Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Presentation (June 2015)
18 slides from Insurance Australia's investor presentation, Jun 16, 2015
Slide 1: Strategic Relationship with Berkshire Hathaway
ABN 60 090 739 923 STRATEGIC RELATIONSHIP WITH BERKSHIRE HATHAWAY 16 JUNE 2015 Mike Wilkins, Managing Director and Chief Executive Officer Nick Hawkins, Chief Financial Officer Strategic relationship with Berkshire Hathaway – 16 June 2015 1
Slide 2: Important Information
IMPORTANT INFORMATION This presentation contains general information in summary form which is current as at 16 June 2015. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Stand
Slide 3: Strategic Partnership with Berkshire Hathaway Supports 15% ROE Target
STRATEGIC PARTNERSHIP1 WITH BERKSHIRE HATHAWAY SUPPORTS 15% ROE TARGET KEY ELEMENTS COMPELLING STRATEGIC RATIONALE Exclusive relationship in Australia and New Zealand Complementary operating capabilities 10-year, 20% quota share Reduced volatility of earnings $500m equity placement (~3.7% of expande
Slide 4: IAG's Relationship with Berkshire Hathaway Commenced 2000, Evolved Over Time
IAG’S RELATIONSHIP WITH BERKSHIRE HATHAWAY COMMENCED 2000, EVOLVED OVER TIME Relationship Transactional has Primarily in developed Strategic relationship reinsurance over time partnership since 2000 Strategic relationship with Berkshire Hathaway – 16 June 2015 4
Slide 5: Video message
ABN 60 090 739 923 Video message Warren E Buffett, Chairman & CEO, Berkshire Hathaway Inc Strategic relationship with Berkshire Hathaway – 16 June 2015 5
Slide 6: Strategic Relationship with Berkshire Hathaway
ABN 60 090 739 923 STRATEGIC RELATIONSHIP WITH BERKSHIRE HATHAWAY Strategic relationship with Berkshire Hathaway – 16 June 2015 6
Slide 7: Australia and New Zealand Operations Complementary Strengths and Capabilities
AUSTRALIA AND NEW ZEALAND OPERATIONS COMPLEMENTARY STRENGTHS AND CAPABILITIES IAG BERKSHIRE HATHAWAY PERSONAL LINES & SME LARGE CORPORATE & SPECIALTY Local market knowledge and customer insights Global market knowledge and expertise Leading brands in Australia and New Zealand Leading global brands M
Slide 8: Nick Hawkins, Chief Financial Officer
ABN 60 090 739 923 Nick Hawkins, Chief Financial Officer Strategic relationship with Berkshire Hathaway – 16 June 2015 8
Slide 9: Quota Share Agreement Reduces Capital Requirement by ~$700m
QUOTA SHARE AGREEMENT REDUCES CAPITAL REQUIREMENT BY ~$700M QUOTA SHARE – REDUCED CAPITAL REQUIREMENT 20% whole of account, across all IAG 700 consolidated entities Initial 10-year agreement 600 Increases capital flexibility and diversification: 500 - Cumulative reduction in capital requiremen
Slide 10: $500m Equity Placement Cements Strategic Partnership
$500M EQUITY PLACEMENT CEMENTS STRATEGIC PARTNERSHIP $500M EQUITY PLACEMENT TO A SIGNIFICANT COMPONENT OF KEY ELEMENTS OF BERKSHIRE HATHAWAY OVERALL AGREEMENT SUBSCRIPTION AGREEMENT IAG option to place up to an ~ 3.7% of IAG’s expanded share Cements strategic and long term additional 5% within 24 mo
Slide 11: Strong Pro Forma Capital Position Considerable Flexibility
STRONG PRO FORMA CAPITAL POSITION CONSIDERABLE FLEXIBILITY QUOTA QUOTA 31 DEC 2014 EQUITY 31 DEC 2014 31 DEC 2014 SHARE SHARE CAPITAL POSITION ACTUAL PLACEMENT PRO FORMA PRO FORMA YEAR 1 YEARS 2-5 CET1 capital ($m) 3,041 500 3,541 3,541 Tier 1 capital ($m) 3,858 500 4,358 4,358 Tier 2 capital ($m) 8
Slide 12: Mike Wilkins, Managing Director & Chief Executive Officer
ABN 60 090 739 923 Mike Wilkins, Managing Director & Chief Executive Officer Strategic relationship with Berkshire Hathaway – 16 June 2015 12
Slide 13: Long Term Strategy: Strategic Priorities Unchanged
LONG TERM STRATEGY STRATEGIC PRIORITIES UNCHANGED OUR STRATEGY IAG leverages market leadership in general insurance and risk management to create superior value for our customers, partners, employees, shareholders and the community OUR LONG TERM FINANCIAL TARGETS ROE ≥ 1.5 x WACC Top quartile TSR OU
Slide 14: Asian Strategy Further Growth Opportunities
ASIAN STRATEGY FURTHER GROWTH OPPORTUNITIES PREVIOUSLY HIGHLIGHTED INITIATIVES OTHER POTENTIAL OPPORTUNITIES Dial-up of interest in SBI General (India) Thai market consolidation from 26% to 49% following increase in FDI limit Increased presence in Malaysia Indonesian market entry – first stage compl
Slide 15: FY15 Outlook Unchanged Since Perils Update in April
FY15 OUTLOOK UNCHANGED SINCE PERILS UPDATE IN APRIL FY15 FY15 GUIDANCE ASSUMPTIONS GWP growth Lower end of 17-20% range Net losses from natural perils of $1bn Reported insurance margin 10.5-12.5% Reserve releases of around 2% of NEP FY15 GWP growth at lower end of 17-20% range (as updated in F
Slide 16: FY16 Guidance Strong Profitability Expected
FY16 GUIDANCE STRONG PROFITABILITY EXPECTED FY16 FY16 GUIDANCE ASSUMPTIONS GWP growth 0-3% Net losses from natural perils of $600m (after allowance for the quota Reported insurance margin 14.0-16.0% share effect) Reserve releases of at least Quota share reduces NEP by ~20% 1% of NEP Further
Slide 17: Summary: Strategic Partnership Delivers Long Term Benefits
SUMMARY STRATEGIC PARTNERSHIP DELIVERS LONG TERM BENEFITS A SIGNIFICANT DEVELOPMENT FOR IAG Recognises quality of IAG’s franchise and strategy Improved customer service / offering Reduced earnings volatility Increased financial flexibility Diversifies capital funding Enhanced ability to deliver on t
Slide 18: We help make your world a safer place
We help make your world a safer place 100% owned unless indicated. 1 RACV is via a distribution relationship and underwriting joint venture with RACV Limited. 2 IAG holds a 98.6% beneficial interest in Safety Insurance, based in Thailand, which trades under the Safety and NZI brands. 3 IAG owns 49%
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