Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — UBS Australian Companies Competing in the Global Playing Field (November 2003)
18 slides from Qbe Insurance's conference presentation, Nov 21, 2003
Slide 1: ASX cover letter: CEO's Presentation to UBS Australia
QBE Insurance Group 21 Navember 2003 The Manager Company Announcements Australian Stock Exchange Limited Level 6 2000 Dear Sir, ree CEC s Presentation to UBS Australia e attached for the $ Aw Please 5 presenlat UO poe, A oq Dunces Ramsay Company Secretary arket's information cur ©! ference or “Aust
Slide 2: Australian Companies Competing in the Global Playing Field
QBE INSURANCE GROUP LIMITED UBS AUSTRALIAN COMPANIES COMPETING IN THE GLOBAL PLAYING FIELD Frank O’Halloran CEO November:2003
Slide 3: Executive Summary
Executive Summar QBE is an Australian-based general insurance and reinsurance group and one_of the top 25 largest of the world’s insurers and.reinsurers.as measured by net written premium — Established in 1886 —.-Listed on ASX as QBE in 1973 following merger of three related _ companies —. Operation
Slide 4: Key Financial Information
* The Group has: - Total assets - A$b - Net assets - A$b - Market capitalisation - A$b - Gross written premium - A$b - NPAT.- A$m * Ratios: -Combined operating ratio - Insurance profit:margin - Capital adequacy multiple - Debt to equity Key Financial informatio! Half Year 31 Dec.2002 30 June 2003 20
Slide 5: Executive Summary: Strategy
executive oummar Strateg) “QBE’s strategy of managing risk by spreading exposure geographically and by product has been a vital ingredient in the Group’s success” *. QBE’s strategy and philosophy.can be summarized as: Geographic spread and product diversification to ensure we are not reliant on any
Slide 6: Geographical Diversification
--Half Year to 30 June 2003 ~ _ Gross Earned Premium ~Lloyd’s division 27.0% (31.7%) -< Geograpnical Diversification Australia 21.0% (19.3%) Asia-Pacific. : European company operations 29.8% (29.1%). 7.1% (8.0%) the Americas 15.1% (11.9%)
Slide 7: Worldwide Portfolio Mix
Worldwide Portfolio Mix Half Year to 30 June 2003 Gross Earned Premium Professional indemnity Marine and aviation : 7.9% (6.4%) - Workers’ compensation 8.6% (10.3%) 8.7% (6.2%) Other 4.9% (8.5%) Property. =. Liability 35.5% (29.3%) 15.1% (16.9%) Financial and credit“ 3.6% (3.1%) Motor:‘and motor cas
Slide 8: Major Initiatives
Major Initiative Some major initiatives over the past 3 years: e « Acquisitions to boost Australian and Asia-Pacific businesses © Cancelled over $1 billion of non-performing portfolios (in 2000/" . 2001) Reduced maximum event retention and exposures to terrorism Tightened product underwriting author
Slide 9: Other Risk Management Initiatives
Other Risk Management Initiatives Other risk management initiatives: e sd Minimal exposure to asbestos and USA long tail casualty Savings on claims reserves in each of past 6 years Reduced exposure to reinsurers (minimal bad debt experience) Further increased prudential margins on insurance liabilit
Slide 10: History of Growth
History of Growth gross and net earned premium Compound average growth rates over last 10 years to June 2003: ~ gross eamed premium 23.3% -net eamed premium 22.7% ASM Target 200. 8,000 GEP A$8.5b 6,000 co NEP AS$6.3b 4,000 2,000 1993 1996........1999 2002
Slide 11: Growth and Insurance Margin
Growth and Insurance Margin 1993 1,189* 104.1 . 1994 1,180 100.2 7.4 1995 1,336 100.4: 8.0 1996 1,561 99.3 8.4 1997 2,050 99.5..- 7.2 1998 2,409 100.3 1.7 1999 2,877 103.9 2.9 2000 4,406 102.5 5.4 2001 6,793 109.6 (2.6) 2002 7,723 97.7 7.2 2003 (est) 8,500** <96.0 >8.9 ~~ * $698 million overseas **
Slide 12: Current Market Conditions
Current Market Condition: Positives Substantial premium rate.increases since 2001 continuing, although at. a lower rate -+5% expected for QBE portfolio in 2004 Improved terms. and conditions prevailing Lower risk profile - terrorism exclusions or government cover and, for QBE, reduced aggregates and
Slide 13: Lloyd's Market: Movements in Insurance Rates
Lloyd’ S marke - Movements i in insurance rates 1992 - 2003 (est) 140 + 130 == Marine , 120 —— Non Marine s Motor. = f: 110 100 90 ~ a — ——- 1992 1993 ..°1994 19951996 1997-1998 1999... 2000. 2001 .2002 .2003 Source: Moody’s
Slide 14: Market Cycle
Market Cycle Likely to be longer with lower trough due to: * Consolidation «Rating Agencies + Regulators «Investors « Management . +. Attitude of Reinsurers « Reduced capacity, particularly for low level reinsurance
Slide 15: Market Condition: Effect of Stronger A$
Market Condition: Effect of stronger A$ «Higher dollar will impact QBE’s top line growth due to 80% of earnings in other currencies: «Net earned premium forecasts for 2004 before acquisitions indicate 10% growth based on A$ to US$ of 70¢.and £2.40 «-Currency exposure matched or hedged «5% movement i
Slide 16: Business Strategy
Business Strateg' Maximise opportunities in current hard market cycle — increased premium rates x — improved policy terms and conditions — Build prudential margins to around 94% degree of adequacy. Net premium growth around 10% p.a., through acquisitions, higher customer retention and organic growth
Slide 17: 2004 Projected Gross Premium
2004 Projected Gross Premium (before acquisitions) Lloyd’s European Company Operations USA/Latin America Australia — Asia Pacific (18 countries) £1.3 billion (100%) £1.2 billion US$1.15 billion A$1.9 billion : “A$0.7 billion
Slide 18: Historical Share Price Performance
Historical share price performance An investment in QBE has outperformed the Australian All Ordinaries Index and inflation with a compound average annual growth rate of. 12.0%.over'5 years, 20.1% over10 years and 24.9% over 20 years 20 484 ww OBE share price performance —- OBE share price performanc