Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — H1 2023 Earnings Presentation
25 slides from Insurance Australia's earnings presentation, Feb 13, 2023
Slide 1: Financial results: Half year ended 31 December 2022
This release has been authorised by the IAG Board Financial results Half year ended 31 December 2022 Nick Hawkins Managing Director and Chief Executive Officer Michelle McPherson Chief Financial Officer 1H23 Results | 13 February 2023
Slide 2: Important information
Important information This presentation contains general information current as at 13 February 2023 and is not a such statements. recommendation or advice in relation to any product or service offered by Insurance Australia Group Limited or its subsidiaries (IAG or the Group). It presents financial
Slide 3: Overview
Overview Nick Hawkins Managing Director and Chief Executive Officer 1H23 Results | 13 February 2023
Slide 4: 1H23 results overview
1H23 results overview GWP Reported margin Underlying margin 1 $7.1bn 8.5% 10.7% Strong rate-driven growth Prior period reserve strengthening, Increasing inflation impacts partially higher perils vs. allowance, credit offset by premium increases and spread benefit higher investment yield Net profit a
Slide 5: Divisional highlights
Divisional highlights Direct Insurance Intermediated Insurance New Zealand Australia (DIA) Australia (IIA) • Over 100k growth in customer numbers • ~11% average rate increases • Strong local currency GWP growth over 9% • Strong GWP growth (Motor 8%, Home ~13%) • Underlying GWP growth ~14% impacted b
Slide 6: Underlying margin impacted by claims inflation
Underlying margin impacted by claims inflation Underlying margin movement (1H22-1H23) • COVID-19 benefit in 1H22 comparative • Underlying claims ratio driven by inflationary impacts with a timing lag on earn-through of premium increases • Benefits from lower expense ratio and higher investment yield
Slide 7: Impact of inflation increased during 1H23
Impact of inflation increased during 1H23 2022 DIA inflation 2H22 1H23 13.0% 12.0% Progressive increase in 11.0% inflation, especially 10.0% towards the end of the 9.0% calendar year 8.0% 7.0% 6.0% Driven by supply chain 5.0% issues and an increase in 4.0% parts and labour costs *6 month rolling wit
Slide 8: 1H23 GWP growth
1H23 GWP growth 9.8% 8.0% 2.3% 6.8% 0.6% 2.8% 7.5% 6.2% 5.2% 1H22 2H22 1H23 Itemised impacts - COVID, ESL, FX and portfolio exits 8 1H23 Results | 13 February 2023
Slide 9: Actively increasing rates to reflect higher inflation
Actively increasing rates to reflect higher inflation 2022 DIA average rate increases* 2H22 1H23 13.0% 12.0% Average rate increases in 11.0% response to higher claims inflation and in 10.0% anticipation of higher 9.0% perils and reinsurance 8.0% costs 7.0% 6.0% 5.0% Further rate increases in 2H23 *A
Slide 10: Financials
Financials Michelle McPherson Chief Financial Officer 1H23 Results | 13 February 2023
Slide 11: Financial summary
1H22 1H23 Change GWP ($m) 6,570 7,061 7.5% NEP ($m) 3,963 4,113 3.8% Insurance profit1 ($m) 282 350 24.1% Underlying insurance margin (%) 15.1 10.7 440bps Financial Reported insurance margin (%) 7.1 8.5 140bps summary Net (loss)/profit after tax ($m) 173 468 170.5% Cash earnings ($m) 176 223 26.7% D
Slide 12: Strong rates driving GWP growth with some portfolio and FX impacts
Strong rates driving GWP growth with Strong rate rises to counter higher some portfolio and FX impacts inflation, perils expectation and reinsurance costs Group GWP growth ~2% volume growth in DIA, with strong personal lines growth in WA and Victoria Reported growth impacted by personal lines portfo
Slide 13: Inflation driving reserve strengthening in Australian short-tail personal lines
Inflation driving reserve strengthening in Short-tail reserve strengthening Australian short-tail personal lines • Higher inflation in motor and home across DIA and IIA Prior period reserve movements ($m) • Adverse development of prior period perils events Long-tail reserves • Net releases from CTP
Slide 14: Claims trend driven by higher inflation in home and motor
Claims trend driven by higher inflation in home and motor Higher average home and motor claims Reported loss ratio from inflationary and supply chain pressures LOSS RATIO 1H22 2H22 1H23 Underlying claims ratio 52.0% 54.5% 58.2% • Motor total losses Discount rate adjustment (1.3%) (5.9%) (1.3%) • Mot
Slide 15: Higher yields drive investment performance
Higher yields drive investment performance ~$12bn Investment Portfolio Technical reserves market impacts ~$7.2bn technical reserves invested in fixed interest & cash - Gain of $89m 3.7% • Driven by higher investment yield and 2.4% narrowing of credit spreads 1.2% 1.3% 1.1% 51 26 29 18 ~$5.0bn shareh
Slide 16: Managing expenses while spending to transform the business
Costs to transform Managing expenses while spending to $193m transform the +41.9% $136m business Gross operating costs $1,303m $1,228m $1,245m 1H22 1H23 Costs to maintain -5.8% +1.4% $1,167m -9.9% $1,052m 1H22 2H22 1H23 1H22 1H23 16 1H23 Results | 13 February 2023
Slide 17: Whole-of-account quota shares arrangements provide capital and reinsurance capacity
Whole-of-account quota shares arrangements provide capital and reinsurance capacity 32.5% Quota share arrangements as at 1 Jan 2023 01/01/2023 Renewal of quota share arrangements achieving 2.5% 30/06/2023 Expect to renew over coming months materially consistent financial outcomes 7.0% Renewed for 5
Slide 18: Auckland flooding results in increased FY23 perils expectation
Auckland flooding results in increased FY23 perils expectation Gross catastrophe reinsurance $m 10,000 $524m Main Catastrophe Program 1H23 perils $70m above allowance $1,145m $350m 500 Drop-down cover FY23 perils estimate FY23 aggregate cover Third and Fourth event cover 350 Increased from $909m ~$3
Slide 19: Strong capital position within target range on pro-forma basis
Strong capital position within target range on pro-forma basis Movement in CET1 ratio 19 1H23 Results | 13 February 2023
Slide 20: Value Proposition and Guidance
Value Proposition and Guidance Nick Hawkins Managing Director and Chief Executive Officer 1H23 Results | 13 February 2023
Slide 21: Increased GWP growth and improved 2H23 margin
Increased GWP FY23 guidance1 growth and GWP growth around 10% improved 2H23 Reported margin of around 10% implies 2H23 reported margin of 11-12% margin Margin impact 1H23 Reported Margin 8.5% o Prior period reserve strengthening ~120bps o Natural perils above allowance ~170bps o Credit spread benefi
Slide 22: Our value proposition
Our value proposition Medium-term margin and ROE targets Our strengths Our strategy Key value drivers Our aspirations • Leading brands • Grow with our customers • Customer growth • “Create a stronger, • Scale and reach • Build better businesses • Claims management more resilient IAG” • Superior cust
Slide 23: Investor Relations
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 60 090 739 923 Level 13, T
Slide 24: Appendix 1: FY23 Guidance and Outlook
Appendix 1: FY23 Guidance and Outlook IAG’s updated guidance for FY23 is based on the 1H23 financial results and the financial impact • An IIA insurance profit of at least $250m in FY24; of the Auckland flooding event, resulting in: • $400m in value from DIA claims and supply chain cost reductions o
Slide 25: Appendix 2: Focused on strategic execution
Appendix 2: Focused on strategic execution 25 1H23 Results | 13 February 2023
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