Helia Group Limited · ASX:HLI
Helia — Investor Presentation (December 2022)
24 slides from Helia's investor presentation, Dec 1, 2022
Slide 1: AASB 17 – Investor Briefing
AASB 17 – Investor Briefing 1 December 2022
Slide 2: Disclaimer
2 Disclaimer This presentation contains general information in summary form which is current as at the date of this presentation. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Repo
Slide 3: Agenda
3 Agenda 01 02 03 04 Overview AASB 17 Closing comments Glossary Pauline Blight-Johnston Michael Cant Pauline Blight-Johnston CEO & MD CFO CEO & MD Pages 4 - 6 Pages 7 - 19 Pages 20 - 21 Pages 22 - 23 AASB 17 Investor Briefing – produced by Helia Group Limited.
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director AASB 17 Investor Briefing – produced by Helia Group Limited.
Slide 5: New reporting but no change to underlying business economics
5 New reporting but no change to underlying business economics What is AASB 17? AASB 17 Insurance Contracts is a new accounting standard that replaces AASB 1023 General Insurance Contracts What does it do? AASB 17 establishes principles for recognition, measurement, presentation and disclosure of in
Slide 6: Recap – 3Q22 market update
6 Recap – 3Q22 market update Premium Claims Investment Strategic revenue incurred portfolio momentum FY22 NEP guidance top Investment income Strategic partnership with of expected range of Continue to be very low impacted by movements Household Capital $375m to $435m in bond rates NEP remains high d
Slide 7: AASB 17
AASB 17 Michael Cant Chief Financial Officer AASB 17 Investor Briefing – produced by Helia Group Limited.
Slide 8: Key AASB 17 impacts
8 Key AASB 17 impacts Balance Sheet Income Statement Regulatory Capital • Liability for Remaining • Insurance Revenue replaces • APRA is updating regulatory Coverage (LRC) replaces Earned Premium capital requirements to align Unearned Premium Liability with new accounting (UPL) • Insurance Revenue i
Slide 9: Key AASB 17 components – Contractual Service Margin
9 Key AASB 17 components – Contractual Service Margin CSM on New Business CSM movement 1 CSM CSM from recognised Discount new this period Contractual Service unwind business Margin (CSM) PV of Risk adjustment CSM Premium CSM (unearned) (unearned) from in- from in- force book PV of Claims, force book
Slide 10: AASB 1023 vs AASB 17 Balance Sheet
10 AASB 1023 vs AASB 17 Balance Sheet AASB 1023 AASB 17 Financial Assets Financial Assets No separate DAC asset – implicit in Liability for Remaining Coverage (LRC) Deferred Acquisition Costs (DAC) Deferred Tax Asset (DTA) Deferred Tax Asset (DTA) Total Assets Total Assets Outstanding Claims Liabili
Slide 11: AASB 1023 vs AASB 17 Balance Sheet – conceptual changes
11 AASB 1023 vs AASB 17 Balance Sheet – conceptual changes AASB 1023 AASB 17 Net Assets Net Assets Total Assets Liability for Unearned Premium Remaining Liability (UPL) Coverage (LRC) Outstanding Claims Liability for Incurred Claims (LIC) Other Liabilities Other Liabilities • Treatment of assets lar
Slide 12: Key AASB 17 components – Liability for Remaining Coverage
12 Key AASB 17 components – Liability for Remaining Coverage AASB 1023 Net AASB 17 Liability Unearned Premium for Remaining Liability Coverage Future embedded CSM CSM Future profit Embedded Profitability Risk margin Risk adjustment Risk margin Risk adjustment PVofofClaims, PV Claims, PV PV of of Cla
Slide 13: Future profit (CSM) by cohort is explicit in AASB 17
13 Future profit (CSM) by cohort is explicit in AASB 17 Future embedded profit (AASB 1023 basis) and future CSM (AASB 17 basis) by book year 1 2009 and prior 2010 - 2014 2015 - 2019 2020 - 2022 Total Future embedded profit CSM • Recent years should have the largest “stock” of unrecognised CSM • Rece
Slide 14: AASB 1023 vs AASB 17 Income Statement
14 AASB 1023 vs AASB 17 Income Statement AASB 1023 AASB 17 Net earned premium replaced by insurance revenue, which comprises: Earned premium Insurance revenue - an allowance for expected claims incurred; expenses; and amortization of acquisition costs Net claims incurred Insurance service expense -
Slide 15: Key AASB 17 profit components - Insurance Service Result
15 Key AASB 17 profit components - Insurance Service Result Insurance service result 1 Contractual Service Margin (CSM) recognised this period Risk adjustment recognised Experience variations • CSM release (and release of risk adjustment) is a material component of profit over time • Experience vari
Slide 16: AASB 1023 vs AASB 17 timing of Insurance Revenue recognition
16 AASB 1023 vs AASB 17 timing of Insurance Revenue recognition Insurance Revenue versus Earned Premium AASB 1023 AASB 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years since underwritten • AASB 1023 profile largely dependent on earnings curve, reflecting the incidence of risk for the whole portfolio • A
Slide 17: Reduced volatility from movements in interest rates
17 Reduced volatility from movements in interest rates AASB 1023 AASB 17 • Investment assets are marked-to-market with • Impact of changing interest rates on the value of unrealised gains or losses recognised in the income insurance liabilities forms part of the insurance statement finance expense •
Slide 18: Capital requirements expected to be largely unchanged
18 Capital requirements expected to be largely unchanged Composition of Regulatory Capital AASB 1023 AASB 17 Technical surplus Technical surplus Net Assets Net Assets Prescribed Capital Amount (PCA) Tier 2 Capital Tier 2 Capital • APRA is currently updating capital standards to align with new accoun
Slide 19: Summary of AASB 17 impacts and timeline
19 Summary of AASB 17 impacts and timeline Balance Sheet Income Statement Regulatory Capital • Liability for Remaining • Timing of revenue recognition • APRA is updating regulatory Coverage (LRC) reflects explicit is different (later) capital requirements to align allowance for future unearned with
Slide 20: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director AASB 17 Investor Briefing – produced by Helia Group Limited.
Slide 21: New reporting but no change to underlying business economics
21 New reporting but no change to underlying business economics Financial Results & Returns • Lifetime profits unchanged • NPAT of similar magnitude and less volatile • Net Assets expected to be lower than AASB 1023 basis • Return on equity expected to be higher and WACC remains unchanged Capital Ma
Slide 22: Glossary
Glossary AASB 17 Investor Briefing – produced by Helia Group Limited.
Slide 23: Glossary
23 Glossary AASB 17 Australian Accounting Standards Board AASB 17 Insurance Contracts establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. AASB 1023 Australian Accounting Standard Board AASB 1023 General Insurance Contracts. CSM (Contrac
Slide 24: 1 December 2022
Investor materials can be found at: Helia.com.au For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Head of Investor Relations D: +61 499 088 640 E: investorrelations@helia.com.au The release of this announcement was authorised by the Board. 1 Dece