Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Investor Presentation (June 2010)
61 slides from Insurance Australia's investor presentation, Jun 23, 2010
Slide 1: Investor presentations by IAG executives (ASX cover letter)
For personal use only 23 June 2010 Manager, Company Announcements Office ASX Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam INSURANCE AUSTRALIA GROUP LIMITED (‘IAG’) INVESTOR PRESENTATIONS BY IAG EXECUTIVES Attached are copies of the following investor presentations
Slide 2: Investor Roadshow Japan – June 2010
For personal use only Investor Roadshow Japan – June 2010 Mike Wilkins Wilkins, Managing Director & Chief Executive Officer Simon Phibbs, Investor Relations ABN 60 090 739 923
Slide 3: Important Information
IMPORTANT INFORMATION For personal use only The information in this presentation is an overview and does not contain all information necessary to an investment decision. It should be read in conjunction with IAG’s other periodic and continuous disclosure announcements lodged with the Australian Secu
Slide 4: Strategy
For personal use only 1 Strateg Strategy
Slide 5: Refined Corporate Strategy – July 2008
REFINED CORPORATE STRATEGY – JULY 2008 For personal use only OUR Deliver superior performance by actively managing our portfolio STRATEGY and driving operational performance and execution • Continue to improve Australian and New Zealand business performance OUR • Pursue selective general insurance g
Slide 6: Improved Underlying Performance
IMPROVED UNDERLYING PERFORMANCE Realising benefits of refined strategy For personal use only • Improvement in reported insurance margin g – 1H10 insurance margin of 13.4% (1H09: 6.2%) Insurance Profit & Margin • Over half of margin expansion from operational improvements 500 13.4% 16% – Increased pr
Slide 7: FY10 Guidance
For personal use only 2 FY10 Guidance G idance
Slide 8: FY10 Insurance Margin Guidance
FY10 INSURANCE MARGIN GUIDANCE Revised to 6 – 7% For personal use only FY10 Insurance Margin Guidance 14.0% 12.0% 11.5‐13.0% 10.5‐12.0% 10.0% 9.0‐11.0% 9.5‐11.0% 8.0% 6.0‐7.0% 6.0% 4.0% 2 0% 2.0% 0.0% 21‐Aug‐09 3‐Feb‐10 12‐Mar‐10 26‐Mar‐10 2‐Jun‐10 Guidance range Melbourne storm Perth storm UK reser
Slide 9: Melbourne Storm – March 2010
MELBOURNE STORM – MARCH 2010 One of the city city’ss worst-ever storms For personal use only Melbourne storm, 6-9 March 2010 • Around 41,000 claims • $135m claim cost, net of reinsurance • A $1bn industry event PAGE 8 Investor Roadshow - Japan
Slide 10: Followed Two Weeks Later by Perth
…FOLLOWED TWO WEEKS LATER BY PERTH Another $1bn industry event For personal use only Perth storm 22 March 2010 • About 28,000 claims • $75m claim cost, net of reinsurance PAGE 9 Investor Roadshow - Japan
Slide 11: UK Business Review: Deterioration in bodily injury claim experience
UK BUSINESS REVIEW Deterioration in bodily injury claim experience For personal use only • Deteriorating g market conditions – Bodily injury issue flagged for past 12 months – Claim farming activities – Increased recession-induced fraud – Industry reports indicate: Bodily od y injury ju y cclaim a
Slide 12: UK Business Review: Remedial actions
UK BUSINESS REVIEW Remedial actions For personal use only • Detailed remedial p programme g implemented p – Further rate increases of 10-20% across all business classes – Exiting certain, unprofitable broker relationships – Cessation of all external aggregator-sourced business of a non-bike nature –
Slide 13: UK Business Review: FY10 financial impact
UK BUSINESS REVIEW FY10 financial impact For personal use only • Significantly g y worse position p than 31 December 2009,, owing g to: – Adverse claim payment experience in opening months of calendar 2010 – Resultant revision of actuarial assumptions – Spread of issue to post-2007 underwriting year
Slide 14: Divisional Performance
For personal use only 3 Di isional Performance Divisional
Slide 15: Divisional Results
DIVISIONAL RESULTS Positive contribution from all divisions in 1H10 For personal use only 1H09 2H09 1H10 INSURANCE PROFIT A$m A$m A$m Australia Direct 194 179 281 Australia Intermediated (7) 55 112 New Zealand (17) 17 68 UK Retained 77 36 24 Asia 9 - 2 Corporate & Other - - 3 Total Retained 256 287
Slide 16: Key Insurance Ratios
KEY INSURANCE RATIOS Trending in the right direction For personal use only Expense ratio Loss ratio 29.9% 29.0% 90% 70.6% 30% 28 3% 28.3% 3.1% 80% 65.0% 3.8% 3.6% 70.9% 25% 70% 9.7% 60% 20% 9.5% 9.4% 50% 15% 40% 83.8% 30% 64.3% 64.1% 10% 17 1% 17.1% 15.7% 15.3% 20% 5% 10% 0% 0% 1H09 2H09 1H10 1H09 2
Slide 17: Australia Direct
AUSTRALIA DIRECT Continued strong performance For personal use only GWP & Margin GWP (A$m) 1 800 1,800 16 9% 16.9% 18% 1H10 results 16% • GWP growth of 7.8% 1,750 12.6% 11.4% 14% – Across all States 1,700 12% – Price and volume 10% 8% • Insurance margin of 16.9% 1,650 1,779 6% – Earned rate increase
Slide 18: Australia Intermediated
AUSTRALIA INTERMEDIATED Turnaround on track For personal use only GWP & Margin 1H10 results GWP (A$m) • Reported R d GWP down d 3 3.6% 6% 1,200 10.2% 12% – ING withdrawal and St George transition 1,150 1,100 10% • Underlying GWP up 2% 8% 1,050 1,159 1,198 1,117 – Underwriting discipline 6% 5.0% 1,00
Slide 19: New Zealand
NEW ZEALAND Strong turnaround turnaround, assisted by weather For personal use only GWP & Margin M i 1H10 results GWP (A$m) • GWP up 5% in local currency 500 20% • Insurance margin of 15% 15.0% 480 15% – Earned rate increases 460 10% – Improved underwriting discipline 440 482 483 472 420 4.0% – Bett
Slide 20: United Kingdom
UNITED KINGDOM Materially impacted by reserve strengthening For personal use only GWP & Margin 1H10 results GWP (A$m) 425 • GWP up 24% in local currency 25% 400 20.2% 20% – Average rate increases of 10% 406 – 15% growth in fleet and special risks 375 15% 398 389 • Reported insurance margin lower 350
Slide 21: Asia
ASIA Strong operating performance performance, Indian JV investment completed For personal use only IAG Asia - GWP Pool (A$m) 1H10 results 400 • GWP up 5.5% in local currency 300 • Regional GWP pool around $400m 200 • Thai and Malaysian y businesses 100 performing well • Reported insurance margin lo
Slide 22: Capital, Reinsurance & Investments
For personal use only 4 Capital, Reinsurance Capital Reins rance & Investments
Slide 23: Balance Sheet
BALANCE SHEET Strong capital position For personal use only MCR / Debt:Total Tangible Capitalisation MCR (x) As at 31 December 2009 2.50 43.3% 50% • Increased MCR multiple of 2.03 35.8% 45% 2.00 29.2% 40% – Improved financial performance 1.50 35% 30% – RES brought g on-balance sheet 25% following am
Slide 24: Reinsurance Protections
REINSURANCE PROTECTIONS Reducing earnings volatility For personal use only • A key part of approach to capital management • Integrated programme of catastrophe cover on calendar year basis – Main cover from $200m up to $4 $4.1bn 1bn – Sideways aggregate cover for multiple events ($150m excess of $15
Slide 25: Investments
INVESTMENTS Conservative mix and high credit quality For personal use only Investment Portfolio – 31 December 2009 Group Investment Asset Allocation - $11.5bn Group Fixed Interest & Cash - $10.6bn Growth < "A" 8% 3% "A" 5% "AAA" 43% "AA" Fixed Interest 49% & Cash 92% • Conservative overall investmen
Slide 26: FY11 Outlook
For personal use only 5 FY11 Outlook O tlook
Slide 27: FY11 Outlook
FY11 OUTLOOK Ongoing improvement in underlying performance For personal use only FY11 Guidance Underlying GWP growth 3–5% Insurance margin 10.5–12.5% • FY11 guidance first provided on 2 June 2010 – Further improvement in underlying performance of Australasian businesses – Modest UK margin • Assumes:
Slide 28: Appendices
For personal use only 6 Appendices
Slide 29: History
HISTORY For personal use only • A leading Australasian general insurer • Long established history in general insurance beginning in 1925 as NRMA Insurance Limited, Limited a mutual insurance company • In July 2000 NRMA Insurance Limited demutualised and became a subsidiary subs da yoof NRMA Insuranc
Slide 30: IAG's Geographical Presence
IAG’S GEOGRAPHICAL PRESENCE For personal use only # ^ * ~ ∞ # 49% ownership ^ 98% voting rights ~ 26% ownership * RACV is via a distribution relationship and underwriting joint venture with RACV Limited ∞ RACV has a 30% interest in The Buzz PAGE 29 Investor Roadshow - Japan
Slide 31: 1H10 GWP Mix by Geography & Channel
1H10 GWP MIX BY GEOGRAPHY & CHANNEL For personal use only PAGE 30 Investor Roadshow - Japan
Slide 32: GWP Growth and Product Split
GWP GROWTH AND PRODUCT SPLIT For personal use only Gross Written Premium by Business A$bn (excluding Share of Associates) $7.8 bn $7.8 bn $7.7 bn $7.4 bn 3% 5% 5% 4% 5% 5% 5% $6.7 bn 6% $6.4 bn 4% $6.4 bn $ 11% 11% 11% 3% 6% 4% 11% 6% 3% 3% 2% 6% 10% 3% 11% 10% $5.2 bn 18% 16% 17% 3% 4% 3% 4% 18% 4%
Slide 33: Our Business Model and Brands
OUR BUSINESS MODEL AND BRANDS For personal use only DIRECT INTERMEDIATED ONLINE DIRECT DIRECT INTERMEDIATED INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE 2 3 4 D KINGDOM NEW ZEALAND 5 STRALIA ASIA UNITED AUS INTERMEDIATED INTERMEDIAT INSURANCE ED INSURANCE OTHER 1 ACTIVE PORTFOLIO MANA
Slide 34: The customer-created brand
For personal use only The customer-created brand UBS Ninth Annual Australian Financial Services Conference Jacki Johnson, Johnson CEO 23 June 2010
Slide 35: Agenda
Agenda For personal use only 1 Overview: organisation and market 1. Divider 2. 2 H How title Buzz The Th goes was B hereborn b Subtitle goes here 3. Bringing the brand to life 4. What the future holds 5. Q & A
Slide 36: About The Buzz
About The Buzz For personal use only • Australia Australia’s s first online community insurance brand • Simple, easy insurance – no jargon • Quick – 60 second quotes • Accessible A ibl 24/7 – multiple access routes, geared to self service • Community and ‘co- co- creation’ at the heart so we can con
Slide 37: About IAG
About IAG For personal use only Divider title goes here Subtitle goes here 1. RACV is via a distribution relationship and underwriting joint venture with RACV Limited 2. RACV has a 30% interest in The Buzz 3 49% ownership 3. hi off A AmGG IInsurance, which hi h iis partt off AmAssurance A A 4. 98% v
Slide 38: Market environment: fast-changing with many opportunities
Market environment: fast-changing with many opportunities For personal use only 1 Changing consumer b h i behaviour and dddemographic hi 2 Switching behaviour changing 3 Competitor activity 100 Reasons for switching insurers in NSW* 90 80 70 60 50 % 40 30 20 10 0 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1
Slide 39: Agenda
Agenda For personal use only 1 Overview: organisation and market 1. Divider 2. 2 H How titleBuzz The Th Bgoes here was born b Subtitle goes here 3. Bringing the brand to life 4. What the future holds 5. Q & A PAGE 6 <TITLE> <DATE>
Slide 40: Months, from conception to birth
12 months, from conception to birth For personal use only Started with a blank sheet of paper Divider title goes here Subtitle goes here May 2008 July 2008 Sept 2008 CEO and Customer Board review Dec 2008 Feb 2009 small team insight of strategy Board Board appointed sessions and plan update update 1
Slide 41: We started by listening to our customers
We started by listening to our customers . . . . Our customers helped us identify f the gaps and their needs. This directly For personal use only influenced our business model and brand strategy. Listening Use of to Multi- Customers Media Divider title goes here Subtitle goes here
Slide 42: Profiling allowed deeper understanding of customer needs
Profiling allowed us to gain a deeper understanding of their needs 25-35 yr olds Under 45 Up to 55 For personal use only (young and trendy) (young families) (mature families, maybe with older kids at home) What’s on • want to enjoy life • busy • kids are their mind? • internet savvy (co- • more ‘inw
Slide 43: We built our business model around our target customers' needs
We built our business model around our target customers’ needs For personal use only Pricing Sales Loyalty Customer & & Claims & Strategy Product Distribution Renewal Divider title goes here Subtitle goes here • On-line • Good referral lodgement & rate tracking • Low • Windscreen cancellations repai
Slide 44: We interpreted our business model through our customers' eyes
We interpreted our business model through our customers’ eyes Internet transactors and creators For personal use only Customers 25-54 year age groups, mid to high socio economic group Online insurance community connected through conversation Central access 24/7, flexible transparent products and pri
Slide 45: Technology enables us to meet our customers' needs
Technology enables us to meet our customers’ needs For personal use only Divider title goes Security here S btitl goes h Subtitle here Accessibility ess b y Reliability Speed Integration
Slide 46: We selected the brand name with all this in mind
We selected the brand name with all this in mind, plus more . . . Represent two way Represent essence For personal use only 1 conversation, of business opportunity energy People in the target Have available URL 2 demographic g p talk Divider title goesacross heremarkets about it Subtitle goes here S
Slide 47: Some key areas that define the brand
Some key areas that define the brand For personal use only The Buzz tone of voice: we’re friendly, smart, we get to the point in a helpful way (straight forward), we appreciate people are busy The Buzz language: we don’t speak in jargon, we use every day speak, simple clear (but not slang) and we sa
Slide 48: The most powerful brands are built from within
But the most powerful brands are built from within For personal use only • The Buzz team lives and breathes the brand • Our way of working is aligned to our values, values brand and the behaviours necessary for entrepreneurial start-ups • Divider title goes here Strong focus on innovation – plus gov
Slide 49: Our brand strategy brings all this together
Our brand strategy brings all this together For personal use only Platform Smarter, together Brand characteristics Intelligent Transparent Easy Divider title goes here Subtitle goes here Genuine Dynamic Tailored/flexible options Transparent & fair pricing Brand attributes Knowledge powered 24/7 acce
Slide 50: Agenda
Agenda For personal use only 1 Overview: organisation and market 1. Divider 2. 2 H How titleBuzz The Th Bgoes here was born b Subtitle goes here 3. Bringing the brand to life 4. What the future holds 5. Q & A PAGE 17
Slide 51: Connecting with target customers: traditional marketing
Connecting with our target customers: traditional marketing For personal use only Divider title goes here Subtitle goes here PAGE 18
Slide 52: Connecting with target customers: out and about
Connecting with our target customers: out and about For personal use only Divider title goes here Subtitle goes here PAGE 19
Slide 53: Connecting with target customers: social networks
Connecting with our target customers: social networks For personal use only Divider title goes here Subtitle goes here PAGE 20
Slide 54: Connecting with target customers: social networks
Connecting with our target customers: social networks For personal use only Divider title goes here Subtitle goes here PAGE 21
Slide 55: Connecting with target customers: in the community
Connecting with our target customers: in the community For personal use only PAGE 22
Slide 56: Agenda
Agenda For personal use only 1 Overview: organisation and market 1. Divider 2. 2 H How titleBuzz The Th Bgoes here was born b Subtitle goes here 3. Bringing the brand to life 4. What the future holds 5. Q & A PAGE 23 FST Conference March 2010
Slide 57: Home page redesign to accommodate two upcoming launches
Home page redesign to accommodate two upcoming launches For personal use only Customer loyalty Divider title goes here Subtitle goes here Home Insurance
Slide 58: Other priorities
Other priorities For personal use only • Brand awareness and driving the right traffic to the site • Customer engagement in ongoing developments • Underwriting and claims management discipline Divider title goes here Subtitle • Social goesstrategy media here • Respond to emerging technologies and co
Slide 59: Measuring success
Measuring success For personal use only • Lead indicators: • Traffic is in target demographic and relevant for time of purchase (l (low b bounce rate)) • Conversion rate – full policy to purchase • Customer Divider advocacy title goes–here referral rate and retention • Lowgoes Subtitle expense herer
Slide 60: Final thought
Final thought . . . For personal use only Divider title goes here Subtitle goes here The market place is not neatly organised - customers interact across channels, products, time of the day
Slide 61: Q&A
For personal use only Q&A
Insurance Australia Group — Investor Presentation (June 2010) on 6ix