Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2013 Earnings Presentation
42 slides from Qbe Insurance's earnings presentation, Feb 25, 2014
Slide 1: ASX cover letter: QBE Presentation on the 2013 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 For personal use only 25 February 2014 The Manager Markets Announcements Office ASX Limited Level 4 Excha
Slide 2: QBE Insurance Group 2013 full year results announcement
For personal use only QBE Insurance Group 2013 full year results announcement John Neal • Group Chief Executive Officer Neil Drabsch • Group Chief Financial Officer 25 February 2014 All figures in US$ unless otherwise stated 1 •
Slide 3: Year in review
For personal use only 2 • Year in review
Slide 4: 2013 result overview
2013 result overview For personal use only • Net profit before amortisation and tax $797M (2012 $1,348M) Results • Net loss after tax of $254M (2012 profit of $761M) • Cash profit $761M (2012 $1,042M) • Insurance profit margin 5.5% (2012 8.0%) • Underlying 2013 insurance profit margin 10 - 11% • Cur
Slide 5: 2013 financial results summary
2013 financial results summary For personal use only For the year ended 31 December 2013 2012 % change GWP $M 17,975 18,434 (2) NEP $M 15,396 15,798 (3) Underwriting profit $M 341 453 (25) COR % 97.8 97.1 - Insurance profit $M 841 1,262 (33) Insurance profit to NEP % 5.5 8.0 - Investment income $M 8
Slide 6: 2013 results compared to December guidance
2013 results compared to 9 December guidance For personal use only 2013 9 December Summary of major items actual guidance GWP $Bn 18.0 18.0 NEP $Bn 15.4 15.2 Prior accident year claims development $M (1)621 650 (undiscounted) Net claims ratio % 64.5 ~ 64 Combined commission & expense ratio % 33.3 ~
Slide 7: Underwriting performance
Underwriting performance For personal use only • GWP down 2% to $17,975M (stable in constant currency) • Rate increases of around 4%, driven by North America Premium income and Australia • Remediation and FPS led to $715M reduction in North America Underwriting result • 97.8% COR (2012 97.1%) • Prio
Slide 8: 2013 insurance profit margin analysis
2013 insurance profit margin analysis For personal use only 13.0 12.0 11.0 (0.3) 0.9 10.0 1.7 (1.8) 0.9 9.0 (0.8) 0.9 8.0 3.6 7.0 6.0 10.6 5.0 4.0 3.0 5.5 2.0 1.0 0.0 FY13 reported PY development Risk margin (2) Risk-free rates Large risk & cats Crop (5) OTP (6) FPS costs (7) Investment FY13 underly
Slide 9: North American Operations
North American Operations For personal use only • GWP down 11% due to FPS and remediation • COR 115.8% (2012 106.8%) above 9 Dec guidance of “around 111%” 2013 result disappointing • Prior accident year claims $412M(1) (2012 $316M) • Restructuring and other costs $134M • Prior accident year developm
Slide 10: Overview of 2013 divisional results
Overview of 2013 divisional results For personal use only Australia & North Latin New Asia Equator 2013 Group America America Europe Zealand Pacific Re GWP ($M) 17,975 5,854 1,380 5,225 4,786 730 3,295 GEP ($M) 17,889 6,107 1,342 5,195 4,602 643 3,361 NEP ($M) 15,396 3,051 1,208 3,609 3,971 500 3,05
Slide 11: Capital, funding and investments
For personal use only Capital, funding and investments 10 •
Slide 12: Balance sheet
Balance sheet For personal use only As at 31 Dec 2013 2012 Shareholders’ equity down, mainly due Summary balance sheet $M $M to FX (stronger US$) ($M) • foreign exchange (1,022) Investments and cash 30,619 31,525 • net loss after tax (254) • dividends paid (net) (224) Trade and other receivables 5,1
Slide 13: Capital levels
Capital levels For personal use only Regulatory capital $M 2013 2012 APRA Prescribed Capital Amount (PCA) 5,624 5,663 Key capital ratios up slightly Tier 1 capital 6,715 6,657 Tier 2 capital 2,240 2,231 Total capital base 8,955 8,888 Insurer financial strength ratings affirmed PCA multiple 1.59 1.57
Slide 14: Borrowings
Borrowings For personal use only Borrowings profile as at 31 December % 2013 2012 • Capital initiatives Subordinated debt 50 47 - Redemption and conversion of remaining SCS resulted in $498M of ordinary share Senior debt 43 29 issuance Hybrid securities - 18 - $500M issue of Tier 2 convertible sub-
Slide 15: Investments
Investments For personal use only • Total investments and cash Equities 0.9% Properties 0.1% (2012 0.4%) (2012 0.1%) – $30.6Bn (2012 $31.5Bn) Short term Corporate money 21.3% – gross yield 2.7% (2012 4.3%) bonds 47.3% (2012 25.9%) (2012 41.7%) • Fixed interest and cash high liquidity provided modest
Slide 16: Reinsurance and outlook
For personal use only Reinsurance and outlook 15 •
Slide 17: 2014 reinsurance program
2014 reinsurance program For personal use only • Multi-year program renewed • Two thirds acquired on a two year basis and the Core reinsurance program remainder renewed annually • Enhanced, high quality security • Diversified panel of reinsurers • Risk adjusted cost reduction of $200M+ • Enhanced co
Slide 18: Outlook 2014
Outlook 2014 For personal use only Premium rates • Market conditions stable • Expect premium rate increases of 2.5% overall • GWP $16.8Bn to $17.3Bn Premium targets • NEP $14.7Bn to $15.2Bn • No material acquisitions planned • Large individual risk and catastrophe allowance of 10.5% Claims ratio • I
Slide 19: Closing remarks
Closing remarks For personal use only • Highly experienced leadership now in place • Claims provisions substantially strengthened Tough actions in 2013 • Top line sacrificed for future sustainable profitability • Operational transformational program setting platform for lower operating costs • 2013
Slide 20: Questions
For personal use only 19 • Questions
Slide 21: Important disclaimer
Important disclaimer For personal use only The information in this presentation provides an overview of the results for the year ended 31 December 2013. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies o
Slide 22: Appendices
Appendices For personal use only 1. Claims ratio analysis 2. Risk margin analysis 3. Discount rates 4. Major impacts of COR by division 5. Divisional results summary 6. 2014 reinsurance program enhancements 7. Investments 8. Regulatory capital 9. 2014 premium outlook 21 • 2013 results presentation
Slide 23: 2013 claims incurred
2013 claims incurred For personal use only Other PY central estimate development Discount - current accident year Claims settlement costs • Catastrophe experience Large individual risk and catastrophe claims Attritional claims – 4.5% versus 6.1% in 2012 80 64.5% 66.0% • Large individual risk losses
Slide 24: 2013 accident year central estimate claims ratio
2013 accident year central estimate claims ratio For personal use only 2013 2012 1H 2H FY 1H 2H FY NEP $M 7,333 8,063 15,396 7,359 8,439 15,798 Attritional(1) % 49.4 49.7 49.6 48.5 50.2 49.4 Large individual risk and catastrophes % 8.3 11.0 9.7 8.0 12.5 10.4 Claims settlement costs % 2.2 2.9 2.6 2.0
Slide 25: 2013 accident year results
2013 accident year results For personal use only 2013 2012 2011 Net central estimate claims ratio (pre risk margins) % 59.2 59.5 65.3 Commissions % 16.8 16.2 14.9 Expenses % 16.5 14.9 13.7 Central estimate COR % 92.5 90.6 93.9 Accident year underwriting profit $M 1,159 1,485 937 Accident year underw
Slide 26: 2013 insurance profit
2013 insurance profit For personal use only 2013 2012 2011 Ins. Ins. Ins. profit profit profit $M margin % $M margin % $M margin % Central est. accident year underwriting profit 1,159 7.5 1,485 9.4 937 6.1 PY central estimate development (552) (3.6) (464) (2.9) 64 0.4 Release of discount and other f
Slide 27: 2013 attritional claims ratio analysis
2013 attritional claims ratio analysis For personal use only 1H13 2H13 FY13 NEP Attritional NEP Attritional NEP Attritional Rest of World 6,638 49.1% 6,600 47.3% 13,238 48.2% Crop 139 67.0% 1,002 67.0% 1,141 67.0% FPS 556 49.1% 461 48.2% 1,017 48.7% Group 7,333 49.4% 8,063 49.8% 15,396 49.6% 1H12 2H
Slide 28: 2013 risk margin analysis
2013 risk margin analysis For personal use only 1800.0 1600.0 8 22 (5) 25 140 1400.0 68 16 (42) 1200.0 1000.0 800.0 1,565 1,333 600.0 400.0 200.0 0.0 FY12 risk FX North America Latin America Europe Australia & New Asia Pacific Equator Re Other FY13 risk margin Zealand margin 27 • 2013 results presen
Slide 29: 2013 movement in weighted average discount rates
2013 movement in weighted average discount rates For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2013 30 June 2013 31 Dec 2012 Australian dollar 3.52 3.27 3.04 US dollar 1.53 1.30 0.87 Sterling 2.06 1.66 1.27 Euro 1.74 1.67 1.26 Argentine peso
Slide 30: 2013 major COR impacts by division
2013 major COR impacts by division For personal use only Australia & North Latin New 2013 Group America America Europe Zealand Asia Pacific Equator Re NEP ($M) 15,396 3,051 1,208 3,609 3,971 500 3,057 COR (%) 97.8 115.8 99.6 96.1 87.4 84.0 96.8 Ins. profit margin (%) 5.5 (14.6) 8.2 5.3 18.8 17.4 5.2
Slide 31: North America
North America For personal use only • Premium rate increases averaged 4% (5% 2013 2012 excluding crop and FPS) Gross written premium $M 5,854 6,569 • Premium income down 11% due to FPS (client loan sales and industry consolidation) and further remediation of the middle markets business Gross earned
Slide 32: Latin America
Latin America For personal use only • GWP up 13%, largely due to full year impact of the 2013 2012 HSBC LBA acquisition Gross written premium $M 1,380 1,223 • Organic GWP growth was 10% in constant currency, after pullback in Colombian SOAT business Gross earned premium $M 1,342 1,170 • Higher claim
Slide 33: Europe
Europe For personal use only 2013 2012 • GWP up 4% or £130M in local currency although US$ premium income up only 3% due to Gross written premium $M 5,225 5,077 strengthening of the US dollar • Modest renewed rate increases overall of 1.5% Gross earned premium $M 5,195 4,854 though motor, credit and
Slide 34: Australia & New Zealand
Australia & New Zealand For personal use only 2013 2012 • GWP up 4% in local currency (up 6% adjusted for FSL) but fell in US$ due to weaker AUD Gross written premium $M 4,786 4,987 • Average premium rates increase of 5.6% with retention slightly stronger at 83% (2012 80%) Gross earned premium $M 4,
Slide 35: Asia Pacific
Asia Pacific For personal use only 2013 2012 • GWP and NEP up 26% and 20% respectively, due to 730 578 full year impact of Hang Seng acquisition, strong Gross written premium $M organic growth in Hong Kong, Singapore and Malaysia 643 545 • Asian Operations contributed $606M of GWP, up 30% Gross earn
Slide 36: Equator Re
Equator Re For personal use only 2013 2012 • GWP down 11% due to decline in the North American portfolios and higher divisional catastrophe and risk Gross written premium $M 3,295 3,710 excess retentions • NEP fell by 10% due to a higher allocation of Group’s Gross earned premium $M 3,361 3,712 rein
Slide 37: Reinsurance: 2014 worldwide cat XoL
Reinsurance: 2014 worldwide cat XoL For personal use only (1) Worldwide cat XoL reinsurance covers all QBE business except inwards reinsurance (Lloyd's syndicate 566), marine and energy (Lloyd’s syndicate 1036), QBE LMI, FPS (with lenders-placed covered by a separate FPS treaty) and crop, all of whi
Slide 38: Reinsurance: 2014 worldwide risk XoL
Reinsurance: 2014 worldwide risk XoL For personal use only (1) Worldwide risk XoL reinsurance covers all QBE business except inwards reinsurance, marine and energy (Lloyd’s syndicate 1036), QBE LMI, FPS (with lenders-placed covered by a separate FPS treaty) and crop, all of which have their own rein
Slide 39: Investments in corporate bonds: fixed and floating rate
Investments in corporate bonds: fixed and floating rate For personal use only COUNTRY 31 Dec 13 % 31 Dec 12 % US$M US$M Australia 6,213 42.8 6,786 51.9 USA 1,859 12.8 1,358 10.4 UK 931 6.4 947 7.2 Japan 1,044 7.2 227 1.7 Canada 772 5.3 216 1.7 ROW other 2,629 18.1 2,210 16.9 Germany 199 1.4 259 1.9
Slide 40: Investments in sovereign / supra-national bonds
Investments in sovereign / supra-national bonds For personal use only COUNTRY 31 Dec 13 % 31 Dec 12 % US$M US$M Australia 519 6.1 324 3.2 USA 3,667 43.1 4,308 42.6 UK 914 10.7 1,662 16.4 Canada 405 4.8 464 4.6 ROW other 1,711 20.1 1,632 16.1 Germany 462 5.4 625 6.2 France 380 4.5 615 6.1 Netherlands
Slide 41: APRA LAGIC calculation
APRA LAGIC calculation For personal use only $M 2013 2012 Tier 1 Ordinary share capital and reserves 10,403 11,417 Net surplus relating to insurance liabilities 1,352 1,045 Deductions (5,330) (6,121) Capital securities 290 316 6,715 6,657 Tier 2 Subordinated debt and hybrid securities 2,240 2,231 To
Slide 42: 2014 premium outlook
2014 premium outlook For personal use only GWP in local GWP guidance NEP in local NEP guidance Full year 2014 currency Bn $USBn (1) currency Bn $USBn (1) North America 5.5 - 5.7 5.5 - 5.7 2.8 2.8 Latin America 1.2 1.2 1.0 1.0 Europe 2.9 4.6 2.3 3.6 Australia & New Zealand 5.3 4.8 4.3 3.9 Asia Pacifi