All figures in US$ unless otherwise stated
Targeted Simplified and Cell Brilliant Basics Pricing Delivered 2018 in Strong balance more focused de-risking reviews accelerating momentum line with targets sheet Portfolio Activities Strengthened Group-wide 2018 average rate Combined 2018 buyback simplified improving performance mgmt standardisation increase of 5.0% 1 operating ratio commitment consistency and accountability 95.7% 2 complete Reduced Driving consistency Global underwriting Premium rate ~3% improvement in PCA towards top Exited loss making catastrophe of performance and standards in place increases in all attritional ratio 3 end of range portfolios at a exposure earnings quality regions premium to book Global claims ~2% improvement in S&P capital Improved property Helping achieve standards in place Strong momentum CAY (ex cat) remains above 3 divisions going ‘AA’ level hazard profile above market rate in 2H forward increases Step change in ~4% GWP growth 4 pricing capability 1. Excludes CTP 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims 3. Excludes Crop and LMI 4. Continuing operations and adjusted constant currency basis
GWP ($M) Premium rate increases Attritional claims ratio 2 5.5% 54.3% 13,657 4.6% 51.3% 13,328 49.1% 2.7% 1.0% FY17 FY18 1H17 2H17 1H18 2H18 2H17 1H18 2H18 COR 3 Cash RoE Dividend per share (A¢) 103.9% 8.0% 50.0 95.7% 28.0 Final 26.0 4.0 22.0 22.0 Interim FY17 FY18 FY17 FY18 FY17 FY18 (1.4%) 1. Continuing operations and adjusted basis 2. Excludes Crop and LMI 3. Excludes the impact of changes in risk-free rates used to discount net outstanding claims
Positive HoH trend Group-wide 1 … North America Europe 5.5% 4.1% 4.8% 4.4% 4.6% 3.1% 3.1% 4.7% 4.9% 2.7% 0.9% 0.7% (0.2)% (1.1)% 1.0% 1H17 FY17 1H18 FY18 1H17 FY17 1H18 FY18 79% 78% 79% 77% 82% 83% 84% 83% 1H17 2H17 1H18 2H18 Australia & New Zealand 1 Asia Pacific 7.3% 1.0% 2018 +5.0% 1 (FY17 +1.8% 1 ) • 6.6% 0.3% 6.1% 5.0% • Targeted rate increases in all markets (2.3)% • Group-wide retention stable (3.9)% 1H17 FY17 1H18 FY18 1H17 FY17 1H18 FY18 83% 85% 84% 84% 81% 79% 67% 69% 12mth premium rate change 12mth premium retention 1. Group and Australia & New Zealand premium rate changes exclude CTP
Australia & New Zealand 2 Europe 66.0% 54.0% 65.2% 64.0% 52.0% 62.0% 61.1% 61.0% 50.0% 60.1% 48.9% 60.0% 59.1% 48.0% 47.1% 58.0% 46.0% 56.0% 46.6% 56.2% 54.0% 44.0% 1H16 2H16 1H17 2H17 1H18 2H18 1H16 2H16 1H17 2H17 1H18 2H18 North America 3 Asia Pacific 58.0% 60.0% 56.5% 57.7% 58.0% 56.0% 56.0% 54.0% 54.6% 54.0% 52.1% 52.0% 52.0% 50.0% 50.0% 48.0% 48.0% 48.7% 47.3% 46.0% 46.0% 1H16 2H16 1H17 2H17 1H18 2H18 1H16 2H16 1H17 2H17 1H18 2H18 Cell review performance management undertaken 1. Adjusted basis as presented in annual and half year reports 2. Excludes LMI 3. Excludes Crop
Significant reduction in poorly performing segments Property hazard grade improving (30)% 3.2% 477 3.1% 334 GWP 1 ($M) 3.0% 2.9% 2.8% Dec’16 Jun’17 Dec’17 Jun’18 Dec’18 FY17 FY18 % of AP 64% 53% HG Index (Rolling 12mths) Remediation actions improving results 2 Improving rate momentum 121.1% 2.0% 0.0% 109.1% 108.5% (2.0)% 99.5% (4.0)% 96.2% 95.0% (6.0)% Dec’16 Jun’17 Dec’17 Jun’18 Dec’18 1H16 2H16 1H17 2H17 1H18 2H18 Renewal premium rates 1. Gross written premium of portfolios subject to Profit Improvement Plans 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims
(15)% +3% +5% +6% 13,657 13,328 4% growth FY17 FX NSW CTP Europe Australia & New North America Asia Pacific FY18 ($M) (scheme reform) Zealand ($M) 1. Continuing operations and adjusted constant currency basis
2018 Activities 2019 Priorities • Cell reviews - increased sophistication and granularity Over 500 cell reviews completed • Continue focus on addressing underperforming cells Attritional ratio improvement in all divisions • Portfolio and capital optimisation Rate adequacy improvement in all divisions Cell reviews • Selective growth in high performing cells Focus on addressing underperforming cells • Detailed underwriting guides for priority portfolios Global underwriting standards • Optimisation of aggregate management Global claims standards created • Led by Group Chief Underwriting Office Global claims upgrades Brilliant Basics • More digitally enabled customer claims journeys
Cash ROE increasing 5 Adjusted operating results FY17 1,2,3 FY18 3,4 8.0% GWP $M 13,328 13,657 NEP $M 11,768 11,830 Net claims ratio % 71.5 64.0 Net commission ratio % (1.4)% 16.5 16.4 FY17 FY18 Expense ratio % 15.3 15.2 COR % 103.3 95.6 Total return to shareholders A$1Bn COR (ex discount rate) % 103.9 95.7 A$1.0Bn Net investment yield % 3.1 2.2 A$0.5Bn Financing & other costs $M (302) (305) Amortisation and impairment of intangibles $M (40) (80) Cash net (loss) profit after tax $M FY17 FY18 (262) 715 Ordinary dividend Share buyback 1. Excludes transaction to reinsure US liabilities Excludes the one-off impact on the Group’s underwriting result due to the Ogden decision in the UK 2. 3. Continuing operations basis Excludes transaction to reinsure Hong Kong construction workers’ compensation liabilities 4. 5. Cash profit ROE from continuing operations excluding gains (losses) on disposals
Clear improvement in earnings quality 103.9% • Attritional ratio is ~3% lower than FY17 98.4% • Reduced contribution from LMI 2.9% 95.7% and Crop • Releases from prior year reserves contributed 0.8% FY17 Catastrophe Normalised Attritional Crop Other FY18 normalisation FY17 (ex Crop & LMI) & LMI 1. Continuing operations and adjusted basis 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims
Current Prior year + = GWP accident year reserve COR COR change $3,992M +2% 1 from FY17 96.5% (4.5)% (3.2)% 95.1% 92.0% 91.9% COR (%) 2 90.7% 91% 92% 91.9% FY17 92.0% Attritional (%) 3 FY17 2 FY18 2 FY17 2 FY18 2 FY17 FY18 57.7% FY17 60.6% • Improved attritional claims ratio • Ex LMI COR: 94.5% • LMI COR moderating: FY18 55.0% (FY17 50.7%) 1. Constant currency basis; however up 5% excluding the impact of regulatory changes to CTP 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims 3. Excludes LMI
Current Prior year + = accident year reserve COR GWP COR change $4,335M +6% 1 from FY17 99.6% (4.4)% 97.3% (2.5)% 95.2% COR (%) 2 94.8% 90.7% 91% 92% 94.8% FY17 95.2% 3 Attritional (%) FY17 2,3 FY18 2 FY17 2,3 FY18 2 FY17 FY18 46.8% FY17 49.6% • Accident year COR and attritional ratio improved • Reduced reliance on PYD • Maintaining expense discipline, lower acquisition cost ratio (-1.4pts) 1. Constant currency basis 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims 3. Excludes one-off impact on the underwriting result due to the Ogden decision in the UK
Current Prior year + = accident year reserve COR GWP COR change $4,711M +3% from FY17 4.2% 109.1% 104.9% 98.2% (0.3)% 97.9% COR (%) 1 92% 97.9% 98.1% 5 FY17 109.1% 4 97.1% 5 Attritional (%) 2 FY17 1,4 FY18 1 FY17 3 FY18 3 FY17 1,4 FY18 1 50.4% FY17 53.2% 4 • Attritional ratio ex-crop improving • Improved acquisition cost ratio (-0.2pts) • 2018 CATs normalising though Hurricane Michael and Wildfires drove excess 1. Excludes the impact of changes in risk-free rates used to discount net outstanding claims 2. Excludes Crop 3. Prior accident year claims development has been adjusted to reflect the impact of additional reinsurance cessions to the US Government 4. Excludes transaction to reinsure liabilities 5. Excludes catastrophe and large individual risk claims in excess of allowance
Current Prior year + = accident year reserve COR GWP COR change $633M (15)% 1 from FY17 5.4% 115.5% 110.1% 104.2% 102.3% 1.9% COR (%) 2 90.7% 91% 92% 104.2% 3 FY17 115.5% Attritional (%) FY17 2 FY18 2,3 FY17 FY18 FY17 2 FY18 2,3 51.0% 3 FY17 56.0% • 2H18 combined operating ratio 99.5% • Premium rate increases of 1.0% (FY17 (2.3)%) • Minor level of adverse prior year development (FY$10M) – 2H positive 1. Constant currency basis 2. Excludes the impact of changes in risk-free rates used to discount net outstanding claims Excludes transaction to reinsure Hong Kong construction workers’ compensation liabilities 3.
Net investment yield Fixed income running yield Duration 3.1% 2.1 2.2% 2.2% 1.6 1.7% FY17 FY18 FY17 FY18 FY17 FY18 • • Growth asset returns of 6.2% (FY17 13.3%) Portfolio positioning supportive of a higher return in 2019 • FI returns of 1.8% (FY17 2.0%) 1. Continuing operations basis
Strong Lower Shareholder Stable capital gearing returns liquidity 1.78x 38.0% A$1Bn ~$1Bn PCA multiple strengthened • Significant benefit from de-risking activities 1.78x • Progressing share buyback 1.64x • Announced further debt buyback Dec-17 Risk charges Capital generation Other Dec-18
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