Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Merrill Lynch Australian Equities Conference 2004
24 slides from Insurance Australia's conference presentation, Oct 1, 2004
Slide 1: Cover letter to ASX: IAG investor presentation
| October 2004 Manager, Company Announcements Office Australian Stock Exchange Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam INSURANCE AUSTRALIA GROUP LIMITED (‘IAG’) INVESTOR PRESENTATION Please find attached copy of presentation by Insurance Australia Group’s Lim
Slide 2: Insurance Australia Group presentation by Michael Hawker, CEO
AUTRE Susetralin COMLaRE Insurance Australia Group Presentation by Michael Hawker, CEO Merrill Lynch Australian Equities Conference New York, 30 September 2004 ia cr EF concn 7 Insurance Australia Group Limited NEMA sGio pe Loou Ee ihe perare Ma! ABN 60 090 739 923 "eat TOR
Slide 3: Important information
important information IAG The information in this presentation is an overview and does not contain all information necessary to an investment decision. lesura ce Susetral COMLaRE The information contained in this presentation and accompanying materials has been prepared in good faith by |AG. No repr
Slide 4: Outline of presentation
Outline of presentation ¢ FY04 results and financial position ¢ CGU & NZI integration update e« Updated strategic goals * Qutlook for FY05 nama sco ggg (cou Bisitnn gui WA LHR A ER AUTRE Susetralin COMLaRE Insurance Australia Group Limited ABN 60 090 739 923 3
Slide 5: FY04 results and financial position
AUTRE Susetralin COMLaRE FY04 results and financial position ia cr EF concn 7 Insurance Australia Group Limited NEMA sGio pe Loou Ee ihe perare Ma! ABN 60 090 739 923 "eat TOR
Slide 6: Our operating environment in FY04
Our operating environment in FY04 q@) ¢ Continuing regulatory change FSR implementation Potts and Davis reviews Terrorism insurance pool implemented 39 changes to legislation Draft APRA Stage II reforms « Outcomes versus business expectations AUTRE Susetralin COMLaRE — Motor accident frequency under
Slide 7: Highlights of improved performance
Highlights of improved performance q@ IAG « Group gross written premium of $6.4bn sos — More than double $2.6bn at listing four years ago ¢ Insurance margin of 13.5%, up from 12.3% for FY03 — Exceeding long-term target range of 9-12% — Includes 15.2% for 2H04 (11.8% for 1H04) — Reflects a confluence
Slide 8: Financial results overview
Financial results overview Financial results/ratios Net earned premium (A$m)} insurance profit (A$m) Shareholders’ funds investment income (A$m} Profit before income tax & OE! (A$m) Reported NPAT (A$m) Net cash flow from operations (A$m) Reported ROE % to ordinary shareholders Normalised ROE % to or
Slide 9: Growth in business versus premium
Growth in business versus premium q@) IAG Gross written premium increased 25% on FY03 to $6,427m sos — FY03 reported $5,150m ~— Add annualised CGU and NZI GWP ($1,291m for 2H03) — Exclude FY03 health insurance GWP of $173m ~- Re-based FY03 GWP of $6,268m Underlying growth in GWP is 2.5% Risks in for
Slide 10: Combined ratio components
Combined ratio components Expense ratio 90.0% Loss ratio Bi 28.8% {incl commission ratio } — CAPaLaEe 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% é S 50.0% SEs 45.0% 40.0% FY9B FY99 FYOO FYD1 FY82 FY03 4HC4 2HO4 FYO4 FY88 FY9O FYOO FYO1 FYO2 FYO3 1HO4 2HO04 FYO4 Expense ratio Combined ratio 420.0% 140
Slide 11: Significant improvement in investment returns
Significant improvement in q) investment returns rd WPSUEAR CE Susetralin COMLaRE Portfolio income (pre-tax) and incl. derivatives Technical reserves Shareholders’ funds Total investment income * Returns for 1H04 and 2H04 are annualised. ¢ The technical reserves return of 3.8% includes active return
Slide 12: Contributions to profit before tax
A$m Contributions to profit before tax © Components of IAG EBITDA (excl OEI) peace COMLaRE 800 $95m ($54m) $142m $263m $559m $718m 700 é 600 500 400 300 200 100 (100) (9) (27) (21) (200) (300) 1H02 2H02 1H03 2H03 1H04 2H04 Insurance result ®@ investment return on shareholder funds @Operating margin
Slide 13: Improved return on equity
improved return on equity IAG AUTRE Return on Equity usta i oe 22.0% CAPaLaEe 20.0% a 18.0% 16.0% Target 13-15% Note: Normalised calculation was based on two 14.0% adjustments to actual NPAT to ordinary 12.0% shareholders: 10.0% 8.0% 4. Exclusion of goodwill amortisation and non- 6.0% recurring item
Slide 14: Financial position & dividends
Financial position & dividends q@ AUTRE Very strong capital position Cae — Paid $696m to shareholders in FY04 (dividends and buy- back) and repaid all short-term debt ($136m) — Group MCR multiple of 1.75x at June 2004 All key insurers have 'AA’ (Outlook ‘Stable’) S&P ratings Reinsurance counter-part
Slide 15: CGU & NZI integration update
AUTRE Susetralin COMLaRE CGU & NZI integration update ia cr EF concn 7 Insurance Australia Group Limited NEMA sGio pe Loou Ee ihe perare Ma! ABN 60 090 739 923 "eat TOR
Slide 16: The integrated Group
The integrated Group ¢ Integration programme essentially complete e Annual pre-tax synergies of $156m now in run-rate — balance in 1H05 ¢ Integrated operations re-organised to align on customer lines ; General Insurance Australia International HN dt LN: “agli: ” Insurance Australia Group Limited NEM
Slide 17: Integration programme complete
Integration programme complete Synergy realisation schedule Allaiigunis/ are prestax Cumulative run-rate per annum Personal lines Commercial IT, shared services & overheads. Australia sub-total International - New Zealand Total synergies in run-rate Synergy benefits collected Costs of implementation
Slide 18: Updated strategic targets
AUTRE Susetralin COMLaRE Updated strategic targets ia cr EF concn 7 Insurance Australia Group Limited NEMA sGio pe Loou Ee ihe perare Ma! ABN 60 090 739 923 "eat TOR
Slide 19: Updated strategic financial goals
Updated strategic financial goals q@) « Top quartile total shareholder return Susstraa COMLaRE —~ TSR goal remains unchanged — Subsequent goals should be looked as interdependent goals to deliver the TSR goal « ROE of at least 1.5x WACC on normalised basis — Donot expect to sustain more than 1.6x WA
Slide 20: Outlook for FY05
AUTRE Susetralin COMLaRE Outlook for FY05 ia cr EF concn 7 Insurance Australia Group Limited NEMA sGio pe Loou Ee ihe perare Ma! ABN 60 090 739 923 "eat TOR
Slide 21: Premium mix and cycles
Premium mix and cycles © IAG AUTRE Susetralin FY ‘04 Gross Written Premium Mix reuse w@ Motor @ Home OShort-tail Commercial Workers’ Comp. mCTP (Motor Liability) BZ Liability @ Other Short-tail 21% ¢ 80:20 short:iong-tail premium mix — aligns with strategic goal « 58% personal lines — less cyclical
Slide 22: Outlook for FY05
Outlook for FY05 © IAG « NEP growth expected to be in 5 -7% range Austral Groupe — Focus on policy growth at prices that deliver target return on WACC — Overall rate increases expected to be lower than in recent years e Organic business has considerable income generating opportunities ~ Policy growt
Slide 23: To summarise ...
To summarise ... IAG AUTRE Susetralin COMLaRE * Broad based financial institution * Many cultures * Significant market concentration « Shareholders’ funds income base larger than insurance operations Focused on general insurance Aligned & unified culture Diversified business Profitability based on r
Slide 24: Relative share price performance and GWP growth
COMLaRE ° Relative performance of IAG Aug-00 Feb-01 Auger Febo02 Augo2 Fep-o3 Aug-03 Febod Aug04 share price from listing “A SAPIASHCCOIndex ——IAG Shwe ——WGCWORLDEXAUS index so ONSAP 200 (8 August 2000) to August 2004 Gross Written Pramium by business Afba sean Growth and diversification of GWP sinc
Insurance Australia Group — Merrill Lynch Australian Equities Conference 2004 on 6ix