Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Citigroup Australia and New Zealand Investment Conference 2004
24 slides from Qbe Insurance's conference presentation, Mar 12, 2004
Slide 1: ASX cover letter for CEO presentation
Insurance Group 12 March 2004 The Manager Company Announcements Australian Stock Exchange Limited Level 6 Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, re: CEO’s presentation at Citigroup's conference Please see attached for the market’s information our CEO's presentation at an Au
Slide 2: Results, Market Conditions and Outlook
QBE INSURANCE GROUP LIMITEC citigroup. AUSTRALIA AND NEW ZEALAND. INVESTMENT CONFERENCE LONDON — MARCH 2004 RESULTS, MARKET CONDITIONS AND OUTLOOK Presenter: Frank O’Halloran, CEO
Slide 3: Company overview
Company overview QBE is an Australian-based general insurance and reinsurance group and one of the 25 largest of the world’s general insurers and reinsurers as measured by net written premium — established in-1886 — listed on ASX as QBE in 1973 following merger of three related companies - } — opera
Slide 4: Key financial information
Key financial information Company overview 2003 The Group has A$BN US$BN * total assets 20.5 16.0 _* net assets 3.4 2.7 a + market capitalisation 7.2 55 *. gross written premium 8.4 6:6 * NPAT $M 572 446 Ratios * combined operating ratio * insurance profit margin (% to NEP) * .capital adequacy (APRA
Slide 5: Growth and insurance margin
Growth and insurance margin Gross written Insurance Insurance _ a premium COR profit profit “investments A$M % % ASM 1994 1,180* 100.2 7.4 72 git 4995 1,336 100.4 8.0 88 1996 1,561 99.3 84 "101 1997 2,054 99.5 72 116 1998 2,409 100.3 7.7 147 1999 2,877 103.9 2.5 56 2000 4,406 102.5 5.4 186 2001 6,79
Slide 6: QBE's strategy and philosophy
QBE’s strategy and philosophy can be summarised as: — embedded QBE culture throughout the organisation applyin Company overview Strategy proven effective risk management practices and controls. focus on products and in markets where O85 has specialised ' experience and knowledge ; : a carefully mana
Slide 7: Highlights
Highlights year ended 31 December 2003 Net profit after tax up 105% to $572 million (2002: $279 million) Net profit before tax up 146% to $765 million. “ (2002: $311 million) aie Insurance profit up 54% to $627 million (2002: $406 milion) or 10.4% of net earned premium (2002: 7.2%) Cash flow from op
Slide 8: Worldwide operations
Worldwide operations HALF YEAR June 2003 Gross written premium GM Gross earned premium $M Net earned premium $M Claims ratio % Commission ratio % Expense ratio %* Gombined operating ratio % Underwriting profit $M Investment income - insurance funds $M** Insurance profit $M Insurance profit Yo to NEP
Slide 9: Worldwide operations
Worldwide operations GWP. Growth * COR Net profit... 2003 2003 2003 2002 2003 $M % % oe Australia 1,869 18 928 974 Asia-Pacific 542 (14) 90.0" 95.9 the Americas 1,342 35 93.1 99.6 European companies 2,441 9 94.7 98.9 Lloyd’s division 2,156 (5) 95.1 96.6 Group 8,350 8 93.8 97.7 General insurance 6,05
Slide 10: Geographical diversification
Company overview Geographical diversification year ended 31 December 2003 Gross earned premium % Lloyd’s division 26.1% (30.4%) fesinan iain Asia-Pacific HAM 7.0% (8.4%) the America 15.5% (11.9%) European companies 29.5% (29.2%) * Number in brackets represents 2002 figure.
Slide 11: Worldwide portfolio mix
Worldwide portfolio mix year ended 31 December.2003 Gross earned premium. % Seer Professional indemnity 3.3% (3.3%) jyarine and aviation 9.2% (9.1%) 8.2% (10.3%) Workers’ compensation = 4 9.2% (9.2%) / Financial and credit 3.3% (2.9%) Property 29.1% (28.2%) Liability 15.9% (13.4%) Other = .-~ Accide
Slide 12: Product diversification
Company overview Product diversification Based on portfolios for the 2003 financial year, the mix between.” long tail, short tail, primary and inwards treaty reinsurance. busine: is estimated as: Gross written premium 2003: Inwards Primary reinsurance | : $M % $M % Short tail 3,205 52.9 1,722 75.2 L
Slide 13: Market conditions 2004
* Actual and analysts’ forecasts — source Deutsche Bank ; Market conditions 2004 Global insurers/reinsurers expect strong returns for FY 2004 Average ROEs* in 2003 Australia 15.7% UK non-life 2 US P&C and multi line 15.2% QBE 18.3% Premium rate increases are holding at January 2004 renewal. overall,
Slide 14: Market conditions 2004: total insured losses
Market conditions 2004 Total insured losses US$BN US$BN insured catastrophe losses 2003 $17 (approx) . 4g | 2002 $13.5 1975 - 2003 2001 $34.4 35 + 2000 $10.6 30 | 1999 $34.0 A A og | 1998 $17.5 \ /\ fe US$BN =) >> a Ph > L—| onved panama yoo 1975 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 200
Slide 15: Market conditions 2004
Market conditions 2004 2003 was.a year of normal to slightly higher large claims and catastrophes — estimated US$17 billion (2002 US$13.5 billion)... Generally, market loss ratios for 2003 should be lower due'to: — higher premiums —. greater retention by insureds Latency issues such as asbestos, US
Slide 16: General corporate strategy & outlook
General corporate strategy & outlook QBE business strategy & 2004 targets subject to usual caveats. Maximise opportunities in current hard market —- overall premium rate increases expected to meet, claims inflation. ‘ in 2004 / — improved policy terms and conditions; gained over the last two. years
Slide 17: General corporate strategy & outlook
General corporate strategy & outlook QBE business strategy & 2004 targets subject to usual caveats. Increase profit after tax by more than 10% Achieve return.on equity in excess of 1.5 times wacc (min target around 14%) Ze PEAS : Reinsurance costs to reduce to around 21% of gross Farned. premium : F
Slide 18: General corporate strategy & outlook
General corporate strategy & outlook QBE business strategy & 2004 targets subject to usual caveats Continue focus on expense management - expense ratio target 12.4% or-less: “ Increase net invested funds by over $1.5 billion to >$12 billion from strong cash flow (subject to A$ value changes) Continu
Slide 19: General corporate strategy & outlook
General corporate strategy & outlook QBE’s key management team has been with the company for many years and. a strong corporate culture has been developed QBE's aim is to promote succession from within thro development of QBE's unique Manager Programm QBE is not contemplating adding any material. ne
Slide 20: Growth strategy
General corporate strategy & outlook Growth strategy Organic premium growth pursued in hardening insurance environment in markets where. QBE has specialised expertise and pricing power A large part of QBE’s growth over the past 15 years is from acquisitiors 76 acquisitions in 20 years — these includ
Slide 21: Proposed growth
General corporate strategy & outlook Proposed growth Projected gross written premium growth GWP Growth Year $BN % * 2003 8.4 Pe woot ; 2004* 92 | GWP growth funded by expected profits and dividend reinvestment The Board may consider a conversion of the LYONs to meet opportunities for additional prem
Slide 22: Insurance liabilities: reserve adequacy
Insurance liabilities Reserve adequacy ¢ Outstanding claims — greater than 90% probability of adequacy — exceeds Group benchmark of 85% « Level of prudential margins increased in 2003, despite thei impac of the stronger A$ si «-The Group’s main asbestos related claims exposure i is in Australia — UK
Slide 23: Conclusion
Conclusion QBE’s capital levels, long term debt and ability to convert the LYONs indicates that-QBE has a well balanced and appropriately leveraged balance F sheet to meet growth and maximise ROE ad Retention levels from largest realistic disaster scenarios are modestv extensive allowance in current
Slide 24: Historical share price performance
$20. +- $18 5 $16 4 $14 4 $12 4 $10.4 $8 + $6.5 $4 | $2 4 $0 Dec-83 Dec-85 Dec-87 ' ~Dec-89 Dec-91 Deéc-93 Dec-95 Dec-97 Historical share price performanci An investment in QBE has outperformed the Australian All Ordinaries Index and inflation with a compound average annual growth rate of 14.2% over
QBE Insurance Group — Citigroup Australia and New Zealand Investment Conference 2004 on 6ix