Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Shareholder Meeting (April 2005)
40 slides from Qbe Insurance's shareholder meeting presentation, Apr 8, 2005
Slide 1: QBE Insurance Group 2005 Annual General Meeting
QBE Insurance Group 2005 2005 Annual Annual General General Meeting Meeting All amounts are expressed in Australian dollars unless otherwise stated 8 April 2005
Slide 2: Mr John Cloney, Chairman
Mr John Cloney Chairman @® QBE Insurance Group
Slide 3: QBE Group Executive
QBE Group Executive Neil Drabsch Gayle Tollifson Jenni Smith Raymond Jones Vince McLenaghan Tim Kenny Steven Burns Peter Grove Duncan Ramsay Mark ten Hove
Slide 4: Results of proxy voting
Results of proxy voting A total of 3,098 valid proxy forms were received. The respective shareholdings have been accumulated and summarised by ASX Perpetual Registrars Limited as set out below: Resolution For Against Open Abstain 1 441,632,729 3,581,794 37,400 23,425,684 2 462,039,249 3,592,248 3,16
Slide 5: Results
Results • Record net profit after tax of $820 million • Increase of 43% on the profit of $572 million for 2003 • Earnings per share, fully diluted for all hybrid securities, up 35% to 104.5 cents per share, compared with 77.5 cents per share last year
Slide 6: Dividend
Dividend • Final dividend of 30 cents per share up 36% on the final dividend of 22 cents per share in 2003 • Final dividend 50% franked • Total payout for 2004, $388 million • 53% of the total 2004 payout reinvested
Slide 7: Historical share price performance
Historical share price performance • An investment in QBE has outperformed the Australian All Ordinaries Index and inflation with a growth rate of 50.4% in 2004, and a compound average annual growth rate of 21.6% over five years, 22.5% over 10 years and 23.7% over 20 years $30.00 QBE Share Price Per
Slide 8: Impact of stronger Australian dollar
Impact of stronger Australian dollar 2004 2004 at 2003 Exchange Actual exchange rates rate impact $M $M % Gross earned premium 8,571 9,090 6 Net earned premium 6,781 7,135 5 Net investment income 508 536 6 Profit after tax 820 878 7 Total investments and cash 15,067 15,147 1 Total assets 25,102 25,5
Slide 9: Net invested funds
Net invested funds 31 Dec 2004 31 Dec 2003 $M % $M % Cash 1,121 7.4 717 6.1 Short term money 5,482 36.4 3,499 29.5 Fixed interest securities and other 6,947 46.1 6,209 52.5 Mortgages 10 0.1 7 0.9 Equities 1,390 9.2 1,272 10.8 Properties 117 0.8 119 1.0 Total investments & cash 15,067 100.0 11,823 10
Slide 10: Funding activities in 2004
Funding activities in 2004 • Cost of acquisitions in excess of $1 billion • New borrowings in 2004 – £175 million 5 year fixed senior notes – US$ 375 million senior convertible securities • US$220 million contingent securities in support of QBE’s Lloyd’s capital requirements
Slide 11: Capital adequacy
Capital adequacy • Group regulatory capital adequacy as calculated by QBE, is around 1.9 times minimum*, compared with 2.1 times last year • Rating agencies Standard & Poor’s and Fitch confirmed A+ rating for QBE’s main insurance subsidiaries • Current capital together with expected profits and pote
Slide 12: Employees
Employees • QBE values – Increasing the long term wealth of shareholders – Customer satisfaction and retention – Employee motivation – Integrity • Staff incentive schemes aligned to financial targets, principally return on equity • QBE Employee Share and Option Plan – 59% of staff worldwide hold QBE
Slide 13: Corporate governance
Corporate governance • The annual report includes a number of statements on QBE’s robust corporate governance structure and risk management framework • Increased regulatory focus has resulted in substantial increase in compliance costs and disproportionate use of management time
Slide 14: Results for 1st quarter 2005
Results for 1st quarter 2005 • Full year 12.5% to 13.5% insurance profit margin on track – currently slightly exceeds the high end of target range • Premium growth targets of 10% gross written premium and 12.5% net earned premium on track • Cash flow remains on budget
Slide 15: Results for 1st quarter 2005
Results for 1st quarter 2005 • Gross investment yields have improved from recent interest rate movements • We are confident of meeting our profit targets and growth subject to the usual caveats
Slide 16: Mr Frank O'Halloran, Chief Executive Officer
Mr Frank O’Halloran Chief Executive Officer
Slide 17: Results for 2004
Results for 2004 • Insurance profit up 45% to $908 million (2003: $627 million) • Combined operating ratio 91.2% (2003: 93.8%) • Cash flow from operations $2.11 billion (2003: $2.09 billion)
Slide 18: Results for 2004
Results for 2004 • Gross earned premium up 10% to $8.57 billion • Net investment income $508 million (2003: $413 million)
Slide 19: Balance sheet strength
Balance sheet strength Results for 2004 • Net outstanding claims of $9.4 billion include prudential margins providing a 94% probability of adequacy • Positive release of prior year claims on undiscounted basis for each of the last seven years • Minimal exposure to asbestos claims – provisions at the
Slide 20: Balance sheet strength
Balance sheet strength Results for 2004 • Unearned premium liabilities of $3.4 billion include substantial allowance for large losses and catastrophes for 2005 • Ratio of borrowings to shareholders funds, 40.5% (2003: 40.3%)
Slide 21: Balance sheet strength
Balance sheet strength Results for 2004 • Low risk investment portfolio $15.1 billion • Strong capital adequacy ratio and balance sheet flexibility for growth
Slide 22: Major initiatives in 2004
Major initiatives in 2004 Acquisitions will add over $1.5 billion of annualised gross written premium ($0.7 billion written in 2004)
Slide 23: Major initiatives in 2004
Major initiatives in 2004 • Ensign commercial motor business in the UK • ING’s 50% interest in the QBE Mercantile Mutual joint venture • Additional capacity in Lloyd’s syndicate 386 (68.4% equity in 2005) • Businesses in Brazil, Singapore, Argentina, Estonia and the UK
Slide 24: Major initiatives in 2004
Major initiatives in 2004 • New underwriting teams in the UK and agency programmes in the US • UK restructure, $40 million annual savings expected by end 2005 and a further $40 million annual savings by end 2007 • Purchased three large profitable underwriting agency businesses in Australia • Further
Slide 25: Recent major initiatives
Recent major initiatives In 2005: • Purchased businesses in Colombia and Vietnam • Acquired underwriting agency with operations in Spain, Germany and France
Slide 26: Raymond Jones
Raymond Jones Managing Director, Australian General Insurance
Slide 27: Australian general insurance
Australian general insurance 2004 2003 Gross written premium $M 2,102 1,869 Gross earned premium $M 2,114 1,715 Net earned premium $M 1,831 1,425 Claims ratio % 61.0 67.2 Commission ratio % 13.3 11.1 Expense ratio % 13.8 14.5 Combined operating ratio % 88.1 92.8 Insurance margin % 17.6 12.5 2005 gro
Slide 28: Vince McLenaghan
Vince McLenaghan Managing Director, Pacific Asia Central Europe
Slide 29: Asia-Pacific general insurance
Asia-Pacific general insurance 2004 2003 Gross written premium $M 520 542 Gross earned premium $M 534 549 Net earned premium $M 439 430 Claims ratio % 48.3 50.0 Commission ratio % 17.1 18.8 Expense ratio % 20.0 21.2 Combined operating ratio % 85.4 90.0 Insurance margin % 18.5 13.0 2005 gross written
Slide 30: Tim Kenny
Tim Kenny President & Chief Executive Officer, the Americas
Slide 31: the Americas
the Americas 2004 2003 Gross written premium $M 1,382 1,342 Gross earned premium $M 1,354 1,213 Net earned premium $M 805 740 Claims ratio % 60.1 63.4 Commission ratio % 25.7 23.5 Expense ratio % 6.5 6.2 Combined operating ratio % 92.3 93.1 Insurance margin % 8.8 8.4 2005 gross written premium expec
Slide 32: Steven Burns
Steven Burns Chief Executive Officer, European Operations
Slide 33: European operations
European operations 2004 2004 2003 2003 ECD* Lloyd’s** ECD Lloyd’s Gross written premium $M 2,453 2,309 2,441 2,156 Gross earned premium $M 2,304 2,265 2,302 2,037 Net earned premium $M 1,971 1,735 1,908 1,533 Claims ratio % 66.3 60.3 66.7 59.2 Commission ratio % 15.0 20.9 15.6 25.4 Expense ratio %
Slide 34: Mark ten Hove
Mark ten Hove Group General Manager, Investments
Slide 35: Investment division
Investment division • Investment portfolio of $15 billion • Investment performance exceeded internal benchmarks and budget • Low risk strategy will continue in 2005 • Investment portfolio expected to be close to $17 billion by end of 2005
Slide 36: Operating targets for 2005
Operating targets for 2005 • Gross written premium expected to increase by 10%, and net earned premium by 12.5% • Target of 10% increase in net earned premium for 2006 (subject to acquisitions) • Target insurance profit margin for 2005 is 12.5% to 13.5% of net earned premium
Slide 37: Variables impacting 2005 key profit drivers
Variables impacting 2005 key profit drivers • 1% movement in equity markets impacts profit after tax by approximately $10 million • 1% movement in interest yield is equivalent to approximately $58 million profit after tax* • 1% movement in the claims ratio is approximately $56 million profit after t
Slide 38: 2005 results
2005 results 1st Quarter • Premium growth and key ratios on track • Insurance profit margin slightly in excess of the high end of target range of 12.5% – 13.5%
Slide 39: Thank you
Thank you QBE directors, shareholders and staff for your continued support and encouragement
Slide 40: CEO's incentives
CEO’s incentives • CEO’s 2004 incentives are based on the achievement of a 22.8% ROE using QBE’s seven year spread basis of accounting. This exceeded the minimum hurdle rate of 13% ROE. No of shares $ or options Short term incentive: Profit Share Incentive – cash component 1,650,880 Long term incent
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