Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2018 Earnings Presentation
35 slides from Qbe Insurance's earnings presentation, Aug 16, 2018
Slide 1: ASX cover letter for half year results 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 16 August 2018 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Stre
Slide 2: QBE Insurance Group 2018 half year results presentation
For personal use only QBE Insurance Group 2018 half year results presentation Pat Regan Group Chief Executive Officer Inder Singh Group Chief Financial Officer All figures in US$ unless otherwise stated Thursday 16 August 2018 All figures in US$ unless otherwise stated
Slide 3: Pat Regan, Group Chief Executive Officer
For personal use only Pat Regan Group Chief Executive Officer
Slide 4: 1H18 results update
1H18 results update For personal use only Simplified and Implemented cell Mobilised an Delivered 1H18 Strong pricing Strong balance more focused performance extensive Brilliant result in line with momentum in all sheet organisation reviews Basics program our FY18 target regions Exited loss-making Ov
Slide 5: Results snapshot
Results snapshot1 GWP ($M) Insurance margin RoE For personal use only 7,887 10.1% 8.2% 9.0% 8.9% 7,596 1H17 1H18 1H17 1H18 1H17 1H18 Attritional claims ratio2 Acquisition cost ratio COR3 52.5% 103.6% 51.8% 51.3% 31.3% 31.7% 31.2% 95.8% 94.5% 1H17 FY17 1H18 1H17 FY17 1H18 1H17 FY17 1H18 1. Continuing
Slide 6: Underlying premium growth of ~2%
Underlying premium growth of ~2% For personal use only Gross written premium 3% (17)% 3% 3% 7,887 7,596 7,887 ~2% growth 7,596 1H17 FX NSW CTP North America Europe Australia & New Asia Pacific 1H18 ($M) Zealand ($M) 5 QBE Insurance Group | 2018 half year results presentation
Slide 7: Pricing momentum
Pricing momentum Positive Group-wide trend… North America Europe For personal use only Quarter on quarter 4.8% 5.1% 4.0% 4.9% 3.1% 3.1% 4.7% 3.5% (1.1)% 0.9% 0.7% (0.2)% 2.1% 0.4% 1.6% 1H17 FY17 1H18 1H18 1H17 FY17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 79% 78% 79% 82% 83% 84% Australia & New Zealand1 A
Slide 8: Simplified and more focused
Simplified and more focused For personal use only Exit underperforming businesses Targeted “de-risking” Focused growth • Latin America Improving property hazard profile - accident & health • Thailand Reduced catastrophe exposure - homebuilders • Hong Kong construction WC Indonesian marine hull - nat
Slide 9: Success of Australia & New Zealand cell reviews
Success of Australia & New Zealand cell reviews Risk profile of property portfolio improving1 Earnings quality is improving For personal use only Hazard index by premium exposure Accident year underwriting result 92.3%2 Avg. premium exposure for hazard index 8-10 100% 16% 90% 98.9%2 Premium exposure
Slide 10: Brilliant Basics: pricing
Brilliant Basics: pricing Driving targeted rate increases… …the opportunity is significant For personal use only 20% 18% Australia & New Zealand1 Asia Pacific3 16% 20% 18% 14% Group2 Premium rate change 12% 10% 8% 6% 4% 2% 0% (2%) 60% 70% 80% 90% 100% 110% 120% Net earned premium by category: Premiu
Slide 11: Remediate Asia: execute Profit Improvement Program
Remediate Asia: execute Profit Improvement Program Significant reduction in poorly performing segments Remediation driving premium contraction For personal use only (3)% (26)% 1H17 285 (12)% (19)% 276 276 (39)% 1H18 227 (38)% 201 205 73 66 63 59 GWP1 ($M) (30)% 40 35 (36)% 25 (44)% 17 11 8 6 3 1H16
Slide 12: Mobilised an extensive Brilliant Basics program
Mobilised an extensive Brilliant Basics program Actions completed… …while focus remains on For personal use only Comprehensive review and implementing a new set of global underwriting standards Established a fully-staffed Chief Underwriting Office in all divisions Detailed global pricing assessments
Slide 13: Actions to date are driving a lower attritional claims ratio
Actions to date are driving a lower attritional claims ratio1 Australia & New Zealand2 Europe For personal use only 66% 54% 60% 48% 59.1% 47.1% 54% 42% FY15 1H16 FY16 1H17 FY17 1H18 FY15 1H16 FY16 1H17 FY17 1H18 North America3 Asia Pacific 54% 60% 52.1% 54.6% 50% 50% 46% 40% FY15 1H16 FY16 1H17 FY17
Slide 14: Inder Singh, Group Chief Financial Officer
For personal use only Inder Singh Group Chief Financial Officer
Slide 15: Financial results summary
Financial results summary Adjusted operating results Profit after tax 4% For personal use only 1H171,2 1H182,3 GWP $M 7,596 7,887 291 $345M $358M NEP $M 5,698 5,837 139 Net claims ratio % 62.7 63.9 1.2 Net commission ratio % 16.4 16.2 (0.2) 1H17 1H18 Expense ratio % 14.9 15.0 0.1 Total (A$) retur
Slide 16: Continued strong performance in Australia and New Zealand
Continued strong performance in Australia and New Zealand For personal use only Current Prior year GWP accident year + reserve change = COR COR $2,040M +3%1 from 1H17 96.8% (4.6)% 95.7% (3.4)% 92.2% 92.3% COR (%)2 92% 90.7%91% 92.3% 1H17 92.2% 1H172 1H182 1H17 1H18 1H172 1H182 Attritional (%)3 59.1%
Slide 17: Improving accident year COR in Europe
Improving accident year COR in Europe For personal use only Current Prior year GWP accident year + reserve change = COR COR $2,614M +3%1 from 1H17 99.9% (8.6)% 96.8% (2.3)% 94.5% 91.3% COR (%)2 92% 90.7%91% 94.5% 1H17 91.3%3 1H172,3 1H182 1H17 1H18 1H172,3 1H182 Attritional (%) 47.1% 1H17 50.3% + Im
Slide 18: Progress in North America
Progress in North America For personal use only Current Prior year GWP accident year + reserve change = COR COR $2,896M +3% from 1H17 3.2% 109.1% 105.9% 6.8%5 100.3% (2.5)% 97.8% COR (%)1 92% 90.7% 97.8% 1H17 98.2% 99.1% FY171,4 1H181 FY17 1H183 FY171,4 1H181 Attritional (%)2 52.1% 1H17 49.9% + Favo
Slide 19: Asia Pacific reflects early benefits from remediation
Asia Pacific reflects early benefits from remediation For personal use only Current Prior year GWP accident year + reserve change = COR COR $350M (17)%1 from 1H17 5.4% 115.5% 110.1% 5.3% 108.5% 103.2% COR (%)2 92% 90.7%91% 108.5%3 1H17 109.1% FY172 1H182,3 FY17 1H18 FY172 1H182,3 Attritional (%) 54.
Slide 20: Investment performance
Investment performance For personal use only Annualised net investment return Fixed income running yield 2.4% • Rising yields and widening 0.3%2 credit spreads 2.25 - 2.75%1 2.1% 2.1% 1.7% • Annualised growth asset FY18 target 1H18 FY17 1H18 returns of ~9% Funds under management3 Duration • FX movem
Slide 21: Balance sheet and capital management
Balance sheet and capital management For personal use only Strong Lower Shareholder Stable capital gearing returns liquidity PCA multiple Debt to equity ratio 1.74x 40.8% 1.64x 36.9% FY17 1H18 FY17 1H18 + A$100M share repurchase + Central cash approaching c.$900M1 2019 reinsurance renewal 1. Pro for
Slide 22: Outlook
For personal use only Outlook Pat Regan Group Chief Executive Officer
Slide 23: 2H18 focus
2H18 focus For personal use only Maintain Cell Review momentum Fully embed and build upon Brilliant Basics Drive improvement in the attritional claims ratio Further reduce large individual risk claims frequency and severity Additional investment in Brilliant Basics and innovation Finalise cost-out p
Slide 24: Our priorities
Our priorities For personal use only 1 Simplify QBE 2018 targets 2 Brilliant Basics COMBINED 3 Drive performance improvement OPERATING 95.0% – 97.0%1,2 RATIO 4 Further reposition North America INVESTMENT 5 Remediate Asia 2.25% – 2.75%2 RETURN 6 Further develop talent and culture 7 Build for the futu
Slide 25: Questions & Answers
For personal use only Questions & Answers
Slide 26: Disclaimer
Disclaimer The information in this presentation provides an overview of the results for the half year ended 30 June 2018. For personal use only This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those l
Slide 27: Appendices
For personal use only Appendices
Slide 28: Currency mix
Currency mix1 Total investments and cash ($M) 1H17 1H18 For personal use only Australian dollar 8,320 33% 7,052 30% US dollar 6,902 27% 6,940 30% Sterling 4,819 19% 4,355 19% Euro 2,473 10% 2,463 10% Canadian dollar 1,024 4% 1,089 5% New Zealand dollar 406 2% 376 2% Hong Kong dollar 484 2% 375 2% Si
Slide 29: North American Operations
North American Operations 1H17 1H18 • GWP up 3% due to growth in Specialty and new program business For personal use only which more than offset the prior year cancellation of two large, Gross written premium $M 2,803 2,896 unprofitable programs Gross earned premium $M • Average premium rate increas
Slide 30: European Operations
European Operations 1H171 1H18 • GWP up 3% on a constant currency basis, with improved pricing For personal use only offset by disciplined new business risk selection Gross written premium $M 2,393 2,614 • Average premium rate increase of 4.8% compared with a reduction Gross earned premium $M 1,915
Slide 31: Australian & New Zealand Operations
Australian & New Zealand Operations 1H17 1H18 • GWP down 1% on a constant currency basis with premium rate For personal use only increases more than offset by NSW CTP scheme reform, non- Gross written premium $M 2,007 2,040 renewal of unprofitable travel credit card business and subdued LMI volumes
Slide 32: Asia Pacific Operations
Asia Pacific Operations 1H17 1H181 • GWP down 17% on a constant currency basis, mainly reflecting For personal use only the sale of Thailand, exiting of Hong Kong construction workers’ Gross written premium $M 409 350 compensation and Indonesian marine hull Gross earned premium $M 378 365 • Average
Slide 33: Equator Re
Equator Re 1H17 1H18 • GWP reduced 9% due to the non-renewal of two proportional For personal use only contracts Gross written premium $M 1,375 1,250 • Average premium rate increase was limited to 5% on catastrophe Gross earned premium $M 798 691 impacted lines. Surplus market capital maintained pre
Slide 34: Financial Strength and Flexibility
Financial Strength and Flexibility Summary balance sheet ($M) 31 Dec 2017 30 Jun 2018 Reserving For personal use only Investments and cash 26,141 23,280 • Positive prior accident year claims development of $51M Trade and other receivables 4,906 5,780 (1H17 $147M) Intangibles 3,079 2,933 • $40M posit
Slide 35: APRA PCA Calculation
APRA PCA Calculation $M FY171 1H182 For personal use only Ordinary share capital and reserves 8,901 8,725 Net surplus relating to insurance liabilities 776 844 Regulatory adjustments to Common Equity Tier 1 Capital (3,642) (3,575) Common Equity Tier 1 Capital 6,035 5,994 Additional Tier 1 Capital –