Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2018 Earnings Presentation
35 slides from Qbe Insurance's earnings presentation, Feb 25, 2019
Slide 1: QBE Presentation on the 2018 results
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 25 February 2019 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: All figures in US$ unless otherwise stated
For personal use only All figures in US$ unless otherwise stated
Slide 3: For personal use only
For personal use only
Slide 4: 2018 delivered against Brilliant Basics priorities
For personal use only 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 perform
Slide 5: 2018 key results: GWP, rate, COR, RoE, dividend
For personal use only GWP ($M) Premium rate increases Attritional claims ratio2 5.5% 54.3% 13,657 4.6% 13,328 51.3% 49.1% 2.7% 1.0% FY17 FY18 1H17 2H17 1H18 2H18 2H17 1H18 2H18 COR3 Cash RoE Dividend per share (A¢) 103.9% 8.0% 50.0 95.7% 28.0 Final 26.0 4.0 22.0 22.0 Interim FY17 FY18 FY17 FY18 FY17
Slide 6: Premium rate increases and retention by division
For personal use only Positive HoH trend Group-wide1… North America Europe 5.5% 4.1% 4.8% 4.4% 4.6% 3.1% 3.1% 2.7% 4.7% 4.9% 0.9% 0.7% (0.2)% 1.0% (1.1)% 1H17 FY17 1H18 FY18 1H17 FY17 1H18 FY18 1H17 2H17 1H18 2H18 79% 78% 79% 77% 82% 83% 84% 83% Australia & New Zealand1 Asia Pacific 7.3% 1.0% • 2018
Slide 7: Attritional claims ratio by division
For personal use only Australia & New Zealand2 Europe 66.0% 54.0% 65.2% 64.0% 52.0% 62.0% 61.1% 61.0% 60.1% 50.0% 60.0% 59.1% 48.9% 48.0% 47.1% 58.0% 56.0% 46.0% 56.2% 46.6% 54.0% 44.0% 1H16 2H16 1H17 2H17 1H18 2H18 1H16 2H16 1H17 2H17 1H18 2H18 North America3 Asia Pacific 58.0% 60.0% 56.5% 57.7% 56
Slide 8: Cell reviews: poorly performing segments and hazard grade
For personal use only Significant reduction in poorly performing segments Property hazard grade improving (30)% 3.2% 477 3.1% 334 GWP1 3.0% ($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 resu
Slide 9: Gross written premium growth bridge
For personal use only +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 10: 2018 activities and 2019 priorities
For personal use only 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 a
Slide 11: For personal use only
For personal use only
Slide 12: Adjusted operating results and cash ROE
For personal use only 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
Slide 13: Clear improvement in earnings quality
For personal use only 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
Slide 14: Australia & New Zealand division results
For personal use only 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 C
Slide 15: Europe division results
For personal use only 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
Slide 16: North America division results
For personal use only 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 impro
Slide 17: Asia Pacific division results
For personal use only 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%
Slide 18: Investment yield, running yield and duration
For personal use only 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
Slide 19: Strong capital, lower gearing, shareholder returns
For personal use only 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 O
Slide 20: Reduced large risk and catastrophe exposure
For personal use only • 2018 “exit” ~$900M Large risk $850M • Lower commercial property hazard profile allowance • Brilliant Basics includes targeted reduction in large exposures Catastrophe • Reduced exposure through $550M allowance - Asset sales - Targeted de-risking
Slide 21: For personal use only
For personal use only
Slide 22: Deliver the 2019 plan
For personal use only Deliver the 2019 Brilliant Talent and Customer Operating Managing Future plan Basics culture focus sustainably risk focus Targeted rate Underwriting, pricing Continue to add Global rollout of Focus on Stronger and more More digitally increases and claims talent EQUITY customer
Slide 23: 2019 targets: COR and investment return
For personal use only Deliver the 2019 plan 2019 targets Brilliant basics COMBINED Talent and culture OPERATING 94.5% – 96.5%1 RATIO Customer focus INVESTMENT Operating sustainably 3.00% – 3.50%1 RETURN Managing risk Future focus 1. Assumes risk-free rates as at 31 December 2018
Slide 24: For personal use only
For personal use only
Slide 25: Disclaimer and forward-looking statements
For personal use only The information in this presentation provides an overview of the may cause actual results to differ materially from those either results for the year ended 31 December 2018. expressed or implied in such statements. There can be no assurance that actual outcomes will not differ
Slide 26: For personal use only
For personal use only
Slide 27: Investments and premium by currency
For personal use only Total investments and cash ($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
Slide 28: North America results summary
For personal use only 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
Slide 29: Europe results summary
For personal use only 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 p
Slide 30: Australia Pacific results summary
For personal use only 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 d
Slide 31: Asia Pacific results summary
For personal use only 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 mar
Slide 32: Equator Re results summary
For personal use only 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 $M 1,614 1,443 - Significantly re
Slide 33: Summary balance sheet, reserving and borrowings
For personal use only Summary balance sheet ($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 $68M
Slide 34: APRA PCA calculation
For personal use only APRA PCA calculation ($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 T
Slide 35: Reinsurance program
For personal use only 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 •