Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2018 Earnings Presentation
34 slides from Qbe Insurance's earnings presentation, Aug 16, 2018
Slide 1: QBE Insurance Group 2018 half year results presentation
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 2: Pat Regan, Group Chief Executive Officer
Pat Regan Group Chief Executive Officer
Slide 3: 1H18 results update
1H18 results update 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 Over 300 reviews Designe
Slide 4: Results snapshot
Results snapshot1 GWP ($M) Insurance margin RoE 7,887 10.1% 8.2% 9.0% 8.9% 7,596 1H17 1H18 1H17 1H18 1H17 1H18 Attritional claims ratio2 Acquisition cost ratio COR3 52.5% 103.6% 51.8% 51.3% 31.3% 31.7% 31.2% 95.8% 94.5% 1H17 FY17 1H18 1H17 FY17 1H18 1H17 FY17 1H18 1. Continuing operations and adjust
Slide 5: Underlying premium growth of ~2%
Underlying premium growth of ~2% Gross written premium 3% (17)% 3% 3% 7,887 7,596 7,887 ~2% growth 7,596 1H17 FX NSW CTP North America Europe Australia & New Asia Pacific 1H18 ($M) Zealand ($M) 5 QBE Insurance Group | 2018 half year results presentation
Slide 6: Pricing momentum
Pricing momentum Positive Group-wide trend… North America Europe Quarter on quarter 4.8% 5.1% 4.0% 4.9% 3.1% 3.1% 4.7% 3.5% (1.1)% 0.9% 0.7% (0.2)% 2.1% 0.4% 1.6% 1H17 FY17 1H18 1H18 1H17 FY17 1H18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 79% 78% 79% 82% 83% 84% Australia & New Zealand1 Asia Pacific • Premium
Slide 7: Simplified and more focused
Simplified and more focused Exit underperforming businesses Targeted “de-risking” Focused growth • Latin America Improving property hazard profile - accident & health • Thailand Reduced catastrophe exposure - homebuilders • Hong Kong construction WC Indonesian marine hull - natural resources • Austr
Slide 8: Success of Australia & New Zealand cell reviews
Success of Australia & New Zealand cell reviews Risk profile of property portfolio improving1 Earnings quality is improving Hazard index by premium exposure Accident year underwriting result 92.3%2 Avg. premium exposure for hazard index 8-10 100% 16% 90% 98.9%2 Premium exposure by hazard index 96.8%
Slide 9: Brilliant Basics: pricing
Brilliant Basics: pricing 20% Driving targeted rate increases… …the opportunity is significant 18% Australia & New Zealand1 Asia Pacific3 16% 20% 18% 14% Group2 Premium rate change 12% 10% 8% 6% 4% 2% 0% (2%) 60% 70% 80% 90% 100% 110% 120% Net earned premium by category: Premium rate adequacy COR >
Slide 10: Remediate Asia: execute Profit Improvement Program
Remediate Asia: execute Profit Improvement Program Significant reduction in poorly performing segments Remediation driving premium contraction (3)% (26)% 1H17 285 (12)% (19)% 276 276 (39)% 1H18 227 (38)% 201 205 73 66 63 59 GWP1 ($M) (30)% 40 35 (36)% 25 (44)% 17 11 8 6 3 1H16 1H17 2H16 2H17 1H17 1H
Slide 11: Mobilised an extensive Brilliant Basics program
Mobilised an extensive Brilliant Basics program Actions completed… …while focus remains on 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 completed Hired a Glo
Slide 12: Actions to date are driving a lower attritional claims ratio
Actions to date are driving a lower attritional claims ratio1 Australia & New Zealand2 Europe 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 1H18 FY15 1H16 FY16 1
Slide 13: Inder Singh, Group Chief Financial Officer
Inder Singh Group Chief Financial Officer
Slide 14: Financial results summary
Financial results summary Adjusted operating results Profit after tax 4% 1H171,2 1H182,3 GWP $M 7,596 7,887 291 $345M $358M NEP $M 5,698 5,837 139 Net claims ratio % 62.7 63.9 1.2 Net commission ratio % 16.4 16.2 (0.2) 1H17 1H18 Expense ratio % 14.9 15.0 0.1 Total (A$) return to shareholders 31%
Slide 15: Continued strong performance in Australia and New Zealand
Continued strong performance in Australia and New Zealand 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% 1H17 61.0% + Improved
Slide 16: Improving accident year COR in Europe
Improving accident year COR in Europe 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% + Improving accident year
Slide 17: Progress in North America
Progress in North America 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% + Favourable PYD in Crop, ne
Slide 18: Asia Pacific reflects early benefits from remediation
Asia Pacific reflects early benefits from remediation 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 (%) 54.6%3 1H17 54.3% + Reins
Slide 19: Investment performance
Investment performance 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 movements, strategic exits
Slide 20: Balance sheet and capital management
Balance sheet and capital management 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.$900M1 2019 reinsurance renewal 1. Pro forma for Argentina and B
Slide 21: Outlook
Outlook Pat Regan Group Chief Executive Officer
Slide 22: 2H18 focus
2H18 focus Maintain Cell Review momentum Fully embed and build upon Brilliant Basics Drive improvement in the attritional claims ratio Further reduce large individual risk claims frequency and severity Additional investment in Brilliant Basics and innovation Finalise cost-out plans Further develop t
Slide 23: Our priorities
Our priorities 1 Simplify QBE 2018 targets 2 Brilliant Basics COMBINED 3 Drive performance improvement OPERATING 95.0% – 97.0%1,2 RATIO 4 Further reposition North America INVESTMENT 5 Remediate Asia 2.25% – 2.75%2 RETURN 6 Further develop talent and culture 7 Build for the future 1. Assumes risk-fre
Slide 24: Questions & Answers
Questions & Answers
Slide 25: Disclaimer
Disclaimer The information in this presentation provides an overview of the results for the half year ended 30 June 2018. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lodgements are availabl
Slide 26: Appendices
Appendices
Slide 27: Currency mix
Currency mix1 Total investments and cash ($M) 1H17 1H18 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% Singapore dollar 226 1%
Slide 28: North American Operations
North American Operations 1H17 1H18 • GWP up 3% due to growth in Specialty and new program business 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 increase of 3.1% compared wit
Slide 29: European Operations
European Operations 1H171 1H18 • GWP up 3% on a constant currency basis, with improved pricing 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 2,134 of 1.1% in 1H17
Slide 30: Australian & New Zealand Operations
Australian & New Zealand Operations 1H17 1H18 • GWP down 1% on a constant currency basis with premium rate 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 Gross earned premium $
Slide 31: Asia Pacific Operations
Asia Pacific Operations 1H17 1H181 • GWP down 17% on a constant currency basis, mainly reflecting 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 premium rate increase
Slide 32: Equator Re
Equator Re 1H17 1H18 • GWP reduced 9% due to the non-renewal of two proportional contracts Gross written premium $M 1,375 1,250 • Average premium rate increase was limited to 5% on catastrophe Gross earned premium $M 798 691 impacted lines. Surplus market capital maintained pressure on non-catastrop
Slide 33: Financial Strength and Flexibility
Financial Strength and Flexibility Summary balance sheet ($M) 31 Dec 2017 30 Jun 2018 Reserving 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 positive discount rate impa
Slide 34: APRA PCA Calculation
APRA PCA Calculation $M FY171 1H182 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 – Capital securities 399