Slide 1: Cover letter to ASX: QBE presentation on 2015 results
QBE Insurance Group Limited ABN 28 008 485 014 Level 27, 8 Chifley Square, SYDNEY NSW 2000 Australia GPO Box 82, Sydney NSW 2001 telephone + 612 9375 4444 + facsimile + 612 9231 6104 www.qbe.com 23 February 2016 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: QBE Insurance Group 2015 annual results presentation
For personal use only QBE Insurance Group 2015 annual results presentation John Neal Group Chief Executive Officer Pat Regan Group Chief Financial Officer Tuesday 23 February 2016 All figures in US$ unless otherwise stated
Slide 3: John Neal, Group Chief Executive Officer
For personal use only John Neal Group Chief Executive Officer 2 2015 annual results presentation
Slide 4: 2015 financial results summary
2015 financial results summary For personal use only For the year ended 31 December 2015 2014(1) 2015(2) Change GWP $M 16,332 14,782 10% NEP $M 14,084 12,213 13% Underwriting profit $M 547 731 34% COR % 96.1 94.0 2.1ppt Insurance profit $M 1,074 1,099 2% Insurance profit to NEP % 7.6 9.0 1.4ppt Prof
Slide 5: 2015 achievements – stability and predictability
2015 achievements – stability and predictability For personal use only • Executed on our plans and met our financial targets Underwriting • Best COR since 2010 excellence • All divisions achieved an underwriting profit • A return to profitable growth • Engineered a significant turnaround in our Nort
Slide 6: 2015 achievements – quality balance sheet
2015 achievements – quality balance sheet For personal use only • Restructured and strengthened balance sheet Financial • Improved capital strength recognised by rating agencies strength • S&P capital comfortably AA equivalent (currently A+ stable) • Large risk and catastrophe claims < 9% of NEP Rei
Slide 7: Pat Regan, Group Chief Financial Officer
For personal use only Pat Regan Group Chief Financial Officer 6 2015 annual results presentation
Slide 8: 2015 adjusted profit reconciliation
2015 adjusted profit reconciliation For personal use only ADJUSTED REPORTED 31 DEC 31 DEC 2015 2015 2015 2015 2014 ARGENTINE DISPOSALS WORKERS' ($M) COMP ($M) ($M) Gross written premium 14,782 179 131 15,092 16,332 Net earned premium 12,213 178 (77) 12,314 14,084 Underwriting result 731 (61) (41) 62
Slide 9: 2015 divisional results - adjusted
2015 divisional results - adjusted For personal use only Australia & North New Emerging 2015 America Europe Zealand Markets Equator Re (1) Group GWP ($M) 4,961 4,386 3,787 1,728 1,007 14,782 GEP ($M) 4,930 4,338 3,753 1,687 994 14,606 NEP ($M) 3,666 3,454 3,282 1,436 367 12,213 Net claims ratio (%)
Slide 10: Delivering on our promises
Delivering on our promises For personal use only Central estimate stability(1) Returned North America and Emerging GWP 2015 versus 2014(2) Markets to underwriting profit(2) 2014 2015 North American ($38M) Operations underwriting profit $30M ($34M) Emerging Markets Operations underwriting profit $11M
Slide 11: 2015 expense ratio versus 2014
2015 expense ratio versus 2014 For personal use only 10 2015 annual results presentation
Slide 12: Cash remittances
Cash remittances For personal use only 2014 2015 • Final dividend 30 Australian cents per share Group head office cash flow at 31 Dec $M $M • FY15 dividend of 50 Australian cents per share, Opening head office cash balance 164 369 representing a 56% payout ratio on cash profit Total divisional divid
Slide 13: Investment performance by asset class
Investment performance by asset class For personal use only 12
Slide 14: Financial strength
Financial strength For personal use only (1) Indicative APRA PCA calculation at 31 December 2014 updated to be consistent with subsequently finalised APRA returns (2) Indicative APRA PCA multiple (3) Calculated as the ratio of net tangible assets to net earned premium 13 2015 annual results presen
Slide 15: Outlook
For personal use only Outlook John Neal Group Chief Executive Officer 14 2015 annual results presentation
Slide 16: Our priorities for 2016
Our priorities for 2016 For personal use only Performance • Maintain underwriting discipline as challenging markets continue management • Meet or beat our performance targets North American • Further improve profitability in North America Operations • Medium term COR target of 95% or better Cost • $
Slide 17: 2016 targets
2016 targets For personal use only Gross written $14.2 – $14.6Bn (1)(2) premium ($14.6 - $15.0Bn at constant currency) Net earned $11.6 – $12.0Bn (1) premium ($11.9 - $12.3Bn at constant currency) Combined operating ratio 94% - 95% (3)(4) Insurance profit margin 8.5% - 10% (3)(4)(5) (1) Premium targ
Slide 18: Three year plan – May in Sydney
Three year plan – investor update May 10 in Sydney For personal use only • Focus areas for growth include: Australian multi-channel, Emerging Growth Markets, Corporate Solutions & Specialty, Bancassurance and SME • Achieve COR of 95% or better North America • Complete build out of Specialty business
Slide 19: Questions & answers
For personal use only Questions & answers 18 2015 annual results presentation
Slide 20: Disclaimer
Disclaimer For personal use only The information in this presentation provides an overview of the results for the year ended 31 December 2015. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lo
Slide 21: Appendices
For personal use only Appendices 20 2015 annual results presentation
Slide 22: 2015 statutory claims ratio analysis
2015 statutory claims ratio analysis For personal use only 2014 2015 1H14 (1)2H14 (1)FY14 1H15 2H15 FY15 NEP $M 6,947 7,499 14,446 6,229 6,085 12,314 Attritional % (2)49.8 (2)51.6 (2)50.7 54.2 49.5 51.9 Large individual risk and catastrophes % (3)9.9 (3)12.3 (3)11.2 8.9 8.5 8.7 Claims settlement cos
Slide 23: 2015 adjusted attritional claims ratio analysis
2015 adjusted attritional claims ratio analysis For personal use only 2014 2015 NEP Attritional NEP Attritional US$M % US$M % Rest of world 12,701 47.0 11,571 48.1 Group large individual & catastrophe risk aggregate (1) - - (289) - US multi-peril crop insurance (2) 965 93.6 556 69.0 Lender-placed in
Slide 24: 2015 movement in weighted average discount rates
2015 movement in weighted average discount rates For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2014 30 June 2015 31 Dec 2015 Australian dollar 2.46 2.43 2.37 US dollar 1.33 1.59 1.80 Sterling 1.30 1.53 1.47 Euro 0.58 0.75 0.59 Group weighted
Slide 25: 2016 premium outlook
2016 premium outlook For personal use only 2015 actual 2016 target 2015 actual 2016 target GWP GWP(1) NEP NEP(1) North America 5.0 4.8 3.7 3.6 Europe 4.4 4.3 3.5 3.4 Australia & New Zealand 3.8 3.5 3.3 3.1 Emerging Markets 1.7 1.8 1.4 1.4 Equator Re 1.0 - 0.4 0.3 Equator Re elimination (1.0) - - - C
Slide 26: FX rates versus US$
FX rates versus US$ For personal use only 2016 December 2014 June 2015 December 2015 forecast Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.82 0.90 0.77 0.78 0.73 0.75 0.70 GBP 1.56 1.65 1.57 1.53 1.47 1.53 1.44 EUR 1.21 1.32 1.11 1.12 1.09 1.11 1.0
Slide 27: Financial performance – underwriting expenses
Financial performance – underwriting expenses For personal use only 26 2015 annual results presentation
Slide 28: North America
North America For personal use only 2014 2015 • First underwriting profit since 2011 Gross written premium $M 5,310 4,961 • Premium rate increase of 0.4% on average, reflecting increased market competition, particularly in property Gross earned premium $M 5,457 4,930 • Excluding $383M of M&LS GWP, t
Slide 29: Europe
Europe For personal use only 2014(1) 2015 • Premium rates down 3.2% on average as market Gross written premium $M 4,526 4,386 pressures continue Gross earned premium $M • GWP up 5% on a constant currency basis, despite 4,805 4,338 competitive market headwinds Net earned premium $M 3,929 3,454 • NEP
Slide 30: Australia & New Zealand
Australia & New Zealand For personal use only 2014 2015 • Premium rates fell by ~2.4%, with a decrease of 2% Gross written premium $M 4,392 3,787 in Australia and 7.3% in New Zealand • GWP down 14% in USD but up 3% on a constant Gross earned premium $M 4,386 3,753 currency basis • Traditional commer
Slide 31: Asia Pacific
Asia Pacific(1) For personal use only 2014 2015 Gross written premium $M 785 759 • Heightened competition across the region; premium rate reductions averaged 3.4% Gross earned premium $M 720 737 • GWP up 3% on a constant currency basis, with double-digit growth in Indonesia, Macau, Malaysia, Philipp
Slide 32: Latin America
Latin America(1) For personal use only (2)2014 2015 • GWP and NEP grew by 13% and 12% Gross written premium $M 1,394 969 respectively on a constant currency basis • Focus shifted to corporate, specialty and SME Gross earned premium $M 1,222 950 post sale of Argentine workers’ compensation • Colombia
Slide 33: Equator Re
Equator Re For personal use only 2014 2015 • GWP up 57% due to Equator Re providing higher Gross written premium $M 642 1,007 limits on divisional treaties with Equator Re now purchasing the Group’s per risk and catastrophe treaties for its own account Gross earned premium $M 764 994 • NEP down due
Slide 34: Financial strength and flexibility
Financial strength and flexibility For personal use only As at 31 December 2014 2015 Summary balance sheet $M $M Reserving • Favourable prior accident year claims Investments and cash 28,583 26,708 development of $147M on an adjusted basis Trade and other receivables 4,748 4,950 ($137M on a statutor
Slide 35: APRA PCA calculation
APRA PCA calculation For personal use only $M 2014 2015 Ordinary share capital and reserves 11,082 10,560 Net surplus relating to insurance liabilities 1,199 711 Regulatory adjustments to Common Equity Tier 1 Capital (5,029) (4,424) Common Equity Tier 1 Capital 7,252 6,847 Additional Tier 1 Capital
Slide 36: Borrowings
Borrowings For personal use only Borrowings profile % 2014 2015 Borrowings of $3,529M at 31 Dec 2015 Subordinated debt 61 74 • Weighted average cost of borrowings unchanged at 6.2% Senior debt 30 17 Capital securities 9 9 Debt to equity ratio within benchmark range of 25% - 35% • Gearing slightly ab
Slide 37: QBE's 2016 global reinsurance program
QBE’s 2016 global reinsurance program For personal use only Risk XL Cat XL Large Risk and Catastrophe Group Risk XL & Cat XL covers all QBE Reinstatements Group Large Risk & business except inwards reinsurance (QBE Re), Catastrophe (GLRC) is Marine and Energy (Lloyd’s Syndicate 1036), Equator Equato