Financial Financial results results Half year ended 31 December 2019 Peter Harmer Nick Hawkins Managing Director and Chief Financial Officer Chief Executive Officer This release has been authorised by the IAG Board 12 February 2020
Over Overview view 1H20 financial results 12 February 2020 2
1H20 highlights Strong underlying performance, in line with expectations held at outset of year GWP growth Underlying performance in line with Provision for customer refunds expectations • $82m net post-tax cost, excluded from 4.1% • GWP growth of 1.4% (like-for-like cash earnings ~2.5%) Agreed sale of India • Underlying margin of 16.9% – 70bps 2.1% improvement vs. 1H19 • Expected to complete in 2H20 1.4% • Solid performance in Australia • Significant profit on sale (to be • Strong performance in New Zealand recognised in 2H20) and regulatory 1H19 2H19 1H20 capital impact expected • Adverse impact of lower interest rates Insurance margin on investment income Strong capital position • Optimisation program benefits 16.9% 16.9% • Above CET1 benchmark accruing as planned 16.2% • Interim dividend of 10 cents per share • Partial regulatory and compliance cost offset (70% franked) – 61% of cash earnings 20.1% FY20 guidance Lower reported margin 13.7% • ‘Low single digit’ GWP growth reaffirmed • Impact of bushfires 13.5% • Reported margin range reduced to 12.5- • Lower than anticipated reserve 14.5% – peril and reserve release effects releases 1H19 2H19 1H20 Reported margin Underlying margin 1H20 financial results 12 February 2020 3
Operational 1H20 activities 2H20 priorities scorecard Customer • Marketing campai aigns launched to positive • Supporting customers and communities in their response: NRMA Insurance, Every home is worth rapid recovery from recent bushfire and hailstorm protecting , and CGU small business, Ambition events Range of activities • Launch of Safer Journeys crash detection and • Integrat ation of the recently-acquired MotorServe linked to three emergency response service trial, to 100,000 NRMA business, within the motor repair model, providing Insurance customers a one-stop-shop for repairs and servicing strategic priorities • Support of Rural Fire Service bushfire efforts, via • Expansion of Carbar ar, the digital car-trading and the fire retardant gel-equipped NRMA MA Insuran ance subscription platform, to respond to customer helicopter appetite for alternative forms of vehicle ownership Simplification • Enhan ancement of short tail l claims processes • Progress policy and pricing systems consoli lidat ation following claims system consolidation with first major release expected in 1H21 • Continued planning of policy and pricing systems • Completion of the design work for upgrad ade of consoli lidat ation digital al finan ance system (SAP) across Australia and New Zealand • Develo lopment of Repai airh rhubmotor repair joint venture to improve efficiency of repairs • Further geograp aphic expan ansion of Repai airhubmotor repair joint venture Agility • Ongoing ‘Listen Learn Act’ program ,empowering • Launch of new culture program to underpin next frontline employees to identify and address era of IAG’s purpose -led strategy customer pain points and process improvements • Continued delivery of enhanced risk • Introduction of new risk target operat ating model management maturity across IAG to uplift risk management capability and capacity • Continue harmonisation of people systems and • Phase 1 rollout of Employee Central, to simpli lify processes, for a consistent cross-Tasman people people le systems into a single le platform rm experience 1H20 financial results 12 February 2020 4
Fina Financia ncials ls 1H20 financial results 12 February 2020 5
1H19 1H20 Cha Change GWP ($m) 5,881 5,962 1.4% Insurance profit* ($m) 496 501 1.0% Underlying insurance margin (%) 16.2 16.9 70bps Financial Reported insurance margin (%) 13.7 13.5 20bps summary Shareholders’ funds income ($m) (7) 50 nm Cash ROE of 12.1% Net profit after tax ($m) 500 283 43.4% Diluted cash EPS (cps) 13.4 16.0 19.3% Dividend (cps) 12.0 10.0 16.7% Cash ROE (%) 9.8 12.1 230bps CET1 multiple 1.18 1.15 3bps *The 1H20 reported insurance profit in this document is presented on a management reported (non-IFRS) basis which is not directly comparable to the equivalent 1H20 financial results statutory (IFRS) figure in IAG’s 1H20 Financial Report (Appendix 4D). A reconciliation between the two is provided on page 10 of the Investor Report and on page 12 February 2020 6 2 of the Financial Report to comply with the Australian Securities and Investments Commission’s Regulatory Guide 230. IAG’s 1 H20 net profit after tax is the same in this document and in the Financial Report.
GWP growth Reported GWP growth Largely rate-driven Reported GWP growth of 1.4% FY20 guidance of ‘low single digit’ 6.3% GWP growth reaffirmed • In line with full year guidance of ‘low single digit’ growth • 2H20 growth expected to be similar to 1H20, from amalgam of: • Net drag from combination of: • Rate increases across short tail • Divested/ceased business ($54m) personal lines 1.4% 0.0% • Lower CTP rates – scheme change • Modest personal line volume gain • Favourable FX translation effect Group Australia New Zealand • Further commercial rate rises • Lower commercial volumes, Like-for-like GWP growth of ~2.5% including business exit effects Like-for-like GWP growth • Short tail personal line rate increases • Lower CTP GWP from cumulative broadly matching claims inflation scheme change-induced pricing • Ongoing commercial rate increases • Modest growth in personal line ~4.7% volumes, skewed to New Zealand ~2.5% • Lower commercial line volumes, driven ~2.0% by Australia Group Australia New Zealand 1H20 financial results 12 February 2020 7
Insurance margin Underlying margin ~0.7% ~1.4% Underlying improvement vs. 1H19 16.9% 16.2% Higher underlying margin of 16.9% Lower reported margin of 13.5% • Further realisation of net benefits from • Reconciliation to underlying margin: optimisation program • High perils incidence, in excess of • ~$80m achieved out of indicated allowance by 2.7% of net earned 1H19 Net operating Investment yield 1H20 $160m expectation for FY20 premium (NEP) improvement • Large portion recognised in claims • Lower than anticipated prior period handling expenses in 1H20 reserve releases (0.1% of NEP vs. 1H20 - reported vs. underlying margin 1.0% underlying assumption) • Partial offset of $20m from increased • Minor positive credit spread impact regulatory and compliance costs 0.2% 2.7% • Investment yield headwind of ~70bps FY20 reported margin guidance range 0.9% from lower interest rates lowered to 12.5-14.5% • Higher Australian commercial line • 150bps reduction, as advised on 24 16.9% profitability – cumulative rate January 2020, sourced from: 13.5% increases and remediation • Lower reserve release assumption of 0.5% of NEP (vs. 1.0%) • Small drag from reversion to more normal working claim frequency in • Increased net natural peril claim cost New Zealand assumption of $715m (vs. $641m) Reported Reserve Perils above Credit spreads Underlying • Further 200bps reduction to reflect margin releases allowance margin heavy rain event – perils assumption 1H20 financial results below 1% 12 February 2020 8 raised to $850m
Reserve releases Net outstanding claims liability ($bn) 9.0 1% of NEP run rate expected in 2H20 6.0 Lower than anticipated 1H20 net prior Significant reduction in net claim period reserve releases (0.1% of NEP) reserves since FY14 • Stronger claim development and • ~55% reduction in net long tail claims 3.0 liability (CTP ~61% reduction), from emergence of large claims compared to recent years, across: combined effect of: • ACT and South Australian CTP • CTP-specific quota share schemes - • Whole-of-account quota shares • Professional risks-related portfolios Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Dec-19 • Significant past reserve releases in pre-2017 report years CTP Other long tail Short tail • Reinsurance of asbestos portfolio • Workers’ compensation, largely from • Lower market share in NSW CTP one substantial claim Prior period reserve releases (% of NEP) • Greater claims certainty post NSW • An offset from professional indemnity CTP reform earthquake-related releases in New Zealand Reduced FY20 guidance assumption of 0.5% of NEP • Lower NSW CTP releases in line with expectations – capped profitability of ~1.0% • Assumes 2H20 run rate of up to 1% of new scheme NEP ~0.5% 0.1% 1H20 actual 2H20 guidance FY20 guidance 1H20 financial results 12 February 2020 9
Recommend
More recommend
