Financial Financial results results Full year ended 30 June 2019 - PowerPoint PPT Presentation

Financial Financial results results Full year ended 30 June 2019 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer 8 August 2019

Over Overview view FY19 financial results 8 August 2019 2

FY19 highlights GWP growth Further underlying improvement, in line with guidance Underlying improvement in line with Asian divestments progressed expectations • Sale of Thailand completed • GWP growth over 3% 3.1% • Indonesia / Vietnam completion • Higher underlying margin of 16.6% expected early FY20 1.8% • Sound performance from Australia • Potential sale of India – in advanced discussions o Strong personal lines profitability FY18 FY19 o Encouraging commercial lines Returning surplus capital margin improvement Insurance margin • $592m capital management initiative • Strong profitability and sound growth completed in November 2018 in New Zealand • Full year dividend equivalent to >79% of 20.1% • Optimisation program benefits 18.9% cash earnings – top end of target range broadly in line with plan 17.9% 16.9% • Strong capital position maintained 16.2% • Partial offset from increased 15.4% 13.7% regulatory and compliance costs 13.0% FY20 guidance embraces further positive momentum Reported margin of 16.9% near mid- point of guidance range • Low single digit GWP growth, post divestments • Full quota share effect • Reported margin range of 16-18% • Perils slightly above allowance • Further optimisation benefits • Lower reserve releases • Lower reserve releases 1H18 2H18 1H19 2H19 Reported margin Underlying margin FY19 financial results 8 August 2019 3

Simplification FY FY19 activities FY FY20 priorities well-advanced Customer • Enhan anced customer digital al experiences, via • Meet changing customer needs by simpler motor and home claim processes accelera lerating investment in data, a, artificial al intell lligence and innovat ation, to build out new • Adopted a customer journey design Increased future focus businesses framework to deliver offerings and on customer engagement experiences accessible le to all customers • Accelera lerate use of the publi lic cloud to more fully access its benefits, allowing more rapid, and growth • Developed a real-time, , interac active customer efficient and flexible customer decisions insights portal al, providing IAG employees with a deeper customer understanding • Apply ly behav avioural al science insights to future products to create value for customers and improve their safety Simplification • Claims component of systems consoli lidat ation • Decommissioning of redundan ant claims largely ly complet lete, across Australia and New systems following technology platform Zealand consolidation • Transition of targeted activities to offshore e • Commence execution of policy operational al partners rs completed administrat ration system consoli lidat ation • Progressed divestment of / e exit from non- • Geographic expan ansion of optimised repai air core businesses modelwithin Australia and New Zealand Agility • Embedded Le Lead ading@IAG program, • As part of MyFlex lexprogram am, launch of Switch strengthening connection of IAG’s purpose and shift management tool, enabling greater strategy to individual accountability and workforce flexibility in a cost-effective and performance customer-centric manner • Continued deployment of Future ME • Continued development of partnerships, program ram, enabling employees to build their products and shared value pro rogra rams that at knowledge and preparedness to participate drive safer communities and deliver on IAG’s FY19 financial results in the workforce of the future purpose 8 August 2019 4

Fina Financia ncials ls FY19 financial results 8 August 2019 5

FY FY18 FY19 FY Change Ch GWP ($m) 11,647 12,005 3.1% Insurance profit ($m) 1,407 1,224 13.0% Underlying insurance margin (%) 14.1 16.6 250bps Financial Reported insurance margin (%) 18.3 16.9 140bps summary Fee based business ($m) (12) (9) nm Shareholders’ funds income ($m) 165 227 37.6% Cash ROE of 14.4% (excludes profit on sale of Net profit after tax ($m) 923 1,076 16.6% Thailand operations) Diluted cash EPS (cps) 42.75 38.83 9.2% Dividend (cps) 34.0 32.0 5.9% Cash ROE (%) 15.6 14.4 120bps CET1 multiple 1.26 1.31 5bps FY19 financial results 8 August 2019 6

GWP growth Mid-point of guidance range GWP growth of 3.1% FY20 guidance of ‘low single digit’ FY19 GWP growth GWP growth • Short tail personal line rate increases broadly matching claims inflation • Sound growth expected from short tail personal lines • Relatively flat short tail personal lines volumes, with areas of growth: • Rate increases • RACV in Australia • Modest volume improvement $1,190m • AMI motor in New Zealand • Lower CTP GWP – scheme change effects in NSW, ACT and SA 7.0% • Lower NSW CTP rates partially offset by higher volumes • Further commercial rate increases, reduced pace in New Zealand • Continued commercial rate growth • Lower commercial volumes principally • ~6% average in Australia 3.1% from recent business exits 2.0% • Reduced New Zealand momentum • Australian underwriting agency- related GWP over $100m lower • Lower commercial volumes Group Australia New Zealand • ~$70m reduction from business exits • Slight benefit from strengthening NZ$ • Like-for-like growth close to 4% FY19 financial results 8 August 2019 7

Insurance margin Reported margin in line with guidance, embracing sound underlying improvement Higher underlying margin of 16.6% Reported margin of 16.9% Underlying margin movement • Full year increase of ~250bps • At mid-point of 16-18% guidance +1.25% range • ~125bps uplift from full year of 12.5% quota shares • Prior period reserve releases of +1.25% 1.7% of NEP • Remaining underlying improvement of ~125bps contains: • Small net perils overrun against allowance • Optimisation program benefits of 16.6% ~$90m • Negative $20m swing from credit spreads 14.1% • Some offset from increased regulatory costs (~$20m) • Improved commercial lines profitability, helped by more normal large loss experience • Lower CTP profitability owing to FY18 12.5% quota shares Net improvement FY19 full year of NSW capped scheme FY19 financial results 8 August 2019 8

Reserve releases Trending down Lower prior period reserve release contribution Prior period reserve releases (% of NEP) • Outcome broadly in line with FY19 guidance of around 2% of NEP • ~$180m net reduction vs. FY18 • Lower CTP releases 5.6% • Long tail Australia Business releases offset by strengthening for past weather events (notably 1H19) 4.0% • Absence of FY18 net strengthening in New Zealand Guiding to 1% of NEP for FY20 1.7% • 2H19 outcome of 1.2%, close to long term assumption • NSW CTP reform effects FY17 FY18 FY19 FY19 financial results 8 August 2019 9

Natural perils Use of FY19 stop-loss cover reduces perils overrun to $19m Natural perils vs allowance FY19 net perils outcome $19m above FY20 perils allowance of $641m allowance • Gross allowance (100%) increased • Two contrasting halves: ~5.5% to $950m $101m $101m • 1H19 $110m above allowance – • Net (post-quota share) allowance of major hailstorm event $641m, up from $608m • 2H19 $91m below allowance – after • FY20-specific stop-loss perils cover of full use of $101m stop-loss $101m xs $675m – gap of $34m above protection allowance • Reasonably active year in Australia, • Lower MER of ~$135m at 30 June 2019 with quiet final quarter (vs. $169m at 1 January 2019) $641m $608m $627m • Benign conditions in New Zealand • Reflects partial erosion of deductible on calendar 2019 • Lower attritional (<$15m) perils aggregate cover activity ($280m) compared to FY18 ($357m) Net perils Allowance / Stop-loss cover Allowance / Stop-loss cover FY19 FY20 FY19 financial results 8 August 2019 10

Expenses Optimisation benefits emerging to plan – partial offset from increased regulatory costs Gross operating costs Optimisation program tracking to plan ~$30m • ~$90m reduction in gross operating ~$50m ~$2,370m costs ~$70m ~$90m ~$845m ~$160m • On target to achieve ~$250m cumulative reduction in FY20 Claims handling Partially offset by higher regulatory & fee based and compliance costs • ~$30m extra annual cost in FY19 ~$2,500m (~$20m increment over FY18) ~$2,260m ~$1,525m • Expectation of a further increase of up to $50m in FY20 (~$80m incremental Underwriting run rate) expenses • Investment in risk-related systems and resources • Increased regulatory requirements FY16 base Divested & exited Extra regulatory Optimisation FY19 Further Further FY20 businesses & compliance benefits regulatory & optimisation costs compliance benefits costs FY19 financial results 8 August 2019 11