IAG shareholders’ equity (excluding non-controlling interests) increased from $6,568 million at 30 June 2014 to $6,817 million at 30
June 2015, reflecting the combined effect of:
the $500 million equity placement to Berkshire Hathaway in June 2015;
a sound operating earnings performance for the financial year, resulting in a net profit attributable to shareholders of $728
million; and
payment of the 26 cents per share final dividend declared in respect of the 2014 financial year ($609 million) and the 13 cents
per share interim dividend declared in respect of the first half of the 2015 financial year ($304 million).
B. CASH FROM OPERATIONS
The net cash inflows from operating activities for the financial year ended 30 June 2015 were $698 million compared to $1,077
million for the prior financial year. The decrease is mainly attributable to the net effect of:
an increase in claims costs paid of $1,838 million, mainly attributable to the former Wesfarmers business, natural peril events
and payment of New Zealand earthquake claims;
an increase in outwards reinsurance premium expense paid of $297 million, mainly attributable to additional cover purchased for
the former Wesfarmers business and CTP adverse development cover within Australia Personal Insurance;
a net increase in other operating payments over receipts of $343 million, primarily due to the addition of the former Wesfarmers
business; and partially offset by
an increase in premium received of $1,842 million, mainly attributable to the former Wesfarmers business; and
an increase in reinsurance and other recoveries received of $160 million, mainly attributable to the former Wesfarmers business.
C. INVESTMENTS
The Group’s investments totalled $15.5 billion as at 30 June 2015, excluding investments held in joint ventures and associates, with
over 70% represented by the technical reserves portfolio. Total investments at 30 June 2014 were $15.4 billion.
As at 30 June 2015, the Group’s overall investment allocation remains conservatively positioned and the credit quality of the
investment book remains strong, with 81% (2014-86%) of the fixed interest and cash portfolio rated in the 'AA' category or higher.
Technical reserves as at 30 June 2015 accounted for $11.0 billion (2014-$10.4 billion) of the Group's investments, and were entirely
invested in fixed interest and cash. The current year saw the transfer of assets from shareholders’ funds to technical reserves to
support earthquake-related liabilities.
The Group’s allocation to growth assets was 41% of the $4.5 billion of shareholders' funds at 30 June 2015 (2014-42%). Included
within the Group’s allocation to growth assets are Australian and international equities and alternative investments.
D. INTEREST BEARING LIABILITIES
The Group’s interest bearing liabilities stood at $1,762 million at 30 June 2015, compared to $1,752 million at 30 June 2014. There
were no changes in composition over the period, with any movement driven by foreign exchange translation effects.
E. CAPITAL MIX
The Group measures its capital mix on a net tangible equity basis, i.e. after deduction of goodwill and intangibles, giving it strong
alignment with regulatory and rating agency models. It is IAG’s intention to have a capital mix in the following ranges over the longer
term:
ordinary equity (net of goodwill and intangibles) 60-70%; and
debt and hybrids 30-40%.
At 30 June 2015, the Group’s capital mix was in the lower half of the targeted range, with debt and hybrids representing 33.8% (2014-
35.4%) of total tangible capitalisation.
F. CAPITAL MANAGEMENT
The Group remains strongly capitalised under APRA's Prudential Standards, with regulatory capital of $4,785 million at 30 June 2015
(2014-$4,981 million). The Group has set the following related targeted benchmarks:
a total capital position equivalent to 1.4 to 1.6 times the Prescribed Capital Amount (PCA), compared to a regulatory requirement
of 1.0 times; and
a Common Equity Tier 1 (CET1) target range of 0.9 to 1.1 times the PCA, compared to a regulatory requirement of 0.6 times.
At 30 June 2015, the Group had a PCA multiple of 1.70 (2014-1.72) and a CET1 multiple of 1.14 (2014-1.14).
Further capital management details are set out in the capital management note within the Financial Statements.
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