • Largely rate-driven growth of 5.6% in short tail motor, to combat claims inflation $73m $24m • Home GWP growth of 3.9% $149m • Initial contributi
Slide 14: Business
Business Positive rate momentum, while margin impacted by large loss experience For personal use only Business GWP growth - underlying vs reported Like-for-like GWP growth over 4% • Increased intermediated rate momentum evident 3.9% 4.2% • Retention held up better than expected throughout FY17 • Low
Slide 15: New Zealand
New Zealand Strong underlying performance, despite rising claim pressures For personal use only GWP growth / underlying margin Return to strong GWP growth 18.4% • 4.3% local currency growth, plus favourable FX effect • Strong growth in personal lines from mix of rate and volume, 15.5% 15.3% led by m
Slide 16: Asia
Asia Lower result from increased competition and higher claim costs in key markets For personal use only Earnings contribution by country* ($m) Lower earnings contribution of $10m (FY16: $26m) 70 • Increased competitive pressures and adverse claim cost trends in Thailand and Malaysia 60 • Move into
Slide 17: Optimising our capital mix
Optimising our capital mix Exploring further reinsurance quota share opportunities For personal use only Equity Two key decisions • Quantum of capital • Form of capital (mix) Capital Debt / hybrid platform Capital mix trends • Increased diversification Reinsurance • Reduced emphasis on equity • Grea
Slide 18: Capital
Capital Strong capital position maintained For personal use only CET1 movement since 31 December 2016 CET1 of 1.09 – upper end of benchmark 0.11 range 0.17 (0.9-1.1) 1 0.07 0.01 PCA of 1.70 – above 0.16 benchmark range (1.4-1.6) 1 Proforma CET1 ratio 1.09 1.09 within benchmark range post final 0.93
Slide 19: Outlook
For personal use only Outlook Peter Harmer Managing Director and Chief Executive Officer
Slide 20: FY18 outlook
FY18 outlook Improved underlying performance For personal use only FY18 guidance Underlying assumptions GWP growth Low single digit 1Net losses from 2Reserve releases 3No material natural perils of of at least 2% movement in $680m foreign exchange Reported Range of rates or investment insurance marg
Slide 21: Our value proposition
Our value proposition Delivering strong shareholder returns For personal use only Investment Value drivers Shareholder case value • Leading player with scale Through-the-cycle targets advantage in Australia and New • Cash ROE 1.5x WACC Zealand (low single digit growth) Fuelling drivers • High divide
Slide 22: We make your world a safer place
For personal use only For ownership details, see www.iag.com.au We make your world a safer place FY17 Results | 23 August 2017 22
Slide 23: Appendix – Group Results
Appendix – Group Results 1H16 2H16 1H17 2H17 FY16 FY17 For personal use only GROUP RESULTS A$m A$m A$m A$m A$m A$m Gross written premium 5,543 5,824 5,802 6,003 11,367 11,805 Gross earned premium 5,734 5,677 5,868 5,824 11,411 11,692 Reinsurance expense (1,632) (1,551) (1,624) (1,603) (3,183) (3,227
Slide 24: Appendix – Group Ratios and Key Metrics
Appendix – Group Ratios and Key Metrics Insurance Ratios 1H16 2H16 1H17 2H17 FY16 FY17 For personal use only Loss ratio 63.1% 68.1% 61.9% 62.5% 65.6% 62.2% Immunised loss ratio 62.7% 65.4% 63.9% 61.6% 64.0% 62.8% Expense ratio 26.2% 25.2% 25.6% 26.1% 25.7% 25.8% Commission ratio 10.3% 9.4% 9.8% 10.0
Slide 25: Appendix – Divisional Performance
Appendix – Divisional Performance FY16 FY17 For personal use only GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Australia 8,780 (0.3) 16.3 13.7 9,081 3.4 17.5 11.5 Consumer 5,801 3.3 19.8 16.0 6,119 5.5
Slide 26: Appendix – Consumer
Appendix – Consumer 1H16 2H16 1H17 2H17 FY16 FY17 GWP ($M) / INSURANCE MARGIN (%) For personal use only CONSUMER A$m A$m A$m A$m A$m A$m 24.6% Gross written premium 2,848 2,953 3,060 3,059 5,801 6,119 21.5% 22.1% 21.8% Gross earned premium 2,834 2,852 2,980 3,021 5,686 6,001 19.8% Reinsurance expens
Slide 27: Appendix – Business
Appendix – Business 1H16 2H16 1H17 2H17 FY16 FY17 GWP ($M) / INSURANCE MARGIN (%) For personal use only BUSINESS A$m A$m A$m A$m A$m A$m Gross written premium 1,419 1,560 1,423 1,539 2,979 2,962 Gross earned premium 1,597 1,525 1,550 1,466 3,122 3,016 Reinsurance expense (413) (406) (417) (376) (819
Slide 28: Appendix – New Zealand
Appendix – New Zealand 1H16 2H16 1H17 2H17 FY16 FY17 GWP ($M) / INSURANCE MARGIN (%) For personal use only NEW ZEALAND A$m A$m A$m A$m A$m A$m 15.2% Gross written premium 1,070 1,112 1,128 1,211 2,182 2,339 Gross earned premium 1,101 1,100 1,143 1,144 2,201 2,287 Reinsurance expense (340) (283) (311
Slide 29: Appendix – Asia
Appendix – Asia 1H16 2H16 1H17 2H17 FY16 FY17 For personal use only ASIA A$m A$m A$m A$m A$m A$m Gross written premium 197 189 182 184 386 366 IAG ASIA GWP FY17 - Gross earned premium 193 193 186 185 386 371 PROPORTIONAL BASIS Reinsurance expense (57) (54) (53) (52) (111) (105) Net earned premium 13
Slide 30: Important information
Important information For personal use only This presentation contains general information current as at 23 August 2017 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 informat
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