Appendix 4E (ASX Listing rule 4.3A)
IAG Annual Report 2023
Insurance Australia Group Limited
ABN 60 090 739 923
Preliminary final report for the year ended 30 June 2023
Results for announcement to the market
2023
$m
2022
$m
Change
$m
%*
Revenue from ordinary activities
19,851
18,347
Up
1,504
8.2%
Net profit/(loss) after tax from ordinary activities
attributable to shareholders of the Parent
832
347
Up
485
139.8%
Net profit/(loss) attributable to shareholders of the
Parent
832
347
Up
485
139.8%
* The percentage change is calculated by dividing the movement between the current and prior years with the prior year amount and multiplying the result by 100.
Dividends – ordinary shares
Amount per security
Franked amount per security
Final dividend
9.0 cents
2.7 cents
Interim dividend
6.0 cents
1.8 cents
Final dividend date
Record date
30 August 2023
Payment date
28 September 2023
The Company's Dividend Reinvestment Plan (DRP) will operate likely by acquiring shares on-market with no discount applied. The last date for the
receipt of an election notice for participation in the Company's DRP is 31 August 2023. The DRP Issue Price will be based on a volume-weighted
average price for a 10-day trading window from 4 September 2023 to 15 September 2023 inclusive.
Eligible shareholders may now lodge their DRP elections electronically by logging on to IAG's share registry, Computershare, on their website at
www.computershare.com.au.
This Appendix 4E for the financial year ended 30 June 2023 is filed with the Australian Securities Exchange (ASX) under ASX Listing Rule 4.3A.
Additional Appendix 4E disclosure requirements can be found in the Annual Report of Insurance Australia Group Limited for the year ended 30 June
2023 (Attachment A). This report is also to be read in conjunction with any public announcements made by Insurance Australia Group Limited
during the reporting year in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the ASX Listing Rules.
Information presented for the previous corresponding period is for the financial year ended 30 June 2022 (unless otherwise stated). The report is
based on the consolidated financial statements which have been audited by KPMG.
Attachment A
IAG Annual Report 2023
Insurance Australia Group Limited
ABN 60 090 739 923
Insurance Australia Group Limited and Subsidiaries
Annual Report 30 June 2023
Insurance Australia Group Limited
This release has been authorised by the
Board of Insurance Australia Group Limited
21 August 2023
ABN 60 090 739 923
Annual Report
2023
About this report
The 2023 annual report of Insurance Australia
Group Limited (IAG, or the Group) includes IAG’s
full statutory accounts, along with the Directors’
and remuneration reports for the financial
year ended 30 June 2023. This year’s corporate
governance statement is available in the
About Us area of our website (www.iag.com.au).
The financial statements are structured to provide prominence
to the disclosures that are considered most relevant to the user’s
understanding of the operations, results and financial position of
the Group.
This year, we have incorporated into the report the content that we
formerly provided in our Annual Review and Sustainability Report,
including the Chair’s and CEO’s reviews. The report also contains
information about how we create value for our key stakeholders
and the outcomes we have achieved for them; our material
Environmental, Social and Governance (ESG) risks and how we
manage these; and other sustainability-related activities.
If you would like to have a copy of the annual report mailed to you,
contact IAG’s Share Registry using the contact details on page 149.
Unless otherwise indicated, references to FY23 and 2023 and FY22
and 2022 in graphs and copy throughout this report refer to IAG’s
financial years ending 30 June 2023 and 2022 respectively. All
figures are in Australian dollars unless otherwise stated.
2023 Annual General Meeting
The 2023 annual general meeting (AGM) of Insurance Australia
Group Limited will commence at 9.30am on Wednesday,
11 October 2023.
Disclaimer
This report contains forward-looking statements, opinions and
estimates. Such statements involve risks, uncertainties and
assumptions, many of which are beyond IAG's control. This may
cause actual results to differ materially from those expressed or
implied in those statements and, consequently, undue reliance
should not be placed on those statements. Please refer to page 151
for IAG's full disclaimer in relation to forward-looking statements
and other representations.
Acknowledgement
of Country
IAG acknowledges Traditional Owners of
Country throughout Australia and recognises
the continuing connection to lands, waters
and communities.
We pay our respect to Aboriginal and Torres Strait
Islander cultures; and to Elders past and present.
We empower Aboriginal and Torres Strait Islander
peoples, businesses and communities.
Our FY23 Investor Report, FY23 Investor Presentation and FY23 Corporate Governance Statement are available in the Results & Reports
area of our website at www.iag.com.au.
The Group and New Zealand climate-related disclosures and the FY23 data pack are available in the Sustainability area of our website.
Highlights
2
Chair’s review
4
CEO’s review
6
How IAG creates value
8
Strategy
10
IAG’s sustainability approach
12
Material topics
13
Customers
14
Shareholders
18
People
20
Communities
24
Environment
28
Group Leadership Team
33
Directors’ report
34
Remuneration report
54
Our FY23 reporting suite
Contents
Insurance Australia Group Limited
This release has been authorised by the
Board of Insurance Australia Group Limited
21 August 2023
ABN 60 090 739 923
Investor Report
FY23
Insurance Australia Group Limited
This Corporate Governance Statement, which has been approved
by the Board of Insurance Australia Group Limited (Board), describes
IAG’s corporate governance framework, policies, and practices as at
21 August 2023. In this Corporate Governance Statement, a reference
to ‘IAG, ‘Group’, ‘IAG Group’, ‘Company’, ‘we’, ‘us’ and ‘our’ is to Insurance
Australia Group Limited ABN 60 090 739 923 and its subsidiaries unless
it clearly means just Insurance Australia Group Limited.
Corporate Governance
Statement 2023
Lead auditor’s independence declaration
81
Consolidated statement of comprehensive income
83
Consolidated balance sheet
84
Consolidated statement of changes in equity
85
Consolidated cash flow statement
86
Notes to the financial statements
87
Directors’ declaration
137
Independent auditor’s report
138
Shareholder information
145
Corporate directory
149
Five-year financial summary
150
KPMG assurance statement
151
Forward-looking statements
151
Glossary
151
FY23 Investor Report
Discussion and analysis of IAG’s results
for the year ended 30 June 2023
FY23 New Zealand Climate-related
Disclosure / Whakapuakanga e whai
pānga ana ki te Āhuarangi
An overview of how IAG’s New Zealand
business manages climate-related risks and
opportunities, designed to advance our
journey towards compliance with the
Aotearoa New Zealand Climate Standards
FY23 Corporate
Governance Statement
Description of IAG’s corporate governance
framework, policies and practices as at
21 August 2023, reporting against the
ASX Corporate Governance Principles
and Recommendations (4th Edition)
FY23 Group Climate-related
Disclosure
An overview of IAG’s management of
climate-related risks and opportunities,
aligned to the recommendations of
the Task Force for Climate-related
Financial Disclosures
FY23 IAG New Zealand
Climate-related Disclosure
Whakapuakanga e whai pānga ana ki te Āhuarangi
August 2023
FY23 Group
Climate-related Disclosure
August 2023
IAG Annual Report 2023
1
+45 AU
+51 NZ
Customer Experience1
(AU: +53 in FY22)
(NZ: +52 in FY22)Highl
2023
Customers
Helping customers
manage risk is at the
centre of our purpose,
to make your world
a safer place
Shareholders
We aspire to deliver
sustainable dividends,
and top quartile total
shareholder returns
People
Our people help bring our
purpose to life and deliver
our strategy
~132,000
Increase in customers in
Direct Insurance Australia
$14,729m
Gross written premium
(up 10.6% from FY22)
45%
Women in senior management2
(up from 44% in FY22)
$10,203m
Claims paid
(up 20% from $8,488m in FY22)
$832m
Net profit after tax
(up 140% from FY22)
74%
Engagement score reported in our
FY23 annual culture survey3 (slightly
down on the 77% result from FY22)
9.0cps
Final dividend, full year dividend
of 15.0cps (up 36.4% on FY22)
1 Customer Experience as measured by
transactional net promoter score (tNPS) is an
internal measure of customer advocacy based
on experiences customers have had with us
across all customer journeys. We obtain this
information via surveys of our personal and
business insurance customers who have had a
recent interaction with IAG via assisted or digital
channels. The tNPS figures as at June 2023 were
calculated on a 12-month rolling average.
2 IAG defines senior management roles as our
Group Executives, Executive General Managers
and the people who report directly to them.
3 Based on December 2022 annual culture survey.
2
IAG Annual Report 2023
lights
Communities
We help to build more
resilient communities
Environment
We focus on climate and
disaster resilience as this
area most impacts our
customers and business,
and is where we can have
the most meaningful impact
$10m
Invested in community initiatives
15%
Total scope 1 and 2 emissions
reduction since FY21 (baseline year
for our emissions reduction target)
9,290hrs
Volunteered by our people
$238m
Invested in green bonds
Net Zero
Roadmap
Published
$1.1m
Spent with Indigenous suppliers
IAG Annual Report 2023
3
CHAIR’S REVIEW
Chair’s review
This year, your Company performed well,
building positive momentum in the face
of complex challenges.
It is a tribute to the commitment and
performance of our Leadership Team –
and everyone who works for the Company
– that we have been able to deliver this
sound result in the face of both economic
and operating challenges.
FY23 results
We achieved a solid financial performance
over the year. Gross written premium grew
by 10.6% to $14,729 million.
Net profit after tax was $832 million,
an increase on the $347 million result
from FY22, reflecting an increase in
insurance profit, improved returns on
our shareholders’ funds investment
portfolio and the benefit of the post-tax
$392 million reduction in the business
interruption provision this year. Excluding
the benefit of the business interruption
provision reduction, net profit after tax
would have been $440 million.
IAG’s FY23 underlying insurance margin
was 12.6%, lower than the 14.6% reported
in FY22, largely due to the impact of
short-tail claims inflation. The underlying
margin of 14.6% in FY22 also included a
COVID-19 benefit of lower claims frequency
and would have been 13.9% without this
benefit. The FY23 reported insurance
profit of $803 million equates to a reported
margin of 9.6%.
The result was achieved in a
challenging year.
Our businesses have had to respond to
some extreme weather events. The financial
year began with severe weather and floods
across New South Wales leading to almost
4,000 claims, mostly for storm damage to
homes, property and vehicles. Then New
Zealand suffered the devastating impacts
of the North Island floods and Cyclone
Gabrielle, within the space of three weeks in
early 2023. These are the second and third
largest events to ever occur in New Zealand.
We pride ourselves on our ability to support
our customers at their time of need, and this
was the case in these extreme events, as
well as in the everyday instances where we
support customers who experience loss.
Further, our teams managed operational
inputs of a rapid increase in inflation and
supply chain shortages in both materials
and labour.
Dividend
IAG remains strongly capitalised with total
regulatory capital of $5,073 million at
30 June 2023.
The strength of the Company’s capital
position, and the FY23 result, has enabled
the Board to announce an increased final
dividend of 9.0 cents per share, franked
to 30%, up from 5.0 cents per share in
FY22. The final dividend will be paid
on 28 September 2023 to shareholders
registered at 5.00pm Australian Eastern
Standard Time on 30 August 2023, and the
dividend reinvestment plan will operate.
This decision brings the full year dividend
to 15.0 cents per share, an increase of
36.4% from 11.0 cents per share in FY22.
The payout ratio of 83% of net profit after
tax excluding the after-tax impact from
releases from the business interruption
provision is in line with IAG’s stated dividend
policy to distribute 60–80% of net profit
after tax excluding the after-tax impact from
releases from the business interruption
provision in any full financial year.
Management and strategy
The company’s performance for FY23
reflects the focus Nick and his team
continue to apply to our strategy to
create a stronger and more resilient IAG.
The Board regularly reviews progress
against the strategic priorities to grow with
our customers; build better businesses;
create value through digital; and manage
our risks.
This year, given the challenges presented
by the operating environment (including
the inflationary impacts, higher perils and
higher reinsurance costs), we fully endorsed
management’s decision to prioritise
improvement in our margin in the near
term. We recognise that this will have some
impact on the overall customer growth
ambition. Nick explains this change in more
detail in his review on the following pages.
A sustainable focus
Our Company-wide approach to
sustainability ensures we continue
to address our most material
environmental, social and governance
(ESG) issues, connect our people
to purpose, and keep pace with the
evolving expectations of our customers,
communities and stakeholders.
We focus on climate and disaster resilience
because the increased frequency and
severity of extreme weather events has
a direct impact on our business and
our customers, and we have seen these
impacts this year.
IAG manages climate-related risks and
opportunities through its Climate & Disaster
Resilience Action Plan (Action Plan), which
commits us to net zero emissions by 2050.
In October 2022, we refreshed our
science-based targets for scope 1 and
2 emissions to align with the Paris
Agreement goal to pursue efforts to limit
the temperature increase to 1.5°C above
pre-industrial efforts.
4
IAG Annual Report 2023
Also in October, we released a Net Zero
Roadmap, setting out a transition plan
to support our work to achieve our net
zero commitment. The plan sets out steps
to reduce scope 1 and 2 emissions, as
well as the work required to understand
and measure priority scope 3 emissions
in our supply chain, underwriting
and investments.
Last year, I wrote about our Action
Plan commitment to have one million
Australians and New Zealanders take action
to reduce their risk from natural hazards
by 2025. Our aim is to build customer
and community climate and disaster
resilience by delivering and collaborating
on preparedness initiatives.
By 30 June 2023, 522,000 people had taken
steps to improve their preparedness by
engaging with campaigns such as IAG’s
Wild Weather Trackers in Australia and
New Zealand, the NRMA Insurance First
Saturday of the Season campaign, and the
IAG and Australian Red Cross Get Prepared
app. These activities are described in detail
in the Communities section of this report,
on pages 24–27.
More information about the Action Plan and
its focus areas is contained in the discussion
of our Environment outcomes on pages
28–32 of this report. In addition to our work
to protect customers and the community,
our ESG focus extends to diversity
employment targets for our people, and
the way we manage our supply chain.
We have targets to have women constitute
50% of our senior management roles,
and Indigenous employees to be
3% of our Australian workforce. This year’s
results are 45% and 1.2% respectively.
We published our third Modern Slavery
Statement in December 2022, and launched
Modern Slavery training modules to support
its application across the business.
Management of ESG issues is governed by a
Board-approved Social and Environmental
Framework, which was updated this year to
strengthen ESG governance.
To increase the measurement and
visibility of ESG, we have introduced
a 5% sustainability metric in the FY24 Group
Balanced Scorecard, focused on
management of scope 1 and 2 emissions.
Divisional Balanced Scorecards will also
include a 5% sustainability metric focused
on emissions management.
This year, the Board approved a refresh
of our Responsible Investment Policy.
We now aim to remove from our investment
portfolio companies that derive more
than 10% of their revenue from oil and gas
production, as well as those who derive that
level of revenue from thermal coal mining.
Our climate-related reporting aligns with
the recommendations of the Task Force
on Climate-related Financial Disclosures.
We will continue to evolve our approach
to ESG reporting in line with stakeholder
expectations and from FY24, will consider
the final recommendations on climate-
related disclosure from the International
Sustainability Standards Board.
Board renewal and diversity
This year, we further strengthened our
Board with the appointment of Wendy
Thorpe in July 2023. Wendy provides us with
additional insurance and other financial
services, technology, and transformational
change skills, supplementing those of
the existing Directors. Shareholders will
have the opportunity to meet Wendy and
learn more about her when she stands for
election at the 2023 annual general meeting
in October.
At the same meeting, two other Directors
will offer themselves for re-election after
retiring by normal rotation in accordance
with our Constitution; they are Simon Allen
and Jon Nicholson.
Our Board has an aspiration to achieve
gender equality. This year, we replaced
our previous Board gender diversity target
to have no less than 30% of Directors of
each gender with a new target of 40–60%
of either gender on the Board. In 2021,
40% of the Board, including our Chair, were
women. Since then, following resignations
and retirements, we’ve fallen marginally
below our target. Wendy’s appointment
takes the percentage of women on our
Board to 27% and we remain actively
focused on recruiting more female Directors
as we work to achieve our diversity target.
Conclusion
Your Company continues to demonstrate
a solid performance, as management
simplifies the business, focuses on strategy,
and successfully addresses external
challenges. Nick and his team are to be
commended for the results described in
this report – as are all those who ensure the
success of our Company, every day.
Thank you to my fellow Directors for
your ongoing guidance and insights, and
on your behalf, thank you to our investors
for your ongoing support.
Tom Pockett
Chair and Independent
Non-Executive Director
“Your Company continues
to demonstrate a solid
performance, as
management simplifies
the business, focuses
on strategy, and
successfully addresses
external challenges.”
IAG Annual Report 2023
5
CEO’S REVIEW
CEO’s review
I am pleased to report on the progress we have made
in a challenging environment.
Our strategy, organisational structure
and leadership team are focused on
driving performance in our core insurance
businesses. This is designed to simplify
what we do and resolve our legacy issues,
to allow us to build a stronger more resilient
IAG and deliver on our purpose to make your
world a safer place. In pursuing that plan,
we made some material changes and we
now have evidence to show that we’re set
up for success:
• Simplifying our brand structure,
and taking the NRMA Insurance
brand national, is helping us deliver
profitable growth
• Implementing an enterprise-wide
claims management system allows us to
capitalise on the scale of our business
• Rolling out technology that delivers
common pricing and policy
administration systems for personal
lines products across our Australia and
New Zealand businesses addresses
25 years of complexity following our
history of acquisitions
• Establishing our Intermediated Insurance
Australia Division led by an experienced
commercial insurance executive ensures
that our quality CGU and WFI brands
are delivering the returns that our
shareholders should expect from them
• Implementing Company-wide risk
management systems and a risk
culture significantly strengthens our
operating environment.
Operating environment
The Australian and New Zealand economies
have been extremely challenging, causing
us to manage:
• the sudden emergence of inflation,
immediately impacting our claims costs;
• a significant rise in natural perils costs as
climate change compounds the impact of
three years of La Nina weather cycle; and
• substantial and sustained reduction in
global reinsurance capacity, which has
materially impacted the Australian and
New Zealand insurance industry.
We are pricing for this challenging operating
environment and that has necessitated
significantly increased premiums. We
have remained mindful of the flow-on
impacts to our customers who are already
experiencing tightening household budgets.
We are committed to addressing climate
change within our own business, and to
helping our customers and communities
improve resilience and reduce risk. We are
an active participant in conversations with
government about mitigation solutions
including building codes, land planning
and planned relocation. We want to share
our knowledge and expertise so that we
can reduce the impact of extreme weather
events and, in turn, the costs of insurance.
In that context, we welcomed the
Australian Federal Government’s June
2023 announcement of nearly $400 million
in funding for key disaster preparedness
projects that will help to protect people and
communities from the impacts of severe
weather and natural disasters.
Despite the increases in premiums, we
are heartened by ongoing very high levels
of customer retention and the growth in
new customers. These are a tribute to the
strength and stature of our brands and
our customers’ confidence in the value
of what we do.
Results for FY23
In this challenging environment, we
achieved strong results for FY23:
• gross written premium grew by 10.6% for
the year, with strong contributions from
all our divisions;
• our net profit after tax was $832 million
compared to $347 million in FY22.
This includes the benefit of the post-tax
$392 million reduction in the business
interruption provision; cash earnings
were $452 million, a 112% increase from
the $213 million we achieved in FY22.
Cash earnings reflect the net profit after
tax adjusted for acquired intangible
assets and unusual items. Unusual items
in FY23 included the pre-tax release
from the business interruption provision,
an impairment to lease assets following
a review of IAG’s property requirements
and other smaller adjustments described
in detail in the accounts; and
• Group expenses remained flat at around
$2.5 billion, reflecting our ongoing focus
on financial discipline.
Commitment to strategy
We continue to be guided by our purpose,
and our strategy of creating a stronger and
more resilient IAG. We have four strategic
pillars, with associated ambitions1:
• Grow with our customers, with the
ambition to add one million additional
direct customers
• Build better businesses, with ambitions
to achieve $250 million in insurance
profit from our Intermediated Insurance
Australia business in FY24, and reduce
our operating expenses as a portion of
our premiums
• Create value through digital, with
$400 million in value from Direct
Insurance Australia claims and supply
chain cost reductions on a run-rate basis
from FY26
• Manage our risks, with our risk maturity
improved across the business.
Additionally, we have aspirational goals
to achieve a 15% insurance margin and
13–14% return on equity on a ‘through
the cycle’ basis.
This year, we made progress against all four
strategic priorities, and this is described
in more detail in the Strategy section on
pages 10–11, but I call out:
• adding approximately 132,000 customers
in our Direct Insurance Australia business
over the past 12 months;
• expanding our Motorserve and Repairhub
sites to successfully get customers’ cars
back on the road quicker;
• making significant progress in
simplifying our complex technology and
consolidating multiple systems; and
• progressing our AI motor total loss
capability, now used across our
businesses, to reduce claims cycle
times from weeks to days.
6
IAG Annual Report 2023
Given the operating environment over the
last couple of years and the significant
macro industry and Company challenges,
towards the end of FY23 we adopted what
we felt was a more realistic approach to
the timelines attached to the ambitions
and goals that support our strategy. We are
focused on:
• continuing to strengthen and apply our
pricing and risk management skills;
• reducing claims management costs;
• streamlining operating and
technology costs; and
• rolling out digitally-based insurance
options for younger people and
small businesses.
Delivering these elements will affect the
timing of our customer growth ambition,
extending the timing by one to two years
past FY26. Our ambition to have our
Intermediated Insurance Australia business
achieve at least $250 million in insurance
profit in FY24 remains on track.
The result is expected to deliver return
on equity and earnings per share that
will significantly improve returns to you,
our shareholders.
Executive changes
There were two changes to my Group
Leadership Team this year. In May, we
announced that our Chief Financial Officer
Michelle McPherson will retire by the end
of calendar year 2023. Michelle joined IAG
as Acting Group CFO in April 2020 and was
appointed CFO in November 2020. I thank
her for the important role she has played
in helping drive the business to achieve its
strategic goals during a challenging time
for the industry and economy, and wish
her all the best in her retirement. Our Chief
Insurance & Strategy Officer Tim Plant left
IAG on 30 June 2023 as we consolidated
group functions to move decisions to the
businesses, where they can be as close to
the customer as possible.
1 Refer to page 51 for more details on FY24 guidance and outlook and page 151 for further information on forward-looking statements and other representations.
Following Tim’s departure, the Strategy
function was moved to our Finance Division,
while Underwriting was transferred to the
Chief Risk Officer.
Supporting our people
We are grateful to all our people who are
key to our customers’ experience, and who
work tirelessly to support our customers
in extreme weather events, as well
as other experiences of accident or loss.
I am very proud that our overall employee
engagement score for FY23 was 74%, only
slightly lower than last year’s 77%, despite
the year’s challenges. We continue to
prioritise the safety and wellbeing of our
people, including offering support when
they need it. In our annual culture survey in
September 2022, 83% of our people agreed
that “IAG provides the support I need for
emotional wellbeing” and 90% agreed that
“My direct leader genuinely cares about
my safety and wellbeing”. Our Safety and
Wellbeing focus continues to ensure our
long term injury frequency rates remain
well below our targets in both Australia
(0.95 against a target of 1.47) and New
Zealand (0.67 against a target of 0.85).
Resolving our legacy issues
This year we continued to make significant
progress in resolving the legacy issues we
have been dealing with.
We took a prudent approach to the
potential liabilities for COVID-19 business
interruption exposure. After test cases
involving the legal interpretation of industry
policies, we continue to make good
progress in finalising customer claims, and
we continue to review, and reduce, the
provision. Based on the Court decisions and
communication with potentially impacted
customers, we have reduced the provision
by $560 million pre-tax during the year.
Our Company, and industry, has faced
legacy pricing issues. IAG has apologised for
this failure, and recognised its significance
and that this was unacceptable. Our focus
has been on putting this right for our
customers, as quickly as possible. Our
remediation is largely complete, with work
ongoing in our New Zealand business. Like
many companies we’ve had some payroll
remediation issues to deal with, and that
matter is also now substantially completed.
Finally, the BCC Greensill issue is still going
through the courts and unfortunately, will
do so for several years. We are defending
all these matters. Our response is
outlined in more detail in Note 2.2 to the
financial statements.
Conclusion
I acknowledge it has been a tough few
years for our industry, and our Company.
But we see several positive financial
signals; we have improved our underlying
performance; retention rates remain
very strong and we’re growing customer
numbers; and we have continued to invest
in our business, and in our people.
Guidance and outlook
Our confidence in the strength of our
underlying business is reflected in our
improved guidance for FY241 for low double
digit gross written premium growth, with
expected modest volume growth and
an increase in customer numbers; and
reported insurance margin guidance of
13.5–15.5%. The reported insurance margin
guidance is expected to deliver an insurance
profit of between approximately $1.2 billion
and $1.45 billion.
Nick Hawkins
Managing Director and
Chief Executive Officer
“We continue to be guided
by our purpose, and
our strategy of creating
a stronger and more
resilient IAG.”
IAG Annual Report 2023
7
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How IAG creates value
8
IAG Annual Report 2023
¡
IAG Annual Report 2023
9
HOW IAG CREATES VALUE
Strategy
Why is this important to IAG?
Our strategy creates a common
vision and direction for the
whole organisation.
IAG’s trusted brands, established supply
chain, deep data assets and financial
strength are key attributes, providing
competitive advantage.
Our long-term objective remains the
delivery of top quartile Total Shareholder
Return, with a sustainable growth profile.
To achieve this, we have set our strategy to
‘create a stronger, more resilient IAG’.
The strategy is underpinned by four
strategic pillars that provide focus, and
inform our operating model: grow with our
customers, build better businesses, create
value through digital, and manage our risks.
Grow with our customers
• Grow as Australians and New Zealanders
grow by delivering outstanding
personalised service when customers
need it most
• Focus the strength of our brands to
meet the evolving needs of consumers
and enable the next wave of growth in
small businesses across Australia and
New Zealand
• Increase our customer reach to make
the world safer for more Australians
and New Zealanders.
1 For more detail, refer to forward-looking statements and other representations on page 151.
We make your world
a safer place
Purpose
Strategy
People
Create a stronger,
more resilient IAG
Our people are the difference:
bringing our purpose to life and
delivering our strategy
Focus
Approach1
Ambitions1
Deliver outstanding personalised
service when our customers need
us the most
Grow with our
customers
• 1m additional direct customers
Manage our
risks
Actively manage capital and
risk in our business so we can
continue to manage the risks
in our customers’ lives
• Risk maturity assessed as Integrated
Build better
businesses
Focus on underwriting expertise,
active portfolio management and
pricing excellence
• $250m IIA insurance profit in FY24
• Reducing expense ratio
Create value
through digital
Create connected experiences
that seamlessly assist and reward
our customers as they unlock the
value of our network
• $400m value from DIA claims
and supply chain cost reductions
on a run-rate basis from FY26
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IAG Annual Report 2023
Build better businesses
• Help Australian and New Zealand
businesses by continuing to focus on
underwriting expertise, active portfolio
management and pricing excellence
• Evolve by investing in core competencies,
delivering consistent high quality
returns to shareholders and enhancing
competitive advantage.
Create value through digital
• Create connected customer
experiences that seamlessly assist
and reward customers
• Transform customer experience while
modernising core platforms and using
intelligent automation to capture value.
Manage our risks
• Manage the risks in IAG’s own business
so that we can continue to manage the
risks in our customers’ lives, by building
a strong, active risk culture and meeting
our obligations to the communities
we serve
• Invest in process, capability,
infrastructure and operational excellence
to create a stable, scalable and
efficient business
• Continue to have a strong capital
platform, ensuring our customers
are appropriately supported by our
financial strength.
Progress
~132k net customer
growth in DIA
Brand rationalisation
in WA and SA
Retention rates ~90% to 95%
in DIA motor and home
IIA FY23 insurance profit of $209m,
on track for at least
$250m insurance profit in FY24
Disciplined cost management with
admin ratio reduction of 90bps
Enterprise Platform rollout
ANZ personal lines on Enterprise
Platform from July 2023
Finalising pricing and
payroll remediation
Further business
interruption provision
reduction of
$200m in 2H23
Quota share
arrangements
locked-in, delivering
materially consistent
financial outcomes
Trade credit /
Greensill
IAG Annual Report 2023
11
HOW IAG CREATES VALUE
IAG’s sustainability approach
We have a responsibility to
manage the environmental,
social and governance (ESG)
risks and opportunities
impacting our business and
the communities in which
we operate. We align ESG
considerations to our broader
strategic ambitions, so that
we are generating long-term
value for our shareholders,
customers and communities.
Our ESG program of work ensures
we continue to act as a responsible
business, connects our people to
purpose, and keeps us on pace with the
evolving expectations of our customers,
communities and stakeholders.
Governance
This financial year, we strengthened
ESG governance through Board-
approved updates of both our Social and
Environmental Framework and Responsible
Investment Policy. The Policy refresh
expanded IAG’s aim to prohibit investments
in companies that derive more than 10% of
their revenue from thermal coal mining to
also include oil and gas production.
We have improved our risk governance
processes by adding specific ESG and
climate risk statements to our risk and
control architecture.
This brings consistency to how we assess
and manage ESG and climate risks and
opportunities and supports understanding
across the business.
Our governance framework is shown
in the Environment section of this report
on page 28, including the responsibilities
of our Board and Group Leadership Team
in overseeing and managing our ESG and
climate-related priorities.
Our performance
This report includes updates on progress
against our social and environmental
commitments. A consolidated view
of our greenhouse gas emissions reporting
is included on page 31 of this report.
A statement regarding third-party limited
assurance provided by KPMG is included
on page 151. KPMG's assurance opinion
is also available on our website at
www.iag.com.au.
12
IAG Annual Report 2023
We conduct an annual
materiality assessment to
inform our enterprise-wide
sustainability priorities,
strategy setting and risk
management processes.
Material topics
HOW IAG CREATES VALUE
Guided by the Global Reporting Initiative
(GRI) Standards, we completed a
comprehensive materiality assessment in
FY22. This financial year, we re-examined
the outcomes of that assessment with a
customer survey and a review of industry
and global socio-economic trends.
Engaging with our customers helps us to
understand if their priorities have changed
and where IAG is best placed to influence
the impacts of our material topics.
This work validated that our four material
topics remain consistent with the FY22
assessment: climate change; disaster
resilience and emergency response;
affordability and availability of insurance;
and trust and transparency.
Further details of our materiality
assessment process can be found
at www.iag.com.au.
Addressing our material topics
Material topic
Our response in FY23
Climate change
Risks and opportunities of a changing
climate, and the social and financial
impacts of natural disasters.
(see pages 28–32 of this report)
Alignment with SDGs: 13
• Published IAG’s Net Zero Roadmap, including
milestones and commitments
• Conducted climate-related transition risk analysis in
the New Zealand business to increase understanding of
future risks and opportunities
• Focused the FY23 annual stress test on climate-related
physical risks to help inform the impact on future
capital adequacy.
Disaster resilience and
emergency response
Community preparation, adaptation
and response to the impacts of natural
disasters and climate change.
(see pages 24–27 of this report)
Alignment with SDGs: 9, 11, 13
• Continued publishing the seasonal Wild Weather
Tracker, using claims data and community research
to build awareness for disaster resilience action in
Australia and New Zealand
• Relaunched the Australian Red Cross Get Prepared App,
which we co-created
• Acted as founding partner of the Australian Resilience
Corps, which has recruited more than 3,000 volunteers
to support community preparedness since launch
• Commissioned the Planned Relocation – Protecting
our Communities research report in Australia to
provide recommendations to help governments
and communities decide when a planned relocation
is necessary
• Put forward a three-step plan to the New Zealand
government with practical, concrete actions to increase
resilience and reduce flood risk.
Affordability and availability
of insurance
Inadequate insurance cover due to
affordability issues or a lack of suitable
insurance products.
Alignment with SDGs: 8
• Launched an NRMA Insurance account on WeChat to
support culturally and linguistically diverse customers
to access our products and services
• Introduced a pay-by-the-month option at no extra cost
for NRMA Insurance motor, home, boat and caravan
policyholders.
Trust and transparency
Erosion of confidence or trust in
institutions due to fraud, corruption
or other dishonest behaviour.
Alignment with SDGs: 8, 9
• Implemented Modern Slavery risk assessment ratings
into IAG’s integrated risk management system
• Provided mandatory Modern Slavery training
to key functions in the business to raise awareness
and lower risk, which 339 employees had completed
at 30 June 2023
• Delivered training to certain teams to build Indigenous
and Māori cultural awareness across IAG.
UN Sustainable Development Goals (SDGs)
8 – Decent work and
economic growth
11 – Sustainable cities
and communities
9 – Industry, innovation,
and infrastructure
13 – Climate action
IAG Annual Report 2023
13
HOW IAG CREATES VALUE
Overview
Helping customers manage
risk supports our purpose,
to make your world
a safer place
Customers
~132,000
Increase in customer numbers in
Direct Insurance Australia in FY23
$10,203m
Claims paid
(up 20% from $8,488m in FY22)
+45 AU
Customer Experience1
(+53 FY22)
+51 NZ
Customer Experience1
(+52 FY22)
1 Customer Experience as measured by
transactional net promoter score (tNPS) is an
internal measure of customer advocacy based
on experiences customers have had with us
across all customer journeys. We obtain this
information via surveys of our personal and
business insurance customers who have had
a recent interaction with IAG via assisted
or digital channels. The tNPS figures as at
June 2023 were calculated on a 12-month
rolling average.
The further roll-out of IAG’s enterprise-
wide technology Enterprise Platform in
FY23 has allowed us to simplify the range
of products we offer our customers and
increase the ways they can engage with
us about their policies and claims.
At the same time, our customers have
experienced considerable premium
increases as we have managed the costs to
our business of high inflation in our supply
chain, an increased number of extreme
weather events and higher reinsurance
costs driven in part by the significant
number of these events in recent years. To
help counter some of these increased costs,
we are working to improve our efficiency
and increase our use of digital solutions.
More broadly, we continue to work with
government on initiatives that will improve
community resilience and reduce risk. We
are an active participant in conversations
about mitigation solutions including
building codes, land planning and planned
relocation. We share our knowledge and
expertise so that we can reduce the impact
of extreme weather events and, in turn, the
costs of insurance.
Responding to extreme weather events
throughout the year has allowed us to do
what we do best: be there for our customers
when they need us most to help them
recover from the costs and impacts of
unexpected loss.
Customers engage with IAG through three
distinct business divisions, each of which
has different market segments and unique
customer propositions.
Direct Insurance Australia
Direct Insurance Australia is IAG’s largest
business division, and home to well-known
Australian consumer brands. We are in the
process of simplifying our brand portfolio
from eight to three go-to-market brands:
NRMA Insurance; RACV Insurance, via our
distribution relationship and underwriting
joint venture with RACV; and ROLLiN’,
which is a digital brand targeted at
younger customers.
The roll-out of the Enterprise Platform has
enabled us to streamline the home, motor
and small business products we offer, from
58 down to 14 individual products.
Inflation and premium increases
The year 2022 was one of the wettest
periods ever experienced in Australia, with
more than nine major weather events and
over 200 rainy days. Our Direct Insurance
Australia business normally receives around
35,000 to 40,000 motor claims a month
and typically repairs about 4,500 damaged
homes a month. Last year’s weather saw
our claims volumes more than double these
levels, placing pressure on our business,
and the whole industry.
Our business-as-usual claims were also
affected by global and local inflation.
Combined with higher reinsurance costs,
these contributed to increased premiums.
We are heartened to have strong customer
retention rates despite these increases.
Property premiums have similarly been
affected by inflation, increased natural
perils and rising reinsurance costs.
Efficiency gains in repairs
Raising premiums has not been our only
response to addressing the cost pressures
we face. Within our motor claims supply
chain, we have increased capacity and
use of the IAG repair network to deliver
better customer outcomes with more
cost efficiency.
Our Motorserve business receives claims,
and triages these into our partner repairer
network. More than 15% of our total
claims are now repaired by our own
Repairhub shops.
This provides us with greater insight into
pricing for motor claims and strengthens
our competitive advantage.
We have also focused on improving supply
chain performance in our property repairs.
We have extended our contracts and our
long-term relationships with our suppliers
to provide us and our builders with better
cost certainty. We are focused on reducing
and closing outstanding claims as quickly
as possible.
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IAG Annual Report 2023
Digital and data-led innovation
The current operating environment
has sharpened our focus on digital and
data-led innovation to improve customer
experience, reduce claims handling time
and deliver more cost efficiency. NRMA
Insurance online now accounts for 43% of
new business sales, and 40% of renewals,
up from 37% and 39% respectively in FY22.
Using our ClaimsTracker service, customers
can lodge and track their claims digitally.
More than 600,000 customers have used
this service since its launch in 2022, creating
over one million individual interactions.
More than 36% of claims are now
lodged online.
We can use automated intelligence to
assess the vehicle in a lodged claim and
predict if it is a total loss. If it is, customers
can opt into a self-settlement process. Total
losses make up about 10% of our claims
volume. We have assisted 30,000 customers
with ClaimsTracker since 2022, accurately
predicting 4,000 total losses. Average total
loss claims settlement time is now hours,
not days, with our fastest lodgement
achieved in 27 minutes from lodgement
to settlement.
We are now rolling this capability out into
our Intermediated Australia and New
Zealand businesses.
Similarly, our Virtual Assist product has
reduced property claim assessment
times by 40%.
Focused on our customers
In this current operating environment,
our key priority has been to focus on our
existing customers. Our customer numbers
grew by approximately 132,000 in FY23,
after growth of approximately 81,500 in
FY22, with much of the growth coming from
increased retention of existing customers.
We have increased the number of products
sold per customer to 2.1 across our
portfolio, and strengthened our product
renewal rates, now 96% in property and
91% in motor.
Over time, we have built a loyal customer
base by recognising both their tenure and
the number of products they hold.
We have extended this recognition through
our NRMA Insurance rewards program,
Help Hub, by launching incentives and
offers that help promote risk reduction.
The Help Hub encourages customers to
participate in risk mitigation activities to
help them control the things they can,
prepare for the things they can't, and
reward them in the process.
The success of our customer-focused
approach is shown by three Canstar Awards
won by NRMA Insurance this year, for:
• Most Satisfied Customers NSW – Home
Insurance 2023
• Most Satisfied Customers NSW – Car
Insurance 2023 (also winning this
category in 2022)
• Outstanding Value SA – Car
Insurance 2023.
The Canstar Customer Satisfaction Awards
are decided by consumer surveys; these
showed high scores for NRMA Insurance
in the Home Insurance NSW and Car
Insurance NSW categories for 2023 across
customer service, product coverage
and communication.
The Canstar award for Outstanding
Value Car Insurance is provided in each
Australian state and territory to recognise
a consistently strong offering across
the entire market. Canstar’s research
team assessed the pricing and features
of 41 providers, across 42 profiles, to
determine which ones offered the best
value to consumers in each state, and
NRMA Insurance came out on top in
South Australia.
In addition to the awards presented to
NRMA Insurance, Canstar named ROLLiN’
Insurance the 2023 Car Insurer of the
year for Outstanding Value in Australia,
New South Wales, Queensland and
Western Australia.
Targeting new customers
In FY23, NRMA Insurance began trialling
a program to engage with culturally and
linguistically diverse customers through
a WeChat channel directed at Chinese
Australians. As at 30 June 2023, the channel
had 2,000 followers and the eight articles
published on the site attracted over
6,100 reads. The WeChat communications
program is supported by two webchat
agents responding to general enquiries
in Chinese.
More than 15% of our total claims are now repaired by our own Repairhub shops, where we have a fixed repair cost for every vehicle.
IAG Annual Report 2023
15
HOW IAG CREATES VALUE
Intermediated Insurance
Australia
Our Intermediated Insurance Australia
division provides insurance products to
personal customers, small to medium
enterprises, and agriculture, commercial
mid-market and corporate customers.
It also distributes products through
partners, underwriting agencies,
regional sales representatives,
authorised representatives and
most significantly, brokers.
Like the Direct insurance businesses, our
Intermediated business has significantly
increased premiums to recover large
increases in costs resulting from more
frequent and damaging weather events,
higher reinsurance costs, and higher-than-
anticipated claims inflation.
To improve efficiency, remove frictional
costs and provide more affordable
products, we are investing in technology to
deliver strategic capability to our business
over the medium term.
The investment is delivering new pricing
tools to give more detailed and accurate
pricing for our liability and agricultural
portfolios, and for extreme weather events.
In 2023, CGU entered into a partnership
with ANZ to become the general insurance
underwriter for ANZ, providing home,
landlord, and motor insurance products.
Thanks to our Enterprise Platform, ANZ
customers will have a digital experience
at the point of sale, and throughout their
insurance journey.
Within claims, we are aiming to create
efficiencies and simplify the claims
transaction, benefiting our customers,
distribution partners, and our business.
In FY23, we continued to add features to
our CGU Claims Broker Portal, enabling
full digital lodgement and allocation. We
are using the capability and success of this
portal within our WFI business.
We have pursued business improvements.
We have implemented more structured
portfolio management program practices,
including bi-annual reviews to monitor all
customer portfolios against target metrics.
As a result of improved portfolio
management practices we have exited
certain segments and taken action on
distribution costs as we continue to
shape the product portfolios and focus
on improving customer outcomes.
We have also addressed the performance of
our long-tail portfolios which were heavily
influenced by the rise in worker-to-worker
injury claims resulting in deterioration of
the FY22 valuation. Action taken includes
a ground-up review of rates, as well as the
decision to exit certain segments such as
primary construction liability.
IAG New Zealand
IAG is New Zealand’s largest general insurer,
serving over two million customers through
two broad business units:
• the intermediated Business Division,
which serves brokers under the NZI
brand; and
• Consumer Division, which has the AMI
and State direct brands. AMI is the
largest brand in New Zealand and State
is the third-largest. This division also
houses our Partner brand, where we
provide products to three of the four
largest banks.
A year of extreme weather
New Zealand experienced the devastating
impacts of the North Island floods, and
Cyclone Gabrielle, within the space of three
weeks in early calendar year 2023. These are
the second and third largest events to ever
occur in New Zealand.
As well as affecting many communities,
the combined impact resulted in an
unprecedented number of claims – just over
50,000 from the two events. As of 30 June
2023, approximately 40% of these claims
had been closed, including over 95% of
motor claims and around 75% of contents
claims. Settling these claims is a big focus
for us as closing them faster means our
customers are supported.
Overall claims volumes from weather
related events in FY23 were three times
higher than in FY22.
We pride ourselves on our ability to support
our customers at their time of need, as we
have done here. We started claims hubs
across the impacted areas, we were in the
communities first, and we continue to be
present on the ground.
We have continued to collaborate with
government and communities on our
climate response. We hope our focus on
the important issue of managed retreat in
New Zealand, along with risk-based pricing
and our leadership on risk mitigation, will
play an important role in helping ensure
New Zealanders can continue to access and
afford the protection of insurance.
Customers
WFI has refreshed its brand via an “Insurance you can shake hands with” campaign
that highlights the way WFI people build a relationship with their customers.
16
IAG Annual Report 2023
Challenging external environment
New Zealand customers have experienced
a challenging external environment.
In addition to the weather events, IAG
has faced higher claims frequency and
increased costs.
At the same time, motor claims have
returned to pre-COVID-19 levels. There
has also been a sustained rise in claims
inflation, caused by increased costs
for parts, paint and non-contracted
labour; more vehicles being enabled with
technology and costing more to repair; and
higher reinsurance costs.
In our home and building policies,
inflation has been driven by higher
natural perils allowances, and increased
reinsurance costs.
While we have had to increase premium
prices to address these costs, we are
conscious of the affordability challenge
facing our customers and have responded
in other ways. These include managing our
administration costs, and efficiency and
automation initiatives.
Customer focused
Repairhub continues to provide our
customers with a first-class experience.
The business has a high net promoter
score of +93 and industry-leading repair
turnaround times.
We launched two new Repairhub sites
in FY23, including our first site on the
North Shore of Auckland (Wairau Valley).
Expanding the Repairhub model into
metropolitan areas is a core part of
IAG New Zealand’s strategy to Build
Better Businesses.
Since acquiring full ownership of First
Rescue in FY22, we have expanded our
Roadside Rescue to existing customers and
begun offering it as a stand-alone service.
We have also continued to transform and
simplify our supply chain, reducing cost and
increasing value. This year, we simplified our
repairer network down to 230 repairers, and
we continue to invest in these businesses,
and simplify our process for them. In 2023,
we launched an automatic assessment tool
to speed up and simply our motor repairers’
assessment approval process, which also
speeds up the process for our customers.
To create further efficiency in our supply
chain and help reduce the costs for
motor vehicle repairs, we have signed a
contract with Partly, an innovative New
Zealand start-up focused on optimising
the marketplace for replacement auto
vehicle parts.
Our customer focus led us to reignite
our retail presence by opening our first
customer-facing site since 2020 in Auckland.
To meet our broker and commercial
customers’ evolving needs, our NZI
business continued to expand its value-
added services. These include personalised
services for businesses with more complex
needs, including value-add risk advisory
services. Here, we sit down with our
customer and the broker outside of renewal
time to consider how we can help them to
reduce certain risks.
In FY23, NZI launched an electrical
inspector’s program to help commercial
customers protect their businesses against
some of the leading causes of commercial
electrical fires.
We also launched our Fleet Fit program,
which offers 14 different products that
can be tailored to help commercial motor
customers improve fleet safety and
performance to help reduce the likelihood
of making a claim in the first place.
Customers appreciate the assurance the
program offers, and as at 30 June 2023
96% of customers that participated in the
program were retained.
Digital and data-led innovation
In response to customers’ evolving needs
and desire to interact with us where and
when its suits them, we continued to see a
shift to digital interactions in FY23, including
a 12% increase in sales through digital
channels for our Direct brands. By the end
of the financial year, a record 37% of claims
were lodged digitally.
We expanded our digital connectivity to NZI
in 2023, with the launch of our first online
broker connection.
Both our State and AMI apps achieved
double digit growth in FY23. To further
improve our claims app experience, we
launched ClaimsTracker for motor vehicle
claims in February 2023. As at 30 June 2023,
it had recorded 39,000 customer visits
and a 33% increase in customers booking
a repairer online. As well as being able to
lodge and track their claim through the app,
customers can use integrated First Rescue
services to book towing through the app.
We continue to simplify our operating
environment and automate our processes
where possible. In FY23 this approach
delivered 167,000 hours of “saved and
avoid” work, and resulted in 167 products
being decommissioned.
Pictured are our claims team members Charmaine Harding (EQC team), Robyn Hogg, Angela Price, Caro Emile and Graeme Duncan
at the Trafalgar Centre, Nelson community hub in August 2022.
IAG Annual Report 2023
17
HOW IAG CREATES VALUE
Shareholders
Overview
A responsible business
creating sustained return
on investments
10.6%
Gross written premium growth
$803m
Insurance profit
12.6%
Underlying insurance margin
597,547
Shareholders as at 30 June 2023
In the face of a challenging operating
environment, IAG delivered a solid
performance for FY23, achieving strong
gross written premium growth and
progress in all four strategic priorities:
customer growth, building better
businesses, creating value though
digital, and managing risks.
FY23 results
Reported FY23 gross written premium
increased by 10.6% to $14,729 million.
Our underlying insurance margin is the
reported insurance margin adjusted for
prior year reserve releases or strengthening,
natural perils claim costs above or below
related allowances and credit spread gains
or losses.
Our FY23 underlying insurance margin was
12.6%, lower than the 14.6% in FY22 due
to the impact of short-tail claims inflation.
The underlying margin of 14.6% in FY22
included a COVID-19 impact of lower
claims frequency and would have been
13.9% without this benefit.
The reduction in the underlying margin
reflects a combination of influences.
On the positive side:
• an increase in the underlying investment
yield on technical reserves to 4.3%
(FY22: 1.8%); and
• an improvement in the expense ratio
of 30 basis points.
These positive factors were more than
offset by:
• around 120 basis point impact from the
increase in the natural perils allowance
from $765 million to $909 million; and
• around 250 basis point increase in
the claims ratio due to inflationary
impacts driving a significant increase
in the average claims size of motor and
home claims.
The reported insurance profit of
$803 million in FY23 (FY22: $586 million)
equates to a reported margin of 9.6%
(FY22: 7.4%), in line with our guidance of
around 10%. In addition to the underlying
margin influences outlined above, this
included:
• unfavourable net natural perils costs of
$297 million above our original allowance
of $909 million (FY22: $354 million
above allowance);
• a $37 million impact from strengthening
of prior year reserves (FY22: $172 million);
and
• a positive impact from narrowing
of credit spreads of $85 million
(FY22: negative $45 million).
FY23 Reported
GWP growth
IIA
portfolio
exits
Multi-year
workers' comp
Foreign exchange
Higher Emergency
Services Levy
FY23 Underlying
GWP growth
10.6%
0.8%
-0.6%
0.6%
-0.3%
11.1%
FY22
Underlying
margin
FY22
COVID-19
benefit
FY22
Underlying
margin
ex-COVID
Increased
perils
allowance
Underlying
claims ratio
Expense
ratio
Investment
yield
FY23
Underlying
margin
Reinsurance
reinstatements
FY23
adjusted
underlying
margin
14.6%
-0.7%
13.9%
-1.2%
-2.5%
0.3%
2.1%
12.6%
0.8%
13.4%
FY23 gross written premium
FY23 underlying insurance margin
18
IAG Annual Report 2023
Net profit after tax of $832 million
(FY22: $347 million) represents a diluted
earnings per share of 32.20 cents
(FY22: 13.33 cents). This included the
benefit of the post-tax $392 million
reduction in the business interruption
provision.
Cash earnings of $452 million are up
112% (FY22: $213 million). Cash earnings
reflect the net profit after tax adjusted for
acquired intangible assets and unusual
items. Unusual items in FY23 included
the pre-tax release from the business
interruption provision, an impairment to
lease assets following a review of IAG’s
property requirements and other smaller
adjustments including profit adjustments
on the sale of SUU and AmGeneral, and
customer refund provision adjustment.
Divisional highlights
Direct Insurance Australia
GWP Growth
Underlying margin
1H22
2H22
1H23
2H23
19.2%
13.2%
18.2%
21.8%
3.3%
5.8%
9.0%
10.9%
Direct Insurance Australia reported gross
written premium of $6,640 million in FY23,
an increase of 10.0% over FY22. Growth
was driven by rate increases to address
claims inflation, an increased natural
perils allowance and higher reinsurance
costs. Volume growth was 1.2% against
FY22, primarily driven by CTP NSW and
Home portfolio. Strong and steady
retention levels remain a key feature of the
business’ performance.
Direct Insurance Australia’s underlying
margin of 15.7% reflects the impact of
higher claims inflation, with a delay in the
earned-through effect of higher premium
rates. The comparative FY22 result of
20.5% included COVID-19 benefits due to
lower motor claims frequency. Excluding
COVID-19 benefits, the underlying margin
in FY22 was approximately 19%.
The reported margin of 14.5% was
impacted by natural perils $74 million above
the allowance, and reserve strengthening
of $19 million which was partially offset by
gains of $46 million from a narrowing in
credit spreads.
Intermediated Insurance Australia
1H22
2H22
1H23
2H23
GWP Growth
Underlying margin
5.1%
5.7%
9.8%
5.0%
8.9%
3.2%
7.8%
16.2%
Intermediated Insurance Australia reported
gross written premium of $4,805 million in
FY23, a 12% increase compared to FY22.
The business delivered an insurance profit
of $209 million in FY23. The key drivers of
the improvement in the reported profit
relative to FY22 ($103 million loss) were
lower natural peril costs, lower prior year
reserve strengthening and a benefit from
credit spreads narrowing.
Intermediated Insurance Australia’s
underlying margin continued to improve
despite the inflationary impact on
short-tail Home and Motor claims.
The 7.7% underlying margin in FY23
(5.0% in FY22) demonstrates the
progress the business is making towards
its insurance profit target of at least
$250 million in FY24.
The key driver of the underlying margin
improvement was an improvement in
investment yields, and a lower expense
ratio which more than offset a deterioration
in the underlying loss ratio.
New Zealand
A$ GWP Growth
NZ$ GWP Growth
Underlying margin
1H22
2H22
1H23
2H23
16.8%
13.2%
13.8%
16.8%
8.3%
5.9%
7.1%
8.1%
3.9%
9.1%
15.6% 15.3%
New Zealand’s gross written premium of
$3,284 million grew 9.8% and was impacted
by the weak New Zealand dollar in the first
half of the financial year. In local currency
terms, premiums grew by approximately
12% in FY23 to NZ$3,587 million. After
allowing for the estimated impact of the
Earthquake Commission cap change, local
currency gross written premium grew by
13.8%. The growth was rate-driven with
overall volumes slightly down on prior year.
New Zealand achieved an insurance
profit of $44 million in FY23, compared to
$220 million in FY22. This translated to a
reported insurance margin of 2.4% (FY22:
12.8%), reflecting the significant impact
of the Auckland flooding and Cyclone
Gabrielle events in the second half of the
financial year.
The FY23 underlying margin of 13.5%
(FY22: 16.8%) largely reflected higher
underlying claims and reinsurance costs.
Capital position
IAG remains strongly capitalised, with
total regulatory capital of $5,073 million
at 30 June 2023. The CET1 ratio is IAG’s
primary capital measure and continues
to exceed targeted levels at 1.12 times the
Prescribed Capital Amount. This compares
to a targeted range of 0.9 to 1.1 times and
a regulatory minimum requirement of
0.6 times.
Dividend
The Board has determined to pay a final
dividend of 9.0 cents per share, franked
to 30%. The final dividend will be paid
on 28 September 2023 to shareholders
registered as at 5.00pm Australian Eastern
Standard Time on 30 August 2023.
This brings the full year dividend to
15.0 cents per share, which equates to
a payout ratio of around 83% of reported
net profit after tax, excluding the after-tax
impact from releases from the business
interruption provision.
IAG’s dividend policy is to pay out
60% to 80% of net profit after tax excluding
the after-tax impact from releases from
the business interruption provision.
Share buy-back
On 17 October 2022, IAG announced that
it intended to buy back up to $350 million
of its ordinary shares via on-market
purchases. At 30 June 2023, approximately
$123 million had been paid for 24,554,658
shares. The share buy-back commenced
in November 2022 and currently has a
proposed end date of 16 October 2023.
IAG intends to extend the proposed
end date of the share buy-back by up
to 12 months.
More details about our FY23 financial
performance are set out in the Operating
and Financial Review on pages 43–53 of
this report.
IAG Annual Report 2023
19
HOW IAG CREATES VALUE
People
Overview
Our people help bring our
purpose to life and deliver
our strategy
74%
Engagement score reported in our
FY23 annual culture survey1 (slightly
down on the 77% result from FY22)
0.95
Lost time injury frequency rate
(Australia)
0.67
Lost time injury frequency rate
(New Zealand)
142,772
Recognition moments to our people
across IAG (up 13% from FY22)
1 Based on our December 2022
annual culture survey.
People are key to serving our customers
and achieving our business priorities.
To attract and retain the best people,
we are investing in technical capability,
leadership development and ensuring we
offer the right experience for our people.
IAG is building a culture that will help
us stand out in today’s competitive
employment market. The values, expected
behaviours, and beliefs that define
our culture are set out in The IAG Way,
shown below.
We assess our culture through annual
surveys and in-depth listening with
our people.
We are focused on three areas:
• Future readiness: attracting and
retaining talented people, and building
the capability we need for the future.
• Wellbeing, inclusion and belonging:
covering diversity, inclusion and health
and safety priorities that are increasingly
important to employees.
• Exceptional experience: providing a
compelling employee experience for all
our people and managing our people risk.
Future readiness
We have identified five leadership
capabilities that will help us achieve
our growth strategy, build future leaders
and sustain a performance culture.
The capabilities are inspirational
leadership; psychological safety;
constructive challenge; enterprise
thinking; and play to win.
In November 2021, we launched two
multi-year immersive programs, partnering
with industry and leadership experts to
build and broaden capabilities and skills
across our circa 370 senior leaders. Early
measures show positive shifts in mindset
and behaviour.
To minimise the risk of losing key people,
and support their retention, we have a
formal approach to reviewing succession,
identifying potential talent and creating
targeted development plans.
Internships through CareerTrackers and
CareerSeekers, and our partnership
with Google recognising Google Career
Certificates, are helping us attract
new people.
Our graduate strategy supports our future
workforce and helps address talent scarcity.
We refined the strategy in FY23 to better
attract the technical talent and future
skills we will need. As a result, a record 71
graduates were offered places with IAG
from more than 2,000 applicants.
To support our people’s career aspirations
we launched the IAG Academy in 2022
to provide multi-channel development
opportunities. We also launched our
first careers week, Brilliant Me: activate
your brilliance, hosting over 80 events
that attracted 10,000 registrations
to participate.
The IAG Academy offers learning
experiences in Customer, Digital & Data,
Insurance, Leadership and Risk faculties.
Courses provide our people with career
pathways, improved capabilities, and new
skills to suit the changing workforce.
Together, we do right
by the people who
count on us.
Our behaviours
What we aim
to demonstrate
every day.
Our values
The beliefs that we
as a Company
stand for.
Our mindset
It unifies us, defines us
and shapes our approach
to everything we do.
Our purpose
Why we exist and
the value we bring
to the world.
The IAG Way
Our
mindset
20
IAG Annual Report 2023
Wellbeing, inclusion
and belonging
We foster an inclusive culture where we
respect and value the different experiences
of people. Our diversity, inclusion and
belonging strategy has three pillars:
• Diversity: build a diverse workforce that
reflects our customers and community
• Inclusion: maintain an inclusive culture
that values and celebrates difference
• Belonging: enable a safe and well
environment so we can bring our
whole selves to work.
In November 2022, we replaced the
Diversity, Inclusion and Belonging
Framework that sits under our diversity,
inclusion and belonging strategy with the
Diversity, Equity and Inclusion Policy to
increase clarity and accountability around
roles, responsibilities, expectations and
commitments. We launched mandatory
diversity, equity and inclusion training
for all our people in February 2023. The
training aims to improve understanding and
capability, enable equitable and inclusive
customer engagement, and further
enhance our people experience.
Gender equity and pay parity
Our annual gender pay equity assessments
include ‘like for like’ role analysis across
the Company, comparing the pay of males
and females in roles substantially similar by
type, function and level.
Our analysis indicates that gender pay
gaps by level are largely the result of
higher representation of females in lower
level and lower paying roles, and higher
representation of men in more senior and
higher paying roles.
In May 2023, IAG hosted a CareerSeekers New Australian Internship Program Annual Spotlight event to showcase CareerSeekers
interns, their journeys and achievements. CareerSeekers is an organisation that provides refugees and asylum seekers with the
opportunity to gain professional work experience through an internship, and IAG has partnered with the organisation since 2019.
IAG Annual Report 2023
21
HOW IAG CREATES VALUE
Diversity targets
We have two measurable diversity targets:
• To have women occupy 50% of senior
management roles.
• To have Aboriginal and Torres Strait
Islanders represent 3% of our Australian
employees.
While we were not successful in achieving
these targets by the original date of FY23,
we continue to make progress towards
them, and we have extended these targets
to FY24 and FY25 respectively. Our FY23
performance against these targets
is detailed below.
Women in senior management
We define senior management roles as
our Group Executives, Executive General
Managers and the people who report
directly to them. More broadly, women
are 60% of our total workforce.
Women occupied 45% of senior
management roles at the end of FY23
(compared to 44% in FY22).
To help us achieve our target, we continue
to focus on career development, and on our
Game Changers program which develops
our emerging female leaders.
Further information on gender diversity
and our progress towards our Diversity,
Equity and Inclusion targets is available
in our FY23 Corporate Governance
Statement (in the Results and Reports
area of our website, www.iag.com.au) and
in our Workplace Gender Equality report
(available in the Careers area of our website,
www.iag.com.au).
Aboriginal and Torres Strait
Islander employment
Aboriginal and Torres Strait Islanders were
1.19% of our employees (or 101 employees)
at the end of FY23. The extension of our
Aboriginal and Torres Strait Islander
employment target of 3% of our Australian
employees from FY23 until FY25 aligns
with the release of our Reconciliation
Action Plan.
To progress towards our target, we engaged
two First Nations recruitment partners,
IPA and Pipeline Talent. We partner with
CareerTrackers in Australia and First
Foundation and TupuToa in New Zealand
to provide internships to high school and
university students.
This year, we worked with our partners at
BlackCard, Arrilla, The Healing Foundation
and Jawun to improve cultural education
and awareness across the Australian
business. We believe this will help us
build a stronger culture of inclusion.
IAG New Zealand has worked to improve
cultural diversity and support for Māori
employees through our Māori Strategy,
He Rautaki Māori. The strategy focuses
on increasing Māori and multi-ethnic
representation in our workforce. We
conducted a He Rautaki Māori (Te ara ki tua)
survey to assess people’s experience and
understand how it can be improved.
Inclusion and accessibility
IAG’s workplaces are acknowledged as
supportive, productive and inclusive for
LGBTIQ+ people. In 2022, we were awarded
Bronze status in the Australian Workplace
Equality Index and achieved the top
category across all sections of the Rainbow
Tick Certification in New Zealand.
IAG completed the Australian Network
on Disability (AND) Access and Inclusion
Index assessment for the second time in
FY23. The Index supports organisations to
identify, measure and improve disability
inclusion and reduce accessibility barriers.
We significantly improved our result this
year and were named one of the top 10
performers in this year’s results.
Through AND, we have been actively
involved in the Positive Action towards
Career Engagement (PACE) and Stepping
Into internship programs. The PACE
mentoring program builds disability
confidence, develops leadership skills
and tackles unconscious bias through
supporting AND member company
employees to mentor a jobseeker with
disability. IAG has supported 23 mentees
over four cohorts of the PACE mentoring
program, with nine mentees completing
the program last year.
Thirty-nine interns have participated in
the program so far. This year, IAG became
a founding member of AND’s Alumni
Connect program.
People
IAG hosted the inaugural AND Alumni networking event in May 2023. Photographed
at the event were (L to R): Neil Morgan, Chief Operating Officer, IAG; John Gerloff,
Principal, Journey Lead IAG (Accessibility champion); Isabel Heiner, Program Manager
Australian Network on Disability; and Deb Heron, Stepping Into Alumni and Regional
Manager QLD/NT at Ability First.
22
IAG Annual Report 2023
Health, safety and wellbeing
This year we started The Good Work
Design Project to create a mentally healthy
IAG by designing work that prevents
harm, promotes wellbeing and supports
productivity. Our people’s psychosocial
health was a focus before COVID-19
and became more critical following
the pandemic.
The project is already delivering benefits for
our people and customers. After the pilot
program was completed in November 2022,
we changed productivity targets for teams
managing vulnerable customers. Teams
reduced the average time to close these
claims from 60 to 20 days.
This year we appointed Sonder to provide
our Employee Assistance Program,
supporting our holistic wellbeing approach.
Sonder gives our people, their families
and friends free access to confidential
physical, medical and mental health care
from registered nurses, wellbeing experts,
psychologists and in-person responders
who are ready to assist 24 hours a day,
seven days a week.
IAG promotes a flexible, hybrid approach
to work guided by our business outputs
and outcomes. Our people are encouraged
to work in a way that supports our
customers, provides the ability to connect
and collaborate and provides them with
flexibility. Based on feedback in our annual
culture survey, 88% of employees feel they
have the flexibility they need to manage
work and commitments.
Exceptional experiences
We gather feedback and measure employee
engagement and our culture through our
culture surveys. Our cultural aspiration
is to be purpose led, risk intelligent and
customer centric.
The average score for IAG employee
engagement was 74%, down slightly on the
FY22 average of 77%. This falls within the
range for achieving, and represents a good
result given the operating environment.
To create an exceptional people experience
and lift engagement, we streamlined the
onboarding experience and celebrate new
employees’ first 30 and 100 days with IAG.
Our Shout Outs | He toa takatini recognition
program embeds a culture of appreciation.
Since we launched the program in 2020, our
people have logged more than 300,000 acts
of appreciation. Analysis of FY23 data found
a strong link between people receiving
regular appreciation and improvements
in engagement and performance.
Our people enjoy the newly refreshed Brisbane office.
This year we started The Good
Work Design Project to create
a mentally healthy IAG by
designing work that prevents
harm, promotes wellbeing and
supports productivity.
IAG Annual Report 2023
23
HOW IAG CREATES VALUE
Supporting more
resilient communities
As climate change continues to increase
the frequency and severity of extreme
weather, we see first-hand the impact it is
having on our customers and communities.
By supporting our customers to be more
resilient to extreme weather, we can help
reduce the impacts physical climate risks
have on them and our business.
We share our claims data analysis and
extreme weather insights through targeted
research and brand-led initiatives, including
the NRMA Insurance Wild Weather Tracker.
This helps people to understand their risk,
suggests actions they can take to be better
prepared, and provides access to tools and
resources that help them put these actions
into place.
We cannot deliver this change alone and
have a long history of partnering with
experts, including the Australian Red Cross,
South Australia State Emergency Service,
Resilient Building Council, Australian
Resilience Corps, GIVIT, and Habitat for
Humanity in New Zealand.
Building awareness and
risk understanding
Understanding local weather risks is
a crucial first step to making informed
decisions on how to prepare. Consumer
research in the NRMA Insurance Wild
Weather Tracker (Tracker) in Australia
and its equivalent in New Zealand
reveals increasing concern about wild
weather. 77% of Australians and 83% of
New Zealanders said they are worried about
the increasing frequency and severity of
wild weather impacts. The Trackers use
IAG’s claims analysis data and consumer
research to help communities understand
their risk. After each storm season, an
updated Tracker is released to highlight the
ongoing impact of storms, floods, bushfires
and other extreme events, reaching an
estimated nine million people.
By building awareness and understanding,
we aim to prompt people to take action.
The Trackers share examples of simple
steps people can take to be more prepared.
However, as Figure 1 from the Summer
2022–23 Australian Wild Weather Tracker
shows, translating awareness into tangible
actions is challenging, with the gap
between intention and action growing.
We know that we can create more resilient
communities by helping to close that gap
through our preparedness campaigns.
In New Zealand, the latest edition of the
Wild Weather Tracker also reveals an
opportunity for us to uplift preparedness
action. We engaged independent
market research to understand levels of
preparedness before and after the North
Island floods and ex-Tropical Cyclone
Gabrielle in early 2023. Figure 2 shows
that while some people are responding to
severe weather warnings and taking action,
there is a gap that we are working to help
close. By sharing our claims analysis and
research alongside simple actions people
can take, we are supporting our customers
to get prepared.
Figure 1 – intention to prepare
vs taking action (%)
Figure 2 – community preparation for
New Zealand North Island flood
Communities
Overview
We help to build more
resilient communities
$10m
Community investment
(FY22: $15.2 million). Our FY22
investment was elevated due to
the extra support we provided
to communities impacted by the
pandemic and extreme weather events
through our NRMA COVID-19 Relief
Program and NRMA HELP package
9,290hrs
Volunteered by our people
(FY22: 2,760 hours)
23
Indigenous suppliers
1,280
Trees planted during
Resilience Day
6,483m2
Bushfire fuel cleared during
Resilience Day
1.4m
Urgently needed essential items
provided through the GIVIT COVID-19
Relief Program, funded by NRMA
Insurance, to people impacted
by the pandemic and extreme
weather events.
Planned to take steps to prepare during the season
Took steps to prepare during the season
56%
46%
48%
54%
49%
40%
37%
39%
37%
63%
66%
59%
52%
55%
59%
52%
2021
2022
2023
Spring
Summer
Autumn
Winter
Upper North Island
Lower North Island
64%
36%
65%
35%
Didn’t take precautions
Took precautions
24
IAG Annual Report 2023
Partnering to drive
action at scale
We have a greater impact when we work
with our partners to develop programs that
help our customers and the community
prepare for, respond to, and recover from
extreme weather.
As an example, included in Figure 3, we
featured the refreshed Get Prepared app,
that we co-created through our Australian
Red Cross partnership, in the NRMA
Insurance ‘First Saturday’ winter campaign.
Tracking our progress
To help us target resilience action in areas
with the biggest impact for both the
community and IAG, we set the following
target in our FY22-24 Climate & Disaster
Resilience Action Plan (Action Plan):
One million Australians and
New Zealanders have taken action to
reduce their risk from natural hazards
by 2025
The target forms part of the Action Plan’s
Transforming the System focus area – to
build community climate and disaster
resilience by delivering and collaborating
on preparedness initiatives.
As of June 2023, we have prompted over
522,000 people to take action across
Australia and New Zealand. While this
marks steady progress, we acknowledge
there are challenges in encouraging the
most impactful actions. We continue to
assess and evolve our approach and use the
insights learned from our disaster resilience
initiatives to drive program prioritisation,
to improve the relevance and effectiveness
of our campaigns.
Beyond the number of individuals
taking action, we remain focused on
understanding and measuring the impact
of those actions. By analysing the impact
of our initiatives we can inform how
we are creating both community and
business value.
Figure 3 – how we collaborate with our partners to build awareness and
drive preparedness action
“ You can reduce the impact of emergencies, big and small, by
being prepared. We are certain that this campaign will see
more Australians prepared for the impact of extreme weather.
Through the partnership we will roll out the co-created Get
Prepared app in our community resilience workshops. The
app will enable us to track adoption rates and digitally prompt
people to complete their emergency plan, which is a wonderful
shift from our previous paper-based approach.”
Kym Pfitzner, CEO Australian Red Cross
NRMA Insurance Wild Weather Tracker (Quarterly)
Builds understanding of the impacts of wild weather and the
importance of preparedness.
First Saturday of the Season campaign
Reinforces awareness and provides three key actions
you can take.
Our People
Employee incentive to
complete an emergency
plan via the Red Cross co-
created Get Prepared app.
Our Customers
Rewarding customers that
complete preparedness
challenges with a Red Cross
First Aid Kit.
Our Communities
Education with
community partners
in local communities.
Climate & Disaster Resilience Action Plan focus areas:
RETHINKING RISK
TRANSFORMING THE SYSTEM
DRIVING TO ZERO
Target: One million Australians and New Zealanders have taken action
to reduce their risk from natural hazards by 2025.
To drive action first we need to build awareness
DRIVING AWARENESS
DRIVING ACTION
TARGETED ACTIVITIES
IAG Annual Report 2023
25
HOW IAG CREATES VALUE
Communities
Supporting recovery
As we partner to drive resilience action,
we are also acutely aware of the challenges
faced in recovery. Volunteering fatigue
is increasing in response to these multiple
extreme weather events. We continue
to support recovery in our communities
through the NRMA Insurance HELP package
and COVID-19 Relief Program. These
provide immediate recovery support
through the GIVIT donations platform and
longer-term recovery through Australian
Red Cross, while enabling our partners
to build their capacity and capability.
Partnering with emergency
services
We recognise the important role emergency
services play before, during and after
extreme weather. This year through our
partnership with the South Australian
SES, 22 IAG staff volunteered to support
sandbagging efforts in preparation for
the Murray River flood event. In addition,
throughout the bushfire season the NRMA
Insurance helicopter was on hand to
support the NSW Rural Fire Service. Our
community partnerships are profiled on
our website at www.iag.com.au.
Engaging our people
We encourage volunteering to connect
our people to purpose, and enable them
to build their understanding of risk and
take their own resilience action. IAG’s
November 2022 Resilience Day saw over
3,000 employees volunteering to deliver
community resilience actions through 140
events across Australia and New Zealand.
Many of these events were developed in
partnership with the Australian Resilience
Corps (The Corps). NRMA Insurance was a
founding member of The Corps.
“ It was great to get out and connect with colleagues and our
community partners. Restoring the coastal ecosystem was
tough but rewarding. Together as a group, the Council said we
were able to achieve more in one day than they could in a year.”
Genevieve Neilson – IAG colleague, at a Resilience Day volunteering event
IAG Resilience Day – our people clearing vegetation to help protect communities
against bushfires in Woodford, New South Wales, with the Australian Resilience Corps.
Our people supporting the South Australia SES sand bagging effort in Mannum,
South Australia, during the Murray River floods in December 2022.
26
IAG Annual Report 2023
Advocacy and collaboration
We publish targeted research to advance
the conversation on floodplain risk
management in Australia and advocate for
ongoing investment in disaster mitigation
efforts. We also recognise that a plan for
relocation needs to be considered when
communities are facing ongoing high
or extreme risk.
In March 2023 the Australian Federal
Minister for Emergency Management,
Senator the Hon Murray Watt, launched
the Planned Relocation – Protecting
our Communities research report,
commissioned by IAG with Rhelm, a
consultancy specialising in natural hazards
and resilience. The report provides
recommendations to help governments and
communities assess planned relocation as
an option to protect lives into the future.
The report outlines seven key
recommendations, including:
• The development of national guidance
on planned relocation;
• Prioritisation and funding for social
support for residents as part of any
planned relocation scheme; and
• The establishment of a legislative
framework for accelerated approvals for
planned relocation, including re-zoning,
subdivision and development approvals.
The full report can be found on the
Research page of our website at
www.iag.com.au.
Supporting communities
through responsible supply
chain management
This year we worked with partners to
improve the social and environmental
standards in our supply chains. In FY23 we
launched Modern Slavery training modules,
which are mandatory for targeted areas of
the organisation. This training is designed to
increase awareness of modern slavery risks
and their potential impact on our business.
In addition to training, during the last
reporting period we commenced work
to embed Modern Slavery commitments
within IAG’s management systems
and processes, including: extending
communication of our Supplier Code of
Conduct to our supplier base with whom we
have direct contracts; supplementing our
Mergers and Acquisitions (M&A) procedure
to include human rights issues as part of our
due diligence activities; and implementing
Modern Slavery risk assessment ratings into
IAG’s integrated risk management system.
Further information is available in our latest
Board-approved Modern Slavery Statement
at www.iag.com.au.
Our Stretch Reconciliation Action Plan
(RAP) includes commitments to work with
First Nations Suppliers. We work with
Supply Nation to increase our spend with
Indigenous owned and run businesses,
and to increase the number of First Nations
businesses in our supply chain.
In the last year, we have procured from
23 First Nations suppliers compared to 32
suppliers during our previous three-year
RAP. We have also increased spend to more
than $1.1 million, from $0.4 million in FY22.
Our targets are to:
• increase spend by 25% annually
over the next two years; and
• procure from a minimum of 65 businesses
over the course of our Stretch RAP by
June 2025.
To help deliver on these targets, we are
engaging with State-based Indigenous
Chambers of Commerce to access a
broader range of Indigenous owned and
run businesses.
IAG Resilience Day – our people preparing to clear invasive vegetation along the Central Coast to help protect communities
from coastal erosion, facilitated by the Australian Resilience Corps and their on-the-ground partner Disaster Relief Australia.
IAG Annual Report 2023
27
HOW IAG CREATES VALUE
Overview
We focus on climate and
disaster resilience as this
area most impacts our
customers and business,
and is where we can have
the most meaningful impact
15%
Total scope 1 and 2 emissions
reduction since FY21 (baseline year
for our emissions reduction target)
$238m
Green bond investments
(FY22: $217 million)
Net Zero
Roadmap
Published
This section is aligned with the
recommendations of the Task Force on
Climate-related Financial Disclosures
(TCFD). It summarises our detailed
Group and New Zealand climate-
related disclosures.
As we continue to evolve our approach
in line with stakeholder expectations,
from FY24 we plan to consider the final
recommendations on climate-related
disclosure from the International
Sustainability Standards Board (ISSB).
The full FY23 Group climate-related
disclosure and FY23 New Zealand
climate-related disclosure can be found
at www.iag.com.au.
Governance
Oversight of ESG and climate-related risks
and opportunities is included within our
governance framework. Key responsibilities
of the IAG Board and senior management
are detailed below.
Environment
CEO has
accountability for
overseeing the
integration of
ESG and climate-
related management
into organisational
strategy.
Group Executives
are accountable
for delivery of our
Climate & Disaster
Resilience Action
Plan, and meeting
our ESG and climate
commitments.
Group Executive
People Performance
& Reputation has
accountability for the
enterprise-wide ESG
and climate-related
approach and
progress reporting,
including approval of
IAG’s annual Group
climate-related
disclosure.
GLT Risk Committee
receives six-monthly
reporting on
climate-related risks
and opportunities.
Sustainability Steering
Committee meets
quarterly to shape,
guide and monitor IAG’s
enterprise-wide approach to
implementing and managing
climate-related risks and
opportunities as part of our
sustainability commitments.
Group Insurance Risk
Committee provides
guidance and governance
of insurance risk including
emerging ESG and climate-
related risks, which are
reported every six months.
Climate and
Decarbonisation Steering
Committee meets monthly
to oversee IAG’s approach
to and integration of
climate-related risks and
opportunities.
Approve the IAG Social
and Environmental
Framework.
Receive ESG and
climate-related updates
(including six-monthly
standalone reporting).
Consider and approve
material, external ESG
and climate-related
reporting.
IAG
Board
Charter
Oversee the appropriate identification,
assessment and mitigation of IAG’s material
risks including ESG and climate-related risks.
Oversee the integrity of IAG’s external financial
reporting including recommending the
approval of the Annual Report to the Board.
IAG Board
IAG Group Leadership Team Accountabilities
IAG Group Leadership Team Committees
Board Risk Committee Accountabilities
Board Audit Committee Accountabilities
28
IAG Annual Report 2023
Strategy
Effective management of climate-related
risk is central to our core insurance business
and delivering for our customers. Our
strategic response focuses on managing
the climate-related physical, transition and
liability risks, and related opportunities.
We deliver our climate approach through
our enterprise-wide Climate & Disaster
Resilience Action Plan (Action Plan).
The Action Plan responds to material
short-, medium- and long-term risks
and opportunities across three focus
areas: Rethinking Risk, Transforming the
System and Driving to Zero. Each includes
commitments and supporting goals to
drive positive outcomes for IAG and our
value chain, while encouraging a transition
to a net zero future. The Action Plan, with
a scorecard showing progress against the
goals, can be found at www.iag.com.au.
Climate-related risks
Physical risks
Examples of risks assessed
Acute
• Increased costs related to extreme weather events impact affordability
and availability of insurance, especially in high-risk areas, leading to
government intervention in the private insurance market and loss of
market/customer base.
Chronic
• IAG’s long-term access to economically sustainable reinsurance and
capital as claims increase from more severe and/or frequent extreme
weather events.
Transition risks
Examples of risks assessed
Regulatory –
current
• Mandatory disclosure frameworks including the Aotearoa New Zealand
Climate Standards.
• Supervision of climate risks in the financial sector, including Australian
Prudential Regulation Authority’s climate-related guidance (CPG229), and
upcoming insurance Climate Vulnerability Assessment.
Regulatory –
emerging
• Mandatory Australian climate- and sustainability-related
financial disclosures.
• International Sustainability Standards Board (ISSB) disclosure frameworks
– climate– and sustainability-related.
• Reserve Bank of New Zealand’s guidance on managing climate-related risks
• Taskforce for Nature-related Financial Disclosures (TNFD).
Legal
• Climate-related litigation risks in respect of IAG, its customers, suppliers
and partners.
Technological
• Emerging technologies to support the transition to a low-carbon economy,
including electric vehicles, charging and energy storage infrastructure, and
renewable energy generation.
Market
• Changes in consumer behaviour to support climate action, enabled by
government policy, e.g. public transport infrastructure and denser living
environments.
• Climate change continuing to disrupt global supply chains, leading to
delays and inflationary pressures.
Reputational
• Risk of greenwashing.
• Increasing affordability and availability challenges due to climate-
related hazards could be seen as a market failure and prompt
government intervention.
• Accelerating expectations around transparency of climate-
related disclosure.
Lifting our understanding of physical
climate-related risks
Our action on climate is grounded in the
knowledge that climate change is already
impacting our customers and our business.
Extreme weather events across both
Australia and New Zealand in FY23 have
led to our customers increasingly having to
face into the impacts of unexpected loss,
and increased costs and claims numbers for
IAG. We have developed a granular view of
the possible physical impacts from climate
change through different warming scenarios
using both IAG and third party data. Our
analysis has identified that without further
action to address resilience and adaptation
from both the private and public sectors,
the exposure and vulnerability of insured
assets to physical risk will increase. In a
high emissions scenario, this is expected to
most significantly impact properties that
we insure in locations highly exposed to
extreme weather and may drive increased
insurance affordability issues.
Supporting our physical scenario analysis,
this year our annual capital stress testing
focused on climate-related physical risks.
Stress testing is undertaken through
the Group’s Internal Capital Adequacy
Assessment Process (ICAAP) framework. It
is a useful tool for exploring the potential
implications of climate risks, which provides
input into our risk appetite, capital target
setting and contingency planning. Future
stress tests are expected to incorporate
transition and liability risks.
Further details of our latest physical risk
scenario analyses and the modelled
financial impacts are in our FY23 Group
climate-related disclosure at
www.iag.com.au. In our New Zealand
business we analysed the potential physical
and transition risks and opportunities
facing the business. We have detailed the
business impacts against three shared
insurance sector scenarios in our FY23
New Zealand climate-related disclosure.
IAG Annual Report 2023
29
HOW IAG CREATES VALUE
Environment
Collaboration on climate action
In recent years we have invested further in
our natural perils capability, which positions
us well to respond to the challenges faced
by a changing climate. This capability is also
directed through our advocacy channels. As
an example, this year in Australia we began
collaborating with other insurers and the
National Emergency Management Agency
on the Hazards Insurance Partnership. This
program provides a single touchpoint for
the Australian Government and insurance
industry to engage on disaster risk
reduction funding, and ultimately reduce
insurance affordability pressures.
Early in FY23 our New Zealand CEO, Amanda
Whiting, shared a three-step plan with the
New Zealand government to help reduce
flood risk. It is hoped that the proposed
plan will lead to a sensible and targeted
reduction of flood risk for the communities
that most need it, increasing resilience and
helping to keep insurance affordable and
available for all New Zealanders.
Further details on our climate and disaster
resilience collaborations are on the
‘Initiatives and Community Partnerships’
page of our website, and in the Group and
New Zealand climate-related disclosures,
available at www.iag.com.au.
Risk management
IAG identifies, assesses and reports on
ESG and climate-related risks to support
the delivery of our strategy. For more
information on our overarching risk
management process see ‘Section A.
Business Risk and Risk Management’ of
this report, and the ‘Managing risk at IAG’
section of our website at www.iag.com.au.
Identifying climate-related risks
Climate-related considerations are
embedded in IAG’s risk architecture and are:
• Included in the Risk Management
Strategy (RMS) which governs all
risk elements
• Assessed for severity, likelihood, velocity
and connectedness in the Enterprise Risk
Profile (ERP)
• Quantified or qualified for impacts and
managed through associated divisional
plan responses.
How we manage
climate-related risks
Our ERP articulates risks that may
impact our ability to deliver our
strategic objectives, outlines controls
to mitigate those risks and supports
the implementation of our strategy.
Management reviews the ERP quarterly
and reports on it to the Board annually.
The FY23 ERP process revalidated
‘inadequate climate change response’ as
a critical enterprise risk. This is consistent
with previous years, reflecting the systemic
impact of climate change on IAG. This
risk is linked to other critical climate-
related enterprise risks identified by the
process, including:
• Economic risks due to extreme weather
losses increasing claims and reinsurance
costs that are already exacerbated by
inflationary pressures
• Political risks (and opportunities) from
increasing government regulation and
potential intervention to address climate
change and disaster resilience
• Social risks relating to insurance
affordability and availability, especially
in high-peril risk areas.
Metrics and targets
IAG uses several metrics to monitor
progress of our climate-related
commitments. They relate to:
• Scope 1, 2 and 3 greenhouse gas
(GHG) emissions
• Carbon footprint and intensity
of investments
• Fossil fuel exposure in underwriting
• Customer engagement.
In FY23, we developed an approach
to better link Executive performance
to ESG outcomes, with the intent being
to include a 5% sustainability metric
in our FY24 Group Balanced Scorecard,
focused on scope 1 and 2 emissions
reduction management.
GHG emissions performance
Figures 4 and 5 provide an overview of our
GHG emissions footprint, and progress
towards our FY30 target to reduce scope 1
and 2 emissions by 37.8% using a baseline
year of FY21.
Alongside our targeted emissions reduction
activities, COVID-19 significantly reduced
our emissions footprint between FY20 and
FY22. A breakdown of IAG Group and New
Zealand emissions, quantified by category
in line with the Greenhouse Gas Protocol,
is available in IAG’s FY23 ESG Data Summary
at www.iag.com.au.
Over the past year we published our
Net Zero Roadmap and also began work on
understanding and estimating our material
scope 3 emissions sources. Understanding
the business and societal impact of our
supply chain and underwriting portfolios
is an important focus for IAG, and one
that the insurance industry as a whole is
contending with. We acknowledge that
there are inherent challenges around data
completeness and accuracy, resource and
capability, combined with the ongoing
evolution of calculation methodologies.
As we continue to develop our approach
to ensure we effectively manage risk and
integrate opportunities, we anticipate
that the scope of our calculation, and
therefore our baseline, will evolve. We will
respond and adapt to these developments
accordingly. We know that achieving our
net zero target will also require changes
outside of our operational control, including
technology development across industry,
and socio-economic changes to help
facilitate a just transition.
As climate-related reporting requirements
emerge, we acknowledge the need to build
our capability and provide more detail on
calculating our scope 3 emissions baseline.
• Supply chain: We have estimated our
supply chain emissions using spend data
and publicly available emissions factors,
and identified areas to prioritise for
decarbonisation. We are working towards
improving the quality of our calculation
and setting interim supply chain targets
in line with our Net Zero Roadmap.
• Insurance-associated emissions:
Guided by standards being
developed by the Partnership for
Carbon Accounting Financials (PCAF),
we have begun a project to baseline
the emissions associated with our
underwriting portfolios, also known
as insurance-associated emissions.
30
IAG Annual Report 2023
Fossil fuel exposure in underwriting
Within the parameters of our underwriting
portfolio target (see page 18 of the FY23
Group Climate-related disclosure), we
have less than $1 million in gross written
premium (GWP) in outstanding exposure to
underwriting of entities predominantly in
the business of extracting fossil fuels and
power generation from fossil fuels – as of
30 June 2023.
While our target was to have ceased
underwriting these entities by the end of
FY23, our exposure remains below 0.01% of
total GWP. We are in the process of evolving
our target to continue working towards
phasing out our fossil fuel exposure,
while supporting customers whose
decarbonisation efforts are consistent
with a just transition to a net zero carbon
emissions future.
Customer engagement
As part of our Net Zero Roadmap
commitments, we are developing a
customer engagement target for our
insurance-associated emissions. This
target will help us to bring our customers
along on the journey as our underwriting
approach evolves. We intend to develop
additional climate-related targets for our
underwriting portfolio as best practice
methodologies evolve.
Figure 4: Group GHG emissions (tCO2e)
YoY
FY23
FY22
FY21
FY20
Scope 1
15%
5,617
4,869
5,601
6,751
Scope 2
–11%
9,729
10,902
12,458
14,562
Scope 3
21%
10,761
8,868
4,552
11,606
Total
6%
26,107
24,640
22,611
32,920
Scope 1: direct emissions from owned and controlled sources, e.g. fuel usage from IAG-owned vehicles.
Scope 2: indirect emissions from the generation of purchased energy.
Scope 3: indirect emissions that occur upstream and downstream of our business operations. The following emissions sources are included within
the boundary of our scope 3 reporting: air travel, waste, paper, staff working from home, car hire, taxi travel and transmission and distribution losses.
Figure 5: Scope 1 and 2 emissions: progress against target
YoY
FY19
FY20
FY21
FY22
FY23
FY25
FY30
Emissions
reduction
activities
Scope 1 and 2
year-on-year
emissions
reduction/
increase
–23%
–19%
–15%
–13%*
–3%**
Further 23% reduction required
to meet FY30 target
Key
activities
Energy efficiency
initiatives
including 5-star
rating building
relocation
Introduction
of solar panels
on IAG’s
Data Centre
Reduction in
fleet size and
fuel-efficient
vehicles
introduced
Property
refurbishments
and energy
efficiency
measures, and
fleet initiatives
IAG Sydney
office achieved
5.5 star
NABERS rating
LED lighting
introduced at
Victoria sites
FY25: 100% renewable energy
sourced for IAG-operated
Australian sites***
Uptake of electric and hybrid
vehicles across Group fleet
*** Alongside our targeted emissions reduction activities, COVID-19 significantly reduced our emissions footprint between FY20 and FY22.
Certain emissions sources have rebounded since the easing of COVID-19 restrictions.
*** Note: due to the ongoing shift to renewable electricity generation in Australia, the emissions intensity of electricity transmission,
distribution and consumption is decreasing. This has driven the decrease in our reported scope 2 emissions in FY23.
*** This commitment will drive delivery of our scope 1 and 2 emissions reduction target. The FY25 timeline is reflective of our current
operations and will be revisited if our business environment changes.
0
35K
Tonnes of CO2 equivalent
30K
25K
20K
15K
10K
5K
Target (1.5C): 37.8% reduction by 2030
2021 Baseline
Trajectory
For FY24, we have developed
an approach to better
link Executive performance
to ESG outcomes.
IAG Annual Report 2023
31
HOW IAG CREATES VALUE
Carbon intensity of investments
We leverage the MSCI ESG Carbon Footprint Calculator
to report on investment-related emissions. Since 2017,
and as shown in Figure 6, IAG’s responsible investment
approach has achieved an aggregate reduction in scope
1 and 2 emissions, as measured by two key metrics:
normalised carbon footprint and weighted average
carbon intensity for our Australian and Global listed
equity mandates (ASX 200, excluding IAG, for Australian
equities; and the MSCI World, for Global Listed equities,
as of June 2020). Our equity portfolio covers 5% of the
total investments of the Group.
A normalised carbon footprint enables comparisons
with a benchmark, between multiple portfolios, and
over time, regardless of portfolio size.
We continue to exceed our 2025 target and have
reallocated our equity investments to companies that
have a lower exposure to climate-related risks or a
strategy to manage these risks.
We continue to consider how our investments can be
further leveraged to support the transition towards a
net zero future. At the end of FY23, we held $238 million
in green bonds, up from $217 million at the end of
FY22. Proceeds from green bonds include financing for
climate change mitigation, improved energy efficiency,
clean energy, climate change adaptation and climate-
resilient infrastructure.
Environment
Figure 6: Scope 1 and 2 emissions of IAG’s Listed Equity Investment Portfolios as of FY231
Further information on our progress in addressing climate risks and opportunities can be found in our FY23 Group climate-related
disclosure, New Zealand climate-related disclosure, and ESG Data Summary. These are on the website at www.iag.com.au, alongside
our Climate & Disaster Resilience Action Plan.
Australian equities
0
50
100
150
200
250
Global equities
0
50
100
150
200
250
114
89
59
84
55% Reduction
49% Reduction
43% Reduction
47% Reduction
Weighted Average Carbon
Intensity (tC02e / US$m sales)
Baseline
(June 2020)
Baseline
(June 2020)
Baseline
(June 2020)
Baseline
(June 2020)
Normalised carbon footprint
(tC02e / US$m invested)
Weighted Average Carbon
Intensity (tC02e / US$m sales)
Normalised carbon footprint
(tC02e / US$m invested)
1 Although IAG information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the “Information”) from
sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein and expressly disclaim
all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not
be reproduced or redisseminated in any form and may not be used as a basis for, or a component of, any financial instruments or products or indices. Further, none of the
Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors
or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if
notified of the possibility of such damages. Certain information ©2023 MSCI ESG Research LLC. Reproduced by permission.
32
IAG Annual Report 2023
Nick Hawkins
Managing Director
and Chief Executive Officer
Started in role 2 November 2020
Peter Horton
Group General Counsel
and Company Secretary
Started in role 2 December 2019
Christine Stasi
Group Executive
People, Performance and Reputation
Started in role 4 November 2019
Julie Batch
Group Executive,
Direct Insurance Australia
Started in role 10 March 2021
Michelle McPherson
Chief Financial Officer
Started in role 2 November 2020
Peter Taylor
Group Chief Risk Officer
Started in role 18 May 2022
Jarrod Hill
Group Executive
Intermediated Insurance Australia
Started in role 13 September 2021
Neil Morgan
Chief Operating Officer
Started in role 10 March 2021
Amanda Whiting
Chief Executive IAG New Zealand
Started in role 1 July 2021
EXECUTIVE
Group Leadership Team
For detailed information about our Group Leadership Team, visit www.iag.com.au.
IAG Annual Report 2023
33
Directors’ report
34
IAG Annual Report 2023
The Directors present their report together with the consolidated financial report
of Insurance Australia Group Limited and its subsidiaries and the Auditor's Report
for the financial year ended 30 June 2023 (FY23) and where appropriate,
references events that have occurred since the end of this period, but before
publication.
Contents
Page
Directors of Insurance Australia Group Limited
35
Meetings of Directors
39
Principal activity
40
Reconciliation between the statutory results (IFRS) and the management reported
(non-IFRS) results
41
Operating and financial review
43
Review of financial condition
48
Strategy and risk management
50
Corporate governance
51
FY24 Guidance and outlook
51
Dividends
51
Significant changes in state of affairs
52
Events subsequent to reporting date
52
Non-audit services
52
Indemnification and insurance of Directors and Officers
52
Lead Auditor's Independence Declaration
53
Rounding of amounts
53
IAG Annual Report 2023
35
The following terminology is used throughout
this report:
• Company or Parent – Insurance Australia
Group Limited; and
• IAG or Group – the consolidated group
consists of Insurance Australia Group
Limited and its subsidiaries.
Directors of Insurance
Australia Group Limited
The names and details of the Company's
Directors in office at any time during or since
the end of the financial year are set out below.
Directors were in office for the entire period
unless otherwise stated.
Chair
Thomas (Tom) W Pockett
BCom, CA – Chair and Independent Non-
Executive Director
Insurance industry experience
Tom Pockett was appointed as a Director of
IAG on 1 January 2015 and became Chair on
22 October 2021. He has been the Chair of the
Nomination Committee since 22 October 2021
and attends all other Board Committee
Meetings in an ex-officio capacity. Tom is also
Chair of Insurance Manufacturers of Australia
Pty Limited.
Other business experience
Tom was previously Chief Financial Officer
and then Finance Director with Woolworths
Limited, and retired from Woolworths Limited
in July 2014. Tom has also held senior finance
roles at the Commonwealth Bank, Lendlease
Corporation and Deloitte.
Tom is Chairman and Non-Executive Director
of Stockland Group and a Non-Executive
Director of O'Connell Street Associates.
Directorships of other listed
companies held in the past three
years
• Stockland Group, since 2014; and
• Autosports Group Limited (2016 – 2021).
Managing Director
Nicholas (Nick) B Hawkins
BCom, FCA – Managing Director and Chief
Executive Officer, Executive Director
Insurance industry experience
Nick Hawkins was appointed Managing
Director and Chief Executive Officer of IAG on 2
November 2020.
Nick previously held the role of Deputy Chief
Executive Officer, accountable for the
management and performance of IAG’s day-
to-day operations. He previously spent 12
years as IAG’s Chief Financial Officer,
responsible for the financial affairs of the
Group. Prior to this, Nick was Chief Executive
Officer of IAG New Zealand and has also held a
number of roles within finance and asset
management since joining the Group in 2001.
Nick was appointed to the position of
President of the Insurance Council of Australia
(ICA) in December 2021 and commenced as
President on 1 January 2022.
Other business experience
Before joining IAG, Nick was a Partner with the
international accounting firm KPMG.
Nick is a graduate of the Harvard Advanced
Management Program.
Directorships of other listed
companies held in the past three
years
• None.
Simon C Allen
BCom, BSc, CFInstD – Independent Non-
Executive Director
Insurance industry experience
Simon Allen was appointed as a Director of
IAG on 12 November 2019 and is a member of
the People and Remuneration Committee and
Risk Committee.
Simon has been a Non-Executive Director of
IAG’s wholly-owned subsidiary, IAG New
Zealand Limited since 1 September 2015 and
was appointed its Chair on 22 November 2019.
Other business experience
Simon has over 35 years of commercial
experience in the New Zealand and Australian
capital markets and was Chief Executive of the
investment bank BZW/ABN AMRO in New
Zealand for 21 years.
Simon was the inaugural Chair of NZX Limited,
Financial Markets Authority and Crown
Infrastructure Partners Limited (previously
known as Crown Fibre Holdings Limited) and
was Chair of Channel Infrastructure NZ
Limited (previously known as The New
Zealand Refining Company Limited).
Simon is a Non-Executive Director of Ampol
Limited and Z Energy Limited and a Trustee of
the New Zealand Antarctic Heritage Trust.
Simon is a Chartered Fellow of the New
Zealand Institute of Directors.
Directorships of other listed
companies held in the past three
years
• Ampol Limited, since 2022;
• Z Energy Limited, since 2022; and
• Channel Infrastructure NZ Limited
(previously known as The New Zealand
Refining Company Limited) (2014 – 2022).
David H Armstrong
BBus, FCA, MAICD – Independent Non-
Executive Director
Insurance industry experience
David Armstrong was appointed as a Director
of IAG on 1 September 2021 and became Chair
of the Audit Committee on 22 October 2021.
He is also a member of the Risk Committee.
Directors’ report
36
IAG Annual Report 2023
Other business experience
David is a former Partner of
PricewaterhouseCoopers, with more than 40
years of experience in professional services.
He has a deep knowledge and understanding
of banking and capital markets, real estate
and infrastructure, and is well versed in
reporting, regulatory and risk challenges
faced by the industry. He was the President of
the Australian Museum Trust and the Trustee
of Lizard Island Reef Research Foundation.
David is a Non-Executive Director of the
National Australia Bank, where he chairs the
Audit Committee, and is a member of its Risk
& Compliance Committee. He is also Chair of
The George Institute for Global Health and the
Director of the Opera Australia Capital Fund
Limited.
David is a Fellow of the Institute of Chartered
Accountants in Australia and a member of the
Australian Institute of Company Directors.
Directorships of other listed
companies held in the past three
years
• National Australia Bank, since 2014.
Jonathan (Jon) B Nicholson
BA – Independent Non-Executive Director
Insurance industry experience
Jon Nicholson was appointed as a Director of
IAG on 1 September 2015. He has been Chair
of the Risk Committee since 10 February 2021
and is a member of the People and
Remuneration Committee and Nomination
Committee.
Other business experience
Jon previously spent eight years with Westpac
Banking Corporation, first as Chief Strategy
Officer and later as Enterprise Executive. He
retired from Westpac in 2014.
Jon’s executive career includes senior roles
with a variety of financial and corporate
institutions, including the Boston Consulting
Group. He has also held various roles with the
Australian Government, including Senior
Private Secretary to the Prime Minister of
Australia (Bob Hawke) and senior positions in
the Department of the Prime Minister and
Cabinet.
Jon is Non-Executive Chair of
QuintessenceLabs, a Director of Westpac
Bicentennial Foundation and a Non-Executive
Director of Cape York Partnerships.
Directorships of other listed
companies held in the past three
years
• None.
Helen M Nugent AC
BA (Hons), PhD, MBA (Dist), HonDBus,
HonDUniv – Independent Non-Executive
Director
Insurance industry experience
Helen Nugent was appointed as a Director of
IAG on 23 December 2016. She is a member of
the Audit Committee and Nomination
Committee.
Previously, Helen was Chair of Swiss Re
(Australia) and Swiss Re (Life and Health)
Australia, and a Non-Executive Director of
Mercantile Mutual.
Other business experience
Helen has extensive financial services
experience, having been Chair of Funds SA
and Veda Group and a Non-Executive Director
of Macquarie Group and the State Bank of
New South Wales. She also served on Westpac
Banking Corporation’s executive team as
Director of Strategy, and prior to that
specialised in the financial services sector as a
Partner at McKinsey & Company.
Helen’s experience as a Non-Executive
Director extends to the energy sector and
telecommunications. Currently, she is Chair of
Ausgrid, and previously was a Non-Executive
Director of Origin Energy. She is also the
Senior Independent Director at TPG Telecom.
Helen has given back extensively to the
community in arts, education and health and
disability. In arts, she has been Chair of the
National Portrait Gallery of Australia, the
National Opera Review, the Major Performing
Arts Inquiry, and the Major Performing Arts
Board of the Australia Council. In education,
she was Chancellor of Bond University and
President of Cranbrook School. In disability
and health, she was Chair of the National
Disability Insurance Agency, and is currently a
Non-Executive Director of the Garvan Institute
for Medical Research. Helen was appointed
Chair of the Order of Australia Association
Foundation Limited effective August 2022.
Helen was made a Companion of the Order of
Australia (AC) in January 2022, having
previously received an AO and a Centenary
Medal. She has also been awarded Honorary
Doctorates from the University of Queensland
and Bond University. She has also been
awarded an Order of Merit by the Australian
Olympic Committee.
Directorships of other listed
companies held in the past three
years
• TPG Telecom, since 2020.
Scott J Pickering
ANZIIF – Independent Non-Executive Director
Insurance industry experience
Scott Pickering was appointed as a Director of
IAG on 1 November 2021 and is a member of
the Audit Committee.
Scott has been a Chief Executive and is a
senior leader in the global insurance industry
with over 30 years of experience in the sector.
He is a Non-Executive Director in state owned
Kiwibank and a former Non-Executive
Director for Chubb Insurance in Australia and
New Zealand.
Scott was formerly regional Chief Executive
Officer for one of the world’s largest insurance
brokers, Willis Towers Watson, for Central and
Eastern Europe, the Middle East and Africa.
Prior to Willis Towers Watson, Scott worked
for Royal & Sun Alliance Insurance as Regional
Chief Executive Officer for Asia and the Middle
East. He has also held senior regional
leadership and Chief Executive roles at ACE
Insurance and CIGNA in the Asia Pacific region
and South Africa.
Scott previously held the position of Chief
Executive of the Accident Compensation
Corporation, which provides comprehensive,
no fault personal injury cover for all New
Zealanders. He stepped down from the role at
the end of June 2021.
Scott is a member of the Australian and New
Zealand Institute of Insurance and Finance.
IAG Annual Report 2023
37
Other business experience
Scott has been the Advisor for Wairarapa
Building Society.
Scott is currently an advisor for Bain
International Inc., Health Now Limited and
Tampi Pty Ltd and a Director in Engage
Consulting Limited.
Directorships of other listed
companies held in the past three
years
• None.
George D Sartorel
MBA from Heriot-Watt University –
Independent Non-Executive Director
Insurance industry experience
George Sartorel was appointed as a Director
of IAG on 1 September 2021. He is a member
of the People and Remuneration Committee
and the Risk Committee.
George is a globally proven insurance Chief
Executive Officer, with extensive operational,
business and technology experience spanning
property, casualty, health, life insurance and
asset management. In an extensive career at
Allianz, George has worked across a large
variety of roles and countries and has led
countries and regions of scale and formed
strategic alliances.
George began his career as the Chief General
Manager of Allianz Australia. Before becoming
the Asia Pacific Chief Executive Officer of
Allianz, George was the Chief Executive Officer
of Allianz Italy and Allianz Turkey. He is the
former Chair of Allianz Asia Advisory Council
and member of the Allianz Australia Group. He
was also a member of the Allianz International
Executive Committee and the founding
member of Allianz X, the corporate venture
capital company that invested in innovative
digital start-ups. George is considered one of
Allianz’s most technologically oriented and
innovatively minded leaders.
George is also a Non-Executive Director of
Prudential plc and previously served as a
Director of BIMA.
Other business experience
George has served as a member of the
Financial Centre Advisory Panel (Monetary
Authority of Singapore).
Directorships of other listed
companies held in the past three
years
• Prudential plc, since 2022.
George Savvides AM
BEng (Hons), MBA, FAICD – Independent Non-
Executive Director
Insurance industry experience
George Savvides was appointed as a Director
of IAG on 12 June 2019 and has been Chair of
the People and Remuneration Committee
since 10 February 2021 and is a member of the
Risk Committee and Nomination Committee.
George has extensive executive experience,
serving as Chief Executive Officer of leading
health insurer Medibank for 14 years (2002 –
2016), and Chief Executive Officer of Sigma
Company (now Sigma Healthcare) (1996 –
2000).
Other business experience
George has been a Non-Executive Director of
BuildXACT Software Limited since July 2021.
He was Non-Executive Chair of the Australian
Securities Exchange (ASX) listed biotech
company Next Science (2018 – 2021) and Non-
Executive Director of New Zealand's Exchange
(NZX) listed entity, Ryman Healthcare (2013 -
2023). George has been Chair of the Special
Broadcasting Service Corporation (SBS) since
July 2020 and Independent Non-Executive
Director and Chair of the I-MED Radiology
Network since September 2022.
George is a former Non-Executive Chair of
Kings Transport and Non-Executive Chair of
Macquarie University Hospital and has served
for 18 years on the Board of World Vision
Australia, including six years as Chair, retiring
in 2018.
Directorships of other listed
companies held in the past three
years
• Ryman Healthcare (2013 – 2023); and
• Next Science (2018 – 2021).
Wendy Thorpe
BA, BBus, Grad Dip Applied Finance &
Investment, FFin, Harvard AMP 172, GAICD –
Independent Non-Executive Director
Insurance industry experience
Wendy Thorpe was appointed as a Director of
IAG on 1 July 2023. She is a member of the
Audit Committee and People and
Remuneration Committee.
Wendy served as an Independent Non-
Executive Director of Tower Limited (2018 -
2023), where she was more recently the Risk
Committee Chair. Wendy was previously a
senior executive at AXA and AMP, leading
technology and operations in Chief
Information Officer and Chief Operations
Officer roles.
Other business experience
Wendy is the Chair of Epworth Healthcare and
Online Education Services, and a Non-
Executive Director of Heritage & People’s
Choice, auDA and Data Action.
Wendy is a former Non-Executive Director of
AMP Bank, Ausgrid and Very Special Kids. She
is also a former member of the Council of
Swinburne University of Technology.
Wendy has over 30 years’ experience in
Financial Services across Insurance,
Investment Management, Banking and
Wealth management at AXA, ANZ and AMP.
Wendy is a member of Chief Executive
Women.
Directorships of other listed
companies held in the past three
years
• Tower Limited (2018 – 2023).
Directors’ report
38
IAG Annual Report 2023
Michelle K Tredenick
BSc, FAICD, F Fin – Independent Non-
Executive Director
Insurance industry experience
Michelle Tredenick was appointed as a
Director of IAG on 13 March 2018 and is a
member of the People and Remuneration
Committee and Risk Committee.
Michelle has held a number of senior
executive roles in major Australian
companies, including National Australia Bank,
MLC and Suncorp. She has over 30 years of
experience in financial services with roles
spanning Chief Information Officer, Head of
Strategy and Corporate Development and
senior leadership roles managing corporate
superannuation, insurance and wealth
management businesses.
Other business experience
Michelle was appointed as a Non-Executive
Director of First Sentier Investors in June 2020,
where she chairs the Audit and Risk
Committee, and Zafin Labs Americas
Incorporated in May 2021, where she chairs
the Human Resources and Governance
Committee and IDP Education in September
2022. She also has been a Director of Urbis Pty
Ltd since 2016. She is a former Chair of the IAG
& NRMA Superannuation Fund (2012 – 2018)
and former Director of Cricket Australia (2015
–2022), as well as the Ethics Centre (2013 –
2022).
She was also previously a member of the
Senate of the University of Queensland (2014
– 2021).
Directorships of other listed
companies held in the past three
years
• IDP Education Limited, since 2022; and
• Bank of Queensland Limited (2011 – 2020).
Directors who ceased
during the financial year
• Sheila McGregor was a Non-Executive
Director from 13 March 2018 to 21 October
2022.
Company Secretaries of
Insurance Australia Group
Limited
Peter J Horton
BA, LLB
Peter Horton joined IAG as Group General
Counsel and Company Secretary in December
2019.
Peter was previously Executive Manager
Legal, Governance and Risk at Transgrid.
Peter’s career has included roles as Group
General Counsel and Company Secretary for
QBE Insurance Group Limited, Group General
Counsel and Company Secretary of
Woolworths Limited, General Manager Legal
and Company Secretary of WMC Resources
Limited.
Peter is also a Non-Executive Director of the
not-for-profit company Business For
Development.
Jane M Bowd
FGIA, FCIS, GAICD, GradDip, LLM, LLB, BA
Jane Bowd joined IAG as Group Company
Secretary and Corporate Counsel in June 2020
and leads IAG's Company Secretariat Team,
responsible for Board and enterprise
governance.
Jane was previously Group Company
Secretary and Corporate Counsel at Coca Cola
Amatil, and prior to that was Head of
Secretariat of the Global Wealth Division at
ANZ Bank. She started her legal and
governance career as a private practice lawyer
in top tier law firm Clayton Utz, including in
Corporate M&A.
Jane holds a Master of Laws, Graduate
Diploma of Applied Corporate Governance,
Graduate Diploma of Legal Practice, Bachelor
of Laws, Bachelor of Arts, and is a graduate of
the Royal Military College, Duntroon. Jane
brings deep knowledge and expertise in legal
and governance matters from her financial
services roles and private practice, and
membership of the Governance Institute of
Australia’s Legislative Review Committee.
Jane’s corporate governance skills were
recognised nationally when she was awarded
the inaugural Company Secretary of the Year
Award at the Australian Law Awards in 2019,
and then again in 2020.
Jane retired as an Independent Non-Executive
Director of the Financial Planning Association
of Australia (FPA), including as Committee
Member on the FPA's Board Audit and Risk
Management Committee, and Governance
and Remuneration Committee, in March 2022.
IAG Annual Report 2023
39
Meetings of Directors
The Board of IAG met 17 times during the year ended 30 June 2023. In addition, the Directors attended Board Strategy sessions and Special Purpose
Committee Meetings during the year.
All Directors may attend all Board Committee Meetings even if they are not a Member of the relevant Committee. The table below only records the
attendance of Directors at Committee Meetings of which they are a Member of.
Director
Board of
Directors1
People and
Remuneration
Committee
Audit
Committee
Risk
Committee
Board Sub
Committee2
Nomination
Committee
Total number of
Meetings held
17
5
7
5
16
3
Required
to attend
Attended
Required
to attend
Attended
Required
to attend
Attended
Required
to attend
Attended
Required
to attend
Attended
Required
to attend
Attended
Current Directors
Tom Pockett3
17
16
-
-
-
-
-
-
11
10
3
3
Nick Hawkins
17
17
-
-
-
-
-
-
13
13
-
-
Simon Allen
17
17
5
5
-
-
5
5
6
6
-
-
David Armstrong
17
17
-
-
7
7
5
5
15
15
-
-
Jon Nicholson
17
15
5
4
-
-
5
5
1
1
3
3
Helen Nugent
17
17
-
-
7
7
-
-
1
1
3
3
Scott Pickering
17
15
-
-
7
7
-
-
1
1
-
-
George Sartorel
17
15
5
4
-
-
5
4
1
0
-
-
George Savvides
17
17
5
5
-
-
5
5
-
-
3
3
Michelle Tredenick
17
17
5
4
-
-
5
5
-
-
-
-
Former Directors
Sheila McGregor4
7
6
-
-
3
3
-
-
-
-
-
-
1 There were 8 scheduled Board Meetings and an additional 9 out-of-cycle Board Meetings during FY23.
2 This includes 11 Board Sub-Committee and 5 Due Diligence Committee Meetings during FY23.
3 Tom Pockett did not attend 2 Meetings due to unforeseen personal circumstances.
4 Sheila McGregor resigned effective 21 October 2022.
Directors’ report
40
IAG Annual Report 2023
Principal activity
The principal continuing activity of IAG is the underwriting of general insurance risks and investment management.
IAG is the largest general insurance company in Australia and New Zealand, selling insurance through a suite of brands. In Australia, IAG is a leading
personal lines insurer, offering short-tail products across the country, as well as long-tail offerings. IAG also sells a range of commercial insurance
products across Australia, with an emphasis on small-to-medium sized enterprises and a leading market share in rural areas. In Australia, the
operations are separated into two distinct divisions, being Direct Insurance Australia (DIA) and Intermediated Insurance Australia (IIA). In New
Zealand, IAG is the leading general insurance provider across both the direct and intermediated channels. All of these divisions benefit from access
to a variety of distribution channels and an array of leading and well-established brands.
The Group reports its financial information under the following business division headings:
Division
Overview
Products
Direct Insurance
Australia
45% of Group gross
written premium (GWP)
Personal lines general insurance products, and some
commercial lines, are sold directly to customers through a
range of distribution channels, such as branches, call centres
and online, including under the following brands:
• NRMA Insurance, Australia wide (excluding Victoria);
• RACV in Victoria, via a distribution relationship and
underwriting joint venture with RACV;
• SGIO in Western Australia, which is transitioning to NRMA;
• SGIC in South Australia, which is transitioning to NRMA;
• CGU Insurance (in NSW, ACT, VIC and QLD); and
• ROLLiN' Insurance.
The division also includes travel insurance and income
protection products which are underwritten by third parties.
Short-tail insurance:
• Motor vehicle
• Home and contents
• Lifestyle and leisure, such as boat, veteran and
classic car and caravan
• Business packages
• Farm
• Commercial motor
Long-tail insurance:
• Professional indemnity
• Compulsory Third Party (motor injury liability)
Intermediated Insurance
Australia
33% of Group GWP
Commercial lines general insurance products, and some
personal lines, are provided through a network of
intermediaries, such as brokers, agents, authorised
representatives and partners, including under the following
brands:
• CGU Insurance;
• WFI; and
• Coles Insurance, via a distribution agreement with Coles.
Short-tail insurance:
• Motor vehicle
• Home and contents
• Lifestyle and leisure, such as boat and caravan
• Travel
• Business packages
• Farm and crop
• Commercial property
• Construction and engineering
• Commercial motor and fleet motor
Long-tail insurance:
• Workers' compensation
• Professional indemnity
• Directors' and officers'
• Public and products liability
New Zealand
22% of Group GWP
Personal lines and commercial lines general insurance products
are provided directly to customers, primarily under the State
and AMI brands, and indirectly through insurance brokers and
agents, under the NZI and Lumley Insurance brands. General
insurance products are also distributed under third party
brands by IAG’s corporate partners, including large financial
institutions.
Short-tail insurance:
• Motor vehicle
• Home and contents
• Commercial property, motor and fleet motor
• Construction and engineering
• Niche insurance such as pleasure craft, boat and
caravan
• Rural
• Marine
Long-tail insurance:
• Professional indemnity
• Commercial liability
Corporate and other
Corporate and other comprises other activities, including
corporate services, capital management activity, shareholders'
funds investment activities, inward reinsurance from
associates, investment in associates, and other businesses that
offer products and services that are adjacent to IAG's
insurance business.
IAG Annual Report 2023
41
Reconciliation between the statutory results (IFRS) and the management
reported (non-IFRS) results
The discussion of operating performance in the operating and financial review section of this report is presented on a management reported basis
unless otherwise stated. Management reported results are non-IFRS financial information and are not directly comparable to the statutory results
presented in other parts of this report. A reconciliation between the two is provided in this section and the guidance provided in Australian
Securities and Investments Commission (ASIC) Regulatory Guide 230 'Disclosing non-IFRS financial information' has been followed when
presenting the management reported results. Non-IFRS financial information has not been audited by the external auditor but has been sourced
from the financial reports. IAG’s statutory and management reported profit before income tax are the same.
IAG’s results for the current financial year contains the impact from a release in the provision for business interruption related claims related to the
COVID-19 pandemic. The High Court of Australia (HCA) on 14 October 2022 denied special leave to appeal the decision of the Full Court of the
Federal Court of Australia in the second business interruption test case handed down in February 2022. The HCA’s decision in relation to the special
leave applications resulted in the Group reducing the net provision by $560 million.
This item is not expected to be a feature of the Group’s future sustainable earnings profile. As a result, and to ensure consistency of the reporting of
key insurance measures and metrics, this item has been shown in the ‘Net corporate expense’ line in the management reported view of the current
year’s results. This view is consistent with the approach adopted in IAG’s Investor Report for the current financial year (Investor Report).
Directors’ report
42
IAG Annual Report 2023
Reconciliation between the statutory results (IFRS) and the management reported (non-IFRS) results is presented below:
Statutory
Results (IFRS)
$m
Business
Interruption Claim
Provision
$m
Payroll
Compliance
Review
$m
Management
Results
(non-IFRS
per Investor
Report)
$m
2023
Gross written premium
14,729
-
-
14,729
Movement in unearned premium liability
(891)
-
-
(891)
Gross earned premium
13,838
-
-
13,838
Outwards reinsurance premium expense
(5,512)
-
-
(5,512)
Net earned premium
8,326
-
-
8,326
Net claims expense
(5,306)
(560)
-
(5,866)
Commission expense
(1,141)
-
-
(1,141)
Underwriting expense
(2,008)
-
-
(2,008)
Reinsurance commission revenue
1,221
-
-
1,221
Net underwriting expense
(1,928)
-
-
(1928)
Underwriting profit/(loss)
1,092
(560)
-
532
Net investment income on assets backing insurance liabilities
271
-
-
271
Insurance profit/(loss)
1,363
(560)
-
803
Net corporate expense1
(23)
560
-
537
Net other operating income/(expenses)
14
-
-
14
Profit before income tax
1,354
-
-
1,354
Income tax expense
(429)
-
-
(429)
Profit after income tax
925
-
-
925
Non-controlling interests
(93)
-
-
(93)
Profit attributable to IAG shareholders
832
-
-
832
2022
Gross written premium
13,317
-
-
13,317
Movement in unearned premium liability
(345)
-
-
(345)
Gross earned premium
12,972
-
-
12,972
Outwards reinsurance premium expense
(5,063)
-
-
(5,063)
Net earned premium
7,909
-
-
7,909
Net claims expense
(5,015)
(200)
-
(5,215)
Commission expense
(1,020)
-
-
(1,020)
Underwriting expense
(2,024)
-
16
(2,008)
Reinsurance commission revenue
1,162
-
(4)
1,158
Net underwriting expense
(1,882)
-
12
(1,870)
Underwriting profit/(loss)
1,012
(200)
12
824
Net investment expense on assets backing insurance liabilities
(238)
-
-
(238)
Insurance profit/(loss)
774
(200)
12
586
Net corporate expense1
12
200
(12)
200
Net other operating income/(expenses)
(222)
-
-
(222)
Profit before income tax
564
-
-
564
Income tax expense
(140)
-
-
(140)
Profit after income tax
424
-
-
424
Non-controlling interests
(77)
-
-
(77)
Profit attributable to IAG shareholders
347
-
-
347
1 The $23 million expense (FY22: $12 million income) was recognised within the 'Fee-based, corporate and other expenses' line in the statement of comprehensive income.
IAG Annual Report 2023
43
The adjustments summarised above reflect the impact on pre-tax earnings for each respective year. Analysis and commentary on the insurance
profit and margin in the operating and financial review section of this report excludes the reconciling items listed above.
The gross reduction during the current financial year in the provision for business interruption related claims was $830 million (FY22: decrease of
$296 million). The net impact after recognition of a $270 million (FY22: $96 million) reduction in recoveries from IAG's whole-of-account quota share
arrangements, is a $560 million (FY22: $200 million) increase to profit before tax. The increase to profit after tax is $392 million (FY22: $140 million).
Operating and financial review
Operating result for the financial year
Key results
30 June
2023
$m
30 June
2022
$m
Gross written premium (GWP)
14,729
13,317
Net earned premium (NEP)
8,326
7,909
Insurance profit1
803
586
Net profit/(loss) after tax2
832
347
Cash earnings
452
213
Reported insurance margin3
9.6%
7.4%
Underlying insurance margin4
12.6%
14.6%
Diluted earnings per share (cents per share)
32.20
13.33
Cash return on equity (ROE)
7.0%
3.4%
Dividend (cents per share)
15.0
11.0
Common Equity Tier 1 Capital (CET 1) multiple
1.12
0.97
1 Reported insurance profit is the insurance profit on a management results basis. Based on the statutory results, the equivalent statutory insurance profit for the current year is $1,363 million
(FY22: $774 million).
2 Net profit/(loss) after tax is the Group's profit/(loss) after tax for the year after adjusting for non-controlling interests.
3 Reported insurance margin is the insurance profit as a percentage of NEP, both on a management results basis. Based on the statutory results, the equivalent statutory insurance margin for
the current year is 16.4% (FY22: 9.8%).
4 IAG defines its underlying insurance margin as the reported insurance margin adjusted for net natural perils claims costs less the related allowance, reserve releases or strengthening and credit
spread movements.
Premiums
Reported FY23 GWP of $14,729 million (FY22: $13,317 million) increased by 10.6%. On an underlying basis, adjusting for currency impacts, portfolio
exits and multi-year policies, GWP growth was 11.1%. This encompassed:
• growth of 10.0% to $6,640 million in DIA, comprising:
– increased GWP momentum in 2H23 with growth of 10.9%, building on 9.0% growth in 1H23. Growth was primarily rate driven with
approximately 1% volume growth in personal short-tail classes; and
– personal short-tail growth was 11.3% for FY23, with momentum increasing to 12.4% in 2H23.
• growth of 12.0% to $4,805 million in IIA, comprising:
– rate increases across IIA’s portfolios averaged 13% during FY23 with an ongoing focus on underwriting discipline; and
– underlying growth was 13.8% with portfolio exits having a negative 3.6% impact and multi-year workers’ compensation policies, contributing
a positive 1.8% impact on reported GWP in FY23.
• Growth of 9.8% in New Zealand to $3,284 million, up approximately 12% in local currency terms:
– both Business and Direct divisions delivered strong growth, 15.5% and 11.2% respectively in local currency. This was driven predominantly
by premium rate increases with relatively stable retention and new business levels.
Directors’ report
44
IAG Annual Report 2023
Insurance margin
The underlying insurance margin is the reported insurance margin adjusted for prior year reserve releases or strengthening, natural perils claim
costs above or below related allowances and credit spread gains or losses.
Insurance margin impacts
30 June
2023
$m
30 June
2022
$m
Underlying insurance profit
1,052
1,157
Reserve releases/(strengthening)
(37)
(172)
Natural perils
(1,206)
(1,119)
Natural peril allowance
909
765
Credit spreads
85
(45)
Reported insurance profit1
803
586
Underlying insurance margin
12.6%
14.6%
Reserve releases/(strengthening)
(0.4)%
(2.2)%
Natural perils
(14.5)%
(14.1)%
Natural peril allowance
10.9%
9.7%
Credit spreads
1.0%
(0.6)%
Reported insurance margin2
9.6%
7.4%
1 Reported insurance profit is the insurance profit on a management results basis. Based on the statutory results, the equivalent statutory insurance profit for the current year is $1,363 million
(FY22: $774 million).
2 Reported insurance margin is the insurance profit as a percentage of NEP, both on a management results basis. Based on the statutory results, the equivalent statutory insurance margin for
the current year is 16.4% (FY22: 9.8%).
IAG’s FY23 underlying insurance margin was 12.6%, lower than the 14.6% in FY22 due to the impact of short-tail claims inflation. Taking into account
the additional $67 million in reinsurance reinstatement costs in FY23, the adjusted underlying insurance margin is 13.4%.
The FY22 underlying margin of 14.6% included a COVID-19 impact of lower claims frequency and would have been 13.9% without this benefit.
The reduction in the underlying margin reflects a combination of influences. On the positive side:
• an approximately 210bps improvement from the increase in the underlying investment yield on technical reserves to 4.3% (FY22: 1.8%); and
• an underlying improvement in the expense ratio of 30bps which takes into account additional Covid-related costs in FY22.
These positive factors were more than offset by:
• an approximately 120bps impact from the increase in the natural perils allowance from $765 million to $909 million; and
• an approximately 250bps increase in the claims ratio primarily due to the inflationary impacts driving a significant increase in the average claims
size of motor and home claims.
The reported insurance profit of $803 million in FY23 (FY22: $586 million) equates to a reported margin of 9.6% (FY22: 7.4%). In addition to the
underlying margin influences outlined above, this included:
• unfavourable net natural perils costs of $297 million (FY22: $354 million);
• a $37 million impact from strengthening of prior year reserves (FY22: $172 million); and
• a positive impact from narrowing of credit spreads of $85 million (FY22: negative $45 million).
Divisional insurance margins
Divisional insurance margins
2023
2022
Direct Insurance Australia
Underlying insurance margin
15.7%
20.5%
Reported insurance margin
14.5%
13.0%
Intermediated Insurance Australia
Underlying insurance margin
7.7%
5.0%
Reported insurance margin
7.7%
(4.0)%
New Zealand
Underlying insurance margin
13.5%
16.8%
Reported insurance margin
2.4%
12.8%
Insurance margin is on a management results basis. Based on the statutory results, the equivalent statutory insurance margin for the current year is 14.5% (FY22: 12.5%) for DIA, 28.4% (FY22:
4.1%) for IIA and 2.4% (FY22: 12.8%) for New Zealand.
IAG Annual Report 2023
45
Detailed commentary on the insurance margin performance is provided in the divisional sections of the Investor Report. A short summary is
provided below.
DIA’s underlying margin of 15.7% reflects the impact of higher claims inflation, with a delay in the earned-through effect of higher premium rates.
The comparative 20.5% in FY22 included COVID-19 benefits due to lower motor claims frequency. Excluding COVID-19 benefits, the underlying
margin in FY22 was around 19%.
The DIA reported margin of 14.5% was impacted by natural perils $74 million above the allowance and short-tail reserve strengthening of $19
million which was partially offset by gains of $46 million from a narrowing in credit spreads.
IIA’s underlying margin of 7.7% continued to improve despite the inflationary impact on short-tail personal claims. The 7.7% underlying margin in
FY23 (FY22: 5.0%) is the same as the reported margin and demonstrates the progress towards the insurance profit target of at least $250 million in
FY24.
New Zealand’s FY23 underlying margin of 13.5% (FY22: 16.8%) was impacted by similar inflationary impacts on short-tail personal claims as the
Australian divisions. The New Zealand reported insurance margin of 2.4% (FY22: 12.8%) was significantly reduced by the two major weather events
in early 2023.
Reinsurance expense
IAG’s total reinsurance expense includes the cost of all covers purchased, including catastrophe, casualty, facultative and proportional protection.
The FY23 reinsurance expense of $5,512 million compares to $5,063 million in FY22, an increase of approximately 8.9%.
Reinsurance expense
Quota share-related reinsurance expense increased 6.4%, as a result of the significant increase in gross earned premium. Non-quota share
reinsurance expenses also increased to $825 million (FY22: $659 million) due to a hardening global reinsurance market and $67 million in
reinsurance reinstatement costs.
Claims
IAG’s immunised underlying loss ratio, which reflects trends in underlying or working claims, was 56.7% in FY23, a significant increase on the 53.3%
in FY22 reflecting inflationary impacts. This ratio excludes all prior year reserve releases or strengthening, natural perils costs and discount rate
adjustments.
Immunised loss ratio
2023
$m
2022
$m
Immunised underlying net claims expense1
4,721
4,213
Discount rate adjustment
(98)
(289)
Reserving and perils effects
1,243
1,291
Reported net claims expense2
5,866
5,215
Immunised underlying loss ratio1
56.7%
53.3%
Discount rate adjustment
(1.1)%
(3.7)%
Reserving and peril effects
14.9%
16.3%
Reported loss ratio3
70.5%
65.9%
1 Immunised underlying net claims expense and loss ratio adjust the reported equivalent to exclude all prior year reserve releases or strengthening, natural perils costs and discount rate
adjustments.
2 Reported net claims expense is the net claims expense on a management results basis. Based on the statutory results, the equivalent statutory net claims expense for the current year is $5,306
million (FY22: $5,015 million).
3 Reported loss ratio is net claims expense as a percentage of net earned premium. Based on the statutory results, the equivalent statutory loss ratio for the current year is 63.7% (FY22: 63.4%).
657
659
825
4,215
4,404
4,687
4,872
5,063
5,512
FY21
FY22
FY23
Reinsurance expense (ex-quota shares) (A$m)
Reinsurance expense - quota shares (A$m)
Directors’ report
46
IAG Annual Report 2023
Underlying claims trends
At a Group level, the immunised underlying loss ratio of 56.7% in FY23 increased on the prior year (FY22: 53.3%), partially due to an approximately
100bps benefit in the prior corresponding period from the COVID-19 impact resulting in lower claims frequency.
On the positive side, the ratio benefitted from the earn-through of higher premium rates. This was more than offset by:
• double digit increases in average motor claims costs driven by parts inflation and disruption in the supply chain network; and
• higher average home claims costs driven by increases in the price of labour and materials.
Reserve releases/strengthening
Prior period reserve strengthening of $37 million occurred in FY23 (FY22: $172 million).
Adverse claim development in short-tail classes occurred due to inflation-driven increases in claims settlements in the first half of the financial year.
In long-tail classes, an assessment of inflation rates resulted in some reserve strengthening.
These totalled $19 million in DIA, $48 million in IIA and were partially offset by $30 million in releases in New Zealand.
Natural perils
Net natural perils claim costs in FY23 were $1,206 million, well above the original allowance of $909 million (FY22: $1,119 million, $354 million above
allowance). The net costs of the Auckland flooding event in January 2023 and Cyclone Gabrielle in February 2023, New Zealand’s second and third
largest peril events on record, were $284 million. This amount was reduced by recoveries under IAG’s reinsurance program.
FY23 Natural perils costs by event
$m
East Coast Low NSW and Heavy Rain NZ (July 2022)
57
Vic/Tas Heavy Rain and Flooding (October 2022)
84
SA/Vic Thunderstorms and Central West NSW Floods (November 2022)
61
Auckland Rain and Floods NZ (January 2023)
216
Dubbo Thunderstorns (February 2023)
44
Cyclone Gabrielle NZ (February 2023)
68
Central Coast and Hunter (NSW) Hail (May 2023)
44
Other events (120 days
$m
Total
$m
2023
Reinsurance recoveries on paid claims
303
3
1
-
307
2022
Reinsurance recoveries on paid claims
148
2
-
-
150
c.
Premium receivable
The majority of the premium receivable balance relates to policies which are paid on a monthly instalment basis. The late payment of amounts due
under such arrangements allows for the cancellation of the related insurance contract eliminating both the credit risk and insurance risk for the
unpaid amounts. Upon cancellation of a policy the outstanding premium receivable and revenue is reversed. IAG is also exposed to the credit risk
associated with brokers and other intermediaries when premium is collected via these intermediaries. IAG’s exposure is regularly monitored by
ALCo with reference to aggregated exposure, credit rating, internal credit limits and ageing of receivables by counterparty. Ageing analysis for
premium receivable is provided below, with amounts aged according to their original due date, demonstrating IAG's limited exposure:
Not overdue
$m
<30 days
$m
Overdue
30-120 days
$m
>120 days
$m
Total
$m
2023
Premium receivable
4,623
104
60
56
4,843
Provision for impairment
(3)
(4)
(10)
(27)
(44)
4,620
100
50
29
4,799
2022
Premium receivable
4,003
73
35
44
4,155
Provision for impairment
(4)
(11)
(13)
(24)
(52)
3,999
62
22
20
4,103
III. Liquidity risk
Liquidity risk arises where liabilities cannot be met as they fall due as a result of insufficient funds and/or illiquid asset portfolios. IAG's liquidity
position is derived from operating cash flows, access to liquidity through related bodies corporate and interest-bearing liabilities (with some
denominated in different currencies and with different maturities). IAG complies with its liquidity risk management practices, which include a Group
Liquidity Risk Management Policy, and has the framework and procedures in place to ensure an appropriate level of monitoring and management
of liquidity.
a. Outstanding claims liability and investments
Underwriting insurance contracts exposes IAG to liquidity risk through the obligation to make payment for claims of unknown amounts on
unknown dates. The assets backing insurance liabilities can generally be readily sold or exchanged for cash to settle claims and are managed in
accordance with the policy of broadly matching the overall maturity profile to the estimated pattern of claim payments.
A maturity analysis is provided below of the estimated net discounted outstanding claims liability (based on the remaining term to payment at the
reporting date) and the investments that have a fixed term (provided by expected maturity). The timing of future claim payments is inherently
uncertain. Actual maturities may differ from expected maturities because certain counterparties have the right to call or prepay certain obligations
with or without penalties.
Maturity analysis
Net discounted outstanding claims liability
Investments
2023
$m
2022
$m
2023
$m
2022
$m
At call
-
-
1,376
941
Within 1 year or less
2,815
2,959
2,077
2,061
Within 1 to 2 years
1,009
1,171
974
1,077
Within 2 to 5 years
1,387
1,550
1,491
2,199
Over 5 years
489
398
4,699
4,222
Total
5,700
6,078
10,617
10,500
Notes to the financial statements
112
IAG Annual Report 2023
b. Interest-bearing liabilities
The following table provides information about the residual maturity periods of the interest-bearing liabilities of a capital nature based on the
contractual maturity dates of cash flows:
Carrying value
Maturity dates of contractual undiscounted cash flows
$m
Within 1 year
$m
1-2 years
$m
2-5 years
$m
Over 5 years
$m
Perpetual
$m
Total
$m
2023
Principal repayments1
2,118
-
-
-
1,618
500
2,118
Contractual interest
payments1
135
112
205
-
-
452
Total contractual
undiscounted payments
135
112
205
1,618
500
2,570
2022
Principal repayments1
2,016
-
-
-
1,612
404
2,016
Contractual interest
payments1
89
89
140
-
-
318
Total contractual
undiscounted payments
89
89
140
1,612
404
2,334
1 All of the liabilities have call, reset or conversion dates which occur prior to any contractual maturity. Detailed descriptions of the instruments are provided in Note 4.1. The contractual interest
payments are undiscounted and calculated based on underlying fixed interest rates or prevailing market floating rates as applicable at the reporting date. Interest payments have not been
included beyond five years.
IV. Capital risk
Capital risk is defined as the risk that capital is insufficient or excessive given the nature, strategies and objectives of the Group, or comprised of a
mix of equity, debt, reinsurance, including IAG’s 32.5% whole-of-account quota share arrangements, or other expiring sources of capital that is
unsuitable or unsustainable due to its cost, structure, flexibility, or our ability to renew or replace on acceptable terms. IAG's capital management
strategy plays a central role in managing risk to create shareholder value whilst meeting the objective of maintaining an appropriate level of capital
to protect policyholders' and lenders' interests, and meet regulatory requirements.
IAG has a documented description of the capital management process (Internal Capital Adequacy Assessment Process (ICAAP)) and reports
annually on its operation to the Board, together with a forward-looking estimate of expected capital utilisation (as represented in IAG’s Capital Plan)
and capital resilience (ICAAP Annual Report). The adequacy of IAG's capital position is judged relative to the Board's Capital RAS, with an Internal
Capital Model (ICM) used to assess the risks of breaching the minimum levels established in the Capital RAS. Scenario analysis and stress testing are
important adjuncts to the ICM. The amount of capital required varies according to a range of factors including the business underwritten, extent of
reinsurance and investment asset allocation.
The target level of capitalisation (risk appetite) for IAG is assessed by consideration of factors including:
• the probability of insolvency over the next three years;
• the probability of falling below the APRA Prescribed Capital Amount (PCA) over the next three years;
• other stakeholder perspectives on capitalisation, including rating agency capital models and associated ratings; and
• domestic and international levels of capitalisation.
a. Regulatory capital
All insurers within IAG that carry on an insurance business in Australia are registered with APRA and are subject to APRA's Prudential Standards. It is
IAG's policy to ensure that each of the licenced insurers in the Group maintains an adequate capital position.
IAG's long-term target capital ranges are set out below:
• a Common Equity Tier 1 capital of 0.9 to 1.1 times the PCA, compared to a regulatory requirement of a minimum of 0.6 times; and
• a total regulatory capital position equivalent to 1.6 to 1.8 times the PCA, compared to a regulatory requirement of a minimum of 1.0 times.
Internal policies are in place to ensure any significant deviations from the benchmarks are considered by the Board as to how any shortfall should
be made good, or any surplus utilised or maintained.
IAG uses the standardised framework detailed in the relevant prudential standards (APRA Level 2 Insurance Group requirements) to calculate
regulatory capital.
IAG Annual Report 2023
113
Regulatory capital position
2023
$m
2022
$m
Common Equity Tier 1 capital (CET1 capital)
2,955
2,364
Additional Tier 1 capital
500
404
Total Tier 1 capital
3,455
2,768
Tier 2 capital
1,618
1,612
Total regulatory capital
5,073
4,380
Total PCA
2,637
2,439
PCA multiple
1.92
1.80
CET1 multiple
1.12
0.97
At 30 June 2023, IAG's Insurance Concentration Risk Charge was $276 million (2022: $211 million).
Consideration is given to the operational capital needs of the business. Targeting a capital multiple above the minimum regulatory requirement
aims to ensure the ongoing strength and security of IAG, while suitably protecting policyholders and lenders.
IAG's capital objectives are achieved through dynamic management of the balance sheet and capital mix, the use of a risk based capital adequacy
framework that relies on explicit quantification of uncertainty or risk and the use of modelling techniques that provide the capacity to understand
the risk/return trade-off as well as valuable inputs to the capital management process. The influences on capital, such as product mix, reinsurance
program design, catastrophe exposure, investment strategy, profit margins and capital structure, are all assessed using dynamic financial analysis
modelling.
An important influence on IAG's capital level is the payment of dividends. IAG targets a dividend payout ratio, measured as a proportion of cash
earnings, within a range approved by the Board.
b. Capital composition
The capital mix at reporting date is shown in the table below:
Capital mix
Target
%
2023
%
2022
%
Ordinary equity less goodwill and intangible assets
60-70
61.5
60.1
Interest-bearing liabilities – hybrid securities and debt
30-40
38.5
39.9
Total capitalisation
100.0
100.00
G. Model risk
Model risk is the potential for adverse consequences from decisions based on incorrect, misapplied, or misused model outputs and reports,
including automated decisions based on model output.
Model risk is important because it can lead to financial loss, adverse customer outcomes, poor business and strategic decision making, damage to
IAG’s reputation and/or regulatory enforcement. At IAG, models are used for a broad range of activities across the business, including underwriting,
valuing exposures, pricing, measuring risk, claims responses, determining capital, reserving adequacy and increasingly automating processes
aligned with IAG’s digital strategy.
Models are required to adhere to the Group Model Governance Policy. The requirements in this policy vary depending on the materiality of the
model. An annual attestation from the model owner to a governing committee is required for each material model. The model owner needs to
attest that the models under their remit are fit for purpose, up to date and comply with the policy and associated standards.
H. Operational risk
Operational risk is defined as the failure to achieve objectives due to inadequate or failed internal processes, people and systems or from external
events.
When controls are inadequate or fail, an operational risk event can cause injury, damage to reputation, have legal or regulatory implications or can
lead to financial loss. IAG manages these risks by initiating an appropriate control framework and by monitoring and managing potential risks. The
Risk Committee is responsible for oversight of the operational risk framework and approval of the Group Operational Risk Management
Framework, and any changes to it. The Board and Group Leadership Team believe an effective, documented and structured approach to
operational risk is a key part of the broader RMF that is outlined in IAG's RMS.
Notes to the financial statements
114
IAG Annual Report 2023
The operational risk framework and standards aim to ensure that consistent governance mechanisms and practices are in place, and that activities
undertaken which involve operational risk are assessed and managed with appropriate regard to the Group's RAS and the achievement of IAG's
objectives. The operational risk framework is supported by aligned frameworks, policies, standards and guidelines for key aspects of operational
risk.
On 28 July 2022, APRA released for consultation a new draft prudential standard CPS 230 Operational Risk Management. Following industry
feedback, APRA released the final prudential standard on 17 July 2023 along with a draft prudential practice guide. The cross-industry standard sets
out minimum standards for managing operational risk, including updated requirements for business continuity and service provider management,
and will replace and supersede a number of existing standards and guidance. IAG has made significant investments to prepare for compliance with
the standard and will participate in further consultation on the draft prudential practice guide. IAG is assessing the final standard and practice
prudential guide to determine areas requiring further work in order to comply by the effective date of 1 July 2025.
Over the last three years, IAG has significantly improved its operational risk management practices following several issues, including potential
business interruption claims relating to COVID-19 and historic matters pertaining to IAG’s pricing systems and processes and payroll related
procedures. IAG is continuing to focus on uplifting operational risk management capability as part of its efforts to accelerate improvements in its
risk maturity. Refer to Note 2.2 and Note 5.3 for further details on the associated provisions.
Management and staff are responsible for identifying, assessing and managing operational risks in accordance with their roles and responsibilities.
I.
Regulatory and compliance risk
Regulatory and Compliance Risk is defined as the risk of adverse legal outcomes, regulatory or reputational impacts arising from failure to manage
compliance obligations, or failure to anticipate and prepare for changes in the regulatory environment. IAG engages with regulators and regularly
monitors developments in regulatory requirements to support ongoing compliance.
In recent times, across Australia and New Zealand, the insurance industry has observed an increase in the frequency and scale of regulatory reviews
and activity. For example, on 15 October 2021 ASIC called on all general insurers to review their pricing practices, systems and controls to ensure
consumers received the full discounts they were promised. ASIC announced that where there are failures, or empty promises about price discounts,
ASIC will use the full range of regulatory tools available to protect consumers – including enforcement action. ASIC has announced that its
Enforcement Priorities for 2023 include failures by providers of general insurance to deliver on pricing promises to consumers and enforcement
action targeting poor design, pricing, unfair contract terms and distribution of financial products including in relation to insurance. ASIC has also
commenced a number of enforcement actions in relation to those types of issues. Where a breach has occurred, regulators may impose, or apply to
a Court to impose, fines and/or other sanctions. In recent years, there has been an increase in the number of matters in respect of which the Group
engages with its regulators, including in relation to pricing matters which are the subject of review and investigation by ASIC. In relation to the civil
penalty proceedings that ASIC commenced against Insurance Australia Limited on 15 October 2021 in the Federal Court of Australia, on 30 June
2023 the Court ordered Insurance Australia Limited to pay a civil penalty in the amount of $40 million for contraventions of the Australian Securities
and Investments Commission Act 2001 (Cth) (ASIC Act), plus ASIC’s costs of and incidental to the proceeding. IAG remains focused on implementing
required legislative changes in a timely and efficient manner.
IAG Annual Report 2023
115
4. Capital structure
Section introduction
This section provides disclosures on the capital structure of IAG, which demonstrates how IAG finances its overall operations and growth
through the use of different sources of funds, including ordinary equity and debt and hybrid instruments. Reinsurance is also an important
source of long-term capital for IAG – reinsurance specific disclosures are included in section 2 insurance disclosures.
The capital that IAG maintains provides financial security to its policyholders, whilst ensuring adherence to the capital adequacy requirements
of industry regulators. IAG also seeks to maintain, and where possible enhance, the overall diversity and efficiency of its capital structure to
support the delivery of targeted returns to shareholders. IAG’s capital composition is substantially in the form of securities eligible for inclusion in
regulatory capital, therefore IAG’s capital mix is primarily determined by its regulatory capital targets.
Note 4.1 Interest-bearing liabilities
Final maturing date
Issue date
Principal
amount
Section
Carrying value
$m
2023
Fair value
$m
Carrying value
$m
2022
Fair value
$m
A. Composition
I.
Capital nature
Tier 1 regulatory capital
Capital notes
No fixed date
22 December 2016
$404 million1
-
-
404
412
No fixed date
22 December 2022
$500 million2
B. I
500
506
-
-
500
404
Tier 2 regulatory capital
AUD subordinated term notes
15 December 2036
24 August 2020
$450 million
B. II
450
450
450
442
15 June 2044
29 March 2018
$350 million
B. III
350
350
350
349
15 June 2045
28 March 2019
$450 million
B.I V
450
450
450
447
1,250
1,250
NZD subordinated term notes3
15 June 2038
5 April 2022 NZ$400 million
B. V
368
338
362
352
II. Operational nature
Other interest-bearing liabilities
36
36
50
50
Less: capitalised transaction costs
(15)
(11)
2,139
2,055
1 The principal amount of Capital Notes 1 issued in 2016 reduced from $404 million to $220 million on 22 December 2022, as a result of a reinvestment offer in relation to Capital Notes 2. The
remaining Capital Notes 1 were fully redeemed on 15 June 2023.
2 On 22 December 2022, the Company issued $500 million of Capital Notes 2. After allowance for a reinvestment offer for certain eligible holders of Capital Notes 1 issued in 2016 and transaction
costs, the Company raised a net amount of $308 million.
3 At the reporting date, the Company recognised accrued interest of $1 million (30 June 2022: $1 million) which is presented within trade and other payables.
B. Significant terms and conditions
I.
Capital Notes 2 issued on 22 December 2022
• distribution rate equals the sum of the three-month bank bill swap rate (BBSW) plus a margin of 3.50% per annum, adjusted for franking credits;
• payments of quarterly distributions are non-cumulative and can only be made subject to meeting certain conditions. If no distribution is made,
no dividends can be paid and no returns of capital can be made on ordinary shares until the next distribution payment date, subject to certain
exceptions;
• IAG may convert, redeem or resell the Capital Notes 2 on 15 June 2029, or upon occurrence of certain events, subject to APRA approval; and
• the Capital Notes 2 are scheduled for mandatory conversion into a variable number of ordinary shares of the Company (subject to a maximum
number of 210 million shares) on 15 March 2032 or each subsequent distribution payment date on which the mandatory conversion conditions
are satisfied, subject to certain conditions.
Notes to the financial statements
116
IAG Annual Report 2023
II. AUD subordinated term notes due 2036
• floating interest rate equal to the three-month BBSW plus a margin of 2.45% per annum is payable quarterly; and
• IAG has an option to redeem the notes at face value on 15 December 2026 and on any interest payment date following the first call date and for
certain tax and regulatory events (in each case subject to APRA’s prior written approval).
III. AUD subordinated convertible term notes due 2044
• floating interest rate equal to the three-month BBSW plus a margin of 2.10% per annum is payable quarterly;
• IAG has an option to redeem the notes at face value between 15 June 2024 and 15 June 2025 and for certain tax and regulatory events (in each
case subject to APRA’s prior written approval); and
• the notes can be converted into a variable number of ordinary shares of the Company (subject to a maximum of 88.7 million shares) at the
option of holders from and including 15 June 2027 and at each subsequent interest payment date.
IV. AUD subordinated convertible term notes due 2045
• floating interest rate equal to the three-month BBSW plus a margin of 2.35% per annum is payable quarterly;
• IAG has an option to redeem the notes at face value between 15 June 2025 and 15 June 2026 and for certain tax and regulatory events (in each
case subject to APRA’s prior written approval); and
• the notes can be converted into a variable number of ordinary shares of the Company (subject to a maximum of 116.7 million shares) at the
option of holders from and including 15 June 2028 and at each subsequent interest payment date.
V. NZD subordinated term notes due 2038
• fixed interest rate of 5.32% per annum, payable quarterly;
• IAG has an option to redeem the notes at face value on 15 June 2028 and on any interest payment date following the first call date and for certain
tax and regulatory events (in each case subject to APRA’s prior written approval); and
• if the notes are not redeemed on 15 June 2028, the interest rate will become the applicable three-month bank bill rate plus a margin of 1.90%
per annum.
C. Non-viability trigger event
If APRA determines that a non-viability trigger event has occurred in relation to the Company, all (or in some circumstances, some) notes must be
converted into ordinary shares of the Company, or, if conversion does not occur when required, written off.
D. Recognition and measurement
Interest-bearing liabilities are initially measured at fair value (net of transaction costs) and subsequently measured at amortised cost using the
effective interest method. Based on market conditions at any point in time, the carrying value of the liabilities may not be representative of the fair
value of the liabilities.
The fair value for all interest-bearing liabilities is calculated using their quoted market price in active markets (fair value hierarchy level 1), except for
the AUD subordinated term notes where their fair value is calculated using their quoted market price in a market that is considered to be lacking
sufficient depth to be considered active (fair value hierarchy level 2).
Note 4.2 Equity
2023
Number of shares in
millions
2022
Number of shares in
millions
2023
$m
2022
$m
A. Share capital
Balance at the beginning of the financial year
2,465
2,465
7,386
7,386
On-market share buy-back, net of transaction costs
(24)
-
(122)
-
Balance at the end of the financial year
2,441
2,465
7,264
7,386
B. Changes during the period
I.
Berkshire Hathaway
On 12 January 2023, IAG announced the renewal of its whole-of-account quota share agreement (WAQS) with National Indemnity Company (NICO),
a Berkshire Hathaway subsidiary. The renewed WAQS is effective from 1 January 2023 and applies until 31 December 2029. In connection with the
renewal of the WAQS, the Strategic Relationship Agreement between the Company, NICO and Berkshire Hathaway Speciality Insurance Company
as well as the Subscription Agreement between the Company and NICO will not be continuing and both were terminated.
IAG Annual Report 2023
117
II. On-Market share buy-back
On 17 October 2022, IAG announced, it would undertake an on-market share buy-back of up to $350 million. During the current financial year, the
Company has acquired on-market 24 million shares for a consideration of $122 million (including transaction costs) at an average price per share of
$4.99. The share buy-back commenced in November 2022 and currently has a proposed end date of 16 October 2023. IAG intends to extend the
proposed end date of the share buy-back by up to 12 months.
C. Nature and purpose of equity
I.
Ordinary shares
All ordinary shares on issue are fully paid and have no par value. Ordinary shares entitle the holder to a vote at a general meeting of the Company
and to participate in the dividends and the proceeds on winding up of the Company in proportion to the number of, and amounts paid on, the
shares held. Shares are classified as equity when there is no obligation to transfer cash or other assets to the holder. Transaction costs directly
attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.
II. Treasury shares held in trust
To satisfy obligations under the various share-based remuneration plans, shares are generally bought on-market at or near grant date of the
relevant arrangement and are managed using in-house trusts, one for Australia and one for New Zealand, which are controlled by IAG. The shares
are measured at cost and are presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, cancellation or reissue
of the shares. The shares are derecognised as treasury shares held in trust when the shares vest or are released to the participant. The total number
of treasury shares acquired on-market during the financial year was 1.8 million (2022: 124 thousand) at an average price per share of $5.19 (2022:
$4.62).
III. Foreign currency translation reserve
The foreign currency translation reserve records the foreign currency differences and related net investment hedge arising from the translation of
the financial position and performance of subsidiaries and investments in associates that have a functional currency other than Australian dollars.
IV. Share-based remuneration reserve
The share-based remuneration reserve is used to recognise the fair value of equity-settled share-based remuneration obligations issued to
employees. The total amount expensed over the vesting period through the consolidated statement of comprehensive income is calculated by
reference to the fair value of the rights at grant date. The fair value of the rights is calculated at the grant date using a Black Scholes valuation model
and Monte Carlo simulation. The volatility assumption has been set considering the Company's historical share price. Some of the assumptions are
based on historical data which is not necessarily indicative of future trends. Reasonable changes in these assumptions would not have a material
impact on the amounts recognised in the financial statements.
The Company provides benefits to employees (including senior management and Executives) through share-based incentives to create a link
between shareholder value creation and rewarding employees, and assist with retention of key personnel. The senior management and Executive
share plan arrangements consist of two separate arrangements working together. These two arrangements are the Deferred Award Rights Plan
(DARs Plan) and Executive Performance Rights Plan (EPRs Plan).
The obligations under share-based payment arrangements are covered by the on-market purchase of ordinary shares of the Company which are
held in trust. The number of shares purchased to cover each allocation of rights is determined by the trustee based on independent actuarial advice.
Notes to the financial statements
118
IAG Annual Report 2023
Note 4.3 Earnings per share
2023
cents
2022
cents
A. Reporting period values
Basic earnings per ordinary share1
33.92
14.09
Diluted earnings per ordinary share2
32.20
13.33
1 The basic earnings per ordinary share is determined by dividing the profit or loss attributable to shareholders of the Parent by the weighted average number of shares of the Parent on issue
during the reporting year. The treasury shares held in trust are deducted, but earnings attributable to those shares are included.
2 Diluted earnings per share is determined by dividing the profit or loss attributable to shareholders of the Parent, adjusted for the finance costs of dilutive convertible instruments, by the
weighted average number of ordinary shares and dilutive potential ordinary shares, primarily as a result of debt instruments that possess a conversion feature.
2023
$m
2022
$m
B. Reconciliation of earnings used in calculating earnings per share
Profit attributable to shareholders of the Parent which is used in calculating basic and diluted earnings per
share
832
347
Finance costs of dilutive convertible securities, net of tax
84
21
Profit attributable to shareholders of the Parent which is used in calculating diluted earnings per share
916
368
2023
Number of
shares in
millions
2022
Number of
shares in
millions
C. Reconciliation of weighted average number of ordinary shares used in calculating
earnings per share
Weighted average number of ordinary shares on issue (adjusted for treasury shares held in trust) used in the
calculation of basic earnings per share
2,453
2,462
Weighted average number of dilutive potential ordinary shares relating to:
Convertible securities
390
295
Unvested share-based remuneration rights supported by treasury shares held in trust
2
3
2,845
2,760
Note 4.4 Dividends
Cents per
share
2023
$m
Cents per
share
2022
$m
A. Ordinary shares
2023 30% franked interim dividend paid on 23 March 2023
(2022: unfranked interim dividend)
6.0
147
6.0
148
2022 70% franked final dividend paid on 22 September 2022
5.0
123
13.0
320
270
468
B. Dividend not recognised at reporting date
2023 30% franked final dividend (2022: 70% franked final dividend)
to be paid on 28 September 2023
9.0
220
5.0
123
C. Dividend franking amount
Franking credits available for subsequent financial periods based on a tax
rate of 30%
291
256
IAG Annual Report 2023
119
The consolidated amounts above are calculated from the balance of the franking account as at the end of the reporting period, adjusted for
franking credits that will arise from the settlement, after the end of the reporting date, of tax-related balances and the franking credits that will be
utilised for dividends determined but not recognised at the reporting date.
The Company, immediately after payment of the final dividend (30% franked), will have no franking credits available for distribution.
The unfranked part of the dividend is declared to be conduit foreign income. For shareholders not resident in Australia, the dividend will not be
subject to Australian withholding tax.
D. Dividend reinvestment
The Company has a Dividend Reinvestment Plan (DRP) which allows eligible shareholders with ordinary shares to elect to receive their dividend
entitlement in the form of ordinary shares of the Company. The price of DRP shares is the volume-weighted average price (VWAP), less a discount if
determined by the Directors, calculated over the pricing period (which is at least five trading days) as determined by the Directors for each dividend
payment date.
A copy of the terms and conditions for the DRP is available at www.iag.com.au in the Shareholder Centre section. The DRP for the 2023 interim
dividend was suspended.
E. Restrictions that may limit the payment of dividends
There are currently no restrictions on the payment of dividends by the Parent other than:
• the payment of dividends is subject to the provisions of the Corporations Act 2001 and IAG's constitution;
• the payment of dividends generally being limited to profits, subject to ongoing solvency obligations, and under the APRA Level 2 Insurance
Group supervision requirements, IAG is required to obtain approval from APRA before payment of dividends on ordinary shares that exceed the
Group’s after-tax earnings as defined by APRA; and
• no dividends can be paid and no returns of capital can be made on ordinary shares if distributions are not paid on the Capital Notes 2, unless
certain actions are taken by IAG. For further details, refer to Note 4.1.
F. Recognition and measurement
Provision for dividends is made in respect of ordinary shares where the dividends are declared on or before the reporting date but have not yet been
distributed at that date.
Note 4.5 Derivatives
A. Reporting date positions
Notional
contract
amount
$m
Fair value
asset
$m
2023
Fair value
liability
$m
Notional
contract
amount
$m
Fair value
asset
$m
2022
Fair value
liability
$m
I.
Net investment hedges (hedge accounting applied)
Forward foreign exchange contracts
-
-
-
737
2
(13)
II. Derivatives (without hedge accounting applied)
Bond futures
3,722
-
(14)
2,380
-
-
Share price index futures
(3)
-
-
17
-
-
Forward foreign exchange contracts1
3,453
6
(21)
3,199
1
(75)
1 Prior year comparatives have been re-presented to combine investment-related derivatives and treasury-related derivatives.
All derivative contracts are expected to be settled within 12 months.
Notes to the financial statements
120
IAG Annual Report 2023
B. Recognition and measurement
Derivatives are initially recognised at fair value, which is determined by reference to current market quotes or generally accepted valuation
principles. Where derivatives are investment-related, they are presented together with the underlying investments or as payables when the fair
value is negative. Any other derivatives are presented as receivables when the fair value is positive or as payables when the fair value is negative.
I.
Hedge accounting
Hedge accounting may be applied to derivatives designated as hedging instruments provided certain criteria are met. At the inception of a hedge
relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will
assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and
how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
• there is ‘an economic relationship’ between the hedged item and the hedging instrument;
• the effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and
the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedge of net investments in foreign operations
The foreign currency exposures arising on translation of net investments in foreign operations are hedged (net investment hedge) using the spot
element of forward exchange contracts and the designation of certain foreign currency borrowings as hedging instruments. The fair value is
determined using observable inputs (level 2 in the fair value hierarchy).
There is an economic relationship between the hedged items and the hedging instruments as the net investment creates a translation risk that will
match the foreign exchange risk on the spot element of the forward exchange contracts and the foreign currency borrowings. The Group has
established a hedge ratio of 1:1 as the underlying risk of the hedging instruments is identical to the hedged risk component.
Any gain or loss on the net investment hedges relating to the effective portion of the hedge is recognised in equity, while the gain or loss relating to
the ineffective portion is immediately recognised in profit or loss. Gains and losses accumulated in the equity reserve are recognised in profit or loss
upon the disposal of the foreign operation.
Details of IAG’s activities in relation to hedges in its foreign operations against foreign currency movements are as follows:
Change in fair
value of items
for
ineffectiveness
assessment
$m
2023
Balance in
foreign
currency
translation
reserve
$m
Change in fair
value of items
for
ineffectiveness
assessment
$m
2022
Balance in
foreign
currency
translation
reserve
$m
Net investment hedges (hedge accounting applied)
Forward foreign exchange contracts
-
66
1
43
II. Derivatives without hedge accounting applied
For derivatives that do not qualify for hedge accounting, the changes in fair value are immediately recognised in profit or loss. Transaction costs for
purchases of derivatives are expensed as incurred.
The fair value of the bond futures and share price index futures are measured using a quoted price in an active market (level 1 in the fair value
hierarchy), whilst the fair value of the forward foreign exchange contracts are determined using observable inputs (level 2 in the fair value
hierarchy).
IAG Annual Report 2023
121
5. Other balance sheet disclosures
Section introduction
This section provides disclosures on other components of IAG's financial position, including:
• Goodwill and intangible assets – these balances primarily relate to the difference between the total consideration paid and the net tangible
assets acquired in relation to past business acquisitions as well as internally developed capitalised software. These assets support the
generation of future earnings and are subject to impairment testing, with finite useful life intangible assets also subject to amortisation. For
example, an impairment will arise if future earnings can no longer support the carrying value of the assets in question.
• Income tax – the note summarises both the comprehensive income (profit or loss and other comprehensive income) and balance sheet items
related to income tax. The profit or loss disclosure includes a reconciliation between the income tax expense reported and the prima facie
amount when applying the Australian company tax rate (30%). The balance sheet disclosure focuses on deferred tax balances, which arise
due to timing differences between the accounting treatment of taxable income or expenses and the treatment adopted by the relevant tax
authority. For example, IAG recognises a deferred tax asset in relation to losses incurred by its Australian and New Zealand operations in prior
financial years. This asset is expected to unwind over time as the tax benefit recognised for accounting purposes is used to offset future
taxable income.
• Provisions – historically this balance has primarily included employee-related costs, for example an annual leave entitlement representing
amounts owing to employees at the balance date based on past service. The provisions balance also includes amounts in respect of the
customer remediation program and payroll compliance review.
• Leases – the note provides information on the effect that leases have on the financial position, financial performance and cash flows of IAG.
Note 5.1 Goodwill and intangible assets
Goodwill
$m
Software
development
expenditure
$m
Distribution
channels
$m
Customer
relationships
$m
Brands
and other
$m
Total
$m
2023
A. Composition
Cost
2,830
1,442
152
194
112
4,730
Accumulated amortisation and impairment
-
(737)
(152)
(184)
(25)
(1,098)
Balance at the end of the financial year
2,830
705
-
10
87
3,632
B. Reconciliation of movements
Balance at the beginning of the financial year
2,823
489
-
13
86
3,411
Additions acquired and developed
2
267
-
-
1
270
Disposal through sale of businesses
(7)
-
-
-
-
(7)
Amortisation
-
(50)
-
(3)
(1)
(54)
Net foreign exchange movements
12
(1)
-
-
1
12
Balance at the end of the financial year
2,830
705
-
10
87
3,632
2022
A. Composition
Cost
2,823
1,176
152
194
110
4,455
Accumulated amortisation and impairment
-
(687)
(152)
(181)
(24)
(1,044)
Balance at the end of the financial year
2,823
489
-
13
86
3,411
B. Reconciliation of movements
Balance at the beginning of the financial year
2,829
285
1
17
88
3,220
Additions acquired and developed
14
220
-
2
-
236
Amortisation
-
(17)
(1)
(6)
-
(24)
Net foreign exchange movements
(20)
1
-
-
(2)
(21)
Balance at the end of the financial year
2,823
489
-
13
86
3,411
Notes to the financial statements
122
IAG Annual Report 2023
C. Impairment
An impairment charge is recognised in profit or loss when the carrying value of the asset, or Cash Generating Unit (CGU), exceeds the calculated
recoverable amount. The impairment charge for goodwill cannot be subsequently reversed, whereas for identified intangibles the charge can be
reversed where estimates used to determine the recoverable amount have changed. For assets with indefinite useful lives, which include goodwill,
the recoverability of the carrying value of the assets is reviewed for impairment at each reporting date, or more frequently if events or changes in
circumstances indicate that it might be impaired. The carrying amounts of intangible assets with finite useful lives are reviewed at each reporting
date by determining whether there is an indication that the carrying values may be impaired. If any such indication exists, the asset is tested for
impairment.
I.
Impairment testing of goodwill
For the purpose of impairment testing goodwill is allocated to CGUs. The recoverable amount of goodwill is determined by value-in-use
calculations, which estimate the present value of future cash flows by using a post-tax discount rate that reflects current market assessment of the
risks specific to the CGUs. Where an impairment is determined, impairment losses relating to CGUs are allocated first to reduce goodwill and then to
other CGU assets on a pro-rata basis.
Goodwill is allocated to the following CGUs:
2023
$m
2022
$m
Direct Insurance Australia
624
622
Intermediated Insurance Australia
1,551
1,558
Australia
2,175
2,180
New Zealand
655
643
2,830
2,823
The following describes the key assumptions on which management based its cash flow projections to undertake the impairment testing:
• Cash flow forecasts are based on the latest three-year management business plans and then trend to the long-term assumptions to cover a ten-
year valuation forecast for growth and profitability.
• Terminal value is calculated using a perpetuity growth formula based on the cash flow forecast at the end of the relevant valuation forecast
period, terminal growth rate in profit or premium and, where appropriate, terminal insurance margin. Terminal growth rates and insurance
margins are based on past performance and management's expectations for future performance in each segment and country. The terminal
growth rate assumptions used in IAG's impairment assessment for significant CGUs as at 30 June 2023 are: Direct Insurance Australia 3.7% (2022:
3.7%), Intermediated Insurance Australia 3.3% (2022: 3.2%) and New Zealand 3.5% (2022: 3.5%).
• Discount rates reflect a beta and equity risk premium appropriate to IAG, with risk adjustments for individual segments and countries where
applicable. The pre-tax and post-tax discount rates used for significant CGUs as at 30 June 2023 are set out in the table below.
2023
2022
Pre-tax
Post-tax
Pre-tax
Post-tax
Direct Insurance Australia
11.8%
9.5%
11.5%
9.3%
Intermediated Insurance Australia
12.2%
9.5%
11.8%
9.3%
New Zealand
12.6%
10.0%
12.4%
9.8%
II. Impairment testing of identified intangible assets
Where the recoverable amount is determined by a value-in-use calculation, it involves the use of accounting estimates and assumptions to
determine the projected net cash flows, which are discounted using an appropriate discount rate to reflect current market assessment of the risks
associated with the assets or CGU. A description of the nature of significant intangible assets is provided below:
• An impairment charge for capitalised software is incurred if there is evidence of obsolescence or significant changes impacting the manner in
which an asset is used or expected to be used or there is evidence indicating the economic performance of the asset is not as intended by
management.
• The value of distribution channels is derived from future revenue expected to be generated as a result of the existing relationships with the
broker networks.
• Customer relationships represent the present value of future profits expected to arise from existing customer relationships (developed prior to
acquisition of the business). The assumptions for the useful life and customer attrition rates are determined based on historical information.
• Brands represent the revenue-generating value of the acquired brand which is determined using the relief from royalty method.
D. Recognition and measurement
All of the goodwill and intangible assets, other than components of capitalised software development expenditure (internally generated), have
been acquired.
Intangible assets are initially recorded at cost at the date of acquisition, being the fair value of the consideration. Internally generated intangible
assets comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended
by management. Goodwill is generated as a result of business acquisition and is initially measured as the excess of the purchase consideration over
the fair value of the net identifiable assets and liabilities acquired. At the date of disposal of a business, attributed goodwill is used to calculate the
gain or loss on disposal.
IAG Annual Report 2023
123
Intangible assets with an indefinite useful life, including goodwill and certain brands, are not subject to amortisation but to impairment testing.
Intangible assets with finite useful lives are amortised on a straight-line basis over the period in which the related economic benefits are expected to
be realised. Amortisation rates and residual values are reviewed annually, and any changes are accounted for prospectively. Amortisation is
recognised within fee-based, corporate and other expenses in the consolidated statement of comprehensive income, whilst the amortisation of
capitalised software is recognised within the insurance profit. The useful lives for each category of intangible assets are as follows:
• capitalised software: up to 3 years, with major core software infrastructure amortised over a period up to 10 years;
• distribution channels: 5 to 10 years;
• customer relationships: 5 to 10 years; and
• brands and other: up to 20 years, except for certain brands with an indefinite useful life.
Note 5.2 Income tax
2023
$m
2022
$m
A. Income tax expense
Current tax
132
136
Deferred tax
295
8
Under/(over) provided in prior year
2
(4)
Income tax expense
429
140
B. Reconciliation of prima facie tax to income tax expense
Profit for the year before income tax
1,354
564
Income tax calculated at 30% (2022: 30%)
406
169
Amounts which are not deductible/(taxable) in calculating taxable income
Disposal of associate
(2)
-
Difference in tax rate
3
(3)
Rebatable dividends
(3)
(3)
Interest on capital notes and convertible preference shares
10
6
Other
13
(25)
Income tax expense applicable to current year
427
144
Adjustment relating to prior year
2
(4)
Income tax expense attributable to profit for the year from continuing operations after
impact of tax consolidation
429
140
C. Deferred tax assets
I.
Composition
Tax losses
436
600
Insurance provisions
152
140
Provisions
14
77
Property and equipment
175
140
Employee benefits
100
88
Investments
47
98
Defined benefit superannuation plans
2
4
Other
43
32
969
1,179
Amounts set-off against deferred tax liabilities
(308)
(224)
661
955
II. Reconciliation of movements
Balance at the beginning of the financial year
1,179
1,156
(Charged)/credited to profit or loss
(211)
39
(Charged)/credited to other comprehensive income*
(3)
(16)
Adjustments relating to prior year
1
5
Foreign exchange differences
3
(5)
Balance at the end of the financial year prior to set-off
969
1,179
* Amounts charged/credited to other comprehensive income relate to the tax effect on remeasurements of defined benefit plans.
Notes to the financial statements
124
IAG Annual Report 2023
III. Tax losses
The deferred tax assets from tax losses relate to the Australian tax-consolidated group as a result of business interruption insurance reserving and
remediation costs, and IAG’s New Zealand business as a result of the Christchurch earthquake events that occurred in 2010 and 2011 and the 2016
Kaikoura earthquake. Tax losses carried forward do not expire after a particular period and remain available to offset against future income tax
liabilities, provided the continuity of shareholding requirement is met at the listed holding company level.
2023
$m
2022
$m
D. Deferred tax liabilities
I.
Composition
Investments
21
10
Other
287
214
308
224
Amounts set-off against deferred tax assets
(308)
(224)
-
-
II. Reconciliation of movements
Balance at the beginning of the financial year
224
179
Charged to profit or loss
84
47
Charged to other comprehensive income*
1
-
Adjustments relating to prior year
(1)
(2)
Balance at the end of the financial year prior to set-off
308
224
* Amounts charged/credited to other comprehensive income relate to the tax effect on hedge of net investments in foreign operations.
E. Recognition and measurement
I.
Income tax
Income tax expense for a reporting year comprises current and deferred tax. Income tax is recognised in profit or loss, except to the extent that it
relates to items recognised directly in either equity or other comprehensive income.
II. Current tax
Current tax assets and liabilities are the expected tax recoverable or payable on the taxable income for the year, using tax rates for each jurisdiction,
and any adjustment to tax payable in respect of previous financial periods. These include any rates or laws enacted or substantially enacted at the
consolidated balance sheet date.
III. Deferred tax
Deferred tax liabilities are recognised for all taxable temporary differences between the carrying amount and tax bases. Deferred tax assets
(deductible temporary differences, carried forward unused tax assets and unused tax losses) are recognised to the extent it is probable that future
taxable profit will be available to utilise them before the unused tax losses or credits expire. In making this assessment, IAG considers historical
trends of profit generation.
The following demonstrates other circumstances when no deferred tax asset or liability is recognised:
• temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit or loss;
• temporary differences between the carrying amount and tax bases of investments in subsidiaries where it is probable that the differences will
not reverse in the foreseeable future; and
• temporary differences relating to the initial recognition of goodwill.
IV. Tax consolidation
The Company and its Australian resident wholly-owned subsidiaries adopted the tax consolidation legislation with effect from 1 July 2002 and are
therefore taxed as a single entity from that date. The Company is the head entity within the tax-consolidated group.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the
tax-consolidated group and are recognised as amounts receivable/(payable) from/(to) other entities in the tax-consolidated group in conjunction
with any tax funding arrangement amounts. Any difference between these amounts is recognised by IAG as an equity contribution or distribution.
All entities in the tax-consolidated group have entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and
several liabilities of the wholly-owned entities in the case of a default by the head entity. The entities have also entered into a tax funding agreement
under which the wholly-owned entities fully compensate the Company for any current tax payable assumed.
IAG Annual Report 2023
125
Note 5.3 Provisions
2023
$m
2022
$m
A. Provisions
Employee benefits
339
322
Restructuring provision
5
23
Customer refunds provision
43
309
Payroll compliance provision
6
17
393
671
B. Employee benefits
I.
Expense recognised in the consolidated statement of comprehensive income
Defined contribution superannuation plans
139
136
Defined benefit superannuation plans
4
5
Share-based remuneration
9
15
Salaries and other employee benefits expense
1,862
1,736
2,014
1,892
II. Provision recognised on the consolidated balance sheet
Short-term and other benefits*
210
181
Long service leave
126
118
Defined benefit superannuation plans
3
12
Executive performance rights
-
11
339
322
* Short-term and other benefits include annual leave entitlements and cash-based incentive arrangements.
The employee benefits provision includes $72 million (2022: $91 million) which is expected to be settled after more than 12 months from reporting
date.
C. Restructuring provision
Balance at the beginning of the financial year
23
20
Additions
2
21
Amounts settled
(20)
(18)
Balance at the end of the financial year
5
23
The restructuring provision primarily comprises restructuring costs in respect of operating model changes in Australia and New Zealand. The
provision outstanding at the reporting date is expected to be settled within 12 months (2022: all).
D. Customer refunds provision
Balance at the beginning of the financial year
309
399
Additions
9
43
Unused amounts reversed
(6)
-
Amounts utilised
(269)
(133)
Balance at the end of the financial year*
43
309
* This balance includes an offsetting amount of $2 million (2022: $3 million) in respect of recoverable indirect taxes.
This customer refunds provision relates to multi-year pricing issues identified by IAG as part of a proactive review of its pricing systems and related
business processes.
On 15 October 2021, IAG advised that ASIC had commenced civil penalty proceedings in the Federal Court of Australia alleging contraventions of the
ASIC Act and the Corporations Act 2001 by Insurance Australia Limited, a wholly-owned subsidiary of the Company. The proceedings relate to
Insurance Australia Limited’s failure to pass on the full amount of discounts to a significant number of NRMA Home, Motor, Caravan and Boat
Insurance customers between March 2014 and September 2019. IAG identified this issue as part of a review in 2019 and self-reported the issue to
ASIC. On 30 June 2023, the Federal Court of Australia ordered Insurance Australia Limited to pay a civil penalty in the amount of $40 million for
contraventions of the ASIC Act, plus ASIC’s costs of and incidental to the proceeding. The customer refunds associated with these proceedings, the
civil penalty amount and ASIC’s expected costs are covered by the customer refunds provision, which also covers other products and pricing-
related matters.
Notes to the financial statements
126
IAG Annual Report 2023
During the current financial period the reduction in the provision of $266 million relates mainly to ongoing remediation payments to impacted
customers and the incurrence of costs associated with running the program. The gross customer refunds provision was $43 million at 30 June 2023
(2022: $309 million).
The customer refunds provision is expected to be settled within 12 months from reporting date (2022: all).
2023
$m
2022
$m
E. Payroll compliance provision
Balance at the beginning of the financial year
17
63
Additions
5
-
Amounts utilised
(16)
(46)
Balance at the end of the financial year
6
17
This provision relates to a retrospective compliance review across a number of IAG’s payroll-related procedures connected to primary and ancillary
legislative and key entitlement obligations.
During the current year, there has been no material impact to earnings related to changes in the payroll compliance provision, with the reduction in
the provision of $11 million relating to the settlement of employee entitlement shortfalls and the incurrence of costs associated with running the
program. The payroll compliance provision was $6 million at 30 June 2023 (2022: $17 million). The provision comprises employee entitlement
shortfalls, interest applicable to those amounts, the cost of administering the associated remediation program and other costs that are expected to
be incurred in relation to this matter.
The payroll compliance provision is expected to be settled within 12 months from reporting date (2022: all).
F. Recognition and measurement
The Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources is probable, and the
amount of the provision can be measured reliably. The amount recognised is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the timing and amount of the obligation.
I.
Annual leave
Liability for annual leave is recognised at the nominal amounts unpaid at the reporting date using remuneration rates that are expected to be paid
when the liability is settled, including on costs.
II. Long service leave
A liability for long service leave is recognised as the present value of estimated future cash outflows to be made in respect of services provided by
employees up to the reporting date. The estimated future cash outflows are discounted using corporate bond yields which have terms to maturity
that match, as closely as possible, the estimated future cash outflows. Factors which affect the estimated future cash outflows such as expected
future salary increases, experience of employee departures and period of service, are incorporated in the measurement.
III. Short-term incentive plan
The short-term incentive plan continued in operation during the current reporting year. Under the plan, eligible employees have the capacity to
earn an incentive, calculated as a proportion of their base salary or fixed remuneration, which is paid in cash each year. The incentive opportunity is
set depending on an employee's role and responsibilities. The majority of employees are on a 10%, 15% or 20% plan. The incentive payments are
determined based on an assessment of individual performance and achievement of a range of Group, business unit and individual goals.
IV. Superannuation
For defined benefit superannuation plans, the net financial position of the plans is recognised on the consolidated balance sheet and the
movement in the net financial position is recognised in profit or loss, except for remeasurements of defined benefit plans (experience adjustments
and changes in actuarial assumptions), which are recognised directly in retained earnings. For defined contribution superannuation plans,
obligations for contributions are recognised in profit or loss as they become payable.
V. Executive performance rights
Executive performance rights (EPRs) issued after July 2013 are indeterminate rights in that they can be cash-settled or equity-settled. The choice of
settlement is with the Board. Liabilities for the EPRs that are cash-settled are recognised as an employee benefit expense over the relevant service
period. The liabilities are remeasured to fair value at each reporting date and are presented as employee benefit obligations in the balance sheet.
VI. Restructuring provision
A provision is recognised for the expected costs associated with restructuring where there is a detailed formal plan for restructure and a valid
expectation has been raised in those persons expected to be affected. The provision is based on the direct expenditure to be incurred which is both
directly and necessarily caused by the restructuring and may include termination benefits. It does not include costs associated with ongoing
activities. The adequacy of the provision is reviewed regularly and adjusted if required. Revisions to the estimated amount of a restructuring
provision are reported in the period in which the revision to the estimate occurs.
IAG Annual Report 2023
127
VII. Customer refunds provision
A provision is recognised for the expected and currently known costs associated with customer refunds. In establishing this provision, assumptions
have been made around the quantum of the premium impact for affected customers, the compound interest attributable to the base premium
amount, the costs associated with operating the associated remediation program and related matters. The appropriateness of all underlying
assumptions continues to be reviewed as the remediation program progresses and adjustments will be made to the provision where required.
VIII. Payroll compliance provision
A provision is recognised for the expected costs associated with the payroll compliance review. In establishing this provision, assumptions have
been made around the quantum of the underpayment of some employee entitlements, interest applicable to those amounts, the cost of
administering the associated remediation program and other costs that are expected to be incurred in relation to this matter.
Note 5.4 Leases
A. Amounts recognised in the balance sheet
I.
Right-of-use assets
Properties
$m
Equipment
$m
Motor vehicles
$m
Total
$m
2023
Balance at the beginning of the financial year
403
6
3
412
Additions to right-of-use assets
50
-
1
51
Depreciation and impairment
(90)
(5)
(1)
(96)
Derecognition of right-of-use assets
(1)
-
-
(1)
Net foreign exchange movements
(1)
-
-
(1)
Balance at the end of the financial year
361
1
3
365
2022
Balance at the beginning of the financial year
454
15
3
472
Additions to right-of-use assets
31
-
1
32
Depreciation and impairment
(72)
(9)
(1)
(82)
Derecognition of right-of-use assets
(9)
-
-
(9)
Net foreign exchange movements
(1)
-
-
(1)
Balance at the end of the financial year
403
6
3
412
II. Lease liabilities
2023
$m
2022
$m
Current
74
74
Non-current
423
455
Carrying value of lease liabilities
497
529
Due within 1 year
84
88
Due within 1 to 2 years
74
81
Due within 2 to 5 years
179
188
Due after 5 years
200
230
Total undiscounted lease liabilities
537
587
Notes to the financial statements
128
IAG Annual Report 2023
III. Net investment in sub-lease
The Group has leased out certain portions of its leased properties, which it has classified as a finance sub-lease. At the reporting date, the Group
recognised net investment in sub-lease of $33 million (2022: $36 million) which is presented within trade and other receivables in the consolidated
balance sheet.
B. Amounts recognised in the statement of comprehensive income
2023
$m
2022
$m
Depreciation and impairment (included in underwriting expense and fee-based, corporate and other expenses)
(96)
(82)
Interest expense (included in finance costs)
(15)
(16)
Expense relating to short-term leases (included in underwriting expense and fee-based, corporate and other
expenses)
(5)
(7)
Interest income from sub-leasing right-of-use assets (included in fee and other income)
1
1
During the 2023 financial year, IAG considered various options to reduce its property portfolio footprint by up to 25%. Options included
consolidating office footprint and sub-leasing. The change in use of the right-of-use assets provides evidence of an indicator of impairment. In
determining the impairment amount, the carrying amount has been compared with the recoverable amount, which is the higher of fair value less
costs of disposal and value-in-use. The current financial assessment incorporating minimum acceptable commercial terms have resulted in a $20
million (2022: $3 million) impairment of IAG’s right-of-use assets as at 30 June 2023.
C. Amounts recognised in the cash flow statement
2023
$m
2022
$m
Total cash outflow for leases
99
102
D. Recognition and measurement
Properties, motor vehicles and equipment of the Group are leased under non-cancellable lease agreements, which are measured under AASB 16.
Most leases are subject to annual review and, where appropriate, a right of renewal has been incorporated into the lease agreements. There are no
options to purchase the relevant assets on expiry of the lease.
Assets and liabilities arising from a lease are initially measured as the present value of lease payments over the term of the agreement that are not
paid at that date. Lease liabilities include the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable; and
• variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date.
The lease term is determined as the non-cancellable period of a lease, considering any options to extend or early terminate the lease that the entity
reasonably expects to exercise.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and
conditions.
To determine the incremental borrowing rate, the Group:
• identifies the relevant risk-free yield curve for the country specific lease and lease term; and
• applies a margin to the risk-free rate that reflects the entity specific credit risk which reflects the rate at which it could borrow from external
markets. The margin has been identified by taking an average of those applied in external markets by entities with a similar credit rating issuing
debt for durations which are consistent with the terms of leases held by IAG.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability
until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted
against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost representing the time value of money is charged to the profit or
loss over the lease period. The discount rate applied is unchanged from that applied at the initial recognition of the lease, unless there are material
changes to the lease.
Right-of-use assets are measured at cost comprising the following:
• the initial measurement of lease liability; adjusted for
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs;
• restoration costs;
IAG Annual Report 2023
129
• less any accumulated depreciation and any accumulated impairment losses; and
• adjusted for any remeasurement of the lease liability.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases of property, motor vehicles and equipment are recognised on a straight-line basis as an expense in
profit or loss. Short-term leases have a lease term of 12 months or less.
6. Group structure
Section introduction
This section provides disclosures on the Group structure, including details of the significant controlled entities. It also provides details of any
significant acquisitions and divestments during the year.
Note 6.1 Disposal of businesses
On 19 July 2021, IAG announced that AmGeneral Holdings Berhad (AmGeneral), the Malaysian business in which it held a 49% interest, had signed
an Implementation Agreement for the proposed sale of its insurance business to Liberty Insurance Berhad (Liberty). Regulatory approval for the sale
was received on 28 June 2022 with completion of the transaction (including distribution of sale proceeds to IAG through a Court approved capital
reduction) occurring on 28 July 2022.
During the second half of the financial year, following the completion of the sale and finalisation of post-close completion adjustments of $10.0
million, a profit of $3 million was recognised.
2023
$m
Cash consideration received
344
Cash consideration receivable
10
Carrying amount of investment in associate
(337)
Other transaction costs
(4)
Profit on sale before income tax and reclassification of foreign currency translation reserve
13
Reclassification of foreign currency translation reserve
(10)
Profit on sale before income tax
3
Income tax (expense)/benefit
-
Profit on sale after income tax
3
Note 6.2 Details of subsidiaries
The following table details IAG’s general insurance operations and other significant controlled entities:
Country of
incorporation/
formation
Ownership interest held by
Group if not 100%
2023
%
2022
%
A. Ultimate parent
Insurance Australia Group Limited
Australia
B. Subsidiaries
I.
Australian general insurance operations
Insurance Australia Limited
Australia
Insurance Manufacturers of Australia Pty Limited
Australia
70.00
70.00
II. New Zealand general insurance operations
IAG New Zealand Limited
New Zealand
Notes to the financial statements
130
IAG Annual Report 2023
Note 6.3 Non-controlling interests
A. Summarised financial information
Set out below is summarised financial information (before intercompany eliminations) of controlled entities where significant non-controlling
interests exist, being Insurance Manufacturers of Australia Pty Limited of which IAG's beneficial interest is 70%.
Insurance Manufacturers of
Australia Pty Limited
2023
$m
2022
$m
I.
Summarised statement of comprehensive income
Net premium revenue
4,132
3,816
Profit after tax attributable to the Parent entity
221
179
Profit after tax attributable to non-controlling interest
94
77
Other comprehensive income
1
4
Total comprehensive income
316
260
II. Summarised balance sheet
Total assets
6,346
5,763
Total liabilities
(5,056)
(4,656)
Net assets
1,290
1,107
Carrying amount of non-controlling interest
387
332
III. Summarised cash flow
Net cash flows from operating and investing activities
413
(420)
Dividends paid to other IAG entities
(93)
(121)
Dividends paid to non-controlling interest
(40)
(52)
Total net cash flows
280
(593)
Note 6.4 Parent entity disclosures
The ultimate Parent entity in the Group is Insurance Australia Group Limited, which is incorporated in Australia. The following information of the
Parent entity is disclosed as required by the current regulatory requirements in Australia.
2023
$m
Parent
2022
$m
A. Financial results
(Loss)/profit for the year
(65)
769
Total comprehensive (expense)/income for the year, net of tax
(65)
769
B. Financial position
Current assets
322
224
Total assets
13,889
13,148
Current liabilities
182
202
Total liabilities
4,219
3,020
C. Shareholders’ equity
Share capital
7,264
7,386
Retained earnings
2,406
2,742
Total shareholders' equity
9,670
10,128
D. Contingent liabilities
There are no known material exposures to the Parent or events that would require it to satisfy any guarantees or take action under a support
agreement (2022: nil) other than the shareholder representative proceeding filed in the Supreme Court of Victoria (refer to Note 7.1 for further
details on contingent liabilities).
IAG Annual Report 2023
131
Recognition and measurement
Contingent liabilities are not recognised on the balance sheet but are disclosed where the possibility of settlement is less than probable but more
than remote. Provisions are not required with respect to these matters as it is not probable that a future sacrifice of economic benefits will be
required or the amount is not reliably measurable. If settlement becomes probable, a provision is recognised. The best estimate of the settlement
amount is used in measuring a contingent liability for disclosure.
E. Commitments
The Parent has no material commitments (2022: nil).
7. Unrecognised items
Section introduction
This section provides an overview of those items that are not required to be recognised in the financial statements, but may have informative
content in relation to IAG’s performance or financial position and are required to be disclosed under the accounting standards. These include:
• contingencies – these primarily relate to contingent liabilities that are only recognised in the financial statements when their settlement
becomes probable or the amount to be settled can be reliably measured; and
• events subsequent to reporting date – information is included on non-adjusting events, favourable and unfavourable, that occur between
the end of the reporting period and the date when the financial statements are authorised for issue. For example, disclosure of the final
dividend in relation to a financial year as it is declared to be paid by the Board subsequent to the reporting date.
Note 7.1 Contingencies
As at 30 June 2023, the Group had the following specific contingent liability to report:
• On 1 August 2022, IAG announced it had been served with a shareholder representative proceeding filed in the Supreme Court of Victoria on
behalf of persons who acquired shares in IAG during the period 11 March 2020 and 20 November 2020 (inclusive), in relation to IAG’s disclosure of
the potential impact of COVID-19 related business interruption claims. Since that time, there have not been any material developments in the
proceedings. As such, it is currently not possible to determine the ultimate financial impact this proceeding may have on IAG, if any. IAG
continues to defend the proceeding.
From time to time the Group is exposed to contingent risks and liabilities arising from the conduct of its business including:
• actual and potential disputes, claims and legal proceedings, including litigation arising out of insurance policies and regulatory matters;
• investigations into conduct, including actual and potential regulatory breaches, carried out by regulatory authorities on either an industry-wide
or Group-specific basis;
• internal investigations and reviews into conduct, including actual and potential regulatory breaches, carried out by or on behalf of the Group;
and
• contracts that involve giving contingent commitments such as warranties, indemnities or guarantees.
The insurance industry, including IAG, is highly regulated and has been the subject of increasing scrutiny by regulators. In recent years, there has
been an increase on the number of matters on which the Group engages with its regulators, including in relation to pricing issues and which is the
subject of ongoing inquiries and investigations.
The above listed matters are often highly complex and uncertain. The Directors are of the opinion that provisions are not required in respect of such
matters, as it is either not probable that a future sacrifice of economic benefits will be required, or the amount is not capable of reliable
measurement. Where appropriate, provisions have been made (refer to Note 5.3 for further details on provisions).
Note 7.2 Events subsequent to reporting date
Details of matters subsequent to the end of the financial year are set out below. These include:
• On 21 August 2023, the Board determined to pay a 30% franked final dividend of 9.0 cents per share. The dividend will be paid on 28 September
2023. The DRP will operate likely by acquiring shares on-market for participants with no discount applied.
Notes to the financial statements
132
IAG Annual Report 2023
8. Additional disclosures
Section introduction
This section includes other information that must be disclosed to comply with the Australia Accounting Standards, Corporations Act 2001 and
ASX Listing Rules, but which is considered relevant to understanding IAG's performance or financial position.
Note 8.1 Notes to the consolidated cash flow statement
2023
$m
2022
$m
A. Composition of cash and cash equivalents
Cash held for operational purposes
474
350
Cash and cash equivalents held in investments
879
588
Cash and cash equivalents
1,353
938
B. Reconciliation of profit for the year to net cash flows from operating activities
Profit/(loss) for the year
925
424
I.
Non-cash items
Net losses/(gains) on disposal of subsidiaries excluding transaction costs
25
(1)
Net (gains)/losses on investments
(50)
566
Amortisation of intangible assets and impairment
51
24
Depreciation of right-of-use assets and property and equipment and impairment
134
115
Other non-cash items
44
81
II. Movement in operating assets and liabilities
Insurance assets
(1,037)
(973)
Insurance liabilities
491
1,062
Net movement in other operating assets and liabilities
(166)
(84)
Net movement in tax assets and liabilities
315
(120)
Provisions
(280)
(195)
Net cash flows from operating activities
452
899
C. Significant non-cash transactions relating to financing and investing transactions
On 22 December 2022, the Company issued $500 million of Capital Notes 2, of which $192 million was non-cash as a result of the reinvestment offer
applicable to the Capital Notes 1 issued in 2016. There was no other financing or investing transactions during the year which have had a material
effect on the assets and liabilities that did not involve cash flows.
D. Recognition and measurement
Cash and cash equivalents represent cash at bank and on hand and deposits at call held in investments, net of any bank overdraft. Money held in
investments is readily convertible to cash within two working days and subject to insignificant risk of change in value. The majority of the amounts
bear variable rates of interest based on daily bank deposit rates. Those balances bearing a fixed rate of interest mature in less than one year.
IAG Annual Report 2023
133
Note 8.2 Related party disclosures
A. Key management personnel
I.
Details of compensation
Key management personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity. It is important to note that the Company’s Non-
Executive Directors are specifically required to be included as KMP in accordance with AASB 124 Related Party Disclosures. However, the Non-
Executive Directors do not consider that they are part of 'management'. The aggregate compensation disclosed in the table below represents the
KMP’s estimated compensation received from IAG in relation to their involvement in the activities within the Group.
2023
$000
2022
$000
Short-term employee benefits
14,594
13,413
Post-employment benefits
426
485
Other long-term benefits
74
107
Termination benefits
1,089
-
Share-based payments
6,504
4,405
22,687
18,410
II. Other benefits
Remuneration does not include premiums paid by IAG for an insurance contract covering current and former Non-Executive Directors' and
Executives' liabilities and legal expenses incurred in respect of the relevant office, as the insurance policies do not specify premiums paid on behalf
of specific individual Non-Executive Directors and Executives and the terms of the contract specifically prohibit the disclosure of the premium paid.
Insurance products provided by IAG are available to all Non-Executive Directors and Executives on the same terms and conditions available to other
employees.
Note 8.3 Remuneration of Auditors
2023
$000
2022
$000
A. KPMG
Audit services for the statutory financial reports of the Parent and controlled entities
8,990
8,191
Assurance services that are required by legislation to be provided by the external auditor
648
716
Other assurance and agreed upon procedures under other legislation or contractual arrangements
303
605
Other services
536
505
Total remuneration of auditors
10,477
10,017
In accordance with advice received from the Audit Committee, the Directors are satisfied that the provision of non-audit services provided by KPMG
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied because the
Audit Committee or its delegate, in accordance with the pre-approved policies and procedures, has assessed each service, having regard to auditor
independence requirements of applicable laws, rules and regulations, and concluded that the provision of each service or type of service would not
impair the independence of KPMG.
Other assurance services principally include reviews of internal controls systems and assurance and attestation relating to sustainability reporting.
Other services primarily relate to taxation services (but not advice in relation to tax structuring) regarding Australian/foreign tax legislation and tax
returns, as well as reviews of risk assessment processes.
Note 8.4 Net tangible assets
2023
$
2022
$
Net tangible assets per ordinary share
1.24
1.12
Net tangible assets per ordinary share have been determined using the net assets on the balance sheet including all right-of-use assets, adjusted for
non-controlling interests, intangible assets and goodwill.
Notes to the financial statements
134
IAG Annual Report 2023
Note 8.5 Impact of new Australian Accounting Standards issued
A. Issued and effective
The new or amended Australian Accounting Standards applicable for the current reporting year are provided below.
Title
Description
AASB 2020-3
Amendments to Australian Accounting Standards – Annual Improvements 2018–2020 and Other Amendments
AASB 2021-7a
Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial
Corrections [general editorials]
Adoption of these new or amended accounting standards had no material financial impact on the Group.
B. Issued but not yet effective
As at the date of this financial report, there are a number of new and revised accounting standards published by the Australian Accounting
Standards Board for which the mandatory application dates fall after the end of this current reporting year.
None of these standards have been early adopted and applied in the current reporting year.
Title
Description
Operative date
AASB 17
Insurance Contracts
1 July 2023
AASB 2020-1
Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-
current
1 July 2024
AASB 2021-2
Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition
of Accounting Estimates
1 July 2023
AASB 2021-5
Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
1 July 2023
AASB 2021-7b
Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and
AASB 128 and Editorial Corrections [AASB 17 editorials]
1 July 2023
AASB 2021-7c
Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and
AASB 128 and Editorial Corrections [deferred AASB 10 and AASB 128 amendments in AASB 2014 10
apply]
1 July 2025
AASB 2022-1
Amendments to Australian Accounting Standards – Initial Application of AASB 17 and AASB 9 –
Comparative Information
1 July 2023
AASB 2022-7
Editorial Corrections to Australian Accounting Standards and Repeal of Superseded and Redundant
Standards
1 July 2023
AASB 2023-2*
Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two
Model Rules
1 July 2023
*
We expect legislation will be enacted with an effective date of 1 January 2024 and IAG is expected to be in scope for the amendments due to the Group’s operations in Singapore and New
Zealand. IAG is in the process of estimating the impact on the Group, if any, and the potential financial impact is not yet known or reasonably estimable.
The Australian Accounting Standards and amendments detailed in the table above are not mandatory for the Group until the operative dates
stated, however, early adoption is permitted.
The Group currently plans to apply the standards and amendments detailed above for the reporting periods beginning on or after the operative
dates set out above. An assessment of the financial impact of the standards and amendments has been undertaken and they are not expected to
have a material impact on the Group’s financial statements, except as noted for AASB 2023-2 and AASB 17.
AASB 17 Insurance Contracts
AASB 17 replaces AASB 4 Insurance Contracts and AASB 1023 General Insurance Contracts. The first applicable reporting period for IAG is for the year
ending 30 June 2024, with a restated comparative period for the year ending 30 June 2023.
AASB 17 does not impact the fundamental economics of our business, our capital or solvency positions, or our financial strength. It impacts the
timing of recognition, measurement and disclosure of our insurance contracts issued and reinsurance contracts held. The quantum of impact is
influenced by several key judgements, the most significant of these are outlined below.
IAG Annual Report 2023
135
• Measurement models – AASB 17 introduces the general measurement model (GMM) which consists of fulfillment cash flows and a contractual
service margin. AASB 17 also provides an alternative and simpler measurement model, the premium allocation approach (PAA) which an entity
may choose to adopt when either the liability for remaining coverage under the PAA is not expected to differ materially from that under the
GMM, or the coverage period of contracts are one year or less. A significant simplification adopted by the PAA relates to the measurement of the
liability for remaining coverage, which is not disaggregated into fulfillment cash flows and a contractual service margin, but rather is largely
based on premium received. In this regard, PAA has similarities to the current accounting requirements for general insurance contracts under
AASB 1023.
The measurement of the liability for incurred claims is consistent under both the GMM and the PAA and requires all incurred claims to be
measured at the present value of expected fulfilment cash flows plus a risk adjustment to reflect the compensation that the entity requires for
bearing the uncertainty relating to the amount and timing of future cash flows. At transition, IAG intends to adopt the PAA for both insurance
contracts issued, and reinsurance contracts held as the eligibility criteria are met.
For groups of contracts that apply the PAA and have a coverage period of one year or less, AASB 17 permits recognition of insurance acquisition
costs as expenses when incurred. IAG does not intend to apply this option and will continue to defer acquisition costs and amortise these over
the coverage period of the related insurance contracts, consistent with current accounting treatment under AASB 1023.
• Level of aggregation and onerous contract losses – AASB 17 requires insurance contracts issued, and reinsurance contracts held, to be
separately grouped into portfolios which comprise contracts subject to similar risk and managed together. These portfolios are further
subdivided into specified measurement groups, based on the date of issue of contracts, which can be no more than a year apart, and on their
profitability.
Contracts that are measured using the PAA are assumed not to be onerous unless facts and circumstances indicate otherwise. IAG has
developed a framework for identifying facts and circumstances that may be indicators of possible onerous contracts. If facts and circumstances
indicate that contracts may be onerous, IAG will perform an assessment to determine if a net outflow is expected from the contracts, measured
based on an estimation of fulfilment cash flows. To the extent onerous contracts are identified, losses are recognised immediately in the profit or
loss and a loss component established. AASB 17 requires that this assessment is performed on a gross basis (i.e., excluding the effect of
reinsurance). To the extent onerous contracts are covered by reinsurance, entered into on or before the recognition of the onerous contracts,
reinsurance recoveries are recognised immediately in the profit or loss and a loss recovery component established. If a group of contracts which
were initially identified as onerous were to subsequently become non onerous, the loss component and similarly the loss recovery component
would be reversed within the profit and loss.
As onerous contract testing will be performed at a more granular level than the current Liability Adequacy Test (LAT) under AASB 1023, it will
result in increased transparency of loss-making groups of contracts and recognition of the associated losses. In isolation, the application of the
onerous contracts requirements is expected to result in a decrease in opening equity on transition to AASB 17.
• Risk adjustment – AASB 17 requires the measurement of insurance contract liabilities to include a risk adjustment for non-financial risk to reflect
the compensation that the entity requires for bearing the uncertainty relating to the amount and timing of future cash flows. This is the
compensation required to be indifferent between either fulfilling a liability that has a range of possible outcomes arising from non-financial risk
or fulfilling a liability that will generate fixed cash flows with the same expected present value as the insurance contracts. The risk adjustment
replaces the concept of a risk margin under AASB 1023, which reflects the inherent uncertainty in the central estimate of the present value of the
expected future payments.
IAG intends to apply a Cost of Capital approach as a key input to determining the risk adjustment. This is likely to result in a risk adjustment of
approximately 12.4% of the net liability for incurred claims (or approximately 16.8% including the COVID-19 business interruption provisions) as
at 30 June 2022. Whilst calibration continues, results indicate that this will generate an implied probability of sufficiency in excess of 75%. This is
expected to be the largest driver of change in the opening equity on transition to AASB 17.
• Discount rates – AASB 17 requires that the estimates of expected cash flows that are used to measure the liability for incurred claims are
discounted to reflect the time value of money and the financial risks related to those cash flows. This aligns to the requirements for measuring
the outstanding claims liability under AASB 1023 using the risk-free rate. In addition, AASB 17 also requires the discount rate to reflect the liquidity
characteristics of the underlying insurance contracts.
This will result in higher discount rates relative to current requirements and an increase in opening equity on transition to AASB 17.
Notes to the financial statements
136
IAG Annual Report 2023
• Presentation and disclosure – AASB 17 introduces substantial changes in the presentation of both the statement of comprehensive income and
balance sheet of IAG’s consolidated financial statements, as well as introducing more granular disclosure requirements.
In the statement of comprehensive income, AASB 17 will require the presentation of the insurance revenue and insurance service expenses gross
of reinsurance. For IAG, insurance revenue replaces gross earned premium and insurance service expenses largely reflects the combination of
claims expense, non-reinsurance related recoveries, commission expense and underwriting expenses. Additionally, all changes in value as a
result of either the effect of or change in the time value of money or financial risk, will no longer form part of the insurance service result but will
be recognised separately as insurance finance income or expenses.
In the balance sheet, as all cash flows resulting from the rights and obligations under insurance and reinsurance contracts are included in the
measurement of each group of contracts, existing balance sheet items will no longer be presented separately. AASB 17 requires these associated
balances to be combined into single line items for portfolios of insurance contracts issued or reinsurance contracts held that are either in an
asset or liability position. In order to reconcile the movement in insurance contract liabilities and reinsurance contract assets from period to
period, the standard requires detailed disclosures that present the changes to each of the individual measurement components.
AASB 17 permits recognition of a component of insurance finance income or expenses either in profit or loss or other comprehensive income.
IAG currently does not intend to apply this option and intends to recognise all elements of insurance finance income or expense in profit or loss.
This aligns to the current approach under AASB 1023 and maintains effective matching with valuation changes in the investment portfolio, which
is measured at fair value through profit or loss.
Transitional impact
On transition to AASB 17 at 1 July 2022, IAG expects to apply the full retrospective approach to all insurance contracts issued and reinsurance
contracts held. Based on the above and work performed to date, the impact of AASB 17 adoption on the Group’s reported net assets of $6,500
million as at 30 June 2022 is currently expected to be within a range of +$20 million to a +$110 million increase, or less than 2% of net assets. The
opening net asset impact is mainly driven by increases to net assets from the measurement of the AASB 17 risk adjustment and higher discount
rates reflecting the inclusion of an illiquidity premium, partially offset by decreases to net assets as a result of the recognition of a loss component,
and loss recovery component, related to recognition of onerous contracts.
The COVID-19 business interruption provision remains unchanged as at 30 June 2022 ($975 million), and has no impact on the quantum of the
transitional adjustment, as the risk adjustment determined under AASB 17 is equal to the risk margin previously determined under AASB 1023. This is
because the estimated risk adjustment takes into consideration the greater inherent uncertainty that exists, and hence the compensation for risk
required.
The requirements of AASB 17 are complex and subject to ongoing interpretation and IAG’s expectations noted above are subject to change as it
continues to assess the impact of the standard and further interpretation developments. The actual transitional impact (1 July 2023) is subject to
the finalisation of key assumptions in relation to each of these components and is impractical to quantify at this stage.
AASB 17 is not expected to change the underlying economics or cash flows of IAG’s business or its strategic direction.
Directors’ declaration
IAG Annual Report 2023
137
In the opinion of the Directors of Insurance Australia Group Limited:
• the financial statements and Notes 1 to 8.5, including all the remuneration disclosures that are contained in the Remuneration Report of the
Directors’ Report, are in accordance with the Corporations Act 2001 including:
– giving a true and fair view of the financial position of the Group as at 30 June 2023 and of its performance, as represented by the results of its
operations and its cash flows, for the year ended on that date;
– complying with Australian Accounting Standards and the Corporations Regulations 2001; and
– the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.2.B; and
• the Remuneration Report of the Directors’ Report complies with the Corporations Act 2001 and Australian Accounting Standards; and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The Directors have been given the declaration required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and the Chief
Financial Officer for the financial year ended 30 June 2023.
Signed at Sydney this 21st day of August 2023 in accordance with a resolution of the Directors.
Nick Hawkins
Director
Independent auditor’s report
138
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Independent auditor’s report
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Shareholder information
IAG Annual Report 2023
145
Information about Insurance
Australia Group Limited (the
Company) including its
announcements, presentations
and reports can be accessed at
www.iag.com.au.
Stock exchange listings
The Company’s ordinary shares are listed on
the ASX under IAG and its Capital Notes 2 are
listed on the ASX under IAGPE.
In addition to the ASX, the Company has
securities listed on the NZX Debt Market under
IAGFC. As such the Company is subject to the
NZX Listing Rules as a primary listed debt-only
issuer, subject to certain waivers. The
Company has been granted waivers from NZX
Listing Rules 3.1.1(b), 3.6, and 3.14.1.
Annual report
Under the Corporations Act 2001 regarding the
provision of Annual Reports to shareholders,
the default option for receiving Annual
Reports is an electronic copy via IAG’s website
at www.iag.com.au.
Annual general meeting
The 2023 Annual General Meeting (AGM) of the
Company will commence at 9:30am on
Wednesday, 11 October 2023.
Online voting
Shareholders can lodge voting instructions
electronically either as a direct vote or by
appointing a proxy for the 2023 AGM at
www.iag.com.au. The information required to
log on and use online voting is shown on the
Notice and Access Letter.
Shareholder questions
If shareholders would like to submit a written
question to the Company or the Company’s
auditor with regard to the AGM or any of the
resolutions to be discussed, shareholders
should send their questions to the Share
Registry, Computershare Investor Services
PTY LTD, GPO BOX 242, Melbourne VIC 3001,
Australia or by fax to +61 (0)3 9473 2555.
Questions for the auditor must be received by
5pm on 4 October 2023.
Shareholders may also submit a question
after completing their voting instructions
online at www.iag.com.au. Shareholders will
also be given a reasonable opportunity to ask
questions of the Company and the auditor at
the AGM.
During the course of the AGM, IAG intends to
answer as many of the frequently asked
questions as practicable but will not be
responding to individual written questions.
Responses to the most commonly asked
questions will be added to the website at
www.iag.com.au in the Shareholder Centre
section.
Dividend payment
methods
The Company does not issue dividend
payments by cheque to shareholders resident
in Australia. Shareholders should provide the
share registry with their alternative
instructions as detailed below.
IAG ordinary shares
• Paid directly into a New Zealand bank
account or to an Australian bank, credit
union, building society or nominated
account; or
• Eligible shareholders can choose to
participate in the Company’s Dividend
Reinvestment Plan (DRP), if available,
providing the option to increase their
shareholding without incurring brokerage
or GST.
Management of holding
Using their Shareholder Reference Number
(SRN) or Holder Identification Number (HIN)
and postcode of their registered address,
shareholders can view their holding online
through IAG's share registry, Computershare,
by following the easy prompts on their
website at www.investorcentre.com where
shareholders will be able to:
• view holding balance;
• review dividend payment history;
• access shareholder forms; and
• retrieve holding statements, including
recent dividend payment advices.
The share registry investor centre site also
allows shareholders to update or add details
to their shareholding. If shareholders wish to
amend or update any of the current details,
they will be asked to register by choosing a
User ID and Password.
Shareholders will also be asked to enter
answers to three personal questions for
verification purposes should they forget their
password in the future.
If shareholders have previously used the
Investor Centre site, they will be asked to key
in their password only.
Once shareholders have completed these
steps, they are then able to update their
details and submit their changes to the share
register including:
• change or amend their address if they are
registered with an SRN;
• nominate or amend their direct credit
payment instructions;
• set up or amend their DRP instructions;
• sign up for electronic shareholder
communications, including the annual
report via email; and
• add/change tax file number (TFN) /
Australian business number (ABN) details.
A confirmation/receipt number will be shown
on screen for the online transaction which
should be recorded should shareholders have
a question in the future.
Shareholders are strongly advised to lodge
their TFN, ABN or exemption. If they choose
not to lodge these details with the share
registry, then IAG is obliged to deduct tax at
the highest marginal tax rate (plus the
Medicare levy) from the unfranked portion of
any dividend or interest payment.
Shareholders may also complete a number of
transactions or request a form over the phone
by contacting the share registry on:
1300 360 688.
Shareholder information
146
IAG Annual Report 2023
Email alert service
Shareholders can register to receive an email alert advising of new IAG media releases, financial announcements or presentations. Shareholders
simply need to visit IAG's website at www.iag.com.au, click on the email alert button in the right hand margin and register their email address.
IAG’s email alert service allows shareholders to choose to receive email alerts about specific subjects (annual meetings, annual reports, careers
information, company announcements, government submissions, results and sustainability information).
Email enquiries
If shareholders have a question, they can email their enquiry directly to IAG's share registry at iag@computershare.com.au. If their question relates
to an IAG company matter and the answer is not on IAG's website, they can email their question to investor.relations@iag.com.au.
Ordinary shares information
Twenty largest ordinary shareholders as at 10 July 2023
Number
of shares
% of issued
shares
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
698,814,026
28.63
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
312,763,678
12.82
CITICORP NOMINEES PTY LIMITED
230,555,126
9.45
NATIONAL INDEMNITY COMPANY
97,513,199
4.00
NATIONAL NOMINEES LIMITED
87,470,936
3.58
BNP PARIBAS NOMS PTY LTD
64,303,858
2.63
BNP PARIBAS NOMINEES PTY LTD
48,302,438
1.98
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
16,758,464
0.69
CITICORP NOMINEES PTY LIMITED
10,545,597
0.43
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
7,559,676
0.31
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
4,406,728
0.18
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
4,297,484
0.18
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
4,086,447
0.17
NETWEALTH INVESTMENTS LIMITED
3,744,509
0.15
IAG SHARE PLAN NOMINEE PTY LIMITED
3,085,984
0.13
BNP PARIBAS NOMS (NZ) LTD
2,297,700
0.09
BUTTONWOOD NOMINEES PTY LTD
2,290,912
0.09
ARGO INVESTMENTS LIMITED
2,000,000
0.08
CITICORP NOMINEES PTY LIMITED
1,959,622
0.08
CITICORP NOMINEES PTY LIMITED <143212 NMMT LTD A/C>
1,957,369
0.08
Total for top 20
1,604,713,753
65.75
Range of ordinary shareholders as at 10 July 2023
Number of
holders
Number
of shares
% of issued
shares
1-1,000
353,142
182,410,567
7.48
1,001-5,000
225,543
433,473,832
17.76
5,001-10,000
13,002
89,560,496
3.67
10,001-100,000
5,086
96,944,356
3.97
100,001 and over
118
1,638,156,297
67.12
Total
596,891
2,440,545,548
100.00
Shareholders with less than a marketable parcel of 88 shares as at 10 July 2023
8,084
245,574
Holders of fully paid ordinary shares are entitled to vote at any meeting of members of the Company:
• on show of hands, one vote for each shareholder present and each other person present as a proxy, attorney or corporate representative of a
member; and
• on a poll, one vote for each fully paid ordinary share that each shareholder present and each other person present as a proxy, attorney or
corporate representative of a member holds or represents.
IAG Annual Report 2023
147
Dividend details
Share class
Dividend
Franking
Amount
per share
DRP issue
price
Payment date
Ordinary
Interim
30% franked
6.0 cents
*
23 March 2023
Ordinary
Final
30% franked
9.0 cents
**
28 September 2023
* The Company’s DRP was suspended for the 2023 interim dividend.
** The DRP issue price for the final dividend is scheduled to be announced on 15 September 2023.
Substantial shareholding information
Substantial shareholders as at 10 July 2023
Number
of shares
% of issued
shares
Ordinary shares
State Street Corporation
168,380,152
6.83
Blackrock Group
141,377,642
6.11
Vanguard Group
123,256,745
5.00
IAGPE Capital Notes 2 information
Twenty largest ordinary shareholders as at 10 July 2023
Number
of notes
% of issued
notes
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
374,118
7.48
CITICORP NOMINEES PTY LIMITED
230,324
4.61
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
217,188
4.34
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
185,707
3.71
MUTUAL TRUST PTY LTD
120,181
2.40
NATIONAL NOMINEES LIMITED
87,740
1.75
NETWEALTH INVESTMENTS LIMITED
76,810
1.54
NAVIGATOR AUSTRALIA LTD
64,145
1.28
BNP PARIBAS NOMINEES PTY LTD
54,508
1.09
MR BRADLEY VINCENT HELLEN + MR SEAN PATRICK MCMAHON
31,098
0.62
JOHN E GILL TRADING PTY LTD
30,139
0.60
NETWEALTH INVESTMENTS LIMITED
28,931
0.58
REGION HALL PTY LTD
26,091
0.52
IOOF INVESTMENT SERVICES LIMITED
25,267
0.51
INVIA CUSTODIAN PTY LIMITED
24,925
0.50
BNP PARIBAS NOMINEES PTY LTD
20,995
0.42
NULIS NOMINEES (AUSTRALIA) LIMITED
17,997
0.36
TRUSTEES OF CHURCH PROPERTY FOR THE DIOCESE OF NEWCASTLE
16,870
0.34
NAVIGATOR AUSTRALIA LTD
14,108
0.28
SPECIALIST NOMINEES PTY LIMITED
12,770
0.26
Total for top 20
1,659,912
33.19
Shareholder information
148
IAG Annual Report 2023
Range of Capital Note 2 holders at 10 July 2023
Number of
holders
Number
of notes
% of issued
notes
1-1,000
6,861
1,967,510
39.35
1,001-5,000
528
1,075,728
21.51
5,001-10,000
35
249,920
5.00
10,001-100,000
19
579,324
11.59
100,001 and over
5
1,127,518
22.55
Total
7,448
5,000,000
100.00
Capital Note 2 holders with less than a marketable parcel of 5 notes as at 10 July 2023
1
1
Capital Note 2 holders have no voting rights in respect of meetings of the Company unless and until ordinary shares are issued to them.
Share rights
As at 10 July 2023, there were 3,911,320 Deferred Award Rights held by 454 participants, 14,356,262 Executive Performance Rights held by 84
participants, and 3,607 Non-Executive Director Award Rights are held by 1 participant. Details of the employee share rights plans are set out in the
Remuneration Report.
Corporate directory
IAG Annual Report 2023
149
Contact details
Share registry
Computershare Investor Services Pty Limited
GPO Box 4709
Melbourne VIC 3001
Australia
Hand deliveries to:
Level 3
60 Carrington Street
Sydney NSW 2000
Telephone
(within Australia) 1300 360 688
(outside Australia) +61 (0)3 9415 4210
Fax
(general) +61 (0)3 9473 2470
Email
iag@computershare.com.au
Registered office
Insurance Australia Group Limited
Level 13, Tower Two, Darling Park
201 Sussex Street
Sydney NSW 2000
Australia
Telephone
+61 (0)2 9292 9222
Website
www.iag.com.au
Key dates
2023 financial year end
30 June 2023
Full year results and dividend announcement
21 August 2023
Final dividend for ordinary shares
Record date
30 August 2023
Payment date
28 September 2023
Annual general meeting information
Written questions for the auditor close
4 October 2023
Proxy return close
9 October 2023
Annual general meeting
11 October 2023
Half year end
31 December 2023
Half year results and dividend announcement
16 February 2024*
Interim dividend for ordinary shares
Record date
22 February 2024*
Payment date
27 March 2024*
2024 financial year end
30 June 2024
Full year results and dividend announcement
21 August 2024*
* Please note: dates are subject to change. Any changes will be published via a notice to the ASX.
Five-year financial summary
150
IAG Annual Report 2023
2023
$m
2022
$m
2021
$m
2020
$m
2019
$m
Gross written premium
14,729
13,317
12,602
12,135
12,005
Gross earned premium
13,838
12,972
12,345
12,164
11,942
Outwards reinsurance premium expense
(5,512)
(5,063)
(4,872)
(4,801)
(4,704)
Net premium revenue
8,326
7,909
7,473
7,363
7,238
Net claims expense
(5,866)
(5,215)
(4,807)
(5,010)
(4,619)
Net underwriting expense
(1,928)
(1,870)
(1,798)
(1,757)
(1,716)
Underwriting profit1
532
824
868
596
903
Net investment income on assets backing insurance liabilities
271
(238)
139
145
321
Management reported insurance profit1
803
586
1,007
741
1,224
Net investment income/(loss) from shareholders' funds
212
(105)
306
(181)
227
Other income
159
132
165
441
111
Share of net profit of associates2
(13)
17
35
57
42
Finance costs
(145)
(93)
(89)
(92)
(94)
Corporate and administration expenses3
341
34
(1,705)
(404)
(124)
Acquired intangible amortisation and impairment
(3)
(7)
(108)
(27)
(54)
Profit/(Loss) before income tax
1,354
564
(389)
535
1,332
Income tax (expense)/benefit
(429)
(140)
125
(37)
(363)
Profit/(Loss) after tax from continuing operations
925
424
(264)
498
969
Profit/(Loss) after tax from discontinued operations
-
-
(13)
(4)
204
Net loss attributable to non-controlling interests
(93)
(77)
(150)
(59)
(97)
Net profit/(loss) attributable to shareholders of the Parent
832
347
(427)
435
1,076
Cash earnings4
452
213
747
279
931
Ordinary shareholders' equity ($ million)
6,650
6,163
6,246
6,077
6,404
Total assets ($ million)
35,026
34,083
33,449
29,694
29,286
Key ratios
Gross written premium growth
10.6%
5.7%
3.8%
1.1%
3.1%
Loss ratio5
70.5%
65.9%
64.3%
68.0%
63.8%
Expense ratio6
23.1%
23.7%
24.1%
23.8%
23.7%
Combined ratio7
93.7%
89.6%
88.4%
91.8%
87.5%
Reported insurance margin8
9.6%
7.4%
13.5%
10.1%
16.9%
Underlying insurance margin9
12.6%
14.6%
14.7%
16.0%
16.6%
Share information
Dividends per ordinary share (cents)10
15.0
11.00
20.00
10.00
37.50
Basic earnings per ordinary share (cents)11
33.92
14.09
(17.82)
18.87
46.26
Basic earnings per ordinary share – cash basis (cents)12
18.41
8.65
31.16
12.12
40.04
Diluted earnings per ordinary share (cents)11
32.20
13.33
(17.82)
18.49
44.58
Diluted earnings per ordinary share – cash basis (cents)12
18.40
8.49
28.51
12.12
38.83
Ordinary share price at 30 June ($) (ASX: IAG)
5.70
4.36
5.16
5.77
8.26
Capital Notes 1 price at 30 June ($) (ASX: IAGPD)
-
102.00
104.57
103.54
106.95
Capital Notes 2 price at 30 June ($) (ASX: IAGPE)
101.20
-
-
-
-
Issued ordinary shares (million)
2,441
2,465
2,465
2,311
2,311
Issued capital notes (million)
5
4
4
4
4
Market capitalisation (ordinary shares) at 30 June ($ million)
13,914
10,747
12,719
13,334
19,089
Net tangible asset backing per ordinary share ($)
1.24
1.12
1.23
1.27
1.43
1 The amounts for the 2023, 2022, 2021 and 2020 financial years are presented on a management reported (non-IFRS) basis which is not directly comparable to the equivalent statutory (IFRS)
figure. A reconciliation between the two, for the 2023 and 2022 years, is outlined in the Reconciliation between the statutory results (IFRS) and the management reported (non-IFRS) results
section of the Directors' Report in this report.
2 Share of net profit of associates includes regional support and development costs.
3 Includes a $560 million pre-tax net impact of the business interruption claim reduction for 2023, a $200 million pre-tax net impact of the business interruption claim reduction and a $12 million
pre-tax net impact of the payroll compliance provision for 2022, a $238 million pre-tax net impact of the customer refunds provision, a $1,150 million pre-tax net impact of the business
interruption claim provision and a $51 million pre-tax net impact of the payroll compliance provision for 2021, and a $246 million pre-tax net impact of the customer refunds provision for 2020.
4 Cash earnings represent non-IFRS financial information. It is defined as net profit after tax attributable to shareholders of the Parent, plus amortisation and impairment of acquired identifiable
intangibles, and excluding non-cash earnings items (not considered part of the Group’s ongoing financial performance).
5 The loss ratio refers to the net claims expense as a percentage of net premium revenue.
6 The expense ratio refers to net underwriting expense as a percentage of net premium revenue.
7 The combined ratio refers to the sum of the loss ratio and expense ratio.
8 Reported insurance margin is a ratio of insurance profit over net premium revenue.
9 From the 2021 financial year, IAG’s underlying margin definition will no longer factor in an allowance for reserve releases. The prior period comparatives are reported on the previous basis,
which included an allowance of 1% of NEP. Underlying margins continue to be adjusted for prior year reserve releases or strengthening, natural peril claim costs above or below related
allowances and credit spread gains or losses.
10 The dividends per ordinary share are partially franked for the 2023, 2022, 2020 and 2019 financial years and unfranked for the 2021 financial year.
11 Reflects basic and diluted earnings per ordinary share on an accounting basis.
12 Basic and diluted earnings per ordinary share on a cash basis are calculated with reference to cash earnings.
Forward-looking statements and other representations
This report contains forward-looking statements including
statements regarding IAG’s strategy, targets, goals, ambitions,
intent, belief, objectives, commitments and current expectations
regarding IAG's business, results, financial condition, capital
adequacy, risk management practices and market conditions.
Forward-looking statements may generally be identified by the use
of words such as "should", “would”, “could”, “will”, “may”, “expect”,
“intend”, “plan”, “forecast”, “aim”, “anticipate”, “believe”, “outlook”,
“estimate”, "project", “target”, “goal”, “ambition”, “continue”,
“guidance”, “aspiration”, “commit” or other similar words. Guidance
on future earnings or performance are also forward-looking
statements.
These forward-looking statements reflect our current views and
expectations of future events and are based on assumptions and
contingencies which are subject to change. Such statements involve
risks (both known and unknown) and assumptions, many of which
are beyond IAG's control. This may cause actual results to differ
materially from those expressed or implied in such statements.
You are cautioned not to place undue reliance upon such forward-
looking statements. IAG assumes no obligation to update such
forward-looking statements (except as required by law).
Key risks which could cause actual results to differ materially from
those expressed or implied are detailed on page 50 under Business
Risk and Risk Management.
In addition, there are particular risks and uncertainties associated
with implementation of IAG’s strategy and related targets,
ambitions and goals. As the targets, ambitions and goals span a
number of years, they are subject to assumptions and dependencies
which have greater levels of uncertainty than guidance given for
FY24. IAG’s ability to execute its strategy and realise its targets,
ambitions and goals will depend upon its ability to respond and
adjust its business plans (as and when developed) to any changes
in such assumptions and dependencies, including disruptions or
events that are beyond IAG’s control.
There are also particular risks and uncertainties associated with
forward-looking statements and other representations relating
to environment, social and governance (ESG) issues, including but
not limited to climate change, climate and disaster resilience and
other sustainability related statements, commitments, targets,
projections, scenarios, assessments, forecasts and expectations.
These are subject to risks (both known and unknown), and there
are significant uncertainties, limitations and assumptions in
the metrics and modelling on which these statements rely. In
particular, the metrics, methodologies and data relating to climate
and sustainability are rapidly evolving and maturing, including
the methodologies to capture and record emissions, and there is
uncertainty around future climate and sustainability related policy
and legislation.
Scope of sustainability-related information subject to assurance
KPMG was engaged by IAG to undertake limited assurance over the following quantitative and qualitative claims for the year
ended 30 June 2023.
Quantitative and qualitative disclosures
Source in the FY23 reporting suite
Selected quantitative disclosures
IAG Environmental, Social and Governance (ESG) Data Summary for FY23
is accessible via www.iag.com.au/sustainability
Selected significant climate-related qualitative disclosures and
selected significant qualitative disclosures in relation to the in-scope
quantitative disclosures (see table above)
Pages 12 to 32 in the Annual Report 2023, with the exception of the
section “Shareholders”
Pages 15 to 20 in the Group Climate-related Disclosures for FY23
(report section on metrics and targets)
Pages 16 to 19 in the New Zealand Climate-related Disclosures for FY23
(report section on metrics and targets)
Selected significant qualitative disclosures pertaining to IAG’s
material sustainability-related issues
Page 13 in the Annual Report 2023
KPMG’s limited assurance opinion is available at www.iag.com.au/sustainability.
Glossary
APRA is the Australian Prudential Regulation Authority.
Credit spread is the difference between the average yield to
maturity of the portfolio of non-government securities and the
average yield to maturity of the liability profile, valued using
Commonwealth Government of Australia yields.
Gross written premium (GWP) is the total amount of insurance
premiums that we receive from customers.
Insurance margin represents our insurance profit as a percentage
of our net earned premium.
Insurance profit is our underwriting result plus the investment
income on assets backing our technical reserves.
Life and General Insurance Capital (LAGIC) is APRA’s
revised regulatory capital regime, which came into effect from
1 January 2013.
Long tail classes of insurance are those such as CTP and workers’
compensation where the average period is generally greater than
12 months between the time when earned premiums are collected
and final settlement of claims occurs.
Net earned premium (NEP) is gross earned premium less
reinsurance expense.
Net profit after tax is our net result, after allowing for income taxes
and the share of profit owing to non-controlling interests.
Prescribed Capital Amount (PCA) is as defined by APRA under its
LAGIC regime.
Risks in force refers to the subject matter that an insurance policy
or contract protects (eg number of vehicles, houses, employees). An
insurance policy may cover one risk or many risks, depending on the
terms of the policy. Risks in force is a measure of the total number of
risks covered by an insurance company at a point in time.
Shareholders’ funds is the investment portfolio of assets we hold
in excess of the amount backing technical reserves; it represents
shareholders’ equity not used in day-to-day operations.
Short tail classes of insurance (such as motor, home and small-to-
medium enterprise commercial) are those with an average period
generally less than 12 months between the time when premiums
are earned and final settlement of claims occurs.
Technical reserves are the investments we hold to back the
outstanding claims liability and unearned premium, net of
recoveries and premium debtors.
Underlying margin is defined by IAG as the reported insurance
margin adjusted for net natural peril claim costs less related
allowance for the period; reserve releases in excess of 1% of NEP;
and credit spread movements.
IAG Annual Report 2023
151
iag.com.au/results-and-reports
1
2
Australia
New Zealand
1 IAG’s short tail personal insurance products are distributed in Victoria under the RACV brand, via a distribution relationship and
underwriting joint venture with RACV. These products are distributed by RACV and manufactured by Insurance Manufacturers of
Australia Pty Limited (IMA), which is 70% owned by IAG and 30% owned by RACV.
2 IAG owns 100% of Insurance Australia Limited (IAL), the underwriter of general insurance products under the Coles Insurance brand.
These products are distributed by Coles under an Authorised Representative Agreement with IAL.