Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2021 Earnings Presentation
32 slides from Qbe Insurance's earnings presentation, Feb 18, 2022
Slide 1: QBE Presentation on the 2021 results
QBE Insurance Group Limited ABN 28 008 485 014 Level 18, 388 George Street, SYDNEY NSW 2000 Australia GPO Box 82, Sydney NSW 2001 telephone + 612 9375 4444 • facsimile + 612 9231 6104 www.qbe.com 18 February 2022 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: 2021 Full Year Results
QBE INSURANCE GROUP LIMITED 2021 Full Year Results Friday 18 February 2022 All figures are in US$ unless otherwise stated. This presentation should be read together with the basis of presentation information detailed on page 22 ® QBE
Slide 3: Andrew Horton, Group Chief Executive Officer
Andrew Horton Group Chief Executive Officer
Slide 4: Diversified portfolio with international footprint
Diversified portfolio with international footprint Extensive product set across all major insurance markets Strong brand, distribution and relationships Embedded performance management disciplines Market conditions remain supportive Business is well positioned to grow Deliberate decision making on c
Slide 5: Portfolio mix by division and class
Motor & motor Professional casualty Financial & indemnity Marine energy Accident & Marine energy credit Accident & & aviation Financial & health Other & aviation health credit Workers’ Public/product compensation Workers’ liability Commercial & compensation domestic property Workers’ compensation Pr
Slide 6: FY21 key metrics and highlights
Combined operating ratio 93.7%1 FY21 average rate increase 9.7% Net investment return of 0.4% or Regulatory capital at 1.75x2 1.3% (ex risk-free rates) GWP growth 21% Pricing remains strong in all regions $260M mark-to-market losses on FI Capital at S&P ‘AA’ level mainly due to higher risk-free rate
Slide 7: Group-wide rate increases 9.7% in 2021
• Group-wide rate increases 9.7% in 2021 11.3% 9.7% 9.7% • Ongoing compound premium rate increases globally 12.6% 10.6% 9.8% 8.9% 10.0% 9.4% • Some signs of moderation in certain market segments • Improved customer retention 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 81% 82% 82% 83% 83% 84% 11.2% 10.5% 8.8% 10.2
Slide 8: Gross written premium growth 21%
17% 15% 20% $18,453M $14,685M 21% growth FY20 FX North America International Australia Pacific FY21 • Crop • Cont. Europe • Workers’ comp • Financial lines • QBE Re • Packages • Retail • Farm • LMI
Slide 9: Inder Singh
Inder Singh
Slide 10: Group financial results summary
FY20 FY21 Gross written premium $M 14,685 18,453 • Strong constant currency GWP growth +21% (17% ex Crop) Net earned premium $M 11,785 13,779 • Constant currency NEP growth of +12% (10% ex Crop) • Underwriting profit of $695M, excludes: Net claims ratio (ex risk-free rates) % 67.9 66.5 • $301M posit
Slide 11: Group combined operating ratio movement
98.6% 21% from FY20 (1.4%) 0.8% 0.3% 95.0% (1.3%) (0.9%) (1.1%) FY20 98.6% FY20 Ex-cat claims Expenses Commissions Cat claims PYD Other FY21 ratio • Improvement underpinned by lower current year claims and operating expense ratios from FY20 58.8% continuing compounding rate increases • Increased inf
Slide 12: CPI inflation is lifting notably across many regions
• CPI inflation is lifting notably across many regions • Diverse portfolio and each cell responds to a unique mix of inflationary drivers • Inflation is broadly in-line with expectations in 2021, albeit with some exceptions • Expecting inflation to remain elevated, reflecting ongoing demand vs. supp
Slide 13: North America results
112.7% 32% from FY20 (2.6%) 0.6% (2.4%) (1.6%) 1.0% 102.9% (4.8%) FY20 112.7% FY20 Ex-cat claims Expenses Commissions Cat claims PYD Other FY21 ratio • Premium growth of 32%, or 20% excluding Crop FY20 69.3% • COR improvement driven by current year claims and operating expense ratios • Catastrophe c
Slide 14: International results
15% from FY20 2.2% 91.3% 0.3% 90.6% (0.5%) (1.9%) (0.6%) (0.2%) FY20 91.3% FY20 Ex-cat claims Expenses Commissions Cat claims PYD Other FY21 ratio • Increased current year claims primarily due to higher IBNR assumptions in long-tail classes FY20 52.8%4 • Catastrophe claims in line with substantially
Slide 15: Australia Pacific results
17% from FY20 92.8% 0.7% 91.4% 3.1% (2.4%) (1.2%) (0.6%) (1.0%) FY20 92.8% FY20 Ex-cat claims Expenses Commissions Cat claims PYD Other FY21 ratio • Current year claims ratio improved despite higher weather related claims FY20 56.6% • Catastrophe claims above allowance due to an increased frequency
Slide 16: Investment performance and portfolio
FY21 investment return $M % FI yield (ex risk-free rate) 144 0.6 Credit spreads MTM 20 0.1 Risk assets 258 13.5 1.5% Credit Based on expected risk spread 0.4% asset return of ~5.5% Expenses and other (40) (0.2) contribution ‘Exit’ run rate Net return (ex risk-free rate) 382 1.3 Wtd avg risk-free rat
Slide 17: Regulatory capital comfortably above midpoint of target range
$3.6B 1.75x 1.72x $3.2B $3.1B $3.0B $2.8B FY20 FY21 FY17 FY18 FY19 FY20 FY21 • Regulatory capital comfortably above the • Updated dividend payout range to better Debt to midpoint of our 1.6x-1.8x target range support the Group’s growth ambitions and total 29.0 27.6 27.5 25.8 24.1 provide flexibility
Slide 18: Andrew Horton, Group Chief Executive Officer
Andrew Horton Group Chief Executive Officer
Slide 19: Our strategy and priorities
Our strategy and priorities Our purpose Our vision Our priorities LQ] Portfolio optimisation +Actively manage for consistency and resilience +Consistent framework to identify and monitor target portfolio +Reduce volatility in earnings QBE — enabling a more resihent future To be the most consistent a
Slide 20: Our Sustainability Framework
Our Sustainability Framework helps us drive performance, manage risks and identify opportunities across the areas of sustainability that are most important to our business, customers and stakeholders See the Sustainability section of our website for more information.
Slide 21: Market conditions are conducive to supporting organic growth
• Market conditions are conducive to supporting 95.0% organic growth ~94% • Premium rate increases expected to continue • Expect improvement on FY21 exit in 2022 • Building greater resilience, with downside protection FY21 PYD Risk Increased Exit FY21 margins Cat allowance & expenses "exit" RI spend
Slide 22: Questions and answers
Questions and answers
Slide 23: Basis of presentation
10. Prior periods (2019 and earlier) are presented on a continuing operations basis 1. All figures are in US$ and adjusted basis as presented in prior reports 2. Combined operating ratios (COR) and underwriting results exclude the impact of 11. APRA PCA calculations at 31 Dec 2021 are indicative. Pr
Slide 24: Important notice and forward-looking statements
The information in this presentation provides an overview of the results for the materially from those either expressed or implied in such statements. There can half year ended 31 December 2021. be no assurance that actual outcomes will not differ materially from these statements. You are cautioned
Slide 25: Appendices
Appendices
Slide 26: Divisional financial summary
FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 Gross written premium $M 13,442 14,685 18,453 4,361 4,775 6,289 5,200 5,856 6,958 3,920 4,079 5,215 Net earned premium $M 11,609 11,785 13,779 3,692 3,351 3,965 4,339 4,812 5,545 3,568 3,626 4,265 Net earned premium (Crop & LMI) $M 1,358 1,
Slide 27: Investments and premium by currency
FY20 FY21 $M % $M % US dollar 9,128 33 9,089 31 Australian dollar 7,420 27 7,924 27 Sterling 4,738 17 5,534 19 Euro 3,751 13 3,609 13 Canadian dollar 1,335 5 1,377 5 New Zealand dollar 460 2 551 2 Hong Kong dollar 372 1 395 1 Singapore dollar 192 1 174 1 Other 339 1 314 1 Total 27,735 100 28,967 100
Slide 28: APRA regulatory capital
31 DEC 31 DEC 2020 2021 Ordinary share capital and reserves 7,606 7,996 CET1 > Common Equity 60% of PCA Tier 1 Capital Total Tier 1 > Net surplus relating to insurance liabilities 1,194 1,250 80% of PCA Additional Tier 1 Regulatory adjustments to Common Equity Tier 1 Capital (3,125) (3,007) Capital
Slide 29: Balance sheet and shareholders' funds
31 DEC 2020 31 DEC 2021 • PYD unfavourable $192M (FY20 $366M unfavourable) excludes $55M of adverse PYD in International matched by premium Investments and cash 27,735 28,967 • Risk margin release $140M due to reduced COVID-19 related uncertainty Trade and other receivables 5,760 7,109 • $301M favou
Slide 30: Debt maturity profile and capital instruments
Weighted average time to first call: 3.5yrs 300 6 886 884 AT1 698 442 538 Tier 2 400 Senior 2022 2023 2024 2025 2026 2027 2028 Balance sheet Issued instruments Issue date First call date Coupon Maturity date value ($M) Capital Notes Nov-17 May-25 5.250% Perp 393 Equity Additional Tier 1 (AT1) Capita
Slide 31: 2022 reinsurance program
Key changes • Cat Top or Drop or Non-Peak1 • Limit reduced to $225M A$300M xs A$4.5B • Drop attachment increased to $175M 1 Pre-paid Reinstatement ANZ • Cat Top Layer • Increased from $100M to $175M $500M xs $2.9B • ANZ Cat Top Layer Worldwide • New purchase for 2022 • Cat Top or Wrap or Agg • Aggre
Slide 32: Sustainability Yearbook 2022 and sustainability progress
For the third year in a row, QBE has been included in the DJSI/Corporate Sustainability Develop a refreshed sustainability strategy to acknowledge QBE’s vision, purpose and Assessment Sustainability Yearbook 2022. Inclusion places QBE among the world’s the rapidly changing environment to bring susta