Insurance Australia Group Limited (IAG) Earnings Call Transcript & Summary

Good morning, and welcome to the Annual General Meeting of Insurance Australia Group Limited. I am Tom Pockett, the Chair of IAG. The Company Secretary has informed me that we have a quorum, so I formally open our 2024 AGM. The notice of meeting was published on the ASX and sent to shareholders. It sets out the items of business we will be considering at today's meeting. And I'll take this notice as read. In keeping with the commitments that we made in our [ Stretch ] Reconciliation plan, we are delighted to welcome Aunty Donna to officially welcome us to her land, the Gadigal Country.

Thank you. [Foreign Language], greetings. Good morning, everyone. And it is a lovely morning because we've had some pretty bad weather in recent times. So today is quite a beautiful day. So thank you for having me here today. I have the great pleasure and responsibility to welcome you to Aboriginal country. Welcome to Country is an ancient, ancient protocol that's been practiced by Aboriginal people for over 65,000 years. So I'm Norma Ingram. In aboriginal cultural protocols, Aboriginal elders and all elders are held in high regard and respectfully acknowledged as Aunt or Uncle. So please feel free to call me Aunty Norma, which most people do. When we do Welcome to Country as an Aboriginal elder, I really have the rights and the authority to do that. I've just sent hello to your greetings to you in the local aboriginal language, which is that of the Gadigal people. So the Gadigal whose lands -- traditional lands we are on today is one of 29 small clan groups of what we refer to and respectfully acknowledged as the Eora country. And so the Eora country is bounded by the Hawkesbury River to the North and Nepean River and the Georges River. So you can just imagine how -- what a beautiful, beautiful country. I mean it's beautiful now. But if you can imagine before all of these buildings and cement and everything was on it, they're just pristine, beautiful, beautiful country. And so the Eora people, the Gadigal people, like our other over 200 different aboriginal nations or language groups that we have, have been looking after caring for this country since we -- in western system, it says 65,000 years. That's a long, long time. And so we've been continuing practicing. So we must have been doing something right to still be here, to still be able to welcome folks to the country. And as we say, aboriginal country, always was, always will be aboriginal country. This is what we refer to. This is what we believe in. So what I did with my clapsticks is what we do when we are walking on land on this great beautiful ancient land. We just make noises to let mother earth know that we are here, we are approaching, and we mean her no harm. We want to continue to look after land, want to continue to practice our culture. When we get to borders, so my people are from Wiradjuri, which is Midwest New South Wales on the Lachlan River, the Galien River. So if we're approaching another country, we'll present a message stick. This one doesn't have anything on it, but what would happen is we have the message stick, we pass it across to the country, the aboriginal country that we want to go into, and we will be either accepted by their elders or the traditional custodians, and they will say, "Yes, please come in. but come in with respect". In my language, [Foreign Language], come in with respect and make sure that you do the right thing. And we all do that. if you invite somebody into your home, you would expect them to be respectful and to look after your home as much as you do. So that's all we ask. And this is what Aboriginal Welcome to Country is all about. It's acknowledging that 65,000 years of culture, of aboriginal culture that it is still practiced in this country today. It's respecting the people. And certainly, it's respecting the land. We all need to take care of the land. And it should not be just up to aboriginal people to do that. We're all Australians, and we need to look after country. We do that and we acknowledge culture. We acknowledge the land by way of our art, our songs, our dancers, the [indiscernible] that we put on our body to do our performances, our dancers and the way we dances, all that story, telling the story. I'm from an ancient peoples who tell stories that's been passed on generation after generation, after generation. Before 1788, we didn't have a pen and paper. So we had to do our dancers. We had to tell our stories in many, many different ways that people to actually physically see what we do and who we are. The colors of the [indiscernible] on our body will tell you the degree at the level of our elders and our children. And I want to acknowledge elders. Elders are really, really important in our culture, in our communities, as I know from other countries and other cultures. Elders are very important. They hold the stories, and they tell their stories. So we want to acknowledge the elders who have passed before us, our spiritual ancestors who look after us, and I wish that for you and your family when you walk these beautiful ancient lands that you will be protected. I acknowledge our spiritual ancestors. I acknowledge our elders who have passed on. I acknowledge our elders who are here today. And really acknowledging the next generation because we do need our future leaders. We do need our future elders. And so really, for me as an aboriginal elder, I have a responsibility to pass their stories on to others. I have this responsibility to pass these stories on to the next generation. So they will continue to tell those stories. So we'll all continue to look after the land. We'll all continue to have that respect. There's three Rs in aboriginal culture, respect, responsibility and reciprocity. They are my 3 Rs, and I continue to practice on a daily basis or I try to continue to practice those. But basically, it's about respect, which I know. Enjoy your day. I know you'll make some fabulous decisions that will be good, not just for your shareholders and your Board, but for Australian people. You are a very important organization, and I wish you all well. So enjoy your day. Welcome to country. Welcome to Gadigal Country and have a great day, everybody. Thank you.

Thank you, Aunty Norma. As usual, a wonderful Welcome to Country and wonderful explanation that went with it. I would now like to introduce the IAG Board of Directors to you. On the stage with me on my far left are George Sartorel, Simon Allen and Wendy Thorpe and Andrew Collings, the Company Secretary. And on my right, starting closest to me is Nick Hawkins, our Managing Director and Chief Executive Officer; Helen Nugent, David Armstrong, George Savvides, Michelle Tredenick and Scott Pickering. Also in attendance are Mr. Brendan Twining, who is the lead audit partner from KPMG, and representatives of IAG's leadership team. And at the left -- on my far left is Kylie Smith, EGM Corporate Affairs and Sustainability, who will read the questions submitted online during the meeting by shareholders. I now declare the poll open on all resolutions. Before we begin, Andrew Collings, our Company Secretary, will briefly give you directions on a few procedural matters. Andrew.

Thank you, Tom. To ensure an orderly meeting today, I will highlight a few safety and housekeeping matters for those in the room. In case of an emergency, please follow the instructions of the fire wardens. If you do need to evacuate, we will be able to evacuate through the fire escapes at the back of the room or on either side of the stage. Please now switch your mobile phones to silent mode if you have not already done so. During the meeting, recording and photography are not permitted. A webcast of the meeting will be available on IAG's website following the meeting. When you arrived at the meeting today, you would have registered with Computershare. Those who are eligible to vote and ask questions will have been given a white card. Voting on all items will be conducted by a poll. The Chair has received the results of the direct voting and proxy voting instructions for each item of business. These results will be displayed on the screen as we deal with each resolution. Once the meeting is closed, final AGM results will be announced by the ASX and made available on IAG's website. For those shareholders who have joined online, we have published an online meeting guide as part of the Notice of Meeting. This will help you navigate the online platform and is available on the voting web page. If at any stage, you have difficulties with the online platform, including voting or asking questions, please contact Computershare on their number shown on the online platform. The Chair has opened the meeting so all shareholders in the room and online can cast their votes on the resolutions included in the Notice of Meeting at any time during the meeting up until the polls are closed. For those in the room, vote on your mobile device by scanning your QR code on the back of the attendance card. If you have any issues voting during the meeting, please just raise your hand and a Computershare representative will assist you. For those online, votes by selecting the Vote icon at the top of your screen and simply select For, Against or Abstain. Shareholders who have joined by phone will need to log into the online platform to vote at today's meeting. Now in terms of questions. At today's meeting, we will only be responding to questions that relate to the items of business. If you're attending in person and have a question that relates to an insurance policy or claim, please speak with a member of our IAG team at the desk in the foyer. All shareholders present in the room, online or by phone will have the opportunity to ask questions in respect of the items of business for the meeting. Questions will be addressed in the following sequence throughout the whole meeting. Firstly, questions received in advance that have not been responded to in the Chair and CEO addresses at today's meeting, followed by questions from the floor, then online questions and finally, questions over the phone. Where we have received similar or overlapping questions online on the same topic, the broadest question will be put forward for response. If shareholders in the room would like to ask a question, there are 4 microphones, 3 at the bottom of the aisles and 1 [ roving ] microphone is at the rear of the room. Please make your way to the designated seating areas behind each microphone and show your shareholder attendance card to the Computershare representative. For those shareholders who have limited mobility, please raise your hand and the microphone will be brought to you. We will only take questions that relate to the items of business being considered at today's during the discussion for that item. For those attending online [Operator Instructions]. When you join the question queue, you'll be placed on mute, but you will still be able to hear the meeting. When it is your turn to ask your question. You'll be announced by the operator. Once your question has been responded to, you will leave the queue and return back to the meeting. If you need to leave the question queue, for example, if another shareholder asks your question while you have been queuing [Operator Instructions]. With that, I now hand back to the Chair.

Thank you, Andrew. IAG's purpose is to make your world a safer place. Over the last 12 months, our businesses have paid around $10.7 billion in claims and accepted 98% of claims received in Australia and New Zealand. This outcome reflects our commitment to helping our customers recover from unexpected loss. In the 3 years prior to this current year, Australia and the rest of the world experienced peril events well beyond expectations. These events led to an unusual combination of factors which included higher prices for reinsurance we buy and shortages of labor to process claims. In addition, there was significant inflation to the cost of materials and labor to repair customers' homes, cars and other assets. These factors have led to higher premiums, which combined with higher interest rates, resulted in difficult years for your company and our customers. We are very conscious of the high -- of the impact of higher premiums on our most vulnerable customers in this environment. And our business has provided a number of customer support measures. We have specialized customer care teams who can help find solutions during the times of financial hardship and provide additional support when needed. In addition, we have frontline teams, trained to identify and support customers who are experiencing vulnerability. Further, we also reward customers with reduced premiums when they have taken positive action to reduce their risk from natural hazards. As part of the broader insurance industry, IAG plays an important role in the economy in providing our services to customers. To do this, it is critical that we maintain financial strength to attract investor and reinsurance capital used to fund our business. In this challenging year, the group's net profit after tax for the full year increased by almost 8% from FY '23 to $889 million. The strong result was driven by an increase in pretax insurance profit to $1.4 billion following an 11% increase in net earned premiums to $9.2 billion, an improvement in the underlying insurance margin and the absence of a release of the provision for business interruption claims compared with a $560 million pretax release in FY '23 and higher investment income on shareholders' funds. The company's strong capital position enabled the Board to declare a final dividend of $0.17 per share franked to 50%. This took the full year dividend to $0.27 per share, an 80% increase on the full year dividend for FY '23. This equated to a payout ratio of approximately 72% of reported net profit after tax towards the upper end of IAG's dividend policy. The combination of share price growth and dividends resulted in shareholder returns of almost 30% for the year. In addition to paying dividends, we have also returned $550 million of capital to shareholders via on-market share buybacks during the past 2 years. At our full year results reported in August, we announced a further on-market share buyback of $350 million. Importantly, the strength of our capital position also ensures that we will be there for our customers when they need us most. Managing our customer claim has remained a priority. As mentioned, significant weather events in both Australia and New Zealand in recent years have led to a considerable and appropriate focus on the claims processes and outcomes associated with these large events. In Australia, this included a federal government inquiry on the 2022 floods. This event was the most catastrophic natural disaster in the world that year. Nick will talk more about the report on this inquiry and the steps we have taken since the 2022 floods to improve our claims processes and services and to further advance the care we provide to vulnerable customers. Central to this care is the skilled and compassionate service our people deliver. Their efforts ensure that most customer claims continue to be resolved without any issue in a timely manner. The company is also investing in improving the customer experience by moving to a single technology platform. We have accelerated claim settlements by up to 2 weeks. We are applying digital and artificial intelligence solutions to assist in finalizing claims. Pricing benefits are also available to NRMA insurance customers with properties at risk of bushfire, if they gain 3 stars or above through a bushfire resilience rating. In regard to sustainability, we have a company-wide approach. And this year, we continue to focus on building climate and disaster resilience and supporting the transition. FY '24 progress included refreshing our approach to using climate scenario analysis to test our strategy and entering into contracts to procure renewable energy across our sites. We also achieved our target of supporting 1 million Australians and New Zealanders to take action to reduce risk from natural hazards by FY '25. We maintained our focus on our two diversity targets, to have women occupy 50% of senior management roles by FY '24 and to have indigenous employees make up 3% of our Australian workforce by FY '25. Our results against these targets were 44% and 1.14%, respectively with plans in place to advance our outcomes towards these targets. In December '23, we published our fourth Modern Slavery Statement, continuing our efforts to respect human rights and mitigate all forms of modern slavery in our operations, investments and supply chain. We updated IAG's group procurement standard to include modern slavery considerations. We continued our engagement with suppliers, and we provided our modern slavery toolkit to small and medium enterprises. We also continue to grow awareness of modern slavery risks among key stakeholder groups across the organization. In terms of your Board, Wendy Thorpe joined the Board in July 2023 and was elected at last year's AGM. Wendy's appointment brings to eight, the number of our directors who have Board or senior executive experience in the insurance industry. We have the insurance experience we need to continue to oversee and guide the company's strategy operations. Director, John Nicholson, retired in October and on behalf of the Board and shareholders, I thank John for the significant contribution he made to the group over 9 years. John's resignation moves female representation on the Board to 30%. The Board is focused on continuing its progress to achieving a 40-40-20 Board gender diversity target. We are also pleased to have appointed Michelle Tredenick as Chair of the Risk Committee; and Wendy Thorpe as Chair of the People and Remuneration Committee effective 1 September 2024. I would like to acknowledge the hard work and commitment of all of IAG's people from my fellow directors to those who have played critical roles for our customers when disasters strike. As an organization, we remain committed to keeping our customers safe, delivering on our strategy and maintaining a strong balance sheet. Our CEO, Nick Hawkins and his group leadership team continue to deliver against IAG's strategic priorities. Their focus will ensure that we have -- we deliver favorable outcomes for our customers and for you, our shareholders as we fulfill your company's purpose to make your world a safer place. I now ask our Managing Director and Chief Executive Officer, Nick Hawkins, to provide further detail about the company's progress and achievements this year. Nick?

Thanks, Tom, and good morning, ladies and gentlemen. And to begin, I also acknowledge the traditional owners of the lands to which we meet, the Gadigal people of the Eora nation. And I pay my respects to elders past, present and emerging. It's great to be here with you today and to have the opportunity to talk about the improvements we've made, how the business is performing and importantly, really share my pride in what we've achieved here at IAG. We continue to be guided by our purpose to make your world a safer place and by our strategy of creating a stronger and a more resilient IAG. We believe we have an important role to play across Australia and New Zealand, helping our customers when they need us most, building customer and community resilience and making Australia and New Zealand safer and importantly, stronger. These activities are important for the long-term success of our company. But actually, they are important for the long-term success of our countries. So let's start with our customers. The current economic environment has led to a real focus on the increased cost of goods and services. And of course, that includes insurance, where premium increases have reflected the higher costs that we've been paying for suppliers, parts, trades and reinsurance, and Tom touched on that. In this context, we have taken a range of actions to help our customers. We have waived premium excesses. We've extended temporary accommodation arrangements, and we've introduced flexible payment options, and some of those have been fee-free for our retail customers. We've enhanced training for our frontline teams, and we're using AI tools to better identify and help our vulnerable customers. And we've hired more people and reshaped our end-to-end claims experience to -- so that we can resolve claims faster. I mean more directly, we paid nearly $11 billion in claims over the last financial year. And that makes it around $47 million in claims that we've paid over the past 5. We're doing what we can to manage our own costs, which, of course, helps our customers as well. A good example of that is the multiyear reinsurance perils cover that we announced in June, which helped stabilize the impacts of what we're seeing around the increased reinsurance costs in the event of further extreme weather. Encouragingly, when we look ahead for customers, we see the potential to limit future premium increases driven by reinsurance and perils costs. In Australia, our industry has been the subject of government inquiry into the way we and other insurers responded to customers affected by the catastrophic events of 2022. The inquiry was an important opportunity for us to listen, learn and build on the changes we've already made since those floods to ensure that we provide the support our customers expect. The recommendations from that inquiry were handed down late last week. We're now reviewing these, and we'll work with the industry, government and regulators to further ensure better customer and community outcomes. We continue to focus on building customer and community resilience. As you know, we do expect more frequent and severe extreme weather in Australia and New Zealand as a result of climate change. That's why we continue to educate communities about their local risks and how to better prepare for that extreme weather that's coming. We launched NRMA Insurance Health Nation education program with the Australian Red Cross, which will deliver more than 2,000 community workshops over the next 3 years. With our role and brand, we're incentivizing safety on our roads by offering potential discounts on monthly premiums based on customers driving habits. And in New Zealand, our AMI insurance team holds Driver Reviver events during long weekends and holidays to help reduce driver fatigue. The team organizes [ tradie ] breakfast, which include tool engraving and some other safety actions. More broadly, we are making Australia and New Zealand safer and stronger. We're raising public awareness of climate change impacts through initiatives like our wild weather tracker. And in both our countries, we partner with communities, industry and government because climate change remains our shared focus. We have an important role to play in this space, and I'm proud of the contribution that our company makes. Going forward, we're positioning ourselves for growth. And just I'll start with our valued brands. In Australia, NRMA Insurance was named as the most Trusted Insurance Brand in Australia for the third year in a row. And we're building on this leadership with the launch of a health company, and you'll have seen this advertising during the Olympics, and you'll see more of it in summer with our cricket sponsorship. Our customer experience measures of plus 50 in New Zealand and 46.8 in Australia, reflect the strength of the businesses that we have. We've invested in new technology and people with a focus on customer improvements particularly in claims. This will help us deliver a better experience when our customers need us most. In terms of new technology, we now have a single consistent policy, pricing and claims engine that sits right across our retail business. Internally, we call that the enterprise platform. It's built for scale and importantly, it's built for growth. We already have 2.3 million customers on this platform and 300,000 more are renewing onto it each month as we move all our 5 million retail customers here. We saw the benefits in action last year when we set up our ANZ Bank partnership arrangement, and we migrated 126,000 policies straight on to this platform. We've also had a real focus on underwriting capability. It remains a core strength and has been a huge focus for us over the past couple of years. This was evident in our FY '24 results, our intermediated insurance business achieved in Australia. And we've also implemented a new, more sophisticated pricing engine in our retail business which integrates the expertise of our in-house climate scientists. Our financial strength and strong capital position help ensure that we can fulfill our role as the financial shock absorber of Australia and New Zealand. Our efforts for our customers and our community deliver strong brands. They deliver strong opportunities importantly for our people and, of course, for all of you, strong financial results. And these will continue to be a defining feature of how we run IAG. We know it's important that we can deliver strong returns for our shareholders because you provide us with the capital that delivers a stronger Australia and New Zealand. We've set targets to achieve appropriate through-the-cycle returns of around 15% insurance margin and a 14% to 15% return on equity. Looking back over the last 4 years, our returns have not reached this level as our performance has been impacted by significant perils and other internal and external issues. Pleasingly, our FY '24 outcomes are much closer to those medium-term targets. This has enabled us to increase our dividends, as Tom mentioned, by 80% on last year and we returned $550 million in capital to shareholders via on-market buybacks over the past 2 years. And of course, shareholders have benefited from our strong share price performance as well. Moving to our people, and I'm really proud of the 14,000 people who work at IAG and the way they look after our customers when those customers need us most. We want our people at IAG to represent the communities of Australia and New Zealand. So we welcome all forms of diversity and make sure that we provide a safe and an inclusive workplace. Our people are committed to our purpose, our customers and the importance of us having a strong risk culture. We have a real focus on recruiting the right people in the first place, on retaining them and providing them with development opportunities that help them to grow their skills during their career with us. And importantly, so they can thrive as people. Let me make a few comments on climate, where we play a big role in supporting people and communities affected by changes in the environment in Australia and New Zealand. In fact, understanding pricing and reducing risk, of course, are at the heart of our business model. We have a 100-year plus history of understanding climate, and we share that knowledge with local, state and federal governments to influence where we build, how we build in the future to reduce our risk. This year, we updated our climate action plan, a key priority in our broader sustainability agenda. And even though we're a relatively small emitter, of course, we need to have our own house in order. So we're taking actions to improve our energy and our waste efficiency. For example, in September, we announced that we migrate -- we're migrating our entire tool of trade fleet, which is around 900 vehicles to electrical hybrid cars. And we've done some important work with our electricity suppliers to move our renewable energy at our sites in Australia and New Zealand. Going forward, I increasingly see our business in three parts: I see us as a retail business, I see us as an intermediated business, and the way we fund them through our capital platform. Our retail businesses in Australia and New Zealand include some of the most recognized and trusted brands in their markets. And our quality products, scale, technology and pricing capability mean we can better support our partners and customers with insurance offerings. Our intermediated businesses also benefit from quality and trusted brands, but really do have distinct products, distribution and technology requirements. And of course, this requires a different capabilities and a specific focus. And critically, we will continue to deliver an efficient capital platform to support our businesses, optimizing our structure to reduce volatility. This strategy has allowed us to return capital over the past 2 years, and we're continuing this in 2024. In the near term, we provided guidance for FY '25 for achieving an insurance margin of 13.5% to 15.5% and gross written premium growth of mid- to high single digit. This also includes an assumption of natural perils being around 18% more than our allowances from last year. We have had a relatively low natural perils in the first quarter, but of course, we know that this can change. Given all of that, we are on track to deliver against the guidance that we issued in August of this year. Let's close with our strategy, which has served us well over the past 4 years. By staying focused on our strategic priorities, we've created a stronger and a more resilient IAG, and we're better positioned today for growth. I'm confident in our ability to deliver strong shareholder returns based on our through-the-cycle ROE targets of 14% to 15%. I'll now hand back to Tom for the main business of the meeting.

Thanks, Nick. We will now turn to the formal items of business for this meeting. There are four resolutions before the AGM this morning. These are set out in the Notice of Meeting. All resolutions are supported by your Board. The first item of business is to receive and consider the financial report and directors' report and auditor's report for the company, for the financial year ended 30 June 2024. There is no vote on this item. These statements and reports are published in the 2024 annual report which was lodged with the ASX on 21 August 2024. The purpose of this item is to provide an opportunity for shareholders to ask questions and make comments about these reports as well as the general business of the company. Shareholders will also have the opportunity to ask questions of our auditor, KPMG, relating to the conduct of the audit and the auditor's report. All questions to the auditor should be addressed to me as Chair. And if appropriate, I will ask our lead partner, Brendan Twining to address the meeting. If your question relates to another item of business at today's meeting, please ask your question when we come to that item. I now invite comments or questions on the financial statements and reports and the management of IAG. Questions will be addressed in the following sequence throughout the whole meeting. Firstly, questions received in advance followed by questions from the floor then online and finally, questions over the phone. Where we have received similar or overlapping questions online on the same topic, the broadest question will be put forward for our response. We have already received 18 questions in advance of today, and I thank those shareholders who submitted them. We have already responded to some questions. And if there are any that have not been addressed, we will respond to them during the discussion of that relevant item of business. I will start with the questions received in advance about the company's operations and results, which Kylie will read out, Kylie?

Thank you, Chair. We received two questions in advance of the financial statements. Chair, the first question is from [ Anthony Gkonis, ] who asks about offering discounts to customers who pay their insurance earlier or on time and to shareholders on their policies.

Thanks for the question, Anthony. And I will invite Nick to address that question.

Thanks, Tom. And thank you for your question, Anthony. I mean we -- particularly in our retail businesses, we offer discounts to customers for both their experience with the company as well as a number of policies they have as well as the amount of time that they've been a customer with one of our retail businesses for. We also offer sort of increasingly many different payment mechanisms in our retail businesses to actually pay your premiums. I think what we really want to do obviously is encourage our shareholders to be customers. And so those customers then can enjoy the benefits and the discounts in the way I've just described. I don't think we're looking at sort of broadening out to some general shareholder discount concept, but really it's encouraging shareholders to be customers and then part of that process within our retail businesses, they'll get the benefit of discounts that are available.

Thanks, Nick. Kylie?

Chair, the next question is from Raymond Saad, who asked why NRMA Insurance premiums have increased beyond the CPI?

Yes. Thank you, Raymond. I think Nick has well explained the increase in his speech when he spoke about the current economic environment, which we've had to deal with, which has had a real impact on the cost of goods and services. As Nick noted, the increased costs also affected insurance premium, given the higher costs we've been paying to suppliers for parts and trades as well as the increased cost of reinsurance across the industry. Before I move to the final question received and ahead of the meeting, if any shareholders in the room has a question, please make your way to the microphones now or raise your hand for the roving microphone. Kylie, last question?

Chair, the last question submitted in advance was from [ Cher Kenny, ] who also question the cost of insurance.

Thank you, [ Cher. ] I think I've already responded to that question in answering the previous one. So I thank shareholders for questions. That ends the questions in advance. I'll now move to questions in the room. Questions in the room? Is that you Natasha, out there?

Chair, may I introduce Ms. Natasha Lee.

Thank you.

Thank you, Tom, and Chairman. And firstly, I'd like to thank the Board and staff for their performance. It was pleasing that there wasn't a major sort of environmental catastrophe this year, which helped things along. Just wanted to elaborate a little bit on the reinsurance strategic partnership or arrangement you have, whilst I understand that things have settled down a little bit in terms of reinsurance. But over the 5 years, are there price resets or reviews built into that? And there was an item sort of a change in the present value of cash flows relating to range -- I think that was somewhat related to reinsurance. How -- is that sort of a normal course of events or was that related to the strategic partnership?

Strategic partnership, we've got a range of reinsurance arrangements. So -- is this the last one we have just done this year?

Yes. Well, you talked about two strategic arrangements, and kind of like on Note 2.23, there's a whole lot of financials and some of that relates to reinsurance. So -- sort of unpacking.

Yes, I'll get Nick to summarize the two significant reinsurance arrangements we put in this year. That's a long tail in...

Thank for the question. I mean just a sort of a high level, remember, reinsurance is effectively insurance for insurance companies. So that's sort of -- we sort of the benefit of all shareholders. We buy insurance to protect ourselves, just like customers buy insurance to protect themselves. That's called reinsurance. Because of our concentration in Australia and New Zealand of our business and the fact that we all live in capital cities predominantly in Australia and New Zealand. So we're quite concentrated in places. We then have to buy reinsurance for those sort of very large unexpected events that can hit -- impact a lot of our customers all at the same time. That's why we buy a lot of reinsurance. And so even though we're sort of a top 30 or 40 insurance company in the world in -- size-wise, in buying reinsurance, we're sort of more like sort of a top 5 company in the world because of that feature. Therefore, we have to think very carefully about relationships and long-term arrangements with that reinsurance capital that supports our company that actually allows us to deliver what we do for our customers. We have a few sort of the sort of three or four very large companies in the world. We kind of have big strategic relationships with them, Berkshire Hathaway, Swiss, Munich and Hanover predominantly where we have a number of very long-dated arrangements with them. I think one of your questions was around pricing. I mean, often, we try to do -- reinsurance often prices every year. We try to put a more longer-dated pricing as well. So we don't have price resets on everything every year, and we have a number of those arrangements in place. The particular transaction we announced in June was on a 5-year fixed price arrangement with a couple of providers. So this is a very important part of sort of the economics in our business model, ensuring that we have that large capacity of reinsurance available to us and that we try to manage some of the significant price changes that we've seen over the last couple -- so in fact, that's -- reinsurance has been a major driver of that cost of property insurance in Australia over the last couple of years as reinsurers have significantly lifted their prices.

No, that's -- thanks. Yes, I do understand reinsurance, although many in the room won't. And you did answer the issue about -- because I wasn't sure whether the 5-year arrangement was head -- had price reviews, a bit like rental markets where you might have a long-term contract that their price reviews but...

We tend to the reinsurance when it comes up.

A couple of the products, it's great that you've got your ROLLIN' Safe and Save app for driver to improve driver safety. I suppose the immediate things which come to mind about that is the potential for people possibly to game it. So how do you know that the person is actually driving at that time. And then there's the flip side, if it's an accident, what are the availability or the risk of that data -- travel data and realizing that a lot of vehicles you can access the various metrics. So the police know how fast you were going and when you braked and all that. What is the flip side of this in terms of the authorities getting hold of that information to investigate an accident?

Well, the data would be private with the customer and IAG. So that would be -- and there's -- I've no doubt there's all sorts of process for [indiscernible] for privacy. Could -- could the law require that data to be provided under some kind of legal requirement? Yes, that probably could like any other data if it was required for a core process or something. But the primary thing is privacy and it's got all the privacy rules that we've got protecting it. Yes.

Yes. That's sort of just wanted a bit of clarification on that. And your Cyclone, your protection for small businesses against cybercrime, what sort of features of that cover given that most cybercrime is made about -- where it becomes available because of generally human error. So what are you actually protecting the businesses from?

Yes.

So the concept is sort of where -- the concept of insurance is all about where someone has suffered a loss. And so under the sort of the concept of cyber, which is the product that's developing, it's really being able to demonstrate that one's had a loss that may be some sort of business interruption as in you can't open the doors of your business because some technology, some problem or various other challenges or other additional costs that one incurs. We just have to engage with consultants and others to fix something up because there's been a crime committed. But it has to be -- I mean, the concept of insurance is unexpected loss. And then there has to be -- that needs to have occurred -- and so that's -- the concept of cyber insurance will be make gooding -- make good on something where loss has occurred.

And I think the -- most of our policies are capped.

They vary. At the moment, I mean, this is an emerging part of the insurance market around the world. At the moment, your company, we only do a very small amount for very small limits because we're trying to learn exactly what is the definition of a loss. We don't have 100, 200-year track record like we do on other types of events. And the world is -- but I think this type of product is going to be needed because that's the type of risks that businesses have going forward. And we're just doing it quite softly, softly at the moment in relation to what we are offering as a company.

Just a very quick final question for this round. It's great that you guys are increasing the number of EVs and hybrid vehicles in your fleet, although you didn't actually disclose what percentage of vehicles and sort of what is the long-term trajectory? Are you aiming to have near 100% by 2030 or something like that.

Yes, yes, we do. I think we're going to convert the whole fleet to electric vehicles. It would be close to 2030 or 2025?

So just to be -- this is our fleet, our 900 cars, not our millions and millions of customer vehicles.

Yes. No, I understand that it's...

I think we're moving everything onto hybrid and electric in the next few years.

Okay. That's great. Just there wasn't sort of clarity in the report about the numbers and the time frames.

Okay. I'll have a look at that, make sure it's clearer.

Chair, may I introduce Mr. Joe Nagy.

Thank you. My question concerns IAG's operations. In 2008, IAG said it wouldn't be affected by the storm damage. They were wrong. It was. Now currently, according to ASIC, IAG has [ dutted ] customers by not giving them the discounts they had promised. IAG's word and its actions are in question. It's word doesn't seem to count for much anymore based on this. This is about character, character. Nick would know an ex Citicorp guy that there are three Cs to extending money and character is the most important one. This is why I'm voting against the election of the three directors and -- the reelection of the three directors. And the point is, again, character doesn't seem to count too much for the Board. What has happened to those who were involved in this fiasco?

Thank you for your question. The pricing discount issue that you were talking about happened quite a few years ago. If I just give you some background on that. We were reviewing all our policies to ensure that they met the principles upon which we wanted to write insurance policies. In that process to ensure that they were correct in the value and [ met on all ] things we wanted these policies to make, in that process, we identified there were mispricing from statements to pricing. We -- that was -- when that was found out it was immediately notified up through the ranks and up to the Board. We immediately put into a process of identifying all those policies that had been mispriced. We advised ASIC of the issue, and we went about a process of refunding all those mispriced matters -- all those mispriced policies to customers in a very orderly and timely fashion. So I think conduct does matter. This was undoubtedly just an issue that happened. We found it, we corrected it. We reported it to the authorities and we have strengthened our controls around that matter. And we're confident that those matters won't arise again. In terms of the people that were responsible back -- this was quite a few years ago, the people that missed that issue and caused that problem, they were identified and they had appropriate actions taken against them as part of our remuneration processes. So it was a pretty well thought through process. I think the key thing is we found it, we quickly got on to it and we fixed it.

That's good to hear. I hope that this goes true for the future that things like this, the Board will catch them and we'll stop them before they see the light of day. Other than that, I want to complement IAG on its performance.

Okay. I don't think we have any other questions from the floor -- we have one there. Yes, sorry. Yes.

Chair, I would like to introduce [ Susan Fegan ].

Chairman, this might be a very basic question, and within the concept of funding and what you're talking about with return -- changing over to EV vehicles and hybrid vehicles. But corporate entities these days are passing on to consumers in one form or another, they offset to waste in the sense that nobody wants to give you anything as a hard -- admittedly, we have our hard copies books today, but statements, things like that now everybody wants us to do it all by e-mail. So therefore, if the consumer wants a hard copy, it's up to us then to better cost of. And I realize it's minuscule per person, but it's extensive over the -- all the customers. So if we were to print out a hard copy, we have to pay for that paper, ink regardless. With -- taking that across to your vehicles, EV and hybrid vehicles, under the current system, I would presume that if your drivers have a vehicle, they would have a fuel card or some sort of system whereby the company takes the cost of that, driver goes into the station, fills up, doesn't have to pay the bill out of his own pocket. How are you going to offset that from your staff point of view, if they then go in with EV vehicles, which they would obviously have to be charging in their homes. And therefore, that cost would then refer on to them. I know it seems obscure question, but do you understand?

Okay. The Annual Report question, I'd have to defer to someone who knows about us mailing out annual reports anymore, but I can sort that out for you. The vehicles that we're talking about are our fleet vehicles, and they're used by a lot of our field staff to go to people's places to assess issues that have happened or through perils events. So we wouldn't be passing on the cost of running that vehicle to those people. It's a work car, and so the IAG pays for those costs. So yes.

This is what -- I'm just wondering how does that occur in the sense that if a person takes a vehicle to their home, I'm presuming that they then have to charge it at...

There'd be mechanisms to either compensate or deal with it. Yes. Thank you. Thank you, Susan. Okay. I don't think there's any more. Kylie, might take -- is there any questions online?

Yes, there are chair. The first question is from Stephen Mayne. It's a 2-part question. He says the mutually owned RACQ has reportedly hired Bank of America to try and sell its Queensland operations. What is our market share in Queensland? And would we be more likely to receive ACCC approval to buy this business than Suncorp? Also, have we had any recent talks with RACV to buy the 30% stake in IMA?

So on the last one, no, we haven't had any discussions. We're extremely happy with the relationship we have with RACV in Victoria. In terms of RACQ, which is the -- for those that are not sure it's the NRMA of Queensland. We don't comment on speculation around whether we're interested in particular companies or assets. We don't do that. The market share for us in Queensland for motor and home is less than 10%. And I think the last part was on the ACCC. I can't guess what the ACCC would do, it's in their control. Thanks, Kylie.

Can I have the next -- there is another question from [ Mr. Henrik. K ], I wish to draw your attention that there is another company listed on the London Stock Exchange using IAG, it's International Airlines Group.

Thank you for that feedback. I sometimes -- International Airlines Group, it owns BA and some of the Spanish carriers. So I often get their customer complaints as well.

The next question, Chair, is from Mr. Jonathan Skelton. He says, given the significant bonuses awarded to management despite 0 customer growth and resilience and reliance on price increases, which were largely acceptable due to limited competition, can you please clarify the following? Can you provide detailed insights into the specific strategies and initiatives that will drive profit growth in FY '25 beyond just increasing premiums? With customers already facing significant premium hikes, how does IAG plan to manage customer retention and affordability? And are there any measures in place to mitigate the impact of further increases on customers?

Okay. That's a big question. Firstly, let me talk about the strategy of IAG. I think we've chatted about the price increases and why they've gone through. The strategy of IAG is relatively simple. Our whole focus is about running a very simple, very efficient insurance company. So that includes ensuring that we have a very big focus on customers, maintaining our retention rates of customers, which is extremely high and ensuring that the operations, the efficiency and the costs of operating IAG kept to an appropriate level. On that, I might just ask, Nick, if he wants to add anything on the strategic component?

Yes. I mean, as Tom said, we're very focused in Australia and New Zealand. We know that in our retail business particularly, we've had significant pricing that's had to flow through to consumers. What that is -- we actually were growing. Particularly here in Australia, we had some retail customer growth over the last couple of years. Last financial year, that was relatively flat. And there's a range of reasons behind that. Part of it are pricing. We're also transitioning to a new platform. We would expect -- so you should expect your company to see customer growth over the next couple of years. That's definitely sort of an important part of our strategy. There's various things we're doing to help drive that. And in fact, we've built a technology platform that's very scalable. So what we want to do is be able to utilize that by growing the size of our business around Australia and New Zealand and really leveraging the investment that we've made there with that technology platform. So that's going to be a feature of what we're going to be talking about over the next couple of years.

Thanks, Nick. And in regards to remuneration, yes, we have financial metrics to incentivize and reward the leadership team; however, there are a range of, what I would call, nonfinancial metrics, which look at customer and claims performance, employee satisfaction, et cetera. So it's not just the numbers. It's how we get to the numbers, which is also important.

Thank you, Chair. The next online question is from [ Ms. Jillian King. ] She says, I congratulate IAG on its efforts for one of Australia's largest corporate fleet transitions. The new Climate Action Plan says IAG will transition to 100% low emissions vehicles although I note that it's not aiming for 100% zero-emissions vehicles. Yet it excludes salary sacrifice vehicles and major events response vehicles because no suitable alternatives are currently available on the market. Why are salary sacrifice vehicles excluded from IAG's emissions reduction plan? I'll continue -- it continues. I note that Transurban has an electric incident response vehicle and that the ACT government is transitioning its nonpassenger fleet to electric, including utes, vans and various trucks and has a plug-in hybrid firetruck. Would you please give examples of major events response vehicles so that we understand what you're talking about. And in light of IAG's leadership in climate action, would you also please explain why the Climate Action Plan takes a limiting position of no suitable alternatives currently available on the market when it comes to some vehicle classes?

Thank you for that question. And there's a lot in that. I mean, directionally, we'd like to do all of that. And so I think this is just a matter of timing. We are -- unfortunate thing that happens often in large events is there's no power. And we therefore have our people, our vehicles, some of our trucks in places that have no power, in places like Northern Rivers had no power for a week or so. And so we've just been a bit cautious about that point. That's kind of why we've positioned it the way we have. On the salary sacrifice vehicles, it's actually a good comment. And probably, over time, we'll change that. And as part of that offering at IAG, that's probably -- we will probably reflect more some of that commentary around electric and hybrid vehicles. So directionally, we're definitely on this path. We're just a bit careful originally that we don't sort of end up having a policy that is not workable in some instances and remembering what we do is we often have our people and vehicles and some trucks in harm's way in these locations that aren't great, that have suffered hardship and often without power. And so that's kind of why we've got to where we've got to. But directionally, we're very much in agreement with the tone of that question.

Thanks, Nick. Next question.

Thank you. It's another question from Ms. Jillian King. Why is IAG managing its air travel instead of reducing it in order to reduce damage to the climate? This is particularly important because as most carbon dioxide and water emissions from aircraft are injected directly into higher levels of the atmosphere, unlike other emissions that have to float up from ground level.

Yes. Thanks, Jillian. The -- we do have a focus on air travel in terms of our Climate Action Plan, and we have targets to reduce it. It's increased in the reporting mainly, of course, in COVID all that stopped. And we got a bump, obviously, after COVID when that resumed. But it's in our Climate Action Plan. Air travel is still critical for our business. All our major funders, reinsurers are overseas and maintaining those relationships are critical, but we do have a plan in place to ensure the essential travel is what we do.

I have another question from Ms. Jillian King. The IAG FY '24 ESG data summary is very informative, providing much more granular information about IAG's operations and its emissions, including emissions reductions. It also helps with the new climate change target baseline year into perspective. I note though that COVID-19 lockdowns only affected just over 1/4 of FY '20, so some rough comparisons between FY '20 and FY '24 are possible. Some of the data is puzzling. Would you please explain the increase in both absolute and per FTE terms, the fossil gas use, general waste and taxi travel in FY '24 compared to FY '20. This is of concern for IAG's finances, efficiency and efforts to care for our climate and the environment.

Look, I can't detail each of those in -- explain each of those in detail. The key thing here is these items are in our Climate Action Plan. They are in our focus. And we will manage them efficiently as we can. And our whole objective here is to reduce our emissions over a period of the plan. So I think that covers the question.

A further question from Ms. Jillian King. I am proud of IAG's efforts to collaborate on and advocate for climate action. The new Climate Action Plan illustrates IAG's collaboration and advocacy work. One thing in the collaboration and advocacy part of the plan puzzles me. The interim target to support 1 million Aussies and Kiwis to take action to reduce their natural hazard risk is measured by accounting. When an individual takes a step to understand their disaster risks or emissions, understands options to reduce them or action to reduce them. How do you know when someone has taken such a step? As a customer, I'm not aware of any measurement of my efforts.