Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2021 Earnings Presentation
20 slides from Insurance Australia's earnings presentation, Feb 10, 2021
Slide 1: Financial results
This release has been authorised by the IAG Board Financial results Half year ended 31 December 2020 Nick Hawkins Michelle McPherson Managing Director and Chief Executive Officer Chief Financial Officer Investor Relations Media Insurance Australia Group Limited James Coghill Amanda Wallace ABN 60 09
Slide 2: 1H21 results overview
1H21 results overview • Stable and resilient underlying business performance in 1H21 • Moved quickly to reset IAG’s operating model to improve shareholder value • Decisive action to address an unusual and complex challenge • Capital strength maintained, supported by $776m capital raise • Progress on
Slide 3: 1H21 highlights
1H21 highlights GWP growth Sound performance, challenges being addressed 4.6% Stable and resilient underlying business Business interruption adverse ruling 3.8% performance • 1H21 post-tax earnings impact of $805m • 3.8% GWP growth, largely rate driven announced on 20 November 2020 1.5% • Improved u
Slide 4: Divisional highlights
Divisional highlights Australia - GWP Growth 4.6% Growth momentum recovers Australia New Zealand • GWP growth ~5% • NZ$ GWP growth of 2.8% • Rate driven growth of 3.1% in short tail • Largely influenced by rate personal lines, increases in line with • Solid 3.1% Business growth 0.04% 0.7% claims inf
Slide 5: Financial summary
1H20 1H21 Change GWP ($m) 5,962 6,188 3.8% Insurance profit1 ($m) 501 667 33.1% Underlying insurance margin2 (%) 16.9 15.9 100bps Reported insurance margin (%) 13.5 17.9 440bps Shareholders’ funds income ($m) 50 138 nm Financial Net profit/(loss) after tax ($m) 283 (460) nm summary Cash earnings ($m
Slide 6: GWP growth
GWP growth Positive momentum Underlying growth around 5% • ~$50m adverse COVID-19 impact in 1H21 (compared to 1H20) mainly in Australian GWP Growth personal lines, in contrast to ~$80m in 2H20 ~0.8% COVID-19 impact Recent trends • Rate increases matching claims inflation in Australia short tail pers
Slide 7: Underlying margin
Underlying margin Benefit from lower motor claim frequency Improvement in underlying margin to 15.9% in 1H21 • ~1.7% net COVID-19 benefit • Nil reserve release assumption (vs. 1% in 2H20) • Normalised underlying margin in-line with 2H20 1H21 net COVID-19 benefit of ~1.7% • ~$100m from lower motor cl
Slide 8: Underlying claims and expenses
Underlying claims and expenses Stable trends, offsetting factors Group adjusted underlying claims ratio Underlying claims ratio improved by ~100bps vs. 2H20 to 52.8% ~1.2% COVID benefit ~2.0% COVID • Represents working claims benefit • Excludes peril costs, prior year reserve changes and discount ra
Slide 9: Prior period reserving
Prior period reserving Modest net reserve strengthening $15m net strengthening (0.4% of NEP) • Prior period strengthening flagged on 20 Prior period reserve movements November 2020 • Deterioration in Australia driven by $18m commercial classes • ~$15m related to workers’ compensation • ~$30m from pr
Slide 10: Natural perils & reinsurance
Natural perils & reinsurance Favourable 1H21 perils outcome $m 10,000 1H21 net perils cost of $290m • $39m below allowance • Favourable outcome in Australia, with New Zealand perils slightly above allowance Main Catastrophe Program • Assisted by ~$90m of recoveries under the calendar 2020 aggregate
Slide 11: Business interruption
Business interruption No change to provision announced on 20 November 2020 Quarantine Act Biosecurity Act Total Total Estimated exposure (business interruption + (prevention of access) (pre-quota share) (post 32.5% quota share) prevention of access) Insured risk (~$bn) 13.0 2.0 15.0 Net central esti
Slide 12: Capital
Capital Comfortably above top end of target benchmark range 12 1H21 financial results | 10 February 2021
Slide 13: Dividend
Dividend Consistent approach applied 1H21 CASH EARNINGS A$m Cash earnings of $462m Net profit/(loss) after tax (460) • Business interruption provision Acquired intangible amortisation and impairment 4 • Unusual nature and scale Unusual items: • Cash ROE of 15.5% - Business interruption provision 1,1
Slide 14: A strong business with a clear purpose
A strong business with a clear purpose We have a strong heritage… … and an opportunity to deliver further uplift • A clear purpose – to make your world a safer place Organic growth has been challenged, with customers demanding better experiences. Focused brands and digital Customer • Market leader i
Slide 15: Our Strategy
Our Strategy Create a stronger, more resilient IAG Strategy Pillars We will grow as Australians and New • Grow the number of direct personal lines customers Grow with Zealanders grow, delivering • Increase the breadth of customer relationships our customers unparalleled personalised service • Drive
Slide 16: 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 17: 1H21 financial results | 10 February 2021
17 1H21 financial results | 10 February 2021
Slide 18: Appendices
Appendices 1H21 financial results | 10 February 2021
Slide 19: Sample of Initiatives
Appendix 1 - Delivering Our Strategy Execution is underway, with momentum building Progress to date 1H21 Current focus 2H21 • Digitised the customer experience in New Zealand • Simplify and focus our brands across Australia Grow with replacing 46 AMI branches with a digital experience • Piloting the
Slide 20: Important information
Important information This presentation contains general information current as at 10 February 2021 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 information on both a statut
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