Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2020 Earnings Presentation
44 slides from Qbe Insurance's earnings presentation, Aug 13, 2020
Slide 1: QBE results presentation for the half year ended 30 June 2020
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 13 August 2020 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Stre
Slide 2: QBE Insurance Group 2020 half year results
QBE INSURANCE GROUP LIMITED 2OZO half year results Thursday 13 August 2020 All figures in US$ unless otherwise stated Q BE
Slide 3: Pat Regan
Pat Regan
Slide 4: COVID-19 response and customer support
• Business continuity plan responded strongly • North America – accelerated workers’ • Workplace of the future – re-thinking how we compensation premium refunds use office vs. home › Employees successfully transitioned to work remotely • Aus Pac: supported >1,300 impacted customers • Accelerate digi
Slide 5: Momentum accelerating – Surplus above S&P 'AA'
Executed comprehensive Building a platform for 1H20 average rate Combined operating Net return6 of (0.4)% capital plan sustainable growth increase of 8.7% ratio 103.4%3 ((1.7)% ex rfr) YTD Regulatory capital at the top Portfolio optimisation with Momentum accelerating – COR 97.4% (ex. COVID-19) De-r
Slide 6: Key metrics: GWP, COR, expense ratio, PCA
8.7% 103.4% 8,0412 6.0% COVID-19 7,637 4.6% 4.7% FX 95.2% Disposals 97.4% 1.0% 1H19 1H20 1H17 1H18 1H19 1H20 1H19 1H20 51.8% 51.3% 25.0 47.7% 45.5%2 1.80x [1.80x] 1.71x 4.0 1H17 1H18 1H19 1H20 FY19 1H206 1H19 1H20 1. Prior periods presented on continuing operations and adjusted basis as presented in
Slide 7: Strong premium rate increases globally
8.7% • Strong premium rate increases globally 6.3% 10.2% • Material increase in pricing momentum, particularly in North America and 5.0% 8.3% International 7.3% 5.5% 4.6% 4.7% • Australia Pacific pricing momentum impacted by COVID-19 response 1H18 2H18 1H19 2H19 1Q20 2Q20 9.8% 10.0% 5.5%2 10.4% 14.2
Slide 8: 10% growth in gross written premium
+1% +12% +14% $8,041M $7,637M 10% growth 1H19 1 FX Disposals North America 2 International Australia Pacific 1H20 2 1. Continuing operations basis 2. Excludes impact of COVID-19
Slide 9: Attritional claims ratio improvement
52.0% 51.3% • 8.8%4 improvement from 54.3% peak in 2H17 51.0% 50.0% • Continued improvement across all divisions 49.0% 47.7% › North America 1H20 improvement despite mix and higher CAY loss picks 48.0% 47.0% › Australia Pacific ~13% improvement since 1H16 4 46.0% 45.5% 45.0% 1H18 1H19 1H20 52.0% 51.
Slide 10: Large claims frequency improvement
11.0% 10.0% 9.7% • Australia Pacific continued improvement in large claims frequency since 9.0% 8.1% 8.2% 1H17 driven by Brilliant Basics program 8.0% 2 7.5% • North America and International improvements emerging following Australia 7.0% Pacific lead 6.0% 1H17 1H18 1H19 1H20 $79M Aviation 1 • Signi
Slide 11: Portfolio actions and rate change vs COR
COR% >100% >14% 87%2 9% 16.5% 1H19 2H19 1H20 Rate Change COR >23% $404M Portfolio: >54% 12% ~35% <46% ~25% 3.9% 1H19 2H19 1H20 2017 2018 2019 2020 PML trend1 GWP Premium rate change Higher hazard exposure Higher hazard frequency 1. Probable maximum loss (PML) is the stated loss likely exceeded only
Slide 12: Catastrophe and COVID-19 subject losses
$600M Premium & Catastrophe aggregate2 $70M expenses $335M 1H20 Subject losses - 1H actual $315M Other claims $80M impact Subject losses - 2H plan $210M3 Total projected subject losses $525M UK BI claims1 $70M Remaining deductible $20M Risk margin $115M Attachment point $545M ~$150M $150M Next $150M
Slide 13: Non-damage business interruption exposure from COVID-19
Region • QBE’s non-damage business interruption exposure arising from COVID-19 is protected by comprehensive property catastrophe XOL, catastrophe aggregate Minimal exposure and “clash” reinsurance • Requires physical damage and all policies North America have virus exclusion • Protected by quota sh
Slide 14: Downside scenarios for credit and mortgage exposures
• Previously modelled most severe downside scenarios are less likely: • Previously modelled most severe downside scenarios are less likely: › Successful fiscal stimulus › Successful fiscal stimulus › Ongoing bank forbearance › Government backstop in UK • Capital impact of expected claims partly reco
Slide 15: Inder Singh
Inder Singh
Slide 16: Group financial results summary
1H19 1H20 1H20 (ex. COVID-19) Gross written premium $M 7,637 8,011 8,041 Net earned premium $M 5,671 5,506 5,556 Net claims ratio (ex discount rate) % 64.3 72.1 66.7 Net commission ratio % 16.1 16.4 16.4 Expense ratio % 14.8 14.9 14.3 COR (ex discount rate) % 95.2 103.4 97.4 Net investment yield2 (e
Slide 17: North America: 10% growth from 1H19
2 + + + + = 10% from 1H193 6.0% 103.4% 10 2.0 COVID-19 Impact 97.0% 2.2% 0.4% Nil 97 .0 1.1% 0.6% 95.2% 97.4% 93.7% (1.6%) 92 .0 (0.8%) 87 .0 1H19 95.2% 82 .0 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 2 97.0% 1H19 47.7% 93.7% 1H19 Attritional Large Crop Expenses De-risking Commissi
Slide 18: International: 14% growth from 1H19
+ + + = 2 14% from 1H193 4.0% 108.8% COVID-19 8.0% Impact Nil 104.8% 98.6% 0.2% 1.1% 99.9% 97.1% (0.3%) 1H19 99.9% 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 2 • Strong premium rate momentum (2Q20 10.4%) 1H19 48.4% • Strong growth in profitable segments including A&H, crop and property progra
Slide 19: Europe: 12% growth from 1H19
+ + + = 12% from 1H192 97.7% 6.1% 97.5% 1.4% Nil 94.3% COVID-19 Impact 92.5% 0.5% (4.8%) (1.6%) 91.4% 1H19 94.3%3 3 3 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 4 • Attritional claims ratio improved 1.7% 1H19 43.2% • Large individual risk and catastrophe claims below allowance • COVID-19 impa
Slide 20: Australia Pacific: 1% from 1H19
+ + + = 1% from 1H192 6.1% 1.1% 96.4% 1.1% COVID-19 94.3% (1.0%) 95.3% 90.2% Nil 90.5% (4.9%) 1H19 90.5% 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 4 • Attritional claims ratio improved 3.5%3 (~13% since 1H16) 1H19 52.8% • Catastrophe costs up 5.0% vs 1H19 driven by summer bushfires and storm
Slide 21: Operating model cost savings
$920M Operating model cost savings 15.2% $874M 15.0% $839M Run rate 14.8% $825M1 expenses Simpler and more streamlined North ~14.4%2 American business $776M3,4 Rationalised technology estate and 14.0% de-commissioned legacy applications 1H17 1H185 1H195 1H20 Strong tactical expense discipline Journe
Slide 22: Investment portfolio: zero listed equities exposure
FUM $24.4B $24.4B 2.5% - 3.0% 100% 100% 1% A to BBB within BBB TAA5 Other Unlisted 7% 7% investments1 Growth assets ~1.75% Equities 2% 12% Sub-IG FI2 4% 10% 3% 93% FI running Investment 86% yield Grade (IG) FI 4% 1% 2% FY19 1H20 Barclays QBE Barclays QBE Original guidance Outlook Index4 Index4 • Zer
Slide 23: Regulatory capital at the top of 1.6x-1.8x
$3.6B COVID-19 impact A $3.2B $3.1B BBB AA $2.7B 1.80x 1.71x AAA FY19 Capital Asset de- 1H20 COVID- Other 1H202 FY17 FY18 FY19 1H20 3 mgt. risking result 191 Pro forma • Regulatory capital at the top of 1.6x-1.8x Debt to 40.8 38.0 38.0 30.2 equity target range S&P Capital remains above ‘AA’ level •
Slide 24: Priorities
Priorities Pat Regan - Group Chief Executive Officer
Slide 25: 2020 priorities unchanged
2020 priorities unchanged © Performance @ Brilliant Basics + ® oe | @ Talent & culture Customer focus Innovation & Technology 24 QBE Insurance Group 2020 half year results presentation
Slide 26: Questions & Answers
Questions & Answers
Slide 27: Important information and disclaimer
The information in this presentation provides an overview of the and other factors, many of which are beyond the control of QBE results for the half year ended 30 June 2020. that may cause actual results to differ materially from those either expressed or implied in such statements. There can be no
Slide 28: Appendices
Appendices
Slide 29: Currency mix of investments and premiums
1H19 1H20 $M % $M % US dollar 7,349 32% 8,756 36% Australian dollar 6,565 28% 6,179 25% Sterling 3,708 16% 3,849 16% Euro 3,005 13% 3,169 13% Canadian dollar 1,191 5% 1,235 5% New Zealand dollar 378 2% 367 2% Hong Kong dollar 367 2% 360 1% Singapore dollar 184 1% 171 1% Other 347 1% 346 1% Total 23,
Slide 30: North America results
1H19 1H202 • Underlying GWP growth was 14%2,3, reflecting strong growth in A&H, property Gross written premium $M 2,804 3,081 programs and Crop Gross earned premium $M • Underlying NEP was down 2%2,3, impacted by the purchase of additional Crop 2,194 2,198 hail and catastrophe reinsurance Net earned
Slide 31: International results
1H191 1H203 • GWP was up 12% on a constant currency basis excluding disposals in Asia, Gross written premium $M 2,880 3,150 reflecting strong pricing, improved retention and strong new business growth, especially in the European insurance operations Gross earned premium $M 2,319 2,498 • Average rene
Slide 32: Australia Pacific results
1H19 1H202 • GWP was up 0.4% on a constant currency basis but up 4% excluding CTP, Gross written premium $M 1,960 1,829 disposals and discontinued portfolios Gross earned premium $M • Average renewal premium rate reduced to 5.5% 3, from 6.8%3 in 1H19 due in 1,951 1,858 part to premium rate freezes i
Slide 33: Balance sheet and shareholders' funds
31 DEC 2019 30 JUN 2020 30 JUN 2020 Pro forma1 $M $M $M Investments and cash 24,374 24,432 24,432 • $175M additional allowance for potential future COVID-19 related claims within premium liabilities Trade and other receivables 4,621 6,282 6,282 Intangibles 2,791 2,746 2,746 • $138M2 risk margin stre
Slide 34: APRA regulatory capital
31 DEC 20191 30 JUN 20202 $M $M Ordinary share capital and reserves 8,153 7,943 Net surplus relating to insurance liabilities 718 835 Regulatory adjustments to Common Equity Tier 1 Capital (3,326) (3,393) Common Equity Tier 1 Capital 5,545 5,385 Additional Tier 1 Capital – Capital securities 399 894
Slide 35: Reinsurance program
• Equator Re quota share protection significantly reduces claims volatility • Low catastrophe retention $500M xs $2.8B Worldwide • Protection against catastrophe severity and frequency of medium-sized catastrophes $300M xs $2.5B • Protection against large individual risk claim severity Worldwide • I
Slide 36: Fixed income
Fixed income investor update
Slide 37: QBE is one of Australia's largest general insurance and reinsurance groups
✓ QBE is one of Australia’s largest general insurance and reinsurance groups ✓ Diversified insurance operations across 27 countries ✓ ASX-listed and regulated by the Australian Prudential Regulation Authority (APRA) ✓ Robust capital metrics with a PCA multiple of 1.80x1 as at 30 June 2020 ✓ QBE has
Slide 38: QBE is an international general insurance and reinsurance company
QBE is an international general insurance and reinsurance company, with meaningful operations in the major insurance hubs. QBE is listed on the Australian Securities Exchange, headquartered in Sydney, Australia and regulated by APRA QBE had Gross Written Premium (GWP) of $8.0411 billion for the half
Slide 39: PCA multiple at 1.80x
• PCA multiple at 1.80x1 (1.6x-1.8x target range) • Remains above S&P ‘AA’ minimum levels • S&P, Moody’s, Fitch and AM Best affirmed 2 QBE Group’s credit ratings • Ratings are supported by the Group’s globally diversified multiline business, strong market positions and robust balance sheet • QBE is
Slide 40: Credit ratings
Long term Debt issue Rating FSR1 ICR2 Outlook affirmation A+ A- Stable July 2020 A1 A3 Stable April 2019 A+ A- Stable May 2020 A bbb+ Stable July 2019 1. Insurance Financial Strength ratings (FSR) : reflects ability of an insurer to meet its obligations and claims. FSR is applicable to operating ins
Slide 41: Debt maturity profile and capital instruments
weighted average maturity: 4.5 years 300 6 894 697 AT1 522 T2 405 400 138 197 Senior 2020 2021 2022 2023 2024 2025 2026 Balance sheet value2 Issued instruments1 Issue date First call date Coupon Maturity date ($M) Capital Notes3 Nov-17 May-25 5.250% 399 Perp Additional Tier 1 (AT1) Capital Notes May
Slide 42: Common Equity Tier 1 Capital and loss absorption
Common Additional Equity Tier 1 Tier 2 Capital Tier 1 Capital • All Additional Tier 1 Capital and Tier 2 Capital must include loss absorption Capital provisions (via conversion or write-down) upon a non-viability trigger event CET1 > 60% of PCA • Both sequential (loss absorption hierarchy) and parti
Slide 43: Our Sustainability Framework helps us drive performance
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 44: Sustainability achievements and commitments
Received Gold Employer status for second year in the Australian Workplace Equality Index (AWEI) Deliver on our ambition to grow our impact investments to $2 billion by 2025. Refer to the Premiums4Good section of our website for more information Included in the 2020 Bloomberg Gender-Equality Index Co