Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Day (June 2023)
49 slides from Insurance Australia's investor day presentation, Jun 14, 2023
Slide 1: IAG Investor Day
For personal use only IAG Investor Day 14 June 2023
Slide 2: Important information
Important information This presentation contains general information current as at 14 June 2023 and is not a recommendation or In addition, there are particular risks and uncertainties associated with implementation of IAG’s For personal use only advice in relation to any product or service offered
Slide 3: Program outline
Program outline For personal use only 01 Introduction Nick Hawkins 02 Direct Insurance Australia Julie Batch 03 Intermediated Insurance Australia Jarrod Hill 04 New Zealand Amanda Whiting 05 Transformation Update Neil Morgan Breakout sessions: - Perils and Pricing - Evolution of Claims 06 CFO Update
Slide 4: Introduction
For personal use only Nick Hawkins Chief Executive Officer 01 Investor Day | 14 June 2023 Introduction
Slide 5: Acknowledgement of Country
For personal use only Acknowledgement of Country IAG acknowledges Traditional Owners of Country throughout Australia and recognises the continuing connection to lands, waters and communities. We pay our respect to Aboriginal and Torres Strait Islander cultures; and to Elders past and present. We emp
Slide 6: Focused on our strategy
Focused on our strategy We make your world Create a stronger, Our people are the difference: bringing our Purpose a safer place Strategy more resilient IAG People purpose to life and delivering our strategy Medium-term goals1 For personal use only Focus Approach Ambitions Grow with our Deliver outst
Slide 7: Strategic focus
Strategic focus For personal use only Grow with our customers Build better businesses Ambition Ambition 1 million additional direct customers $250m IIA insurance profit in FY24 Reducing expense ratio Progress Progress • 207k net new customers in DIA • IIA on track to achieve $250 million insurance p
Slide 8: Strategic focus (continued)
Strategic focus (continued) For personal use only Create value through digital Manage our risks Ambition Ambition $400m value from Claims Risk maturity assessed as Integrated Progress Progress • Accelerated Enterprise Platform rollout with functionality built • Renewed key Whole of Account Quota Sha
Slide 9: Operating environment
Operating environment Premium increases reflect claims inflation, reinsurance and natural perils impacts For personal use only Motor premium increases & claims inflation Gross natural perils & reinsurance $m 20% 16% 2,900 14% 12% 19% 10% 8% 6% 18% 2,400 4% 2% 0% 17% 1,900 16% Rate Change % Inflation
Slide 10: Medium-term targets
Medium-term targets Improved shareholder returns with increased ROE and strong EPS growth For personal use only Environment has changed, with: • Increased investment yields support improved margins and ROE; • Strong top-line growth delivers improved ROE metrics due to lower capital strain from organ
Slide 11: Direct Insurance Australia
For personal use only Julie Batch Group Executive, Direct Insurance Australia 02 Investor Day | 14 June 2023 Direct Insurance Australia
Slide 12: Direct Insurance Australia overview
Direct Insurance Australia overview For personal use only Simplified • Strongest insurance brand in • 2nd strongest insurance brand • #1 insurance brand with consumer Brands Australia (Brand Finance) in Australia ratings of 4.7 (Trust Pilot) • #2 in financial services • 2023 Car Insurer of the year
Slide 13: Operating environment
Operating environment For personal use only Increased peril claims Upward cost pressures Emerging system growth • Significant natural perils • High global inflation • Slower economic growth • High claims volumes • Global supply chain bottlenecks • Increase in population and business (e.g. new cars,
Slide 14: Strong action in the current environment
Strong action in the current environment For personal use only To help Australians like no one else Value Growth $400m of value through claims 750k new customers by growing nationally, targeting and supply chain by FY26 younger customers and small business segments by FY26 $70m of value generated si
Slide 15: Claims cost inflation stabilising | Motor
Claims cost inflation stabilising | Motor Key trends over last 12 months For personal use only • Claims volumes returned to pre-COVID-19 levels in March 2022 Motor claims inflation & premium increases • Claims inflation spiked in Aug-Oct 2022 in line with global trends 16% • Supply chain affected by
Slide 16: Property rate response
Property rate response Property inflation (non-perils) & premium increases For personal use only 25% Key trends over last 12 months 20% • Significant protracted weather events 15% • Increased reinsurance cost Property • Lower frequency of non-peril claims 10% • Availability and cost of key materials
Slide 17: Transforming customer experience and cost
Transforming customer experience and cost Help our customers live their life with less disruptions For personal use only Proactive Here to Help, no Building more Finalised in the by nature matter where here is resilient capabilities blink of an eye Claims Tracker AI for Motor Total Loss Virtual Prop
Slide 18: Strengthening our customer base
Strengthening our customer base Grow across Australia • Focus on retention and risk selection for profitable growth For personal use only • NRMA HelpHub is increasing customer engagement and retention • Recognising customer tenure as well as increasing products per customer NT 1 QLD • Omni-channel e
Slide 19: Conclusion: Direct Insurance Australia
Conclusion Direct Insurance Australia For personal use only Summary • Strong action in a challenging market • Strengthening performance in FY23 and beyond • Growing our existing customer base • On track to deliver our strategic ambition and goals 19 Investor Day | 14 June 2023
Slide 20: Intermediated Insurance Australia
For personal use only Jarrod Hill Group Executive, Intermediated Insurance Australia 03 Investor Day | 14 June 2023 Intermediated Insurance Australia
Slide 21: Intermediated Insurance Australia overview
Intermediated Insurance Australia overview For personal use only Intermediated Personal Lines Low Touch SME & Agri Mid-Market & Corporate Via Brokers Via Brokers Via Brokers Via Reps Via Reps Via Reps Via Partners Via Agencies ~A$1.2bn ~A$1.7bn ~A$1.9bn FY23F GWP FY23F GWP FY23F GWP 21 Investor Day
Slide 22: Operating environment
Operating environment Australian Intermediated Insurance Market For personal use only • Market continues to take rate to stabilise margins and (GWP including Personal & Commercial Lines) offset higher claims and reinsurance costs. • Limited evidence of new capital or entrants coming into the Commerc
Slide 23: Strategy – Ambition26
H1 H2 H3 Strategy – Ambition26 Horizon 1 - Simplification For personal use only Horizon 1 Outcomes • Growth largely rate driven to improve margin and offset input Horizon 1 Horizon 2 Horizon 3 costs. Simplification Growth Differentiation • Proactive and structured portfolio management capability in
Slide 24: Key Horizon progress
H1 H2 H3 Key Horizon 1 progress For personal use only Underwriting Pricing Claims Active expense Winning new practices Deploying modern efficiency management partner - ANZ Implemented regular rating tools in key Deployed and Disciplined expense ANZ will be delivered product line portfolio products a
Slide 25: Building strategic capability
H1 H2 H3 Building strategic capability For personal use only FY24 Outlook Horizon 1 Horizon 2 Horizon 3 • Confident of delivering at least $250m insurance profit. Simplification Growth Differentiation • In anticipation of significant re-insurance increases, we started applying rate to cover costs in
Slide 26: Technology
H1 H2 H3 Technology Strategic investment will reshape our partner proposition IIA’s core insurance capabilities For personal use only We have traditionally built our brands around trust and relationships. Distribution Underwriting Pricing In the future we will lead the way in providing data driven D
Slide 27: Conclusion: Intermediated Insurance Australia
Conclusion Intermediated Insurance Australia For personal use only Summary • Confident of delivering FY24 insurance profit target. • Underwriting and efficiency foundations in place. • Attracted strong people capability and leadership. • Commercial lines technology is an opportunity. 27 Investor Day
Slide 28: New Zealand
For personal use only Amanda Whiting CEO, IAG New Zealand 04 Investor Day | 14 June 2023 New Zealand
Slide 29: IAG New Zealand overview
IAG New Zealand overview #1 For personal use only Ambition: Personal lines To protect the future of every Kiwi market share Business Division Consumer Brands Division Via Brokers Direct Brands Bank Partners #1 Commercial lines market share NZ$1.7bn NZ$1.4bn NZ$0.5bn >2M FY23F GWP FY23F GWP FY23F GWP
Slide 30: North Island Floods and Cyclone Gabrielle
North Island Floods and Cyclone Gabrielle New Zealand communities have been hit hard For personal use only #2 and #3 A$284m largest loss events Group net cost in NZ history 49k claims Strong lodged for the events community 30% closed to date response across North Island 30 Investor Day | 14 June 202
Slide 31: Operating environment
Operating environment For personal use only Slower system growth Higher claims frequency Upward Cost Pressures • 2023 population growth 0.8% • Open claims are ~60% higher • Higher claims inflation across due to the weather events motor and property • Personal Motor sales down 6% ‒ Personal Motor now
Slide 32: Two-phase strategy
Two-phase strategy FY23 Focus • Rising rate increases, particularly in 2H23 in response Margin and customer retention focus into FY24 to inflation and higher reinsurance costs - Personal Motor ~20% For personal use only - Commercial 15-20% Growth - Home ~20-30+% - adjusted for EQC impact • Strong cu
Slide 33: NZI Intermediated
NZI Intermediated Always striving to add value for our customers For personal use only Market-leading broker NPS Strong GWP growth (+25pts ahead of competitors) 13.6% in 1H23 83% commercial customer retention NZI Assurance Small & micro businesses Large Corporate sector seeking straight-forward digi
Slide 34: Claims Customer Claims Journey
Claims Customer Claims Journey Foundations strengthened to improve customer experience and reduce costs For personal use only Customer Roadside Lodge claim Event Rescue Support digitally Support for lost keys, Available for AMI & dead battery, towing, State Personal Lines accident response, tyre pun
Slide 35: Conclusion: IAG New Zealand
Conclusion IAG New Zealand For personal use only Summary • Achieving strong GWP growth • Continued momentum on closing claims • FY24 priorities: – Deliver margin and customer retention – Launch Enterprise Platform for Direct brands – NZ Transformation 35 Investor Day | 14 June 2023
Slide 36: Transformation Update
For personal use only Neil Morgan Chief Operating Officer 05 Investor Day | 14 June 2023 Transformation Update
Slide 37: Transformation activities are on track
Transformation activities are on track Priorities 2020 2023 2026 1. Claims For personal use only • 16 independent, ageing claims platforms • Brand centric 2. Personal lines • 16 policy & pricing systems • 1000+ Products 3. Intermediated • 17 policy & pricing systems • Bespoke connectivity 4. Operati
Slide 38: Claims Transformation on Enterprise Platform
1. Claims Transformation on Enterprise Platform • 16 independent, • Single, modernised • Intelligent ageing claims platforms new claims platform automation For personal use only • Brand centric • Digital first & highly • Legacy architecture scalable decommissioning • Ring-fenced legacy 2020 2023 202
Slide 39: Personal Lines Transformation on Enterprise Platform
2. Personal Lines Transformation on Enterprise Platform • 16 policy & pricing • Strategic solution live • Single strategic systems solution • Onboarding brands For personal use only • 1000+ Products in-flight • 16 core products • Trans-Tasman re-use • 80% less documents proven 2020 2023 2026 Pricing
Slide 40: Intermediated Enablement
3. Intermediated Enablement • 17 policy & pricing • Strategic Partner • Strategic solution systems solution deployed aligned x-Tasman For personal use only • Bespoke • 7 Commercial solutions • Commercial specific broker/partner enablement • Trans-Tasman re-use connectivity 2020 2023 2026 Network gro
Slide 41: Future Fit Operations
4. Future Fit Operations • Multiple Legacy • Trans-Tasman operations • Lean, highly HR, Risk & Ops automated back office • Digital platforms for HR, For personal use only platforms • 500K hours + p.a. Risk & Finance • Geography centric automation • Enterprise automation • Cloud nascent platform esta
Slide 42: Conclusion
Conclusion NZ: 60% one-touch NZ NZ: 80 FTE savings motor claims from Claims Automation For personal use only DIA: 5% reduction IIA: ANZ win Claims in call volumes Direct DIA: AI for total motor NZ: 67% Peak loss supported 30,000 digital lodgement customers Intermediated NZ: 12% increase IIA: Admin c
Slide 43: CFO Update
For personal use only Michelle McPherson Chief Financial Officer 06 Investor Day | 14 June 2023 CFO Update
Slide 44: CFO update
CFO update For personal use only Deeper dive into capital, reinsurance and expense base Capital Platform Reinsurance Cost base AASB17 • Strong capital base built • Impact of reinsurance • Gross operating • Will apply from 1 July on equity, hybrid and program on perils cost trajectory 2023 reinsuranc
Slide 45: Capital platform
Capital platform Reinsurance Equity Debt / hybrid For personal use only • Catastrophe and earnings • Capital management options • Hybrid securities volatility covers • Ongoing on-market buyback • Subordinated term notes • Unique quota share arrangements Quota share arrangements 01/01/2023 Hannover R
Slide 46: Impact of global reinsurance market changes
Impact of global reinsurance market changes Gross catastrophe reinsurance Gross catastrophe reinsurance For personal use only program at 1 Jan 2020 Comparison of 2023 program to 2020 program program at 1 Jan 2023 $m $m 10,000 10,000 ~$220m ~$135m $196m Reinsurance Perils Capital - ICRC program cost
Slide 47: Group expenses
Group expenses Cost base 2,503 2,531 ~$2.5bn ~$2.5bn gross operating cost target achieved 12.7 12.7 ~12 For personal use only in FY21 and FY22, and on track for FY23 Expected increase in gross operating costs from FY24. Drivers of cost uplift include: FY21 FY22 FY23 FY24 FY25 • Wage inflation pressu
Slide 48: AASB17
AASB17 AASB17 will NOT impact our capital or For personal use only solvency requirements or business strategy Onerous Financial impact Timing Measurement Capital & contracts Impacts the timing of Applies from 1 July approach Balance Sheet Testing at a more recognition, 2023 Premium Allocation Cost o
Slide 49: Investor Relations
For personal use only Investor Relations Mark Ley Nigel Menezes Mobile. +61 (0)411 139 134 Mobile. +61 (0)411 012 690 Email. mark.ley@iag.com.au Email. nigel.menezes@iag.com.au Media Amanda Wallace Mobile. +61 (0)422 379 964 Email. amanda.wallace@iag.com.au Insurance Australia Group Limited ABN 60 0