Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2017 Earnings Presentation
41 slides from Qbe Insurance's earnings presentation, Feb 26, 2018
Slide 1: Cover letter to ASX: QBE presentation on 2017 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 26 February 2018 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: 2017 full year results presentation
For personal use only QBE Insurance Group 2017 full year results presentation Pat Regan I Group Chief Executive Officer Michael Ford I Group Chief Financial Officer All figures in US$ unless otherwise stated Monday 26 February 2018
Slide 3: Pat Regan, Group Chief Executive Officer
For personal use only Pat Regan Group Chief Executive Officer
Slide 4: 2017 In Review
2017 In Review For personal use only Catastrophe Operational Balance Impact Performance Sheet Combined operating ratio Asia Pacific result unacceptable Strong investment return 104.1%1,2,3 (2016 93.7%2,3,4) of 3.2% North American reserves “Excess” catastrophe claims5 strengthened: PYD and LPTs Capit
Slide 5: Asia Pacific and Latin America
Asia Pacific and Latin America Asia Pacific Latin America For personal use only 96% 116% 103% 113% 2016 HK workers’ Attritional One-off & Other 2017 2016 PYD Attritional Other 2017 COR1 comp claims restructuring COR1 COR1 claims COR1 costs • Significant items impacting FY17 • Announced sale of Latin
Slide 6: Our Strategic Agenda: A stronger and simpler QBE
For personal use only Our Strategic Agenda: A stronger and simpler QBE
Slide 7: Our Focus
Our Focus For personal use only 1 Simplify QBE 2 Brilliant Basics 3 Drive Performance Improvement 4 Further Reposition North America 5 Remediate Asia 6 Talent and Culture 7 Build for the Future 6 QBE Insurance Group | 2017 full year results presentation
Slide 8: Simplify QBE
1 Simplify QBE For personal use only Our Focus Simplification Initiatives • Core markets and products: • Latin America - Attractive market • Hong Kong workers’ comp - construction - Solid market position with a competitive • Thailand sale agreement signed advantage • North American portfolio: - Real
Slide 9: Brilliant Basics
2 Brilliant Basics For personal use only Underwriting Pricing Claims Re-set and refine common Develop best in class Implement global claims standards and practices pricing models standards Consistent, best practice Deploy consistently across Drive further claims indemnity underwriting standards the
Slide 10: Drive Performance Improvement: Cell Review Process
3 Drive Performance Improvement: Cell Review Process Cell reviews are being rolled out across QBE to drive a higher degree of accountability and execution For personal use only • Instilling consistent operating routines across 60 global cells • Highly interactive regular sessions between Global, Loc
Slide 11: Further Reposition North America
4 Further Reposition North America Key Priorities For personal use only 2017 NEP 2013 NEP 1 Deliver 2018 plan $3.5Bn1 $4.9Bn2 $726m $1,170m 2 Establish Brilliant Basics fundamentals $497m $658m $341m $220m 3 Refine operating model - refine core P&C portfolio and simplify the operating platform $410m
Slide 12: Remediate Asia: Execute Profit Improvement Program
5 Remediate Asia: Execute Profit Improvement Program Remediation activities Reduction in poor performing segments For personal use only GWP OF PIP1 PORTFOLIOS -7.8% 1 Targeted performance improvement plans -3.7% -12.9% 470 434 263 254 207 180 Implement Brilliant Basics: 1H16 1H17 2H16 2H17 FY16 FY17
Slide 13: Talent and Culture; Build For The Future
6 Talent and Culture For personal use only 7 Build For The Future • Continue to build talent and • Focus on building internal capability data science capability • Culture centred around: • Investment in Insurtech companies • Fast-paced • Decisive • Accountable • • Digital Talent & Diverse Innovation
Slide 14: Michael Ford, Group Chief Financial Officer
For personal use only Michael Ford Group Chief Financial Officer
Slide 15: 2017 Financial Results Summary
2017 Financial Results Summary For the year ended 31 December 20161,2 20172,3 For personal use only GWP $M 14,088 14,191 NEP $M 11,636 12,458 COR % 94.4 103.6 COR (ex discount rate) % 93.7 104.1 Insurance profit $M 1,064 24 Insurance profit to NEP % 9.1 0.2 Statutory net profit (loss) after tax $M 8
Slide 16: 2017 Divisional Results - Adjusted
2017 Divisional Results - Adjusted Australia For personal use only North Asia Latin Equator 2017 Europe2 & New Group1,2 America1 Pacific America3 Re Zealand GWP ($M) 4,556 4,049 4,024 740 863 1,580 14,191 GEP ($M) 4,622 4,010 4,135 779 835 1,614 14,446 NEP ($M) 3,541 3,212 3,480 653 715 847 12,458 N
Slide 17: North America and Equator Re – Heavily Cat Impacted
North America and Equator Re – Heavily Cat Impacted North America: Catastrophes and reserve Equator Re: Catastrophes For personal use only strengthening 109.7 c. 109% % 98% 109% 141% 98%98% 89% Reserve 2017 2017 Excess risk 2017 Adj 2017 Excess risk Other strengthening Adj COR1,3 & cat claims COR CO
Slide 18: Europe and Australia & New Zealand
Europe and Australia & New Zealand Europe: Prior accident year reserve ANZO: Performance management driving For personal use only releases moderating underwriting improvement 90.7%91% 97%- 95.2% 95% 92% 92% 98% 2016 Lower Attritional Other 2017 2016 Attritional LMI Fee Other 2017 COR1,2,3 PYD claims
Slide 19: Investment Performance
Investment Performance 2017 return above plan Fixed income duration (years) For personal use only 0.4% (0.1%) 0.3% 1.0% (0.3%) 1.5 1.6 1.9% 3.2% 0.9 Planned FI Capital Gain Duration Impact Planned Growth Growth Asset Expenses 2017 FY Net Contribution from Credit from Rising Asset Outperformance Retu
Slide 20: Financial Strength
Financial Strength S&P Outlook ‘Stable’ Dividend For personal use only • Final dividend 4 Australian cents per share • FY17 total dividend 26 Australian cents per share • Total FY17 payout (including share buyback) of $495M • Dividend policy unchanged Cash remittances Share buyback • A$139M purchase
Slide 21: Outlook
For personal use only Outlook Pat Regan Group Chief Executive Officer
Slide 22: Our Focus: 2018 Targets
Our Focus For personal use only 1 Simplify QBE 2018 Targets 2 Brilliant Basics COMBINED 95.0% - OPERATING 3 Drive Performance Improvement RATIO 97.5%1,2 4 Further Reposition North America 5 Remediate Asia INVESTMENT 2.5% - 3.0%2 RETURN 6 Talent and Culture 7 Build For The Future 1 Assumes risk-free
Slide 23: Questions & Answers
For personal use only Answers Questions &
Slide 24: Disclaimer
Disclaimer For personal use only The information in this presentation provides an overview of the results for the year ended 31 December 2017. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lo
Slide 25: Appendices
For personal use only Appendices
Slide 26: 2017 Attritional Claims Ratio Analysis
2017 Attritional Claims Ratio Analysis For personal use only 20162,3 20171,2 NEP Attritional NEP Attritional US$M % US$M % Rest of portfolio 11,093 51.9 11,507 52.4 Crop insurance 543 59.0 951 77.5 QBE Group 11,636 52.2 12,458 54.3 25 1 Excludes one-off adverse impact on the Group’s underwriting res
Slide 27: 2017 Adjusted Claims Ratio Analysis
2017 Adjusted Claims Ratio Analysis For personal use only 20162,3 20171,2 1H16 2H16 FY16 1H17 2H17 FY17 NEP $M 5,791 5,845 11,636 6,045 6,413 12,458 Attritional claims % 52.8 51.7 52.2 53.3 55.3 54.3 Large individual risk and catastrophes % 9.5 8.7 9.1 9.7 19.3 14.6 Claims settlement costs % 2.9 2.6
Slide 28: 2017 Statutory Claims Ratio Analysis
2017 Statutory Claims Ratio Analysis For personal use only 2016 2017 1H16 2H16 FY16 1H17 2H17 FY17 NEP $M 5,615 5,451 11,066 6,043 5,998 12,041 Attritional claims % 54.5 55.5 54.9 53.3 59.1 56.2 Large individual risk and catastrophes % 9.8 9.3 9.6 9.7 20.7 15.2 Impact of reinsurance transactions1 %
Slide 29: Currency Mix
Currency Mix For personal use only 28 QBE Insurance Group | 2017 full year results presentation
Slide 30: Movement in Weighted Average Discount Rate
Movement in Weighted Average Discount Rate For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2016 30 June 2017 31 Dec 2017 Australian dollar 2.26 2.17 2.31 US dollar 2.04 2.15 2.36 Sterling 0.68 0.89 0.92 Euro 0.19 0.45 0.42 Group weighted averag
Slide 31: FX Rates versus US$
FX Rates versus US$ For personal use only December June December 2016 2017 2017 Closing Average Closing Average Closing Average rate rate rate rate rate rate AUD 0.72 0.74 0.77 0.75 0.78 0.77 GBP 1.23 1.35 1.30 1.26 1.35 1.29 EUR 1.05 1.11 1.14 1.08 1.20 1.13 ARS 0.06 0.07 0.06 0.07 0.05 0.06 30 QBE
Slide 32: North American Operations
North American Operations For personal use only 20161 20171 • GWP up 1%2 as Specialty and Crop experienced strong growth, partially offset by declines in P&C Gross written premium $M 4,647 4,556 • Average premium rate up 0.7% compared with flat in 2016 Gross earned premium $M 4,657 4,622 • Net claim
Slide 33: European Operations
European Operations For personal use only • GWP up marginally on a constant currency basis 20161 20172 • Premium rates (ex Ogden) were broadly flat Gross written premium $M 4,076 4,049 compared with an overall reduction of 2.4% in 2016 • NEP up 4% on a constant currency basis Gross earned premium $M
Slide 34: Australian & New Zealand Operations
Australian & New Zealand Operations For personal use only 2016 2017 • GWP down 1% on a constant currency basis1 Gross written premium $M 3,933 4,024 • Premium rates up 6.1% (excluding CTP) due to on-going pricing initiatives since 2016 Gross earned premium $M 3,924 4,135 • Premium retention broadly
Slide 35: Asia Pacific Operations
Asia Pacific Operations For personal use only • GWP down 3% on a constant currency basis, 2016 2017 reflecting remediation actions, actively lapsing poorly performing and high hazard accounts Gross written premium $M 765 740 • Premium rates fell 2.3% compared with 0.1% in 2016 (but pricing condition
Slide 36: Latin American Operations
Latin American Operations For personal use only • GWP up 4% on a constant currency basis 2016 2017 reflecting strong growth in Argentinean and Brazilian motor portfolios Gross written premium $M 867 863 • NEP up 5% on the same basis • Net claims ratio increased to 64.5% Gross earned premium $M 840 8
Slide 37: Equator Re
Equator Re For personal use only 20161 20171 • GWP up 17% due to an increase in proportional business Gross written premium $M 1,349 1,580 • Net claims ratio increased to 130.7% due to: o significant global catastrophe activity Gross earned premium $M 1,246 1,614 which exceeded the Group aggregate l
Slide 38: Financial Strength and Flexibility
Financial Strength and Flexibility Reserving For personal use only As at 31 Dec 2016 31 Dec 2017 Summary balance sheet $M $M • Favourable PYD of $37M (FY16 $366M) Investments and cash 25,235 26,141 • $67M positive discount rate impact Trade and other receivables 4,831 4,906 (FY16 $80M adverse) Intan
Slide 39: APRA PCA Calculation
APRA PCA Calculation For personal use only $M 20161 20172 Ordinary share capital and reserves 10,334 8,901 Net surplus relating to insurance liabilities 674 712 Regulatory adjustments to Common Equity Tier 1 Capital (4,441) (3,642) Common Equity Tier 1 Capital 6,567 5,971 Additional Tier 1 Capital -
Slide 40: Borrowings
Borrowings For personal use only Borrowings profile % FY16 FY17 Borrowings Subordinated debt 74 72 • $3,616M at 31 December 2017 Senior debt 17 17 • Weighted average cost of borrowings Additional Tier 1 securities - 11 5.8% (FY16 5.9%) Capital securities 9 - Maturity profile1 % FY16 FY17 Debt to equ
Slide 41: QBE's 2018 Global Reinsurance Program
QBE’s 2018 Global Reinsurance Program For personal use only Cat XL Large Risk & Catastrophe Group Risk XL & Cat XL covers Group Large Risk & Cat (GLRC) all QBE business except inwards provides coverage for all reinsurance (QBE Re), Marine exposures (except Crop & LMI). and Energy (Lloyd’s Syndicate