Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — CLSA Investors' Forum 2013
21 slides from Insurance Australia's conference presentation, Sep 26, 2013
Slide 1: Presentation to the CLSA Investors' Forum
26 September 2013 For personal use only Manager, Company Announcement Office ASX Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, Presentation to the CLSA Investors’ Forum Please find attached a copy of a presentation that is being delivered in Hong Kong this afterno
Slide 2: CLSA Investors' Forum 2013
26 September 2013 ABN 60 090 739 923 For personal use only CLSA INVESTORS’ FORUM 2013 Nick Hawkins Chief Financial Officer
Slide 3: Important Information
IMPORTANT INFORMATION For personal use only This presentation contains general information in summary form which is current as at 22 August 2013. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International F
Slide 4: Overview of IAG
OVERVIEW OF IAG PURE GENERAL INSURER, TOP 30 ASX-LISTED COMPANY For personal use only Approaching A$10bn in annual gross written premium (GWP) Strong market shares in Australia and New Zealand, supported by range of iconic brands High growth Asian footprint established Market capitalisation
Slide 5: FY13 Key Highlights
FY13 KEY HIGHLIGHTS STRONG PERFORMANCE AND POSITIVE OUTLOOK For personal use only STRONG UNDERLYING Gross written premium (GWP) growth of 11.8%, 8.7% ex-AMI PERFORMANCE Underlying margin of 12.5% - exceeds ROE target Individual business units performing well – Strong result from Australia Dire
Slide 6: FY13 Financial Summary
FY13 FINANCIAL SUMMARY SIGNIFICANT UPLIFT ACROSS ALL KEY MEASURES For personal use only FY12 FY13 CHANGE GWP ($M) 8,495 9,498 11.8% NET EARNED PREMIUM ($M) 7,346 8,318 13.2% INSURANCE PROFIT ($M) 845 1,428 69% REPORTED MARGIN (%) 11.5 17.2 570bps NET PROFIT AFTER TAX ($M) 207 776 275% CASH NPAT ($M)
Slide 7: FY13 Reported Insurance Margin
FY13 REPORTED INSURANCE MARGIN BOOSTED BY FAVOURABLE CONDITIONS For personal use only REPORTED INSURANCE MARGIN – FY13 VS FY12 KEY POINTS 17.2% 0 Strong reported margin of 17.2% 180 (FY12: 11.5%) 0 194 Improved underwriting performance of 104 17 nearly $300m, sourced from all divisions 0 296 11.
Slide 8: Australia Direct
AUSTRALIA DIRECT CONTINUES TO PERFORM STRONGLY For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 4,584 6.6% GWP growth of 6.6% Insurance result ($m) 822 51.1% – Primarily rate, supplemented by volume Underlying margin (%) 13.5 170bps – Growth in all states and mos
Slide 9: Australia Intermediated (CGU)
AUSTRALIA INTERMEDIATED (CGU) DELIVERS UNDERLYING DOUBLE DIGIT MARGIN For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 3,028 9.7% Strong GWP growth of 9.7% - rate and volume Insurance result ($m) 470 82.2% Significantly improved underlying margin of 11.2% Under
Slide 10: New Zealand
NEW ZEALAND MAINTAINS STRONG UNDERLYING PERFORMANCE For personal use only KEY METRICS FY13 CHANGE KEY POINTS Gross written premium ($m) 1,575 30.2% GWP growth of 30.2% (local currency 26.8%) Insurance result ($m) 115 11.7% – Full year contribution from AMI (FY12: 3 months) Underlying margin (%) 11
Slide 11: Asia
ASIA MOVING FROM DEVELOPMENT TO DELIVERY For personal use only FINANCIAL CONTRIBUTION BY COUNTRY KEY POINTS GWP now around 7% of Group (proportional basis) PROPORTIONAL EARNINGS – Participating in a gross premium pool of $1.3bn GWP CONTRIBUTION – Significant growth in Thailand, post FY12 floods FY
Slide 12: Investment Portfolio
INVESTMENT PORTFOLIO CONSERVATIVE MIX AND HIGH CREDIT QUALITY For personal use only TOTAL INVESTMENT GROUP ASSET ALLOCATION SHAREHOLDERS’ FUNDS PORTFOLIO – $13.6BN $4.2bn 14% 22% 54% 24% $9.4bn 86% Technical Reserves Shareholders' Funds Fixed Interest and Cash Growth Fixed Interest and Cash Equities
Slide 13: Investment Returns
INVESTMENT RETURNS STRONG PERFORMANCE, AIDED BY MARKET MOVEMENTS For personal use only INVESTMENT INCOME ($M) TECHNICAL RESERVES RETURNS Lower returns reflecting mark-to-market capital losses (FY12: capital gains) Positive impact of $110m from narrower credit spreads Continued to achieve over
Slide 14: Reserve Releases
RESERVE RELEASES FAVOURABLE EXPERIENCE IN LONG TAIL CLASSES For personal use only GROUP RESERVE RELEASES (% NEP) KEY POINTS 7% Higher than expected FY13 releases of $212m (FY12: $195m), equivalent to 2.5% of NEP 6% – Driven by favourable experience in 5% Australian long tail classes 4% – CGU outco
Slide 15: Natural Perils Experience
NATURAL PERILS EXPERIENCE FAVOURABLE RESULT FOLLOWING BENIGN FIRST HALF For personal use only NATURAL PERILS – IMPACT ON MARGIN KEY POINTS 2% Favourable overall FY13 experience – 1.9% positive margin impact, vs. 1% allowance 0% 2H13 slightly above allowance FY08 FY09 FY10 FY11 FY12 FY13 – Ex-Tro
Slide 16: Reinsurance Expense
REINSURANCE EXPENSE RATIO HAS STABILISED For personal use only GROUP REINSURANCE EXPENSE KEY POINTS 17% increase in FY13 reinsurance expense to 8.2% 8.6% 9 $817m (FY12: $700m), reflects: 7.4% 8 – Full year of AMI 6.3% 6.3% 6.5% 6.3% 7 6.2% 6.2% 6.2% – Overall business growth 6 5 – Higher rates ass
Slide 17: Catastrophe Reinsurance
CATASTROPHE REINSURANCE PARTIAL AGGREGATE EROSION AT 30 JUNE 2013 For personal use only 2013 CATASTROPHE PROGRAMME – AS AT 30 JUNE KEY POINTS Aggregate erosion of $105m at 30 June 2013 - $145m deductible remains Next catastrophe renewal 1 January 2014 Additional cover purchased in respect of F
Slide 18: Strong Capital Position
STRONG CAPITAL POSITION IN LINE WITH BENCHMARKS For personal use only 30 JUNE 2013 KEY POINTS Strong regulatory capital position PCA – PCA multiple of 1.67 (benchmark 1.4-1.6) – CET1 multiple of 1.09 (benchmark 0.9-1.1) Modest movement against pro forma 31 December CET1 2012 position, reflecting
Slide 19: Dividend
DIVIDEND POLICY OF 50-70% OF CASH EARNINGS For personal use only DIVIDEND – CENTS PER SHARE 1 KEY POINTS 9 Consistent application of dividend policy from FY09 8 71.5% 70.8% – 50-70% of cash earnings 67.1% 64.7% 7 60.5% – Provides sufficient flexibility to fund 6 growth and bolt-on acquisitions (AM
Slide 20: FY14 Outlook
FY14 OUTLOOK For personal use only GUIDANCE FY14 GWP growth 5-7% Insurance margin 12.5-14.5% GUIDANCE FOR FY14 ASSUMES: Net losses from natural perils in line with budgeted allowance of $640m Reserve releases 1-2% of NEP No material movement in foreign exchange rates and investment markets 18
Slide 21: Questions
For personal use only QUESTIONS
Insurance Australia Group — CLSA Investors' Forum 2013 on 6ix