Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2013 Earnings Presentation
39 slides from Qbe Insurance's earnings presentation, Aug 20, 2013
Slide 1: Results presentation cover letter to ASX
QBE Insurance Group Limited ABN 28 008 485 014 Level 02, 82 Pitt Street, SYDNEY NSW 2000 Australia GPO Box 82, Sydney NSW 2001 telephone + 612 9375 4444 • facsimile + 612 9231 6104 www.qbe.com For personal use only 20 August 2013 The Manager Market Announcements Office ASX Limited Level 4 Exchange C
Slide 2: 2013 half year results announcement
For personal use only QBE Insurance Group 2013 half year results announcement John Neal Group Chief Executive Officer Neil Drabsch Group Chief Financial Officer 20 August 2013 All figures in US$ unless otherwise stated 1
Slide 3: Half year in review
For personal use only Half year in review 2 QBE HY13 results presentation
Slide 4: Key messages
Key messages For personal use only • On track to deliver our full year target for COR 92% and insurance Guidance reaffirmed profit margin 11% • Delivered on capital initiatives to further strengthen the balance sheet and enhance financial flexibility • Successful implementation of first stage of our
Slide 5: Key highlights
Key highlights For personal use only • NPAT of $477M (1H12 $760M) • Cash profit of $590M (1H12 $844M) Results • 92.8% COR and insurance profit margin 10.8% • Net risk margin strengthening $63M or 0.8% of COR • GWP falling behind plan due to North America and FX • Premium rate increases averaged 5% •
Slide 6: 1H13 financial results summary
1H13 financial results summary For personal use only For the half year ended 30 June 2013 2012 % change GWP $M 9,446 9,223 2 NEP $M 7,333 7,359 - Underwriting profit $M 530 522 2 COR % 92.8 92.9 - Insurance profit $M 790 958 (18) Insurance profit to NEP % 10.8 13.0 - Investment income $M 394 683 (42
Slide 7: 1H13 insurance profit margin analysis
1H13 insurance profit margin analysis For personal use only 18.0 Net risk margin 17.0 strengthening 0.8 16.0 15.0 14.0 13.0 (2.4) 0.6 0.2 (0.5) 12.0 2.4 (2.3) 3.1 (0.2) 0.4 11.0 10.0 9.0 8.0 7.0 6.0 10.8 12.1 5.0 4.0 3.0 2.0 1.0 0.0 1H13 reported PY PY risk margin CY risk margin Risk-free rates Larg
Slide 8: Overview of 1H13 divisional results
Overview of 1H13 divisional results For personal use only Australia North Latin & New 1H13 Group America America Europe Zealand Asia Pacific Equator Re GWP ($M) 9,446 2,703 733 3,103 2,507 400 1,889 GEP ($M) 8,413 2,536 694 2,480 2,392 311 1,533 NEP ($M) 7,333 1,286 622 1,731 2,077 244 1,373 Claims
Slide 9: North American Operations
North American Operations For personal use only • GWP $2.7Bn down $0.4Bn on target Results • COR 94.5% reflecting increase in expense ratio due to lower NEP • $64M(1) prior year development offset by risk margin release • FPS affected by BoA loan sales, industry consolidation, placement rates and pr
Slide 10: Capital, funding and investments
For personal use only Capital, funding and investments 9
Slide 11: Balance sheet
Balance sheet For personal use only As at 30 June 13 31 Dec 12 Significant impact from weaker A$ Summary balance sheet $M $M Investments and cash 29,955 31,525 Trade and other receivables 5,751 5,232 Intangibles ($M) Intangibles 5,614 6,068 • Identifiable subject to amortisation 1,056 • Goodwill 4,5
Slide 12: Impact of FX movements
Impact of FX movements For personal use only Movement in rates % June 2013 vs Dec 2012 June 2013 vs June 2012 US dollar strengthened against major Balance sheet P&L currencies in 1H13 Closing rate Average rate AUD (12.0%) (2.6%) GBP (6.3%) (2.0%) Euro (1.3%) 1.0% Exchange rate impact US$M Estimated
Slide 13: Capital levels
Capital levels For personal use only Regulatory capital $M 1H13 FY12 S&P affirm ‘A+’ financial strength APRA prescribed capital amount (PCA) 5,664 5,663 rating for our main insurance Tier 1 capital 6,963 6,657 subsidiaries Tier 2 capital (1)2,160 2,231 Total capital base 9,123 8,888 PCA multiple 1.6
Slide 14: Investments
Investments For personal use only Equities 0.5% (FY12 0.4%) • Total investments and cash at 30 June 2013 Short term was $30.0Bn money 25.7% (FY12 25.9%) • Net investment income (ex FX) broadly in line with expectations at $359M (1H12 $686M) – net investment yield 2.3% (1H12 4.8%) Properties* 0.6% (F
Slide 15: Borrowings
Borrowings For personal use only Borrowings profile as at 30 June 2013 % 1H13 FY12 • Capital and funding initiatives Subordinated debt 48 47 – $600M 5 year senior note securities Senior debt 41 29 issued at 2.4% pa coupon Hybrid securities 4 18 – Hybrid senior convertible securities Capital securiti
Slide 16: Outlook
For personal use only 15 Outlook
Slide 17: Outlook 2013
Outlook 2013 For personal use only • Rates to increase 4% to 5% on average Premium lowered due to • GWP $17.5Bn - $18.0Bn (target $17.8Bn) North America and weaker A$ • NEP $15.0Bn - $15.5Bn (target $15.3Bn) • Attritional claims ratio to benefit from – premium rate increases and remediation Claims –
Slide 18: Closing remarks
Closing remarks For personal use only • Senior management succession complete • ONE QBE global business Implementing our strategy • Improving financial strength and flexibility • Operational transformation program ahead of plan Focus on maintaining and • Targeting higher regulatory and rating agency
Slide 19: Questions
For personal use only 18 Questions
Slide 20: Important disclaimer
Important disclaimer For personal use only The information in this presentation provides an overview of the results for the half year ended 30 June 2013. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies
Slide 21: Appendices
Appendices For personal use only 1. Claims, underwriting, insurance and risk margin analysis 2. Discount rates 3. Divisional result summaries 4. APRA LAGIC calculation 5. Premium outlook 20 QBE HY13 results presentation
Slide 22: Claims incurred
Claims incurred For personal use only Other PY central estimate development • Large individual risk and catastrophe claims within Discount - current accident year Claims settlement costs allowance despite unusual individual risk claims severity 80 Large individual risk and catastrophe claims Attriti
Slide 23: Claims ratio analysis
Claims ratio analysis For personal use only 1H13 1H12 2H12 FY12 NEP $M 7,333 7,359 8,439 15,798 Attritional % 49.4 48.5 50.2 49.4 Large individual risk and catastrophes % 8.3 8.0 12.5 10.4 Claims settlement costs % 2.2 1.9 1.9 1.9 Discount % (2.5) (2.1) (2.3) (2.2) Accident year central estimate cla
Slide 24: Accident year results
Accident year results For personal use only 1H13 1H12 1H11 Net central estimate claims ratio (pre risk margin) % 57.4 56.3 64.2 Commissions % 17.8 16.8 15.8 Expenses % 15.6 14.6 14.0 Central estimate COR % 90.8 87.7 94.0 Accident year underwriting profit $M 685 904 409 Accident year underwriting pro
Slide 25: Insurance profit analysis
Insurance profit analysis For personal use only 1H13 1H12 1H11 Ins. Ins. Ins. profit profit profit $M margin % $M margin % $M margin % Central estimate accident year underwriting profit 685 9.2 904 12.3 409 6.0 PY central estimate development (178) (2.4) (117) (1.6) 9 0.1 PY risk margin 165 2.3 380
Slide 26: Commission and expense analysis
Commission and expense analysis For personal use only 40.0 Crop seasonality 35.0 0.2 0.6 (1.3) 0.9 0.9 0.6 30.0 25.0 20.0 31.5 33.0 33.4 15.0 10.0 5.0 0.0 FY13 guidance Crop commission Crop expenses 1H13 seasonally LPI costs (1) Commission rate Expense rate (2) NEP volume (3) 1H13 actual adjusted FY
Slide 27: Attritional claims ratio analysis
Attritional claims ratio analysis For personal use only 55 50 1.2 (0.9) (1.2) 45 40 35 30 25 48.5 49.4 20 15 10 5 0 1H13 attrititional claims ratio North America (1) Divisional mix (2) Group ex North America (3) 1H12 attritional claims ratio (1) Includes temporary spike in LPI claims of $40M ($66M i
Slide 28: Risk margin analysis
Risk margin analysis For personal use only 1500 Net P&L charge of $63M 1400 1300 (85) 9 6 96 17 (5) 12 (63) 1200 1100 1000 900 800 700 1,333 1,320 600 500 400 300 200 100 0 FY12 risk margin FX Other North America Latin America Europe Australia & New Asia Pacific Equator Re 1H13 risk margin Zealand 2
Slide 29: Major COR impacts by division
Major COR impacts by division For personal use only North Latin Australia & 1H13 Group America America Europe New Zealand Asia Pacific Equator Re NEP ($M) 7,333 1,286 622 1,731 2,077 244 1,373 COR (%) 92.8 94.5 95.0 95.7 89.9 84.8 92.2 Ins. profit margin (%) 10.8 6.9 10.6 6.1 17.2 16.4 9.5 Normalisa
Slide 30: Weighted average discount rates
Weighted average discount rates For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2013 31 Dec 2012 30 June 2012 Australian dollar 3.27 3.04 2.90 US dollar 1.30 0.87 0.85 Sterling 1.66 1.27 1.15 Euro 1.67 1.26 1.75 Argentine peso 19.56 17.78 13.8
Slide 31: North America
North America For personal use only • Premium rate increases averaged 6.9% across P&C 1H13 1H12 • Premium income down due to FPS (portfolio sales and client consolidation) and crop (delayed planting) Gross written premium $M 2,703 3,228 • 1H13 claims ratio affected by Gross earned premium $M 2,536 3
Slide 32: Latin America
Latin America For personal use only • GWP up 43%, primarily driven by the HSBC 1H13 1H12 Argentina acquisition, which contributed $277M of premium compared with only $87M in 1H12 Gross written premium $M 733 512 • Organic GWP growth was 7%, reflecting strong growth in Brazil, Colombia (ex SOAT busin
Slide 33: Europe
Europe For personal use only • Reported GWP up 13% and 15% in local currency largely due to expansion of London property portfolio 1H13 1H12 • Average premium rates increase of 2% in the face of Gross written premium $M 3,103 2,748 challenging market conditions • Claims ratio adversely impacted by f
Slide 34: Australia & New Zealand
Australia & New Zealand For personal use only 1H13 1H12 • Reported GWP up 4% in local currency but only 1% in USD due to weaker AUD Gross written premium $M 2,470 • Average premium rates increase of 6.5% with 2,507 retention strong at 82% • Improved claims ratio reflects lower attritional claims Gro
Slide 35: Asia Pacific
Asia Pacific For personal use only 1H13 1H12 • GWP up 51% due to Hang Seng Insurance acquisition in Hong Kong and a large multi-year contract won as a result of collaboration with European Operations Gross written premium $M 400 265 • Underlying organic GWP growth was 21% reflecting strong growth in
Slide 36: Equator Re
Equator Re For personal use only • XoL pricing was broadly flat but heavily dependant upon claims experience 1H13 1H12 • GWP down 10% reflecting higher divisional catastrophe (and in some case per risk) retentions and reduced quota Gross written premium $M 1,889 2,093 share business from North Ameri
Slide 37: APRA LAGIC calculation
APRA LAGIC calculation For personal use only $M HY13 FY12 Tier 1 Ordinary share capital and reserves 11,211 11,383 Net surplus relating to insurance liabilities 1,169 1,045 Deductions (5,701) (6,087) Capital securities 284 316 6,963 6,657 Tier 2 Subordinated debt and hybrid securities (1)2,160 2,231
Slide 38: Premium outlook
Premium outlook For personal use only Full year 2013 GWP in local GWP guidance NEP in local NEP guidance currency Bn $USBn (1) currency Bn $USBn (1) North America 5.9 5.9 3.0 3.0 Latin America 1.5 1.5 1.3 1.3 Europe 3.2 4.9 2.3 3.4 Australia & New Zealand 4.9 4.8 4.1 4.0 Asia Pacific 0.7 0.7 0.5 0.5
Slide 39: For personal use only
For personal use only 38