Australia’s Leader in MPCI Strengthening your farm enterprise with Multi-Peril Crop Insurance Guide to Latevo’s Certainty Insurance™ Product Grower Workshop March 2015. 1
Today’s Agenda 1. What is all-peril revenue insurance? 2. Latevo’s Certainty Insurance™ Product 3. How Growers can join the 2015 Latevo Program 4. Costs and benefits for the Grower 2
Think of MPCI as another farm input * Active ingredient: revenue-based MPCI 3
… that protects against all natural perils Wet Dry Excessive rain Water stress • • Flood • Hail • Hot Cold Temperature Frost • • stress Snow • Wind Fire Cyclone/Hurricane • Bushfire • Tornado • Accidental Fire • Excessive Wind • Lightning • Biological Other Wildlife • Accidental Overspray • Insect or pest • Straying Livestock • manifestation Weed Infestation • 4 Plant disease. •
Yield-based MPCI versus Revenue-based MPCI YIELD-BASED MPCI (Y-MPCI) YIELD-BASED MPCI (Y-MPCI) REVENUE-BASED MPCI (R-MPCI) REVENUE-BASED MPCI (R-MPCI) Pays out on Pays out on Yield losses losses Pays out on Pays out on Revenue losses losses 5
Why Revenue MPCI is more effective Scenario Yield Grain Price Revenue (mt/ha) ($/mt) ($/ha) 1 3.0 2 2.0 3 1.5 6
Why Revenue MPCI is more effective Scenario Yield Grain Price Revenue (mt/ha) ($/mt) ($/ha) 1 3.0 $200 2 2.0 $150 3 1.5 $400 Assumptions Assumptions R-MPCI pays out below $360/ha revenue • Y-MPCI pays out below 1.8 mt/ha • 7
Revenue MPCI pays out when you need the cash in Scenario 2 Scenario Yield Grain Price Revenue Payout (mt/ha) ($/mt) ($/ha) 1 3.0 $200 $600 R-MPCI 2 2.0 $150 $300 Y-MPCI 3 1.5 $400 $600 Assumptions Assumptions R-MPCI pays our below $360/ha revenue • Y-MPCI pays our below 1.8 mt/ha • 8
MPCI improves farm outcomes and wealth creation HOW MULTI-PERIL CROP INSURANCE DRIVES BETTER FARM OUTCOMES Greater certainty of income for the farmer � Purchase Multi-Peril Crop Insurance � More resilient and Increased availability successful farmers � of bank financing � Increased use of forward Better crop care selling, with income supported � with cash to spend � 9
Today’s Agenda 1. What is all-peril revenue insurance? 2. Latevo’s Latevo’s Certainty Insurance™ Product Certainty Insurance™ Product 2. 3. How Growers can join the 2015 Latevo Program 4. Costs and benefits for the Grower 10
Multi-Peril Crop Insurance is now working in Australia • Latevo founded in 2013 to run commercial pilot in the Australian grains sector • First MPCI policies written in 2014, across all farm sizes • First claims paid in Jan. 2015 11
… across all major wheat producing regions Latevo’s Clients in 2014 Early Signups for 2015 12
In drought-stricken 2014, Latevo paid claims to 8 clients PREMIUMS VERSUS CLAIM VALUE, 2014 PREMIUMS VERSUS CLAIM VALUE, 2014 � Dollars Dollars $1,000,000 � Net Premium � Claim Value � $800,000 � $600,000 � $400,000 � $200,000 � $0 � 1 � 2 � 3 � 4 � 5 � 6 � 7 � 8 � 9 � 10 � 11 � 12 � 13 � 14 � 15 � 16 � 17 � 18 � 19 � 20 � 21 � 22 � 23 � 24 � 25 � 26 � 27 � 28 � 29 � Latevo's Clients 2014 � “Without the [Latevo] policy, the failed year just gone would have resulted in us negotiating overdraft extensions … [and] and then try and prioritise any capital made available for the year ahead, or in other words, cut corners.” Alistair Mace, Nindigully, Queensland . 13 13
Latevo’s assessment model redefines insurance – enabling coverage in high risk environments COMPREHENSIVE ASSESSMENT FRAMEWORK FOR MULTI-PERIL CROP INSURANCE Farm Marketing Production Financials Plan Plan 14 14
A Planned Approach to Grain Marketing EXAMPLE OF A GRAIN MARKETING PLAN % Priced % Production Pr Pr Price Ti Time 10% Pre Planting $280 - $310 '12 or early '13 20% Post Germinat'n $280 - $320 May - Oct 30% Pre Harvest $260 - $300 Aug - Oct 40% Pre Harvest $260 - $300 Aug - Oct 80% Harvest $260 - $300 Nov - Dec 90% Late Jan - May $260 - $300 Jan '14 100% March - May $260 - $300 March '14
… and in graphical form EXAMPLE OF A GRAIN MARKETING PLAN Per Cent of Expected Yield Sold Forward 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Pre-planting Post- Pre-harvest- Pre-harvest- Harvest Jan-Mar Mar-May germination early late 16
Flexible coverage levels …
… keep premiums affordable INSURANCE PAYOUT VERSUS FARM REVENUE VOLATILITY INSURANCE PAYOUT VERSUS FARM REVENUE VOLATILITY Probability distribution of Revenue (yield * price) Insurance Payout Farmer’s risk exposure covered by insurance Self insurance Maximum insurance payout � Farm Revenue Farm Revenue Max sum insured (60-80% of revenue) 18 18
Today’s Agenda 1. What is all-peril revenue insurance? 2. Latevo’s Certainty Insurance™ Product 3. How Growers can join the 2015 How Growers can join the 2015 Latevo Latevo Program Program 3. 4. Costs and benefits for the Grower 19
How Growers can join the 2015 How Growers can join the 2015 Latevo Latevo Program Program • What is a Production Audit? • What does a Production Audit involve? • How does Latevo engage our Agents? • How Growers, Agents & Latevo interact • Key Dates for 2015 & Timeframes 20
What is a Production Audit? What is a Production Audit? • Process that underpins:- - Level of Coverage Offered - Premium Cost • Analysis – Historical Production & Financial Data • Derives – Variability of Income – High/Low/Average $/ha • Financial trends identified = no guess work = removes risk of self assessing. • Self assessment lends itself to over or under-insuring – not beneficial for anyone. 21
What does a Production Audit Involve What does a Production Audit Involve • Who – Independent Auditing Accountants • What - 5 years financials, tax returns & cashbooks - 5 years production records i.e. crop areas/yields/grain on hand • How – “Normalise” the production year with the financial year • Why – Avg. Income per Ha + Consideration of Grain Marketing & Agronomy Strategies = Basis for Coverage Offered & Premium Cost 22 22
How Growers, Agents & Latevo interact • Agents use relationship with Growers to introduce Certainty Plus • Agents register clients with Grower Information & Financial Release Forms • Latevo confirms acceptance into the program based on geographic limits • Agents invoice Grower for Production Audit • Agents collect & submit a complete data set to Latevo 23
How Growers, Agents & Latevo interact How Growers, Agents & Latevo interact cont cont’ • Latevo engages Auditing Accountants to complete Production Audit • Latevo completes Risk Assessment based on PA outcomes & offers Growers Policy Estimate & Final Quote. • Latevo invoices & binds policy on receipt of payment by Grower. 24
Key Dates & Timeframes Key Dates & Timeframes Applications Close for 2015 Season • 11 11 th th April 2015 April 2015 Policies Offered up to: • 30 30 th th June 2015 June 2015 Quote expires 14 days from Latevo Policy Offering • Production Audit turnaround 14 days from receipt of complete data set. • Claims processing 30 days from submission to settlement. • 25
Today’s Agenda 1. What is all-peril revenue insurance? 2. Latevo’s Certainty Insurance™ Product 3. How Growers can join the 2015 Latevo Program 4. Costs and benefits for the Grower Costs and benefits for the Grower 4. 26
Multi-Peril Crop Insurance cost is comparable to other input costs COMPARISON OF LATEVO PREMIUMS AND CROP INPUTS, BY CATEGORY � $ per hectare 45 Seed 40 Fertiliser 35 Mechanical Median unit cost ($ per hectare) 30 Herbicide 25 Insecticide 20 Fungicide 15 Services 10 MPCI 5 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Unit cost range ($ per hectare) 27
In summary, there are big benefits of joining Latevo’s Certainty Plus Insurance Program in 2015 • The confidence of receiving a significant payout in years where income is low • Not needing to borrow additional money to fund next year’s crop • Never breaching your bank covenants • Having the flexibility to hold grain and wait for a higher price • Taking advantage of land purchase opportunities • Knowing that you will not go broke in the next drought event. 28
Find out how you can benefit from Crop Insurance. Join our National Grower Workshops, March-April, 2015. www.latevo.com 29 29
National Grower Workshops March-April, 2015 30
Future Thank You 31
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