QBE Insurance Group Limited · ASX:QBE
QBE Insurance — 1H16 Earnings Presentation
33 slides from QBE Insurance's earnings presentation, Aug 17, 2016
Slide 1: QBE Insurance Group 2016 half year results presentation
QBE Insurance Group 2016 half year results presentation John Neal Group Chief Executive Officer Pat Regan Group Chief Financial Officer Wednesday 17 August 2016 All figures in US$ unless otherwise stated
Slide 2: John Neal, Group Chief Executive Officer
John Neal Group Chief Executive Officer 2
Slide 3: 1H16 Results Snapshot
1H16 RESULTS SNAPSHOT GWP AND NEP(X2) ($M) CLAIMS RATIO“) 8,593, 7,877 7,918 7,892 6,140 6,088 5585 5,791 | | - - 60.5% 59.8% 1H13 1H14 1H15 1H16 1H13 1H14 1H15 1H16 GWP Mm NEP EXPENSES ($M) COMBINED OPERATING RATIO®) 16.1%) 15.6% 1,142 1,134 1,055 931 94.8% 94.8% 94.1%'9 94.0% 1H13 1H16 1H13 1H14 1
Slide 4: Progress on our strategic agenda
PROGRESS ON OUR STRATEGIC AGENDA FRANCHISE PERFORMANCE GROWING WELL STRENGTH IMPROVEMENT DIVIDENDS CAPITALISED $ $ GROWTH × Flat REINSURANCE Reinsurance optimisation generated savings of $54M UNDERWRITING EXCELLENCE × 3.1% deterioration in attritional claims ratio CLAIMS $218M positive prior yea
Slide 5: Progress in North American operations
PROGRESS IN NORTH AMERICAN OPERATIONS IMPROVE • Improving pricing, risk selection through targeted geographical and UNDERWRITING industry focus EXECUTION • Remediate commercial auto portfolio STRENGTHEN • Focused on delivering integrated “go-to-market” capabilities, centred CUSTOMER around Specialty
Slide 6: Australia & NZ: strong profitability in long tail classes offset by short tail deterioration
AUSTRALIA & NZ: STRONG PROFITABILITY IN LONG TAIL CLASSES OFFSET BY DETERIORATION IN SHORT TAIL ATTRITIONAL CLAIMS RATIO • Pricing pressure • CTP frequency • Inflation on short tail claims 6.6% 3.4% Mainly long tail classes 2.4% 1.0% 1.0% Benefit of DLRC structure with Equator Re (1) (1) 1H15(1) Pri
Slide 7: Comprehensive program of remedial actions underway in Australia
COMPREHENSIVE PROGRAM OF REMEDIAL ACTIONS UNDERWAY IN AUSTRALIA PeopleTRADING MAJOR and CTP NSW Short tail lines Leadership PARTNERS Increased claims Prolonged soft market Significantly strengthened ISSUES frequency Claims inflation with rising repair and replacement management team ACTION
Slide 8: Pat Regan, Group Chief Financial Officer
Pat Regan Group Chief Financial Officer 8
Slide 9: 1H16 Financial Results Summary
1H16 FINANCIAL RESULTS SUMMARY For the half year ended 30 June 2015(1) 2016 GWP $M 8,557 8,107 NEP $M 6,084 5,615 Underwriting profit $M 401 54 COR % 93.4 99.0 Adjusted COR (ex discount rate impact) % 94.1 94.0 Insurance profit $M 610 326 Insurance profit to NEP % 10.0 5.8 Profit before tax $M 595 3
Slide 10: 1H16 Divisional Results
1H16 DIVISIONAL RESULTS North Australia & Emerging 1H16 America Europe New Zealand Markets Equator Re Group GWP ($M) 2,818 2,508 1,861 850 1,125 8,107 GEP ($M) 2,184 1,930 1,871 793 583 6,876 NEP ($M) 1,710 1,385 1,654 655 197 5,615 Net claims ratio (%) 71.6 58.6 67.7 54.8 58.9 64.8 Net commission r
Slide 11: Key Performance Drivers
KEY PERFORMANCE DRIVERS (1) GLRC attaches at 8.9% of net earned premium. (2) Excludes the impact of asset sales as presented in our 2015 interim report. (3) Excludes the impact of transactions to reinsure UK long tail liabilities. 11 (4) Refer to slide 21.
Slide 12: Investment Performance by Asset Class
INVESTMENT PERFORMANCE BY ASSET CLASS 12
Slide 13: Financial Strength
FINANCIAL STRENGTH S&P CAPIT. DIVIDE Interim dividend 21 Australian cents per share 6-1 5% increase on 1H15 dividend Payout ratio adjusted for discount rate impact Borrowings ($Bn) 3.6 3.5 3.5 Goodwill & Intangibles 3.8 3.6 3.6 ($Bn) PCA multiple 1.67x 1.73x 1.69x(?) = (1) Dial shows surplus above S
Slide 14: Outlook
Outlook John Neal Group Chief Executive Officer 14
Slide 15: Updated 2016 Financial Targets
UPDATED 2016 FINANCIAL TARGETS GROSS WRITTEN PREMIUM $13.7 – $14.1Bn (1)(2) ($13.8 - $14.2Bn at constant currency) NET EARNED PREMIUM $11.5 – $11.9Bn (1)(3) ($11.6 - $12.0Bn at constant currency) COMBINED OPERATING 94% - 95% (4)(5) (includes positive prior accident year development) RATIO INSURANCE
Slide 16: Key Priorities for 2H2016
KEY PRIORITIES FOR 2H2016 PORTFOLIO • Address the Australian & New Zealand attritional claims ratio MANAGEMENT • Maintain improvement in North America and Latin America • Achieve our $150M FY16 expense reduction target PERFORMANCE • Build-out and embed initiatives for claims to achieve $200M run IMP
Slide 17: Questions & answers
Questions & answers ® QBE
Slide 18: Disclaimer
DISCLAIMER The information in this presentation provides an overview of the results for the half year ended 30 June 2016. 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 19: Appendices
Appendices ® QBE
Slide 20: 1H16 Claims Ratio Analysis
1H16 CLAIMS RATIO ANALYSIS 2015 2016 1H15 2H15 FY15 1H16 NEP $M 6,229 6,085 12,314 5,615 Attritional claims % 54.2 49.5 51.9 54.5 Large individual risk and catastrophes % 8.9 8.5 8.7 9.8 Claims settlement costs % 2.8 3.2 3.0 3.0 Claims discount % (6.6) (1.1) (3.9) (1.3) Accident year claims ratio %
Slide 21: 1H16 Attritional Claims Ratio Analysis
1H16 ATTRITIONAL CLAIMS RATIO ANALYSIS 1H15 1H16 NEP Attritional NEP Attritional US$M % US$M % 5,607 (1)48.0 5,484 51.1 Rest of world US multi-peril crop insurance 216 85.1 307 83.1 M&LS (2) 261 39.7 - - UK long tail liability reinsurance premium - - (176) - QBE Group adjusted 6,084 49.1 5,615 54.5
Slide 22: 1H16 Movement in Weighted Average Discount Rate
1H16 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2015 31 Dec 2015 30 June 2016 Australian dollar 2.43 2.37 1.77 US dollar 1.59 1.80 1.20 Sterling 1.53 1.47 0.56 Euro 0.75 0.59 (0.16) Group weighted average (ex Argentin
Slide 23: 2016 Premium Outlook
2016 PREMIUM OUTLOOK 2016 revised 2016 revised target target 2016 previously stated 2016 previous stated GWP(1)(2) GWP target NEP(1)(3) NEP target North America 4.5 4.8 3.5 3.6 Europe 4.1 4.3 3.2 3.4 Australia & New Zealand 3.7 3.5 3.3 3.1 Emerging Markets 1.6 1.8 1.3 1.4 Equator Re - 0.4 0.3 Group
Slide 24: FX Rates versus US$
FX RATES VERSUS US$ 2016 June 2015 December 2015 June 2016 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.77 0.78 0.73 0.75 0.75 0.73 0.72 GBP 1.57 1.53 1.47 1.53 1.33 1.43 1.36 EUR 1.11 1.12 1.09 1.11 1.11 1.12 1.10 ARS 0.11 0.11 0.08 0.11 0
Slide 25: North America
NORTH AMERICA 1H15 1H16 • Premium rates on average broadly flat 3,109 2,818 • Excluding the impact of M&LS sale, GWP was Gross written premium $M down 1% compared with the prior year. 2,309 2,184 • Net claims ratio of 71.6%, reflecting: Gross earned premium $M – 3.5% adverse discount rate impact Net
Slide 26: Europe
EUROPE 1H15 1H16 • Premium rates down 3% on average Gross written premium $M 2,659 2,508 • GWP and NEP down 1% on a constant currency basis Gross earned premium $M 2,112 1,930 • Use of data & analytics enabling strong cross selling strategies to support new business volumes Net earned premium $M 1,6
Slide 27: Australia & New Zealand
AUSTRALIA & NEW ZEALAND 1H15 1H16 • Premium rates broadly flat Gross written premium $M 1,928 1,861 • GWP down 3% in USD but up 3% on a constant currency basis with growth across a number of Gross earned premium $M 1,913 1,871 portfolios • NEP down 1% USD but up 6% on a constant Net earned premium $
Slide 28: Emerging Markets
EMERGING MARKETS 1H15 1H16 Gross written premium $M 929 850 • GWP up 10% and NEP up 7% on a constant currency basis, reflecting: Gross earned premium $M 864 793 - strong growth across Latin America - underlying growth in Asia, notably Indonesia, Net earned premium $M 741 655 Malaysia, the Philippine
Slide 29: Equator Re
EQUATOR RE 1H15 1H16 • GWP up 15% due to Equator Re providing higher Gross written premium $M 976 1,125 limits on divisional treaties • NEP up 8% from the prior period Gross earned premium $M 485 583 • Net claims ratio of 58.9%: 182 197 – relatively benign large individual risk and Net earned premiu
Slide 30: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY As at 31 Dec 2015 30 June 2016 Summary balance sheet $M $M • Favourable PYD of $218M Investments and cash 26,708 25,741 Reserving • $283M adverse discount rate impact • PoA of 89.0% (FY15 89.0%) Trade and other receivables 4,950 6,316 Intangibles 3,604 3,592 Other as
Slide 31: APRA PCA Calculation
APRA PCA CALCULATION $M FY15(2) 1H16(1) Ordinary share capital and reserves 10,560 10,384 Net surplus relating to insurance liabilities 764 806 Regulatory adjustments to Common Equity Tier 1 Capital (4,424) (4,470) Common Equity Tier 1 Capital 6,900 6,720 Additional Tier 1 Capital - Capital securiti
Slide 32: Borrowings
BORROWINGS • $3,482M at 30 June 2016 Borrowings • Weighted average cost of borrowings 5.8% Debt to • Ratio within 25% - 35% benchmark range equity • Debt to tangible equity up slightly to 51.7% 32
Slide 33: QBE's 2016 Global Reinsurance Program
QBE’S 2016 GLOBAL REINSURANCE PROGRAM Risk XL Cat XL Large Risk and Catastrophe Group Risk XL & Cat XL covers all QBE Reinstatements Group Large Risk & business except inwards reinsurance (QBE Re), Catastrophe (GLRC) is Marine and Energy (Lloyd’s Syndicate 1036), Equator Equator designed to match QB