Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2005 Earnings Presentation
28 slides from Insurance Australia's earnings presentation, Feb 24, 2005
Slide 1: Financial results
Financial results Half-year ended 31 December 2004 Michael Hawker, Chief Executive Officer George Venardos, Chief Financial Officer 24 February 2005 enseeance shee . f “es NEMA SGIO cou & os Bag ce Good morning. Welcome to the Insurance Australia Group 1H05 results briefing. Copies of all the materi
Slide 2: Agenda
Agenda © IAG * Operating conditions & results Michael Hawker * Dividends * Segmental analysis George Venardos « Reducing risk in the business * ROE and operating outlook Michael Hawker * Conclusion & questions a4 A i? “me NERAA =SGIO \cou BY snstemance ineprance Australia Group Limiged Pstare aan eo
Slide 3: Momentum continues in 1H05
Momentum continues in 1H05 ° Net profit increased to $446m ¢ Strong underlying performance and robust trading conditions which underpinned — Revenue (NEP) growth of 6.8% since 1H04 — Insurance margin increase to 16.7%, with increases in each business segment e |nsurance earnings grew faster than pre
Slide 4: Sustained financial strength
Sustained financial strength * Annualised ROE for ordinary shareholders increased ~ Reported 27.8% (1H04: 18.4%) ~ Normalised 19.5% (1HO4: 14.5%) ~ Exceeds fong-term target of 1.5x WACC * Average ROE for the four and half years since listing ~ Reported 11.6% ~ Normalised 13.5% * Very strong capital
Slide 5: Interim dividend increased by 50%
Interim dividend increased by 50% @) IAG AHO 4HO2 HOS Hod THOS @ interim dividend oh EPS Continued improvement in interim dividends — supported by increased EPS ineprance Australia Group Limiged Pstare aan eo a Tooa28 scio ggig (cou = wen + The Group has increased dividends per share each year — mor
Slide 6: Contributions to profit before tax
Contributions to profit before tax Components of IAG EBITDA (excl OER 900 $792m $718m 800 706 600 $262m 506 400 306 $142m 9 200 $559m ASm {27} (24) (43) 2H03 4HO4 2HO04 HOS ‘@ lrwestment retum on shareholder funds Non insurance margin™ Nor recarring items pote et exmerae exounsas, ASW KE fe bee * In
Slide 7: Key insurance ratios
Key insurance ratios Expense ratio Loss ratio a Combined ratio insurance reargin {before tax} Longer expectation 9.42% Ee ee eee ee a4 A i? “me NERAA =SGIO \cou BY snstemance ineprance Australia Group Limiged Pstare aan eo a Tooa28 z * This slide shows the trend in the insurance margin and its compo
Slide 8: Shareholders' funds
Shareholders’ funds, Total investment income “Retums are annualised « The 1H05 technical reserves return of 4.05% (8.1% annualised) includes active return of 26 basis points « The 1H05 return on shareholders’ funds of 11.7% (23.4% annualised) includes active return of 29 basis points — Return reflec
Slide 9: Financial results overview
Financial results overview © IAG Half-year Half-year Half-year Financial results/ratios ended ended — ended De Jun-04 Net earned premium (A$m) $2912 = $2,954 insurance profit {AG$m} $344, $448. Sharehoiders' funds investment income (A$m) $204 $230. Profit before income tax & OE {(A$m)} 2) BaRe $668.
Slide 10: Delivering organic growth
Delivering organic growth * Gross written premium increased by 1.3% on 2H04 — Compares with 4.5% for the previous six months * Net earned premium increased by 5.4% on 2HO04 — Compares with 1.4% for the previous six months * Each segment delivered sales growth (ie volume}, which remains key to sustai
Slide 11: Premiums more affordable
Premiums more affordable © IAG Affordability of NRMA Car Insurance (NSW) In late 2004, NSW motor premiums averaged 58% of AWE CTP NSW AFFORDABILITY INDEX In late 2004, NSW CTP benchmark premium was 34% of AWE Proportion of AWE Combined, there has been a 12% drop relative to AWE + The detail on this
Slide 12: Claim satisfaction trends
Claim satisfaction trends motor and home (direct channel Customers and people positive © Das? bees be rs. Pe yar WO Dit ising mat ow IAG tnsijsas Engagement of our people TAG 2008 (45%) TAG 2004 (63%) Claims satisfaction improvements, reduced complaint levels and increased engagement of our people a
Slide 13: Ongoing focus delivering results
Ongoing focus delivering results © Sustained imprevement in margins All business segments contributing Wks Insurance margin {before tax} Sustained capital strength 205 4HOa 2r104 505 ineprance Australia Group Limiged ABA 89 290 739-923 + In summary, this period’s results are a testament to our decis
Slide 14: Segment analysis
Segment analysis ineorance ferare WEE a shee . f “es NEMA SGIO cou & os Bag ce enseeance Thanks Mike. Good morning.
Slide 15: Australian personal lines
Australian personal lines Half-year Half-year Australian Personal Lines ended ended Dec-03 Gross written premium Net premium revenue Underwriting profit Insurance profit Loss ratio Expense ratio Administration ratio Commission ratio Combined ratio Insurance margin (before tax) * Sustained margins su
Slide 16: Australian commercial lines
Australian commercial lines Half-year Half-year Half-year Australian Commercial Lines ended ended ended Dec-03 Dec- et premium revenue Underwriting profit Insurance profit Profit from fee based business Total commercial line resuit Insurance ratios Lass ratio Expense ratio Administration ratio Commi
Slide 17: Slide 17
Slide 18: Reducing risk in the business
Reducing risk in the business 18
Slide 19: Reducing risk in the business
Reducing risk in the business © IAG * Investment risk — Introduction of new classes, styles and managers — Surplus capital fund established * Improved reinsurance protections * MCR and contingent capital inaprance Australia Grou ABA 89 290 739-923 + The process of introducing greater diversification
Slide 20: Reinsurance protections increased
Reinsurance protections increased © IAG * Catastrophe event protection increased to $3.5bn from $3.0bn * Maximum event retention remains at $100m — Represents a reduction in volatility when measured against premium base — Retention for a second event is $75m * Reinsurer counterparty credit profile r
Slide 21: Group MCR coverage remains strong
Group MCR coverage remains strong © 2.50x § lnipact of RES on MGR. ~ 1.90x tmultiple Wf exchanged $ 2.00x ‘brings the MCR Io 247 2 al ss oe 2 Revised Target MCR g 150 Se 3 = & 4.00x = a 3 2 0.50x So 0.00x 2H03 THOS 204 THOS &4T1 Non-hybrid capitall@ Hybrid! T2 1% RES ineprance Australia Group Limige
Slide 22: Return on equity
Return on equity ineorance ferare WEE a alia shee . f “es NEMA SGIO cou & os Bag ce enseeance
Slide 23: Return on equity improved
Return on equity improved © Annualised return on equity 30.0% 28.0% 28.0% 24.0% 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 18.0% 8.0% 6.0% 4.0% 2.0% Average normalised 13.5% e sotat TLE (2.0%) (4.0%) FYOt FYo2 FYO3 Fyos +HOS ROE (Actual) attributable to ortinary shareholders BROE (Nonnalised) attrtetatie t
Slide 24: Outlook
Outlook ponte +, niin = SGtO enseeance emp s4 lia Group Limited 3 24
Slide 25: Outlook - drivers
Outlook - drivers * Profitability outlook influenced by a number of interacting factors « External — Good economic performance in Australia and New Zealand — Increasing competitive pressures — Reinsurance rates stable — Stable liability classes due to tort law reforms — Investment market performance
Slide 26: Outlook
Outlook * On balance — Now expect the FY05 insurance margin to be at least 15.0%, subject to no further major losses — NEP growth of 5-7% for FY05 is unchanged * Strategy remains unchanged — focus on optimising our franchise in Australia and New Zealand and seeking overseas investment opportunities
Slide 27: Share price performance since listing
Share price performance since listing TAG Share Priae Pertormance aor veR fe $ MLAS WORD EX AUS Indo mere este gg . fa “ME cacuny ingorance Australia Group: imite:t nema scio ggig \cGu Sis. ge w4 ABN 8) 090 780 926 ‘aa ” oe snstemance or 27
Slide 28: Questions
Questions ponte +, niin = SGtO enseeance emp s4 lia Group Limited 3 28
Insurance Australia Group — H1 2005 Earnings Presentation on 6ix