Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Investor Day (October 2014)
61 slides from Qbe Insurance's investor day presentation, Oct 14, 2014
Slide 1: ASX cover letter: EO Investor and Analyst Day presentation
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 For personal use only 14 October 2014 The Manager Market Announcements Office ASX Limited Level 4 Exchang
Slide 2: Investor and analyst day presentation: European Operations business review
For personal use only QBE Insurance Group Investor and analyst day presentation European Operations business review October 2014
Slide 3: EO business review - agenda
EO business review - agenda For personal use only Page No. EO divisional overview 09.00 – 10.30 3 - 19 Richard Pryce – Chief Executive Officer EO capital and reserving update 10.30 – 11.30 20 - 27 David Winkett – Chief Financial Officer Risk and Solvency II 11.30 – 12.30 28 - 35 Phil Dodridge – Chie
Slide 4: EO divisional overview
For personal use only EO divisional overview Richard Pryce, Chief Executive Officer
Slide 5: Contents
Contents For personal use only • Market positioning and environment • Underwriting structure and management team • Performance • Ambition and strategic priorities 4 4
Slide 6: Market positioning - current state
Market positioning - current state For personal use only Specialist commercial insurer and reinsurer, comprising strong UK commercial presence, multi-line global reinsurer, international specialty P&C business and smaller European business • With a full year GWP expectation of £2.8bn at H1 2014 (inc
Slide 7: Market positioning – GWP by domicile of assured
Market positioning – GWP by domicile of assured For personal use only Circa 15% including QBE NA reinsurance 6
Slide 8: Market positioning – GWP by broker
Market positioning – GWP by broker For personal use only Top 5 Next 10 Besso Tyser JLT 0.6% 0.7% 6.8% Xbridge Marsh 0.8% Towergate 16.5% 3.7% Hyperion AIG 1.2% 6.9% 56.1% 15.4% PFIH 1.3% THB Willis 2.2% 9.4% R K Harrison 1.5% Aon 16.5% Miller Lockton 1.9% 1.5% The remaining 28.5% of our business is
Slide 9: Market environment - challenging
Market environment - challenging For personal use only Significant competition in most of our operating divisions, with excess capital and strong appetite creating difficult trading environment, placing increasing pressure on margins over recent years • Economic environment showing signs of improvem
Slide 10: Market environment - rate experience
Market environment - rate experience For personal use only H1 experience vs full year plan Prior year experience Full Year Q1 YTD Q2 YTD Plan Actual Actual Brussels 0.6% 0.6% 0.5% Dublin -2.2% -2.6% -4.8% London -2.8% -4.4% -6.2% USA -1.1% -4.0% -4.8% Reinsurance -1.4% -2.2% -3.5% Canada & Middle Ea
Slide 11: Underwriting management structure
Underwriting management structure For personal use only The restructure of our insurance underwriting business implemented in 2013 continues to deliver greater external clarity, stronger internal accountability across our key geographies and better cross company collaboration The structure allows us
Slide 12: Underwriting management structure
Underwriting management structure For personal use only Retail International Markets* Global Re* David Hall Colin O'Farrell Jonathan Parry Property, Liability, Motor, Marine, Energy, Political Risk & Violence, Property, Casualty/US Multiline Financial & Specialty Markets (F&SM) International Propert
Slide 13: Senior management team
Senior management team For personal use only RICHARD PRYCE CEO 33 2 PHIL DOMINIC COLIN JONATHAN CHERYL DAVID HALL DAVID JOE GORDON DODRIDGE CLAYDEN O’FARRELL PARRY CURTIS Managing Director WINKETT Chief Operations Chief Risk Officer Claims Director Chief Underwriting Chief Underwriting Chief Human R
Slide 14: Performance - improvement
Performance - improvement For personal use only Despite the challenging environment we are well positioned to withstand the prevailing conditions and recommence profitable growth in many areas of our business • Profitable growth – identifying growth opportunities over the next three years has been a
Slide 15: Performance - H1 2014 management result compared to plan and prior year
Performance - H1 2014 management result compared to plan and prior year For personal use only Solid progress across the majority of our business despite increasingly challenging market conditions H1 14 H1 14 H1 13 GWP expected to reduce (due to disposals and portfolio Plan Actual Actual restructures
Slide 16: Performance - H1 2014 competitor analysis
Performance - H1 2014 competitor analysis For personal use only Source: Macquarie Capital H1 Results Analysis - September 2014 15
Slide 17: Performance - 2015 outlook
Performance - 2015 outlook For personal use only • EO does not anticipate: - any material change in market conditions - any more major portfolio changes/disposals • Focus will be on profitable growth, based on those market segments identified in strategic planning • Key drivers of growth will be: −
Slide 18: Quantum Operational Transformation Program
Quantum Operational Transformation Program For personal use only 1 2 3 4 5 6 KEY FACTS STATUS 23% of EO UK FTE’s impacted: Program is on-track. » 280 roles moving to GSSC » Key processes live for finance, » 110 roles moving to UK SSC claims and underwriting admin » 67 roles eliminated (efficiencie
Slide 19: Ambition
Ambition For personal use only Profitably develop our market leading position in chosen markets and specialisms and grow sub-scale businesses • Maintain a largely defensive position in 2014 and limited growth in 2015, with expectation to achieve more significant growth by 2017 through organic “busin
Slide 20: Strategic priorities
Strategic priorities For personal use only EO’s strategic priorities are aligned to QBE Group’s global vision, objectives and the value creation model and support its long-term growth ambitions Enhanced product leadership through quality underwriting, claims and risk management capability Maximise v
Slide 21: Capital and reserving update
For personal use only Capital and reserving update David Winkett, Chief Financial Officer
Slide 22: Contents
Contents For personal use only • EO corporate structure • Recent performance • Capital update • EO reserving • Conclusions 21
Slide 23: Corporate Structure – simplified group
Corporate Structure – simplified group For personal use only EO plc GWP $4.6bn GWP are 2014 latest in US$ EO Holdings Ltd Funding Insurance operations Service Companies companies and SPV’s Lloyd’s Insurance EO has 1 2 MSUK QMIL contingent QUL/QCORP QIEL financing GWP GWP (LOC) $2bn $2.2bn supporting
Slide 24: Performance – Group statutory result
Performance – Group statutory result For personal use only COR will be distorted by the material GWP Medmal reinsurance transaction $’m 6,000 100% 95.5% 94.6% 96.1% 5,225 5,077 90% 5,000 4,828 4.6bn 80% 2,122 4,000 2,329 2,004 70% H2 96.4% 3,000 95.6% 94.3% H1 60% COR 2,000 (%) 50% 3,103 2,824 2,748
Slide 25: Capital – QBE Re
Capital – QBE Re For personal use only • Excess capital has built up in QBE Re through corporate consolidation and retained profits • Dividend declared in H1 2014 • Right-sizing QBE Re − Target capital level probably the higher of $500m and S&P A/AA frontier − Strategic growth plans should utilise Q
Slide 26: Capital – QIEL
Capital – QIEL For personal use only • QIEL performance has been the weakest of EO entities due to reserve volatility • Approx $390m of potentially volatile medmal reserves reinsured in H2 2014 • Regulatory capital increased during H1 2014 from subsidiary dividend and parent capital injection • Capi
Slide 27: EO reserving
EO reserving For personal use only Held reserves ¹ • Uncertainties £’000 − Long tail disease QIEL 2,050 − Inflation sensitivity QBE Re 850 − Recent growth areas Lloyd’s 1,950 • Opportunities 4,850 − Medmal reserves of approx $390m now reinsured • Comprehensive reserving process using − Potential for
Slide 28: Conclusions
Conclusions For personal use only • Corporate structure stable with only changes being: − potential separation of QIEL and QBE Re − remaining CEE branch “disposals” • All EO regulated entities have standalone capital sufficient to support target S&P ratings and accommodate planned growth • Short-ter
Slide 29: Risk and Solvency II
For personal use only Risk and Solvency II Phil Dodridge, Chief Risk Officer
Slide 30: Risk framework
Risk framework For personal use only Risk Categories Insurance Operational Liquidity Credit Strategic Group Market Risk Risk Risk Risk Risk Risk Risk Risk Appetite Business strategy & objectives Governance Reporting Risk culture Risk Processes Total Risk Assessment capital management Risk models and
Slide 31: Evolving role of the CRO team
Evolving role of the CRO team For personal use only Strategic Build & Review & Design Risk Embed Challenge Management Particular focus on: • Achieving business plans (validation and stress testing) • Challenge and oversight of business performance and reserving • Review and challenge of strategic pl
Slide 32: Risk culture
Risk culture For personal use only • Risk culture has been a key area of focus for Executive Management and Boards • A high level assessment of risk culture across EO was undertaken with a deep dive review in underwriting • This has found that our leaders take risk seriously and encourage this behav
Slide 33: External risks
External risks For personal use only Risk Comments / Mitigation Ongoing soft market Business has been non-renewed if it is not meeting our profit conditions expectations. Acceptable new business is hard to come by. Top line has reduced Potential for increasing Certain lines experienced increased cla
Slide 34: Internal risks
Internal risks For personal use only Risk Comments / Mitigation Failure to manage Significant remediation undertaken at both a risk and portfolio level since underwriting performance 2012. Largely complete and improvement is evident in the resulting performance metrics Failure to grow core After a y
Slide 35: EO's risk map
For personal use only 34 EO’s risk map
Slide 36: Solvency II
Solvency II For personal use only • Solvency II regulations will be in force from 1 January 2016 • The industry still has a lot to complete particularly for those wanting to apply for internal model approval • QBE EO is seeking internal model approval with PRA and Lloyd’s. In turn, Lloyd’s will be s
Slide 37: International Markets
For personal use only International Markets Colin O’Farrell, Chief Underwriting Officer
Slide 38: Current state
Current state For personal use only With a full year GWP expectation of £0.8bn at H1 2014 (excluding aviation), International Markets represents circa 8% of QBE Group. Risks are written via both Lloyd’s (Syndicates 1036¹ and 1886¹) and QBE Insurance (Europe) Ltd paper. • Our business is globally div
Slide 39: Senior management team (effective 1/10/2014)
Senior management team (effective 1/10/2014) For personal use only Colin O’Farrell Chief Underwriting Officer 30 27 Sam Harrison Managing Director 21 16 NICK NICKY NEILA PETER TIM HARRIS TIM GARY MENEAR ABLETT BUURMAN BURTON Director of PEMBROKE CROWLEY Director of Director of Director of Director o
Slide 40: Market dynamics
Market dynamics For personal use only • All London carriers suffering rating pressure due to surplus of capacity at both local and global level • We have positioned ourselves for profitable growth exporting our expertise through managed operations and/or QBE’s strong local network • Global brokers c
Slide 41: Market dynamics – by product
Market dynamics – by product For personal use only Marine – opportunities to participate on marine SME facilities as the broking community commoditise low premium business. Multinational sector is a key growth area Natural Resources – whilst rates down due to exceptional results, opportunities to gr
Slide 42: H1 2014 management result compared to plan (excluding aviation)
H1 2014 management result compared to plan (excluding aviation) For personal use only H1 14 H1 14 Plan Actual GWP 26% down on plan. The main components are market Gross written environment, whereby new business volumes are down, rebased £m 638.2 468.7 premium underwriting strategy for our open marke
Slide 43: Strategic initiatives
Strategic initiatives For personal use only QBE Oil & Gas Oil & Gas business is a core product to International Markets for which we have an established true market leadership and a consistent record of profitability. Establishing a global brand and product offering to both wholesale and retail mark
Slide 44: Next steps
Next steps For personal use only • Ensure our underwriting distribution model is multi-faceted enabling a dynamic and geographically agile underwriting strategy: ― maintain London portfolio which is core to our business in a challenging environment and continue to deliver market leading results ― co
Slide 45: Global reinsurance
For personal use only Global reinsurance Jonathan Parry, Chief Underwriting Officer
Slide 46: Current state
Current state For personal use only With a full year GWP expectation of £0.6bn at H1 2014 (including QBE NA reinsurance), Global Re represents circa 6% of QBE Group. Risks are written via both Lloyd’s (Syndicate 566¹) and QBE Re company paper Managed from London via four office locations: London 34%
Slide 47: Senior management team
Senior management team For personal use only JONATHAN PARRY CUO 33 14 PETER WILKINS PAUL HORGAN LUC BOGHE CHRIS LARSON DAVID SHEARS Head of Specialty Head of Property Head of Life and Head of Global Head of Reinsurance Reinsurance European Multi-Line Casualty & US Multi- Claims Line 20 15 28 14 32 2
Slide 48: Market dynamics
Market dynamics For personal use only • Cedents retaining more business to protect net premium • Deteriorating market conditions particularly for catastrophe business • Over-capacity due to capital market entities chasing higher returns • Increased appetite from existing reinsurers following very pr
Slide 49: Market dynamics – by product
Market dynamics – by product For personal use only Specialty – difficult market conditions as downward rating pressure continues to grow, albeit not as excessive as other classes of business. Loss impacted aviation and marine business should see rate rises. A&H continues to perform well as we contin
Slide 50: H1 2014 management result compared to plan (including QBE NA reinsurance)
H1 2014 management result compared to plan (including QBE NA reinsurance) For personal use only H1 14 H1 14 Plan Actual Gross written £m 593.5 459.3 GWP reduced significantly relative to plan due to excess capital premium and increased client retention, coupled with FX impact of Gross earned strengt
Slide 51: Strategic initiatives & next steps
Strategic initiatives & next steps For personal use only Property pro-rata Historically underweight Life (short term mortality) Develop in US, Europe and Latin America US A&H Expand US portfolio writing both treaty and facultative Potential distribution 1. Bermuda (approval received) opportunities 2
Slide 52: Retail Markets
For personal use only Retail Markets Richard Pryce, Chief Executive Officer
Slide 53: Current state
Current state For personal use only With a full year GWP expectation of £1.4bn at H1 2014, Retail Markets represents circa 14% of QBE Group. Comprising a diverse book of commercial business written via both QBE Insurance (Europe) Ltd and Lloyd’s (Syndicate 386 and 1886¹) paper. Risks are written via
Slide 54: Senior management team (effective 1/11/2014)
Senior management team (effective 1/11/2014) For personal use only David Hall Managing Director 34 <1 Matt Crane David Hall David Harries Jerry Probert Matt Roles Talbir Bains Matt Lacy Director of Middle (Interim) Director of Director of (Interim) Portfolio Head, Portfolio Head, Market & SME Direct
Slide 55: Market dynamics
Market dynamics For personal use only QBE’s corporate recognition is growing and we are in a good position to grow even within mature markets • Tough trading conditions, SME and Middle Market accounts placed on price ahead of value • Corporate clients increasingly require close dialogue and relation
Slide 56: H1 2014 management result compared to plan
H1 2014 management result compared to plan For personal use only H1 14 H1 14 Plan Actual Gross written GWP in line with plan reflecting modest rate increases in £m 749.5 750.3 premium UK&I and level across other geographies. Overall year to date premium rate increases for renewing business of 2.2% G
Slide 57: Strategic initiatives
Strategic initiatives For personal use only • Customer Value Proposition - closer to client, and improving relationships via expertise, products and delivery all supported by client engagement function • Industry segmentation – e.g. create a European real estate/property owner underwriting team cent
Slide 58: Next steps
Next steps For personal use only People & places • Selective quality recruitment to deliver strategic priorities and future growth • Encourage entrepreneurial business building behaviours • Communicate our enhanced value proposition to our colleagues and customers Client sector focus • Create a clie
Slide 59: Close
For personal use only Close Richard Pryce, Chief Executive Officer
Slide 60: Thank you
For personal use only Thank you Richard Pryce Chief Executive Officer Telephone: +44 (0)20 7105 4580 richard.pryce@uk.qbe.com
Slide 61: 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 2014. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies