Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2023 Earnings Presentation
25 slides from Insurance Australia's earnings presentation, Aug 21, 2023
Slide 1: Financial Results for the year ended 30 June 2023
This release has been authorised by the IAG Board Financial Results for the year ended 30 June 2023 21 August 2023 Results Presentation | 21 August 2023
Slide 2: Important information
Important information This presentation contains general information current as at 21 August 2023 (unless otherwise stated) and may cause actual results, outcomes, conditions or circumstances to differ from those expressed, is not a recommendation or advice in relation to any product or service offe
Slide 3: Nick Hawkins, Chief Executive Officer: Introduction
Nick Hawkins Chief Executive Officer Introduction Introduction
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. We empower Aboriginal and To
Slide 5: Executing on our strategy
Executing 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 ~132k net customer growth in DIA Grow with our Brand rationalisa
Slide 6: FY23 results overview
FY23 results overview GWP Reported margin Underlying margin1 $14.7bn 9.6% 12.6% Up 10.6% in FY23 and 13.7% in 2H23 Impacted by natural peril costs $297m Strong momentum with 2H23 at 14.6% above allowance Net profit after tax Final dividend FY24 Guidance2 GWP growth of low double digits $832m 9cps Re
Slide 7: Divisional highlights
Divisional highlights Direct Insurance Intermediated Insurance New Zealand Australia (DIA) Australia (IIA) • ~132k growth in customer numbers • ~13% average rate increases • Strong NZ$ GWP growth of ~12% • Accelerating GWP growth (Motor & • 2H23 GWP growth of 16.2% assisted by • Reported margin of 2
Slide 8: Making the world a safer place for our customers
Making the world a safer place for our customers Our customer focus has delivered strong Customer Experience NPS across our Australian (+45) and New Zealand (+51) businesses Helping customers in time of need Supporting Communities Easier and simpler • Helped 650,000 customers recover from • Major Ev
Slide 9: Michelle McPherson, Chief Financial Officer: Financials
Michelle McPherson Chief Financial Officer Financials
Slide 10: Financial summary
Financial summary FY22 FY23 Change GWP ($m) 13,317 14,729 10.6% NEP ($m) 7,909 8,326 5.3% Expense ratio (%) 23.7 23.1 60bps Reported insurance profit1 ($m) 586 803 37.0% Reported insurance margin (%) 7.4 9.6 220bps Underlying insurance profit ($m) 1,157 1,052 9.1% Underlying insurance margin (%) 14.
Slide 11: Strong GWP growth to drive future GEP growth
Strong GWP growth to drive future GEP growth Reported GWP growth of 10.6%: Group GWP vs GEP growth • Increasing rate rises to counter higher inflation, perils expectation and 14% reinsurance costs • >1% DIA volume growth primarily from 12% Home and Motor in Victoria • Strong retention rates across I
Slide 12: Underlying margin movement
Underlying margin movement 12 Results Presentation | 21 August 2023
Slide 13: Claims ratio increase driven by higher inflation
Claims ratio increase driven by higher inflation Underlying claims ratio +4.2% -2.9% +2.5% Higher average home and motor claims costs due to inflationary and supply chain 54.2% 54.0% pressures 0.9% 2.0% Inflation moderating in Australia but 58.2% remains elevated in New Zealand 55.3% 56.7% 54.5% 53.
Slide 14: Cost base
Cost base Group expenses ~$2.5bn gross operating cost target achieved for third year 2,503 2,531 2,494 FY23 costs down 1.5% which includes $50m in amortisation of technology and system investment 12.7 12.7 11.9 FY23 costs down 2.8% excluding amortisation impact Group administration ratio ex-levies e
Slide 15: Higher yields driving improved investment performance
Higher yields driving improved investment performance Investment yield on technical reserves ~$12bn Investment Portfolio 5.0% $7.4bn technical reserves invested in fixed interest & 3.7% cash 2.4% • Gain of $271m driven by the higher investment 56 1.1% yield and narrowing of credit spreads, offset by
Slide 16: Net profit after tax
Net profit after tax NPAT movement ($m) FY22 FY23 OTHER LINE ITEMS A$m A$m Interest (93) (145) Profit/(loss) from fee-based business (34) (37) Share of profit/(loss) from associates 17 (13) Non-controlling interests (77) (93) Amortisation (7) (3) Net corporate expense - Lease impairment charge - (20
Slide 17: Strong reinsurance protection for remainder of calendar 2023
Strong reinsurance protection for remainder of calendar 2023 Gross catastrophe reinsurance program $m Whole of account quota shares arrangements 10,000 renewed • 32.5% protection with leading global reinsurers • ~5% margin uplift contribution to target financial performance CY23 Main Catastrophe Pro
Slide 18: Strong capital position
Strong capital position CET1 ratio of 1.12 at 30 June 2023 • Above top end of target range • ~8pts capital impact on pro- forma from FY23 final dividend • ~$227m (~9pts capital impact) remains of the share buyback limit of up to $350m and is intended to be completed within 12 months 18 Results Prese
Slide 19: AASB17 impacts
AASB17 impacts AASB17 not expected to impact IAG’s underlying economics, cash flows, capital or strategic direction Transitional adjustment at 30 June 2022 Minor balance sheet impact on transition: • Cost of capital approach to risk adjustment to result in a lower probability of adequacy • Onerous c
Slide 20: Nick Hawkins, Chief Executive Officer: Closing
Nick Hawkins Chief Executive Officer Closing Introduction
Slide 21: Premium increases driven by inflation, perils and reinsurance
Premium increases driven by inflation, perils and reinsurance DIA Home inflation (non-perils) & premium increases 25% 20% Pricing includes higher perils Increasing natural perils and reinsurance costs 15% and reinsurance costs 20% 3,400 Perils above/(below) allowance (RHS) 10% 19% Gross perils allow
Slide 22: FY24 strategic focus
FY24 strategic focus 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 Focus Net direct customer growth with progress towards one million goal Grow w
Slide 23: FY24 guidance
1 FY24 guidance GWP growth of ‘low double digit’ Reported insurance margin of 13.5% to 15.5% % $ FY23 Reported margin/insurance profit 9.6 803m FY23 Underlying margin/insurance profit 12.6 1,052m FY24 Underlying insurance margin drivers • Net Earned Premium growth • Ongoing claims inflation • Higher
Slide 24: 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 Mobile. +61 (0)422 379 964 Email. amanda.wallace@iag.com.au Insurance Australia Group Limited ABN 60 090 739 923 Level 13, T
Slide 25: Appendix 1: FY24 Guidance and Outlook
Appendix 1: FY24 Guidance and Outlook IAG’s confidence in its strong underlying business is reflected in guidance for FY24 which includes: • GWP growth of ‘low double digits’. This will be primarily rate driven to cover claims inflation, higher reinsurance costs and an increased natural peril allowa
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