Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — FY2018 Earnings Presentation
29 slides from Insurance Australia's earnings presentation, Aug 15, 2018
Slide 1: Financial results: Full year ended 30 June 2018
For personal use only Financial results Full year ended 30 June 2018 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 15 August 2018
Slide 2: Overview
For personal use only Overview FY18 financial results 15 August 2018 2
Slide 3: FY18 highlights
FY18 highlights GWP growth Improved underlying performance 8.9% For personal use only FY18 underlying improvement in line Combined 12.5% quota share with expectations agreements commenced 2H18 4.3% 3.2% • Like-for-like GWP growth over 4%, • Reduced earnings volatility and underlying margin of 14.1%
Slide 4: Strategy: Three strategic priorities
For personal use only Strategy Three strategic priorities Optimise our core insurance business while creating future Eleven growth options capabilities FY18 financial results 15 August 2018 4
Slide 5: Operational scorecard
Operational FY18 activities FY19 priorities scorecard Customer • Applied customer segmentation model to inform brand • Apply customer behavioural analysis to prioritise For personal use only strategy, marketing and customer journey design investment decisions that drive customer advocacy • Digitised
Slide 6: Safer communities
Safer communities Framework to support safer, stronger, more confident communities For personal use only Key recent actions Fifth report from Australian Business Roundtable for Disaster Resilience & Safer Communities • ‘Building resilience to natural disaster in our states and territories’ Co-organi
Slide 7: Financials
For personal use only Financials FY18 financial results 15 August 2018 7
Slide 8: Financial summary
FY17 FY18 Change For personal use only GWP ($m) 11,439 11,647 1.8% Insurance profit ($m) 1,270 1,407 10.8% Underlying margin (%) 12.4 14.1 170bps Financial Reported margin (%) 15.5 18.3 280bps summary Shareholders’ funds income ($m) 246 165 -32.9% Cash ROE of 15.6% Net profit after tax ($m) 929 923
Slide 9: GWP growth
GWP growth Like-for-like >4%, largely rate-driven For personal use only Sound underlying growth Reported growth of 1.8%, FY19 GWP growth in line with ‘low single guidance of 2-4% • Rate increases addressing digit’ guidance claims inflation in motor • Further rate increases across and home • After ab
Slide 10: Insurance margin
Insurance margin Year-on-year improvement For personal use only Higher FY18 underlying margin 2H18 consistent with 1H18 Margin trends – 1H17 – 2H18 of 14.1% (FY17: 12.4%) • ~250bps quota share impact in 2H18 • Reduced pressure on motor 18.9% profitability as rates at least • Absorption of ~$10m of R
Slide 11: Natural perils
Natural perils FY19 stop loss cover extends from perils allowance For personal use only FY18 net perils $84m below FY19 allowance of $608m Natural perils vs allowance allowance • Takes into account 12.5% • >$120m of reinsurance protection quota shares from calendar 2017 aggregate cover in 1H18 • Gro
Slide 12: Reserve releases
Reserve releases For personal use only $93m Higher than expected outcome (4% of NEP) $77m $456m $365m $305m Guiding to 2% $267m of NEP for FY19 -$2m -$39m FY17 FY17 FY18 FY18 Group Consumer Business New Zealand FY18 financial results 15 August 2018 12
Slide 13: Australia
Australia Strong Consumer result, modest For personal use only $293m -$190m Business margin recovery -$40m Underlying GWP growth Improvement in FY18 Further improvement $9,081m $9,144m of over 3% underlying margin to 12.9% expected in FY19 (FY17: 11.5%) • Rate-driven growth of 4-5% • Sound GWP growt
Slide 14: New Zealand
New Zealand Strong performance maintained For personal use only Healthy NZ$ GWP growth of Strong FY18 underlying Strong performance New Zealand – 8.9% in FY18 margin of 17.6% expected in FY19 GWP growth / underlying margin • Consumer Division growth • Earn-through of rate • Further GWP growth – of 8
Slide 15: Margin impact: FY19 reported margin guidance
Margin impact FY18 reported margin 18.3% For personal use only 12.5% quota shares from 1 January 2018 125bps (full year 250bps impact) Reserve releases FY19 (200bps) (2% expectation, vs. 4% in FY18) Natural perils in line with allowance reported (100bps) (FY18 below allowance) margin No investment m
Slide 16: Capital
Capital Strong capital position For personal use only (0.12) 0.03 0.01 0.15 (0.18) (0.23) 0.13 1.19 1.26 0.98 Dec-17 2H18 FY18 interim 12.5% Other Jun-18 FY18 final Capital Asia Jun-18 earnings dividend quota shares dividend management disposals (proforma) initiative FY18 financial results 15 August
Slide 17: Capital management initiative
Capital management initiative Subject to shareholder approval For personal use only 25 cents per share ($592m), Strong capital position expected to comprise: post-initiative • 19.5 cents capital return • Close to mid-point of targeted CET1 range, on • Reduced tax cost base 30 June 2018 pro forma Tim
Slide 18: Outlook
For personal use only Outlook FY18 financial results 15 August 2018 18
Slide 19: FY19 outlook
FY19 outlook Further underlying improvement For personal use only FY19 guidance measures Underlying assumptions GWP growth 2–4% Reported insurance margin 16.0–18.0% 1 Net losses from 2 Reserve releases of 3 No material natural perils of $608m, around 2% movement in foreign in line with allowance exc
Slide 20: Our value proposition
Our value proposition For personal use only Delivering strong Investment case Value drivers Shareholder value shareholder returns • Leading player with scale advantage in Australia and Customer Through-the-cycle targets • Cash ROE 1.5x WACC New Zealand (low single digit growth) • High dividend (60-8
Slide 21: For personal use only
For personal use only INSURANCE SGJO STATE Australia " swann cou fF See New Zealand COP NA Si Mmsurance
Slide 22: Appendix – Group results
Appendix – Group results For personal use only 1H17 2H17 1H18 2H18 FY17 FY18 GROUP RESULTS A$m A$m A$m A$m A$m A$m Gross written premium 5,620 5,819 5,649 5,998 11,439 11,647 Gross earned premium 5,682 5,639 5,780 5,742 11,321 11,522 Reinsurance expense (1,571) (1,551) (1,613) (2,238) (3,122) (3,851
Slide 23: Appendix – Group ratios and key metrics
Appendix – Group ratios and key metrics For personal use only Insurance Ratios - Continuing Business 1H17 2H17 1H18 2H18 FY17 FY18 Loss ratio 61.7% 62.3% 60.1% 60.3% 62.0% 60.2% Immunised loss ratio 63.9% 61.4% 60.9% 60.1% 62.6% 60.5% Expense ratio 25.0% 25.7% 25.0% 23.9% 25.3% 24.5% Commission rati
Slide 24: Appendix – divisional performance
Appendix – divisional performance For personal use only FY17 FY18 GWP INSURANCE MARGIN GWP INSURANCE MARGIN Reported Growth Reported Underlying Reported Growth Reported Underlying DIVISION A$m % % % A$m % % % Australia 9,081 3.4 17.5 11.5 9,144 0.7 19.6 12.9 Consumer 6,119 5.5 21.8 13.9 6,214 1.6 24
Slide 25: Appendix – Australia
Appendix – Australia GWP ($M) / INSURANCE MARGIN (%) For personal use only 9,081 9,144 1H17 2H17 1H18 2H18 FY17 FY18 20.5% 19.6% 18.5% 18.8% AUSTRALIA RESULTS A$m A$m A$m A$m A$m A$m 17.5% 16.5% Gross written premium 4,483 4,598 4,453 4,691 9,081 9,144 Gross earned premium 4,530 4,487 4,612 4,519 9,
Slide 26: Appendix – Australia Consumer
Appendix – Australia Consumer GWP ($M) / INSURANCE MARGIN (%) For personal use only 1H17 2H17 1H18 2H18 FY17 FY18 AUSTRALIA CONSUMER RESULTS A$m A$m A$m A$m A$m A$m 6,119 6,214 25.3% Gross written premium 3,060 3,059 3,052 3,162 6,119 6,214 23.0% 21.5% 22.1% Gross earned premium 2,980 3,021 3,092 3,
Slide 27: Appendix – Australia Business
Appendix – Australia Business GWP ($M) / INSURANCE MARGIN (%) For personal use only 1H17 2H17 1H18 2H18 FY17 FY18 2,962 2,930 AUSTRALIA BUSINESS RESULTS A$m A$m A$m A$m A$m A$m 11.3% 10.4% 11.1% Gross written premium 1,423 1,539 1,401 1,529 2,962 2,930 Gross earned premium 1,550 1,466 1,520 1,484 3,
Slide 28: Appendix – New Zealand
Appendix – New Zealand GWP ($M) / INSURANCE MARGIN (%) For personal use only 1H17 2H17 1H18 2H18 FY17 FY18 2,486 2,339 NEW ZEALAND RESULTS A$m A$m A$m A$m A$m A$m 14.2% Gross written premium 1,128 1,211 1,190 1,296 2,339 2,486 13.8% 13.3% Gross earned premium 1,143 1,144 1,160 1,214 2,287 2,374 Rein
Slide 29: Important information
Important information This presentation contains general information current as at 15 August 2018 and is not a recommendation or advice in relation to Insurance Australia Group For personal use only Limited (IAG) or any product or service offered by IAG’s subsidiaries. It presents financial informat
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