23 April 2013 ABN IAG IN FOCUS NEW ZEALAND

Transcription

1 23 April 2013 ABN IAG IN FOCUS NEW ZEALAND

2 IMPORTANT INFORMATION This presentation contains general information in summary form which is current as at 23 April It presents financial information on both a statutory basis (which has been prepared in accordance with Australian accounting standards, which comply with International Financial Reporting Standards (IFRS)) and non-ifrs basis. This presentation is not a recommendation or advice in relation to Insurance Australia Group Limited ( IAG ) or any product or service offered by IAG s subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision. It should be read in conjunction with IAG s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange which are also available at No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation. To the maximum extent permitted by law, IAG, its subsidiaries and their respective directors, officers, employees and agents disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of IAG, including the merits and risks involved. Investors should consult with their own professional advisors in connection with any acquisition of securities. The information in this presentation is for general information only. To the extent that certain statements contained in this presentation may constitute forward-looking statements or statements about future matters, the information reflects IAG s intent, belief or expectations at the date of this presentation. IAG gives no undertaking to update this information over time (subject to legal or regulatory requirements). Any forward-looking statements, including projections, guidance on future revenues, earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause IAG s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Neither IAG, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. In addition, please note that past performance is no guarantee or indication of future performance. This presentation does not constitute an offer to issue or sell securities or other financial products in any jurisdiction. The distribution of this presentation outside Australia may be restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of IAG. Local currencies have been used where possible. Prevailing current exchange rates have been used to convert local currency amounts into Australian dollars, where appropriate. All references starting with 1H refer to the six months ended 31 December, being the first half of IAG s financial year. For example, 1H13 refers to the six months ended 31 December All references starting with 2H refer to the six months ended 30 June, being the second half of IAG s financial year. For example, 2H13 refers to the six months ended 30 June All references starting with FY refer to the financial year ended 30 June. For example, FY13 refers to the year ended 30 June

3 AGENDA WELCOME AND IAG OVERVIEW Mike Wilkins IAG IN NEW ZEALAND: LEADERSHIP IN A CHANGING MARKET Jacki Johnson DIRECT INSURANCE Craig Olsen CANTERBURY EARTHQUAKE RECOVERY UPDATE Video NZI (INTERMEDIATED) Karl Armstrong PANEL DISCUSSION - REINSURANCE David Priebe Guy Carpenter Edouard Schmid Swiss Re Julie Batch IAG Reinsurance SUMMARY AND Q&A Mike Wilkins Jacki Johnson 3

4 IAG OVERVIEW Mike Wilkins Managing Director and Chief Executive Officer

5 IAG STRATEGIC PRIORITIES A CLEAR FOCUS ON AUSTRALIA, NEW ZEALAND AND ASIA 5

6 IAG NEW ZEALAND GROWTH THROUGH ACQUISITION 2001: 2003: 2012: NEW ZEALAND NOW REPRESENTS NEARLY 17% OF THE GROUP S GWP 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, % % % % 15% 15% 15% 15% 14% 14% 13% 1,040 1,082 1,087 1,107 1,137 1,187 1,207 1,247 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1H13 (Ann'd) New Zealand GWP (NZ$m) % Group GWP (ex-uk) 14% 1,552 17% 1,912 6

7 IAG IN NEW ZEALAND LEADERSHIP IN A CHANGING MARKET Jacki Johnson Chief Executive Officer New Zealand

8 IAG S NEW ZEALAND EXECUTIVE TEAM LEADING AND SECURING THE NEW ZEALAND MARKET Jacki Johnson Chief Executive Officer Dan Coman Chief Financial Officer Dean MacGregor EGM Canterbury Recovery Karl Armstrong EGM NZI Craig Olsen EGM Direct Insurance Tanya Hadfield EGM People & Culture Allan Dornan Chief Operating Officer 8

9 NEW ZEALAND ECONOMY SOUND ECONOMIC FUNDAMENTALS 2012 GDP growth of 2.5%, forecast average approaching 3% over next two years Economic growth is solid and broad-based with increases across almost all industries Canterbury recovery is a key driver more protracted than originally anticipated New Zealand s economic outlook (GDP growth) is similar to Australia New Zealand Australia New South Wales Victoria 2.7%¹ 2.6%¹ 2.75%² 2.5%² ¹ Consensus Economics (April 2013), calendar 2013 ² State Treasury half-yearly reviews (December 2012), financial year to 30 June

10 OVERVIEW OF THE INSURANCE MARKET SHORT TAIL MARKET NZ$5BN GWP IAG participates in an available GWP pool of NZ$5bn MARKET SPLIT BY SEGMENT Essentially short-tail in nature Growth of ~35% since 2009, driven by significant rate increases to recover post-earthquake increase in reinsurance costs 10% 9% 5% 26% Reinsurance capacity continues to be available EQC - statutory scheme covering land and first NZ$100,000 of a home in event of an earthquake 27% 18% High insurance penetration of 77% 5% Long tail classes remain government-run (Accident Compensation Corporation (ACC)) Home Private Motor Other Personal Commercial Property Commercial Vehicles Liability Other Commercial Source: ICNZ, IAG estimates (calendar 2012) 10

11 COMPETITIVE LANDSCAPE IAG A CLEAR LEADER IN A CONSOLIDATED MARKET 2012 NZ$5BN NEW ZEALAND GENERAL INSURANCE MARKET 5 3% 3% 3% 4% 10% 39% NZ$bn 4 3 6% 2 9% 23% 1 IAG Vero Lumley QBE Tower AIG FMG Allianz Other Source: ICNZ, IAG estimates (calendar 2012) Source: ICNZ, IAG estimates 11

12 REGULATION AND REFORM ACTIVE ENGAGEMENT Broad and robust engagement with government on reforms Focus on maintaining a sound and efficient insurance industry, with effective management of risk Support framework that delivers contractual certainty for insurers and customers Industry Risks Customers Prudential regulation and licensing Reform of Earthquake Commission Act Fire services and funding Land-use planning and consents Earthquake-prone buildings Unfair contract terms Fair trading Privacy law 12

13 OVERVIEW OF IAG S NEW ZEALAND BUSINESS WELL-BALANCED PORTFOLIO WITH STRONG MARKET SHARES PREMIUM BASE OF ~NZ$2BN GWP BY CLASS GWP BY CHANNEL 12% 34% Personal Commercial 44% Intermediated Direct 66% 44% Affinity Source: IAG results, six months to 31 December

14 BUSINESS PERFORMANCE STRONG UNDERLYING MARGIN Underlying performance has been strong, throughout a challenging period Dip in FY11 reflects post-earthquake reinstatement costs 11.2% 11.8% 11.5% Pass-through of steep increase in reinsurance costs 8.5% From c.8% of GWP in FY10, to 15% in 1H13 Reported performance has reflected: Impact of earthquakes in FY11 Reserve strengthening in 1H % 10.4% 8.3% Meeting ROE target 0.4% FY10 FY11 FY12 1H13 * Underlying margin = reported margin adjusted for: All prior period reserve movements Natural perils vs. allowances Reported Margin Underlying Margin* 14

15 NEW ZEALAND STRATEGY CLARITY OF PURPOSE AND TARGETS PURPOSE AMBITION STRATEGY TARGETS What we stand for: Our ambition is: Our strategy is: Our financial targets include: As New Zealand s leading general insurer, our purpose is to help people manage risk and recover from the hardship of unexpected loss To be New Zealand s insurer of choice by being the easiest to interact with To deliver sustainable, customer-focused, diverse general insurance operations that create a superior experience for our customers, and achieve a superior operational performance Underlying long term margin of c.10% GWP growth at least in line with the industry Our customer targets include: Net Promoter Score of 50% Customer retention 15

16 STRATEGIC HORIZONS A FOCUS ON SUSTAINABLE AND PROFITABLE GROWTH HORIZON 1 Strengthen underlying business Integrate AMI / initiate synergy realisation Disciplined underwriting / pricing Product development Growing people and capabilities HORIZON 2 Cost focus / simplification Complete AMI synergy realisation Consolidate and upgrade systems, infrastructure Engage with, and respond to, regulatory changes Progress towards completion of Canterbury earthquake claims Leverage scale through focus on customer service HORIZON 3 Consider new opportunities Enterprise value 1. Integrate AMI and accelerate value 2. Consolidate and upgrade systems and infrastructure 3. Consider new opportunities FY12 FY13 FY14 FY15 16

17 HOME INSURANCE CHANGES AWARENESS CAMPAIGN LEADS THE INDUSTRY CHANGE Most New Zealand home policies written on unspecified replacement basis Reinsurers require greater visibility of total exposures - move to specified sum insured Change across most of industry up to 1.4m homeowners STRATEGY Secure accurate sum insured Retain customers / protect reputation by helping homeowners with the change Position IAG as being the helpful, knowledgeable, leading and trusted insurer TACTICS 360 O public awareness and customer communication campaign under IAG banner with full brand / partner integration 17

18 DIRECT INSURANCE DIVISION Craig Olsen Executive General Manager Direct Insurance Division

19 DIRECT INSURANCE INDUSTRY IN NEW ZEALAND LEADING POSITION IN A NZ$1.5BN MARKET DIRECT INSURANCE MARKET SHARES SPLIT OF IAG S DIRECT BUSINESS 7% 6% 11% 28% 13% 14% 27% 94% State AMI Tower AA FMG Others SME Personal Source: ICNZ, IAG estimates (calendar 2012) Source: IAG results, six months to 31 December

20 IAG DIRECT INSURANCE IN NEW ZEALAND CRITICAL MASS SECURES POSITION Two strong brands with long pedigrees: State Insurance founded by the New Zealand government in 1905 AMI origins as a mutual, dating back to 1926 Distinct brands with differing distribution attributes Collective market-leading position: 55% market share Nearly 1 million customers Around 2.2 million policies Over 1,500 employees SHARE OF GWP HOME & CONTENTS 45% 51% MOTOR 40% 47% OTHER 15% 2% CHANNEL MIX CALL CENTRE 66% 39% BRANCH 19% 60% INTERNET 15% 1% Six months to 31 December

21 STRATEGIC PRIORITIES SUSTAINED MARKET LEADERSHIP STRATEGIC PRIORITIES Customer retention Profitable customer growth Scope and scale opportunities SUSTAINED OUTCOMES MARKET LEADING POSITION Customer service Operating efficiencies Improved market coverage (via two-brand strategy) STRONG PROFITABILITY Business transformation 21

22 TWO-BRAND STRATEGY BUILDING ON THE BEST OF BOTH WORLDS PROVIDING CHOICE FOR CUSTOMERS ON WHEN AND HOW TO DO BUSINESS WITH US Opportunity for new products to AMI customers Travel insurance launched Rationalise and focus marketing activity to improve market coverage and reduce duplication Home insurance product changes Excess options and operational initiatives to improve customer experience AMI brand position strengthened SHARE OF GWP NORTH ISLAND SOUTH ISLAND 77% 63% 23% 37% Six months to 31 December

23 AMI INTEGRATION TRACKING TO PLAN NZ$30M BY APRIL 2014 SYNERGY BENEFITS BREAKDOWN 80 INTEGRATION PROJECTS UNDER WAY OR COMPLETE 13% Notable milestones to date: Shared services integration Employee contractual transfer complete HR systems and processes largely integrated AMI marketing reinvigoration AMI travel launched Improved claims processes Procurement and supplier contracts consolidated 29% Claims & Claims Services Technology & Reinsurance 16% 42% Distribution & Procurement Other 23

24 CANTERBURY RECOVERY VIDEO UPDATE Dean MacGregor Executive General Manager Canterbury Recovery

25 NZI (INTERMEDIATED) Karl Armstrong Executive General Manager, NZI

26 INTERMEDIATED INSURANCE IN NEW ZEALAND LEADING POSITION IN A NZ$3.5BN MARKET Intermediated market of NZ$3.5bn GWP, with significant personal lines component INTERMEDIATED INSURANCE MARKET SHARES NZI holds a strong position with a 32% market share: New Zealand s oldest insurance company, established in % 4% 5% 7% 32% GWP of around NZ$1.1bn 9% ~80% written through broker network ~20% written through affinity (bank) partners 12% Over 800 FTE employees 2012 Intermediated Insurance Company of the Year 27% IAG Vero Lumley QBE AIG Allianz ACE Other Source: ICNZ, IAG estimates (calendar 2012) 26

27 NZI BUSINESS OVERVIEW STRONG PERSONAL LINES CONTRIBUTION NZI GWP SPLIT BY MARKET SEGMENT NZI GWP SPLIT BY PRODUCT 1% 6% 5% Commercial Property Home Owners 42% Commercial Personal 12% 35% Personal Motor Vehicle Commercial Motor Vehicle 58% 12% Contents Liability 14% 15% Other Commercial Other Personal Source: IAG results, six months to 31 December

28 NZI STRATEGIC PRIORITIES DRIVING FROM THE INSIDE OUT STRATEGIC PRIORITIES Industry leadership Results driven Customer focus Future proofing Appropriate pricing and sustainable risk underwriting Strong relationships Drive efficiencies through simplification / business improvement / technology Drive consistency across financial institutions and the broker business and in offerings to the end customer Best people / flexibility to respond to changing business, customer and economic needs Leverage our scale and expertise SUSTAINED OUTCOMES MARKET LEADING POSITION STRONG PROFITABILITY 28

29 STEPPING UP TO THE CHALLENGES CAN DO THE BIG THREE 1. Affordability 2. Capacity 3. Home insurance changes KEY INITIATIVES Reorganisation of team to enhance account management Sophisticated pricing precision Driving efficiency and continuous improvements Roll out personal lines B2B (Integrate) / website refresh need2know partner leverage 29

30 PANEL DISCUSSION Jacki Johnson Chief Executive Officer New Zealand David Priebe Vice Chairman Guy Carpenter & Company LLC Edouard Schmid Head of Property & Speciality Swiss Re Julie Batch Group General Manager, Reinsurance IAG

31 SUMMARY & OUTLOOK Jacki Johnson Chief Executive Officer New Zealand

32 SUMMARY CLEARLY DEFINED GOALS AND STRATEGIES SUSTAINED OUTCOMES MARKET LEADING POSITION STRONG PROFITABILITY Effective and direct engagement with government, regulators, industry, business Simplicity, fast execution and the customer Canterbury rebuild need2know campaign Leverage scale and expertise DIRECT INSURANCE Customer growth and retention Two-brand, best of both worlds approach Complete AMI integration, deliver synergies INTERMEDIATED INSURANCE Focus on pricing and sustainable risk underwriting Increase flexibility and drive efficiencies Relationship management Long term underlying margin of c.10% GWP growth at least in line with industry Customer retention Net promoter score of 50% 32

33 A MARKET LEADING PRESENCE IN NEW ZEALAND 33