Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — Shareholder Meeting (November 2002)
33 slides from Insurance Australia's shareholder meeting presentation, Nov 13, 2002
Slide 1: 2002 Annual General Meeting CEO Presentation
2002 Annual General Meeting CEO Presentation 13 November 2002 Insurance Australia Group Limited ABN 60 090 739 923 1
Slide 2: Year in review
Year in review Insurance Australia Group Limited ABN 60 090 739 923 2
Slide 3: Momentous events in the insurance industry
Momentous events in the insurance industry • Claims: – World Trade Center (“S11”) – Bushfires – Storms • Investment markets: – Negative equity returns (worst in 14 years) – Low interest rates • Negative sentiment towards the insurance industry: – HIH demise – Medical indemnity – Public liability Ins
Slide 4: A decade of underwriting losses in Australia
A decade of underwriting losses in Australia Underwriting result 0 (500) ? (1,000) A$m (1,500) (2,000) (2,500) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: APRA Statistics: Total private sector underwriting results. Insurance Australia Group Limited ABN 60 090 739 923 4 •The ten ye
Slide 5: Insured catastrophes – WTC may be worst ever
Insured catastrophes – WTC may be worst ever >$50bn? 45.0 40.0 35.0 1994 30.0 AUD$bn 25.0 20.0 15.0 1992 1995 1996 10.0 1998 1999 5.0 1991 2001 Wind, hail & flooding, US 0.0 Winter Storm "Anatol", Western/Northern Europe Winter Storm "Lother", Western Europe Tropical Storm "Alison", rain, floods, US
Slide 6: Investment markets - worst performance in a decade
Investment markets - worst performance in a decade ASX MSCI Aust Bonds 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Financial Year Source: 1. ASX is the S&P ASX 200 Accumulation Index. Up until 1 April 2000 the ASX All Ordinaries Accu
Slide 7: Insurance Australia's performance
Insurance Australia’s performance Insurance Australia Group Limited ABN 60 090 739 923 7
Slide 8: Record performance from underlying business
Record performance from underlying business • Net earned premiums increased by 15% to $3,195 million • Underwriting profit of $142 million • Expense ratio improved from 20.3% to 19.7% • Combined ratio improved by over 5% to 95.6% • Insurance margin rose from 7.6% to 8.7% • Insurance profit rose by 3
Slide 9: Diversified Gross Written Premium by product
Diversified Gross Written Premium by product $ 1, 7 16 $ 1, 7 7 2 m $ 2 , 12 3 m $ 2 ,5 5 4 m $ 3 , 110 m $ 3 ,5 5 2 m 4% 4% 17 % 19 % 5% 3% 9% 6% 2% 2 3% 5% 3% 18 % 2 8% 17 % 4% 26 % 30 % 2% 16 % 2% 1% 1% 16 % 17 % 17 % 47% 49 % 5 1% 56 % 5 2% 50 % FY97 F Y9 8 FY99 F Y0 0 F Y01 F Y0 2 M o to r Ho m
Slide 10: Improved insurance ratios
Improved insurance ratios Expense Ra tio Los s R atio 25.0% 90.0% 85.0% 22.5% 80.0% 23.9% 85.9% 20.0% 75.0% 83.8% 80.5% 21.6% 75.9% 20.3% 70.0% 19.7% 17.5% 65.0% 15.0% 60.0% FY99 FY00 FY01 FY 02 F Y99 FY00 F Y01 FY02 Combined Ra tio Ins ura nc e Ma rgin ( be fore t ax) 110.0% 10.0% 105.0% 7.5% 107.7
Slide 11: Achieved underwriting profit
Achieved underwriting profit Underwriting Result ($m) 200 100 0 (100) (200) (300) (400) FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 Insurance Australia Group Limited ABN 60 090 739 923 11 We have delivered our first full year underwriting profit and the third consecutive half year with underwriting prof
Slide 12: Improved earnings growth
Improved earnings growth Actual and Normalised Earnings 500 400 300 440 A$m 200 296.4 318 292 253.1 191 100 174 -25 138 143 74.9 0 FY98 FY99 FY00 FY01 FY02 -100 Financial year ended Reported Earnings Normalised earnings (based on pre-tax investment returns of 8% on TR and 11.5% on SHF) Normalised ea
Slide 13: Remain strongly capitalised
Remain strongly capitalised • Strong MCR multiple in the range of 1.35 to 1.65 • 90% probability of sufficiency reserving policy • Strengthened reinsurance programme • Restructured investment holdings • Reduced cost of capital • Very strong insurer financial strength rating of ‘AA’/stable outlook* f
Slide 14: Full year dividend increased
Full year dividend increased • Reflection of strong performance • Normalised earnings up 51% to $440m using the historic assumptions • Normalised earnings up 9% to $318m using the new investment assumptions • Final dividend of 6 cents per share, fully franked (paid 21 October 2002) • Total dividend
Slide 15: Performance to September 2002
Performance to 30 September 2002 Target YTD September Scorecard GWP Growth 5%-9% exceeded Combined Ratio: Group target Sub 100% exceeded Short-tail target 96-98% exceeded Long-tail target 105-110% exceeded • Insurance margin is above 10% reflecting strong underlying business performance • The Group’
Slide 16: Where to from here?
Where to from here? Insurance Australia Group Limited ABN 60 090 739 923 16
Slide 17: Strategic direction – 5 year financial aspirations
Strategic direction – 5 year financial aspirations Reinvigorate Goals customer focus Core operations Top quartile total s’holder return Extend scale in gen. insurance Deliver earnings ROE 13 – 15% Leverage core Double GWP by capabilities Build capability FY 2007 Risk Maintain combined management Inv
Slide 18: CGU/NZI acquisition - consistent with stated strategy
CGU/NZI acquisition - consistent with stated strategy Acquisition Strategy Scorecard Extending scale and diversity in general insurance 4 Leveraging core capabilities in underwriting and claims 4 Improving risk - Diversification of geography, product and distribution 4 channels Delivering high quali
Slide 19: Delivers new brands
Delivers new brands GWP A$1,571m Products Home, motor, commercial, workers compensation, public liability Geography Australia - All states GWP NZ$357m (A$290m) Products Commercial products and personal lines Geography New Zealand GWP A$116m Products Consumer credit and motor vehicle related products
Slide 20: Delivers product diversification
Delivers product diversification Gross Written Premium By Business $5.6bn 4% 4% 2% 11% $3.6bn 4% $3.1bn 18% 4% $2.6bn 4% 17% $2.1bn 3% $1.8bn 19% 5% 20% $1.7bn 6% 9% 2% 23% 5% 18% 28% 3% 17% 26% 30% 2% 16% 4% 1% 1% 16% 2% 17% 17% 37% 49% 47% 51% 56% 52% 50% FY97 FY98 FY99 FY00 FY01 FY02 FY02* IAG IA
Slide 21: Delivers complementary distribution channels
Delivers complementary distribution channels • IAG is predominantly a direct insurer, CGU/NZI improves the balance between distribution channels Distribution of IAG business by source Distribution of CGU/NZI business by source Institutions Direct 2% Distribution of combined IAG & 10% Broker Broker C
Slide 22: Delivers geographic diversification
Delivers geographic diversification NT GWP $9m IAG 13% QLD WA IAG&CGU 13% GWP $345m GWP $434m IAG 3% IAG 19% IAG&CGU 15% IAG&CGU 29% GWP IAG SA $410m 21% IAG&CGU 51% GWP $2,525m NSW/ACT IAG IAG&CGU 24% 29% GWP $1,081m IAG 17% IAG&CGU 34% VIC GWP $80m Source: IAG 10% (1) APRA December 2001. (2) CGU f
Slide 23: Delivers geographic diversification
Delivers geographic diversification Gross written premium outside NSW/ACT 60% 55% 50% Group target 50% % non NSW/ACT 40% 42% 40% 34% 30% 20% 21% 20% 10% 12% 11% 8% 0% FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 IAG & CGU/NZI IAG Note: Combined business based on 12 months to 30 June 2002 for IAG and 12 m
Slide 24: Industry premium
Industry premium Australian General Insurance New Zealand General Insurance (A$bn) (NZ$m) 6.0 1,000 Gross pr em ium revenue A$bn 861 4.8 900 Gross written premium NZ$m 5.0 800 4.0 700 600 3.0 3.1 472 500 2.3 397 1.9 400 2.0 1.7 464 1.7 300 186 185 1.0 200 100 0.0 0 IAG RSA SUN CGU Allianz IAG NZ RSA
Slide 25: Synergies – Insurance Australia the natural owner
Synergies – Insurance Australia the natural owner • Overall synergy benefits expected to be $160 million pre-tax per annum • Generate synergies through complementary operations – Merge IAG’s commercial operations into CGU/NZI – Merge CGU/NZI personal lines into IAG • No revenue synergies have been i
Slide 26: Fair price
Fair price • Discount to annual GWP for combined CGU/NZI of $2bn* • Within NTA range of 1.1 - 3.4 for transactions in past 3 years • Synergy benefits conservative • Tangible asset backing is a higher percentage of price paid than recent transactions *GGU and NZI GWP Insurance for year Australia ende
Slide 27: Acquisition update
Acquisition update • Funding and Share Purchase Plan • Regulatory approvals • Integration timetable Insurance Australia Group Limited ABN 60 090 739 923 27 The Share Purchase Plan is scheduled to close on 21 November 2002. By now, eligible ordinary shareholders registered on 24 October 2002 will hav
Slide 28: Some other initiatives
Some other initiatives Insurance Australia Group Limited ABN 60 090 739 923 28
Slide 29: Initiatives
Initiatives • Customers – Getting it Right, “Help” brand campaign • People • Risk management • Advocacy position – risk management for the community- share information we have gathered during our 75 year history, creating a safer community environment • Sponsorship program – crime prevention, injury
Slide 30: Share price performance
Share price performance Insurance Australia Group Limited ABN 60 090 739 923 30
Slide 31: IAG share price relative to market performance
IAG share price relative to market performance 130.0 IAG share price index 94.2 120.0 110.0 100.0 90.0 S&P/ASX200 80.0 index 91.1 70.0 MSCI index 58.6 60.0 50.0 08/08/2000 08/09/2000 08/10/2000 08/11/2000 08/12/2000 08/01/2001 08/02/2001 08/03/2001 08/04/2001 08/05/2001 08/06/2001 08/07/2001 08/08/2
Slide 32: IAG share price relative to insurance industry performance
IAG share price relative to insurance industry performance 130.0 120.0 110.0 100.0 IAG Share price index 94.2 90.0 80.0 S&P/ASX200 70.0 Insurance Index 78.2 60.0 MSCI Insurance index 60.5 50.0 08/08/2000 08/09/2000 08/10/2000 08/11/2000 08/12/2000 08/01/2001 08/02/2001 08/03/2001 08/04/2001 08/05/20
Slide 33: Proposed:
Proposed: Insurance Australia Group Limited ABN 60 090 739 923 33 33
Insurance Australia Group — Shareholder Meeting (November 2002) on 6ix