Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2018 Earnings Presentation
34 slides from Qbe Insurance's earnings presentation, 2019
Slide 1: All figures in US$ unless otherwise stated
All figures in US$ unless otherwise stated
Slide 2: Outlook - Pat Regan, Group Chief Executive Officer
Pat Regan
Slide 3: Simplified and more focused; targeted de-risking; delivered 2018 in line with targets
Simplified and Targeted Cell Brilliant Basics Pricing Delivered 2018 in Strong balance more focused de-risking reviews accelerating momentum line with targets sheet Portfolio Activities Strengthened Group-wide 2018 average rate Combined 2018 buyback simplified improving performance mgmt standardisat
Slide 4: GWP, attritional claims ratio, premium rate increases, COR, cash ROE, dividend
GWP ($M) Premium rate increases Attritional claims ratio2 5.5% 54.3% 13,657 4.6% 13,328 51.3% 49.1% 2.7% 1.0% FY17 FY18 1H17 2H17 1H18 2H18 2H17 1H18 2H18 COR3 Cash RoE Dividend per share (A¢) 103.9% 8.0% 50.0 95.7% 28.0 Final 26.0 4.0 22.0 22.0 Interim FY17 FY18 FY17 FY18 FY17 FY18 (1.4%) 1. Contin
Slide 5: Positive HoH premium rate trend group-wide and by division
Positive HoH trend Group-wide1… North America Europe 5.5% 4.1% 4.8% 4.4% 4.6% 3.1% 3.1% 2.7% 4.7% 4.9% 0.9% 0.7% (0.2)% 1.0% (1.1)% 1H17 FY17 1H18 FY18 1H17 FY17 1H18 FY18 1H17 2H17 1H18 2H18 79% 78% 79% 77% 82% 83% 84% 83% Australia & New Zealand1 Asia Pacific 7.3% 1.0% • 2018 +5.0%1 (FY17 +1.8%1)
Slide 6: Attritional claims ratio by division
Australia & New Zealand2 Europe 66.0% 54.0% 65.2% 64.0% 52.0% 62.0% 61.1% 61.0% 60.1% 50.0% 60.0% 59.1% 48.9% 48.0% 47.1% 58.0% 56.0% 46.0% 56.2% 46.6% 54.0% 44.0% 1H16 2H16 1H17 2H17 1H18 2H18 1H16 2H16 1H17 2H17 1H18 2H18 North America3 Asia Pacific 58.0% 60.0% 56.5% 57.7% 56.0% 58.0% 56.0% 54.0%
Slide 7: Significant reduction in poorly performing segments
Significant reduction in poorly performing segments Property hazard grade improving (30)% 3.2% 477 3.1% 334 GWP1 3.0% ($M) 2.9% 2.8% FY17 FY18 Dec’16 Jun’17 Dec’17 Jun’18 Dec’18 % of AP 64% 53% HG Index (Rolling 12mths) Improving rate momentum Remediation actions improving results2 2.0% 121.1% 0.0%
Slide 8: 4% GWP growth
+3% (15)% +5% +6% 13,657 13,328 4% growth FY17 FX NSW CTP Europe Australia & New North America Asia Pacific FY18 ($M) (scheme reform) Zealand ($M) 1. Continuing operations and adjusted constant currency basis
Slide 9: 2018 Activities and 2019 Priorities
2018 Activities 2019 Priorities Over 500 cell reviews completed • Cell reviews - increased sophistication and granularity Attritional ratio improvement in all divisions • Continue focus on addressing underperforming cells Rate adequacy improvement in all divisions • Portfolio and capital optimisatio
Slide 10: Inder Singh
Inder Singh
Slide 11: Adjusted operating results, cash ROE and total return to shareholders
Adjusted operating results Cash ROE increasing5 FY171,2,3 FY183,4 8.0% GWP $M 13,328 13,657 NEP $M 11,768 11,830 Net claims ratio % 71.5 64.0 Net commission ratio % 16.5 16.4 (1.4)% FY17 FY18 Expense ratio % 15.3 15.2 COR % 103.3 95.6 Total return to shareholders A$1Bn COR (ex discount rate) % 103.9
Slide 12: Clear improvement in earnings quality
Clear improvement in earnings quality 103.9% • Attritional ratio is ~3% lower 98.4% than FY17 2.9% 95.7% • Reduced contribution from LMI and Crop • Releases from prior year reserves contributed 0.8% FY17 Catastrophe Normalised Attritional Crop Other FY18 normalisation FY17 (ex Crop & LMI) & LMI 1. C
Slide 13: Australia & New Zealand: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $3,992M +2%1 from FY17 96.5% (4.5)% 95.1% (3.2)% 92.0% 91.9% COR (%)2 92% 90.7%91% 91.9% FY17 92.0% Attritional (%)3 FY172 FY182 FY17 FY18 FY172 FY182 57.7% FY17 60.6% • Improved attritional claims ratio • Ex LMI COR: 94.5% • LMI COR mo
Slide 14: Europe: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $4,335M +6%1 from FY17 99.6% (4.4)% 97.3% (2.5)% 95.2% COR (%)2 92% 90.7%91% 94.8% 94.8% FY17 95.2%3 Attritional (%) FY172,3 FY182 FY17 FY18 FY172,3 FY182 46.8% FY17 49.6% • Accident year COR and attritional ratio improved • Reduced rel
Slide 15: North America: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $4,711M +3% from FY17 4.2% 109.1% 104.9% 98.2% (0.3)% 97.9% COR (%)1 92% 97.9% 98.1%5 FY17 109.1%4 97.1%5 Attritional (%)2 FY171,4 FY181 FY173 FY183 FY171,4 FY181 50.4% FY17 53.2%4 • Attritional ratio ex-crop improving • Improved acquis
Slide 16: Asia Pacific: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $633M (15)%1 from FY17 5.4% 115.5% 110.1% 104.2% 102.3% 1.9% COR (%)2 92% 90.7%91% 104.2%3 FY17 115.5% Attritional (%) FY172 FY182,3 FY17 FY18 FY17 2 FY18 2,3 51.0%3 FY17 56.0% • 2H18 combined operating ratio 99.5% • Premium rate increa
Slide 17: Net investment yield, fixed income running yield and duration
Net investment yield Fixed income running yield Duration 3.1% 2.1 2.2% 2.2% 1.6 1.7% FY17 FY18 FY17 FY18 FY17 FY18 • Growth asset returns of 6.2% (FY17 13.3%) • Portfolio positioning supportive of a higher return in 2019 • FI returns of 1.8% (FY17 2.0%) 1. Continuing operations basis
Slide 18: Strong capital
Strong Lower Shareholder Stable capital gearing returns liquidity 1.78x 38.0% A$1Bn ~$1Bn PCA multiple strengthened • Significant benefit from de-risking activities 1.78x • Progressing share buyback 1.64x • Announced further debt buyback Dec-17 Risk charges Capital generation Other Dec-18
Slide 19: Reduced catastrophe and large risk exposure
• 2018 “exit” ~$900M Large risk $850M • Lower commercial property hazard profile allowance • Brilliant Basics includes targeted reduction in large exposures Catastrophe • Reduced exposure through $550M allowance - Asset sales - Targeted de-risking
Slide 20: Slide 20
Slide 21: Deliver the 2019 plan
Deliver the 2019 Brilliant Talent and Customer Operating Managing Future plan Basics culture focus sustainably risk focus Targeted rate Underwriting, pricing Continue to add Global rollout of Focus on Stronger and more More digitally increases and claims talent EQUITY customer sustainability and res
Slide 22: 2019 targets
Deliver the 2019 plan 2019 targets Brilliant basics COMBINED Talent and culture OPERATING 94.5% – 96.5%1 RATIO Customer focus INVESTMENT Operating sustainably 3.00% – 3.50%1 RETURN Managing risk Future focus 1. Assumes risk-free rates as at 31 December 2018
Slide 23: Questions & Answers
Questions & Answers
Slide 24: Important notice and forward-looking statements
The information in this presentation provides an overview of the may cause actual results to differ materially from those either results for the year ended 31 December 2018. expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these
Slide 25: Appendices
Appendices
Slide 26: Total investments and cash and GWP by currency
Total investments and cash ($M) FY17 FY18 US dollar 7,439 29% 7,185 31% Australian dollar 8,104 32% 6,678 29% Sterling 4,628 18% 4,144 18% Euro 2,705 11% 2,541 11% Canadian dollar 1,092 4% 1,055 5% New Zealand dollar 421 2% 418 2% Hong Kong dollar 536 2% 371 2% Singapore dollar 203 1% 165 1% Other 4
Slide 27: North America results
FY171 FY18 • GWP up 3% with Specialty (A&H) and Crop experiencing strong growth. P&C premium was flat due to further repositioning of the Gross written premium $M 4,556 4,711 book Gross earned premium $M 4,622 4,612 • Average premium rate increase of 4.1%, up from only 0.7% in 2017 Net earned premiu
Slide 28: Europe results
FY171 FY18 • GWP up 6% on a constant currency basis, reflecting the pricing environment and targeted growth in profitable portfolios such as Gross written premium $M 4,049 4,355 Continental Europe and life and accident reinsurance Gross earned premium $M 4,010 4,302 • Average premium rate increases
Slide 29: Australia & New Zealand results
FY17 FY18 • GWP up 2% on a constant currency basis with premium rate increases partly offset by NSW CTP scheme reform, the non- Gross written premium $M 4,024 3,992 renewal of unprofitable travel credit card business and subdued Gross earned premium $M 4,135 3,985 LMI volumes due to macro-prudential
Slide 30: Asia Pacific results
FY17 FY181 • GWP down 15% on a constant currency basis, reflecting decisive action to sell and/or exit underperforming businesses including Gross written premium $M 740 633 Thailand, Hong Kong construction workers’ compensation and Gross earned premium $M 779 708 Indonesian marine hull Net earned pr
Slide 31: Equator Re results
FY17 FY18 • GWP reduced 6% due to changes in divisional reinsurance including the non-renewal of a number of proportional contracts Gross written premium $M 1,580 1,486 • Net claims ratio improved very significantly due to: Gross earned premium $M 1,614 1,443 - Significantly reduced (albeit above av
Slide 32: Summary balance sheet, reserving and borrowings
Summary balance sheet ($M) 31 Dec 2017 31 Dec 2018 Reserving Investments and cash 26,141 22,887 • Positive prior accident year claims development of $92M1 Trade and other receivables 4,906 5,185 (FY17 $17M) Intangibles 3,079 2,800 • $13M positive discount rate impact (FY17 $68M positive) Other asset
Slide 33: APRA Prescribed Capital Amount calculation
APRA PCA calculation ($M) 31 Dec 20171 31 Dec 20182 Ordinary share capital and reserves 8,901 8,400 Net surplus relating to insurance liabilities 776 818 Regulatory adjustments to Common Equity Tier 1 Capital (3,642) (3,312) Common Equity Tier 1 Capital 6,035 5,906 Additional Tier 1 Capital – Capita
Slide 34: Reinsurance program: Risk XOL, Cat XOL, Cat Agg
Risk XOL Cat XOL Cat Agg $500m xs $2.8bn Worldwide $300m xs $2.5bn Worldwide Main Cat XOL limit • $2.1bn xs $400m Cat Top or Drop or Non-Peak1 limit • Top $300m xs $2.5bn for Peak or $2.1bn • Drop $300m xs $100m xs $300m for Peak or 1 Pre-paid xs $400m Worldwide Reinstatement • Drop $300m xs $100m f