Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 FY2011 Earnings Presentation
21 slides from Insurance Australia's earnings presentation, Feb 24, 2011
Slide 1: Financial Results Half Year Ended 31 December 2010
FINANCIAL RESULTS For personal use only HALF YEAR ENDED 31 DECEMBER 2010 Mike Wilkins Managing Director and Chief Executive Officer Nick Hawkins Chief Financial Officer 24 February 2011 ABN 60 090 739 923
Slide 2: Group Results
1 For personal use only GROUP RESULTS Mike Wilkins Managing Director and Chief Executive Officer
Slide 3: The Half in Summary
THE HALF IN SUMMARY HOME MARKETS CONTINUE TO PERFORM WELL Insurance margin of 12.7% For personal use only • Underlying GWP growth of 3.2% • Insurance profit of $470m (1H10: $488m) • Net profit of $161m, after $150m UK intangibles impairment • Interim dividend of 9cps, fully franked (1H10: 8.5cps) St
Slide 4: 1H11 Insurance Margin
1H11 INSURANCE MARGIN AUSTRALASIAN IMPROVEMENT OFFSET BY UK For personal use only 640 620 600 22 580 42 560 540 145 520 13.4% 69 500 480 5 1 12.7% 460 440 420 400 380 360 340 488 470 320 300 280 260 240 220 200 1H10 Australia Direct Australia New Zealand United Kingdom Asia Corporate & Other 1H11 In
Slide 5: Divisional Performance
For personal use only 2 DIVISIONAL PERFORMANCE Mike Wilkins Managing Director and Chief Executive Officer
Slide 6: Divisional Results
DIVISIONAL RESULTS HOME MARKETS ARE PERFORMING WELL 1H11 GWP REGIONAL MIX For personal use only 1H10 1H11 Insurance Profit (A$m) and Margin (% ) A$m % A$m % Australia Direct 281 16.9 350 19.4 Australia Intermediated 112 10.2 154 14.3 New Zealand 68 15.0 90 19.8 Total Australia and New Zealand 461 14
Slide 7: Australia Direct
AUSTRALIA DIRECT PERFORMING WELL GWP (A$m) / Insurance Margin (%) For personal use only KEY POINTS 2,000 1,919 20.0% 1,874 19.5% • GWP growth of 7.9% 1,779 1,800 19.4% 19.0% – Encouraging volume gains 18.5% 1,600 • Increased insurance margin of 19.4% 18.0% 17.5% – Improved underwriting and cost disc
Slide 8: Australia Intermediated
AUSTRALIA INTERMEDIATED ONGOING IMPROVEMENT IN UNDERLYING PERFORMANCE For personal use only KEY POINTS GWP (A$m) / Insurance Margin (%) • GWP growth of 5.4% 1,177 1,200 1,117 1,147 16.0% – Difficult market conditions 14.0% 14.3% 12.0% – Rate increases vary by portfolio 1,000 10.0% – Retention remain
Slide 9: New Zealand
NEW ZEALAND INCREASED REPORTED MARGIN, AIDED BY REINSURANCE PROTECTIONS KEY POINTS For personal use only GWP (A$m) / Insurance Margin (%) 600 25.0% • GWP grew by 3% in local currency 500 472 489 472 – Flat reported GWP 20.0% 400 19.8% – Moderate rate increases offset by 15.0% reduced volumes from im
Slide 10: Asia
ASIA SBI GENERAL MOVING TO FULL LAUNCH IN 2H11 KEY POINTS For personal use only IAG ASIA – GWP POOL (A$) • Participation in regional annual GWP pool of 500 $420m • Thai business recorded strong GWP growth, 400 but margin impacted by flood events • Malaysia continues to perform well 300 • SBI General
Slide 11: United Kingdom
UNITED KINGDOM HIGHER THAN EXPECTED LOSS OWING TO BODILY INJURY CLAIM INFLATION KEY POINTS For personal use only 500 UK GWP • Higher than expected insurance loss of $121m 400 – Ongoing bodily injury claim inflation 300 – Non-private motor market more challenging than expected 200 406 306 – LAT expen
Slide 12: Capital, Investments and Dividends
3 For personal use only CAPITAL, INVESTMENTS AND DIVIDENDS Nick Hawkins Chief Financial Officer
Slide 13: Balance Sheet
BALANCE SHEET STRONG CAPITAL POSITION For personal use only MCR (x) MCR remains above benchmark MCR (x)/Debt: Total Tangible Capitalisation (%) • MCR of 1.81 times at 31 December 2010 2.20 35.8% 40.0% 36.0% 38.0% • Debt to total tangible capitalisation of 2.00 33.0% 36.0% 34.0% 33%, in line with 30–
Slide 14: Reinsurance
REINSURANCE SIGNIFICANT PROTECTION PROVIDED For personal use only • Significant reinsurance protections in 1H11 • Integrated programme of catastrophe cover on calendar year basis renewed from 1 January 2011: – Main cover from $250m up to $4.1bn – Three-year buy-down below $250m – First event MER of
Slide 15: Reserve Releases
RESERVE RELEASES LONG TERM EXPECTATION OF 0.5-1.0% OF NEP For personal use only • 1H11 reserve releases of 10% $103m (net of $18m UK 9% strengthening) 8% 7% • Majority sourced from central 6% estimate 5% • Significant sources in 1H11 4% were: 3% – CTP (Australia Direct) 2% – Workers’ comp and 1% pro
Slide 16: Investments
INVESTMENTS CONSERVATIVE MIX AND HIGH CREDIT QUALITY For personal use only INVESTMENT ASSET GROUP FIXED INTEREST & ALLOCATION – $11.8B CASH – $10.3B 3% 3% 13% Fixed Interest "AAA" and Cash 39% "AA" Growth "A" < "A" 55% 87% • 87% of total portfolio in fixed interest and cash • Growth assets have rise
Slide 17: Investment Returns
INVESTMENT RETURNS SOUND PERFORMANCE For personal use only $m 400 350 Technical reserve returns 300 250 • Lower returns in face of rising yields 200 150 • 100bps of return generated above risk 100 free rate 50 0 • Credit spread volatility has continued to 1H10 2H10 1H11 ease Investment income on tec
Slide 18: Dividend
DIVIDEND INCREASED INTERIM DIVIDEND For personal use only Dividend Cents 9.0 cps fully franked interim dividend 10 • Up from 8.5 cps in 1H10 8 • Represents 52% of cash earnings 6 9.0 4 8.5 • Policy remains to pay 50%–70% of cash 2 4.5 earnings for the full year 0 1H10 2H10 1H11 18
Slide 19: Outlook
For personal use only 4 OUTLOOK Mike Wilkins Managing Director and Chief Executive Officer
Slide 20: FY11 Outlook
FY11 OUTLOOK ONGOING STRONG PERFORMANCE FROM AUSTRALIA AND NEW ZEALAND For personal use only FY11 Insurance margin 8%–10% Underlying GWP growth 3%–5% Guidance for FY11 assumes: • Ongoing strong underlying performance from the Australian and New Zealand businesses • Second half loss from the UK opera
Slide 21: Business Model and Brands
BUSINESS MODEL AND BRANDS DIRECT INTERMEDIATED ONLINE DIRECT DIRECT INTERMEDIATED For personal use only INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE INSURANCE 2 3 4 UNITED KINGDOM NEW ZEALAND AUSTRALIA 5 ASIA INTERMEDIATED INTERMEDIATED INSURANCE INSURANCE OTHER 1 ACTIVE PORTFOLIO MANAGEMENT &
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