[PPT] - Strengthening your farm enterprise with Multi-Peril Crop Insurance PowerPoint Presentation

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Strengthening your farm enterprise with Multi-Peril Crop Insurance

Guide to Latevo’s Certainty Insurance™ Product

Grower Workshop March 2015.

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Australia’s Leader in MPCI

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Today’s Agenda

1. What is all-peril revenue insurance?
2. Latevo’s Certainty Insurance™ Product
3. How Growers can join the 2015 Latevo Program
4. Costs and benefits for the Grower

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Think of MPCI as another farm input

* Active ingredient: revenue-based MPCI

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… that protects against all natural perils

Wet

Excessive rain
Flood
Hail

Dry

Water stress

Hot

Temperature

stress Biological

Wildlife
Insect or pest

manifestation

Plant disease.

Cold

Frost
Snow

Wind

Cyclone/Hurricane
Tornado
Excessive Wind

Fire

Bushfire
Accidental Fire
Lightning

Other

Accidental Overspray
Straying Livestock
Weed Infestation

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Yield-based MPCI versus Revenue-based MPCI

YIELD-BASED MPCI (Y-MPCI) YIELD-BASED MPCI (Y-MPCI) Pays out on Pays out on Yield losses losses REVENUE-BASED MPCI (R-MPCI) REVENUE-BASED MPCI (R-MPCI) Pays out on Pays out on Revenue losses losses

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Why Revenue MPCI is more effective

Scenario Yield (mt/ha) Grain Price ($/mt) Revenue ($/ha) 1 3.0 2 2.0 3 1.5

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Why Revenue MPCI is more effective

Scenario Yield (mt/ha) Grain Price ($/mt) Revenue ($/ha) 1 3.0 $200 2 2.0 $150 3 1.5 $400

Assumptions Assumptions

R-MPCI pays out below $360/ha revenue
Y-MPCI pays out below 1.8 mt/ha

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Revenue MPCI pays out when you need the cash in Scenario 2

Scenario Yield (mt/ha) Grain Price ($/mt) Revenue ($/ha) 1 3.0 $200 $600 2 2.0 $150 $300 3 1.5 $400 $600

R-MPCI Y-MPCI Payout

Assumptions Assumptions

R-MPCI pays our below $360/ha revenue
Y-MPCI pays our below 1.8 mt/ha

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MPCI improves farm outcomes and wealth creation

HOW MULTI-PERIL CROP INSURANCE DRIVES BETTER FARM OUTCOMES

Purchase Multi-Peril Crop Insurance Greater certainty of income for the farmer Increased availability

f bank financing

Better crop care with cash to spend Increased use of forward selling, with income supported More resilient and successful farmers

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Today’s Agenda

1. What is all-peril revenue insurance?

2.

2. Latevo’s

Latevo’s Certainty Insurance™ Product Certainty Insurance™ Product

3. How Growers can join the 2015 Latevo Program
4. Costs and benefits for the Grower

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Multi-Peril Crop Insurance is now working in Australia

Latevo founded in 2013 to

run commercial pilot in the Australian grains sector

First MPCI policies written in

2014, across all farm sizes

First claims paid in Jan.

2015

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… across all major wheat producing regions

Early Signups for 2015 Latevo’s Clients in 2014

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In drought-stricken 2014, Latevo paid claims to 8 clients

PREMIUMS VERSUS CLAIM VALUE, 2014 PREMIUMS VERSUS CLAIM VALUE, 2014 Dollars Dollars

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$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Latevo's Clients 2014 Net Premium Claim Value

“Without the [Latevo] policy, the failed year just gone would have resulted in us negotiating overdraft extensions … [and] and then try and prioritise any capital made available for the year ahead, or in other words, cut corners.”

Alistair Mace, Nindigully, Queensland.

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Latevo’s assessment model redefines insurance – enabling coverage in high risk environments

COMPREHENSIVE ASSESSMENT FRAMEWORK FOR MULTI-PERIL CROP INSURANCE

Marketing Plan

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Production Plan Farm Financials

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A Planned Approach to Grain Marketing

% % Priced Pr Production Pr Price Ti Time 10% Pre Planting $280 - $310 '12 or early '13 20% Post Germinat'n $280 - $320 May - Oct 30% Pre Harvest $260 - $300 Aug - Oct 40% Pre Harvest $260 - $300 Aug - Oct 80% Harvest $260 - $300 Nov - Dec 90% Late Jan - May $260 - $300 Jan '14 100% March - May $260 - $300 March '14

EXAMPLE OF A GRAIN MARKETING PLAN

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… and in graphical form

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Pre-planting Post- germination Pre-harvest- early Pre-harvest- late Harvest Jan-Mar Mar-May

Per Cent of Expected Yield Sold Forward

EXAMPLE OF A GRAIN MARKETING PLAN

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Flexible coverage levels …

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… keep premiums affordable

INSURANCE PAYOUT VERSUS FARM REVENUE VOLATILITY INSURANCE PAYOUT VERSUS FARM REVENUE VOLATILITY

Max sum insured (60-80% of revenue)

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Maximum insurance payout Self insurance

Insurance Payout Farm Revenue Farm Revenue

Probability distribution of Revenue (yield * price) Farmer’s risk exposure covered by insurance

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Today’s Agenda

1. What is all-peril revenue insurance?
2. Latevo’s Certainty Insurance™ Product

3.

3. How Growers can join the 2015

How Growers can join the 2015 Latevo Latevo Program Program

4. Costs and benefits for the Grower

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How Growers can join the 2015 How Growers can join the 2015 Latevo Latevo Program Program

What is a Production Audit?
What does a Production Audit involve?
How does Latevo engage our Agents?
How Growers, Agents & Latevo interact
Key Dates for 2015 & Timeframes

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What is a Production Audit? What is a Production Audit?

Process that underpins:-
Level of Coverage Offered
Premium Cost
Analysis – Historical Production & Financial Data
Derives – Variability of Income – High/Low/Average $/ha
Financial trends identified = no guess work = removes risk of

self assessing.

Self assessment lends itself to over or under-insuring – not

beneficial for anyone.

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What does a Production Audit Involve What does a Production Audit Involve

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Who – Independent Auditing Accountants
What
5 years financials, tax returns & cashbooks
5 years production records i.e. crop areas/yields/grain on hand
How – “Normalise” the production year with the financial year
Why –
Avg. Income per Ha + Consideration of Grain Marketing &

Agronomy Strategies = Basis for Coverage Offered & Premium Cost

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How Growers, Agents & Latevo interact

Agents use relationship with Growers to introduce

Certainty Plus

Agents register clients with Grower Information & Financial

Release Forms

Latevo confirms acceptance into the program based on

geographic limits

Agents invoice Grower for Production Audit
Agents collect & submit a complete data set to Latevo

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How Growers, Agents & Latevo interact How Growers, Agents & Latevo interact cont cont’

Latevo engages Auditing Accountants to complete

Production Audit

Latevo completes Risk Assessment based on PA
utcomes & offers Growers Policy Estimate & Final Quote.
Latevo invoices & binds policy on receipt of payment by

Grower.

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Key Dates & Timeframes Key Dates & Timeframes

Applications Close for 2015 Season

11 11th

th April 2015

April 2015

Policies Offered up to:

30 30th

th June 2015

June 2015

Quote expires 14 days from Latevo Policy Offering
Production Audit turnaround 14 days from receipt of complete data set.
Claims processing 30 days from submission to settlement.

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Today’s Agenda

1. What is all-peril revenue insurance?
2. Latevo’s Certainty Insurance™ Product
3. How Growers can join the 2015 Latevo Program

4.

4. Costs and benefits for the Grower

Costs and benefits for the Grower

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Multi-Peril Crop Insurance cost is comparable to other input costs

COMPARISON OF LATEVO PREMIUMS AND CROP INPUTS, BY CATEGORY $ per hectare

Unit cost range ($ per hectare) Median unit cost ($ per hectare)

MPCI Services Fungicide Insecticide Herbicide Mechanical Fertiliser Seed 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85

5 10 15 20 25 30 35 40 45

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In summary, there are big benefits of joining Latevo’s Certainty Plus Insurance Program in 2015

The confidence of receiving a significant payout in years where

income is low

Not needing to borrow additional money to fund next year’s crop
Never breaching your bank covenants
Having the flexibility to hold grain and wait for a higher price
Taking advantage of land purchase opportunities
Knowing that you will not go broke in the next drought event.

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Find out how you can benefit from Crop Insurance. Join our National Grower Workshops, March-April, 2015. www.latevo.com

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National Grower Workshops March-April, 2015

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Future

Thank You

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