Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 FY2006 Earnings Presentation
29 slides from Insurance Australia's earnings presentation, Feb 23, 2006
Slide 1: Financial results Half year ended 31 December 2005
Financial results Half year ended 31 December 2005 Michael Hawker, Chief Executive Officer George Venardos, Chief Financial Officer 23.February 2006 Insurance Australia Grows Limited ABN 60 030 739.928 nama scio ggic | RU ANSE Good morning. Welcome to the Insurance Australia Group results briefing o
Slide 2: Agenda
a ferenct? Agenda Results and operating conditions Dividends Capital position International expansion Changes in basis of reporting Segmental analysis Capital — Reinsurance & MCR Outlook Conclusion & questions scio ggig \cau Riss IAG Michael Hawker George Venardos Michael Hawker All amounts for HOH
Slide 3: Michael Hawker
VAG Michael Hawker . ra . BE cree Insurance Australia Group Limited nRwis. scio geig (cou A Bey we ABN 60090 738928 RU ANSE
Slide 4: Record interim profit and dividend with capital return
Record interim profit and dividend with capital return « Net profit to holders of ordinary shares increased to $461m — Aracord half-year result ~- increased by 2% relative to 1H05 and 40.5% on 2HOS « Continuing to generate strong margins coupled with record returns from the equity markets « Insuranc
Slide 5: Financial results overview
Financial results overview Financial Results/Ratios Haif-year Half-year Half-year ended ended Dec 04 Jun 05 NEP (A$m) cs 3,085 Profit attributable to hofders of ordinary shares (A$m) e So BAet Reported ROE % {Average Equity} to holders on ordinary equity pa : 26.4% Normalised ROE % (Average Equity)
Slide 6: Leading market shares retained
Leading market shares retained © IAG ¥ie Sept-04 = Y/e Sept-05 Australian Premiums 3m om Growth Bigg industry gross premium revenue 22,809 22,701 ~0.5% iAG gross written premium §,594 5,637 6.8% 1AG share of the market 24.5% 24.8% 0.3% Industry data per APRA Quarterly Statistics. excluding inwards r
Slide 7: Trend in customer complaints
‘iistornan com hse sone ts el Trend in customer complaints {direct personal lines portfolio} aiass ais ames aes Retention rates Srand health (Retalt brands) Retyavan ston) MSI 9, OF ORE Lae“ All amounts for 1HO8 & subsequent porfads eastaled under AIFRS Ki Insurance Ausiratia Group Limited SBN BONSE
Slide 8: Consistent earnings contribution from insurance business
Consistent earnings contribution from y insurance business a Auge Geo Components of pre-tax profit (excl minority interests} 2HO4 HOS 2H05 THOS B Insurance result Et lnvestment return on shareholder fends & Non-insurance margi” 1 Non-recurting items “ Non-insurance margin includes net corporate expe
Slide 9: Stability of key insurance ratios
Stability of key insurance ratios Expense ratio Loss ratio AG Linke Oakey married Sas Insurance margin {before tax} hid ea an $6 ae sa aes e846 em Cavite a HN Cates tr Notes: 1 ‘Only 1HOS and subsequent periods have been restated for AIFRS: and 2 The immunised combined ratio is determined by assumin
Slide 10: Increased investment income
Increased investment income Portfolio income {pre-tax} and inct. derivatives Technical reserves ges 8.1% FEE Shareholders’ funds i 295) 23.4% 23.2% — Total investment income 3 42.4% e “537: 10.8% * Technical reserves return of 5.6% ~ Includes active return of 26 bpts, primarily frorn the equity over
Slide 11: Reported ROE enhanced by equity markets — normalised ROE sustained
Reported ROE enhanced by equity markets — normalised ROE sustained Annualised Return on Equity 30%, 26% 20% 18% 10% 5% O% FYO3 FYo4 FYOS 1H08 v4 ROE (Actual) attributable to holders of ordinary shares B ROE (Normatised) attributable to holders of ordinary shares « Equity market returns delivered fur
Slide 12: Double digit dividend growth 12.5%
Double digit dividend growth 12.5% @) IAG Dividends per share 22.0 Fyot eva FyO3 FOF FYOS. THOS Wa brosinsaivisend ag Finstalividend Ail earnings pre-goodwillf amortisation and post RPS dividends * Dividends for 1HO6 represent: — 47% of reported earnings — 68% of normalised earnings * Since listing,
Slide 13: Increased regulatory capital coverage
Increased regulatory capital coverage © 3.00% 5 2.50 4 2.00% 4 4.50% 4 4.00% 4 MCR Multiple (times) 0.50% 4 0.00x + 20-Jun-03 30-Jun-04 30-Jun-05 31-Dec-05 @ 71 Non-hybrid capital wii hybrid pg 72 GRES « The Group’s capital, expressed as an MCR multiple, is 2.04 times « The excess above 1.55x MCR is
Slide 14: Capital return
Capital return « Surplus capital of approximately $870m at 1H06, before paying the interim dividend on ordinary shares of $215m « Continuing philosophy of returning surplus capital to shareholders — History of buy-backs (three in five years) « Surplus capital being held for pending Asian investments
Slide 15: Acquiring stakes in profitable Asian insurers
Acquiring stakes in profitable Asian insurers with total GWP of over $3bn IAG insurance %© Seathet ni . Est. total industry Gwe" growth pa Bak MiNW.CDIG-COM.En. $2,628m 14% NWA 936m 14% aac ie $96m 11% om $275m 10% $3,034m Notes: 1) Estimated GWP based on local accounting policies Fa te All gmounts
Slide 16: IAG's initial equity interest equates to over $800m of GWP
IAG’s initial equity interest equates to over © $800m of GWP — 12.7% growth 4 Estimated ‘Current equity: IAG share'ot Transactions as’ Bun ALGWP: Share GWE: ‘percentage: of $m $m 1AG:GWP. Finalised transactions: IAG Thaitand (NZI) R 106.0 Safety Insurance 96 38.3 37 AmAssurance 275 30.0 a3 Estinated
Slide 17: George Venardos
VAG George Venardos . ra . BE cree Insurance Australia Group Limited nRwis. scio geig (cou A Bey we ABN 60090 738928 RU ANSE
Slide 18: Changes in basis of reporting
Changes in basis of reporting © IAG « Required to report under Australian equivalents of International Financial Reporting Standards (AIFRS) for FYO6 « Allinformation relating to FYO5 has been restated ~ Earlier periods not being restated as information not readily available « Reconciliations in fin
Slide 19: Australian Personal Lines
Australian Personal Lines Half-year Half-year Australian Personal Lines ended Gross written premium Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense Underwriting profit Investment income on technical reserves insurance profi insu
Slide 20: CTP affordability and AWE inflation
CTP affordability and AWE inflation ©) IAG O% a a a — EEL PEELE SPS Ho So OS HSLES SLES SL TP SLERS Annual increase In NSW AWE [-—atty increase annualised —=— Annuat increase to quarter ] * Measured using the ‘Sydney best metro’ rate over five years - Premium up by 1.6% - NSW AWE up by 28.4% ~ Annua
Slide 21: Australian Commercial Lines
Australian Commercial Lines Haif-year Half-year Half-yeai Australian Commercial Lines ended ended Gross written premium Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense Underwriting profit investment income on technical reserves
Slide 22: International businesses
International businesses Half-year Half-year Half-yeau International operations ended ended ended] dun 05 Dec 05) A isl Gross written premium Gross earned premium Reinsurance expense (34) : Net premium revenue 462. : Net claims expense (298), Commission expense } (44), Underwriting expense ee (70}%
Slide 23: A record performance from IAG NZ
A record performance from IAG NZ © IAG Half-year Half-year Half-yea New Zealand Operations ended Gross written premium Gross earned premium Reinsurance expense Net premium revenue Net claims expense Commission expense Underwriting expense re Underwriting profit investment income on technical reserve
Slide 24: Reinsurance
Reinsurance « Catastrophe event limit cover purchased was retained at $3.5bn « Maximum event retention increased to $200m from $100m — Cost of cover in the market too expensive relative to the capital the Group considers necessary to back it — Moves the exposure to a little over 3% of NEP for one ev
Slide 25: Capital base and MCR multiple
Paid-up ordinary shares Hybrid equity Reserves Retained earnings Excess technical provisions {net of tax) Less: deductions"? Tier 2 capital Subordinated debt Capital base Minitaum capital requirements {MCR} Australian general insurance businesses international insurance businesses MCR™ : BO Se f MCR
Slide 26: Outlook
Outlook nama scio gic RU ANSE VAG Insurance Australia Grows Limited ABN 60 030 739.928 I'd now like to hand back to Michael Hawker to discuss our outlook.
Slide 27: Outlook
Outlook « During 2H06, the Group expects - To deliver an insurance margin in the range of 14 — 16% for FY06 - Maintain A & NZ market shares, provided pricing is at sustainable levels ~ Progress completing the international investments already announced and pursue other opportunities in accordance wi
Slide 28: Share price performance since listing
Share price performance since listing © IAG Relative Share Price Performance 200 Shave privw S844 20 Fab 2005 200 150 100 Paci St Ri is ferenct? ORLOEK MUS eHleA RAS ESRF 2 ISSURARIE INDEX ee SAMAK maser MMMIGC ewe Ail amounts for THO & subsequent pastas restated under IFRS ve PSAs | wa Insuranie Au
Slide 29: Questions
VAG Questions Insurance Australia Grows Limited ABN 60 030 739.928 nama scio gic RU ANSE
Insurance Australia Group — H1 FY2006 Earnings Presentation on 6ix