Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2016 Earnings Presentation
33 slides from Qbe Insurance's earnings presentation, Feb 27, 2017
Slide 1: QBE Insurance Group 2016 full year results presentation
QBE Insurance Group 2016 full year results presentation John Neal Group Chief Executive Officer Pat Regan Group Chief Financial Officer Monday 27 February 2017 All figures in US$ unless otherwise stated
Slide 2: John Neal, Group Chief Executive Officer
John Neal Group Chief Executive Officer 2
Slide 3: 2016 Results Snapshot
2016 RESULTS SNAPSHOT COR(1) CLAIMS RATIO(1) INSURANCE MARGIN GWP(3) EXPENSES ROE 7.5%(2) 8.1% 2015 2016 (1) Excludes the impact of changes in risk-free rates used to discount net outstanding claims (2) Excludes Argentine workers’ compensation business and M&LS deferred acquisition cost write down (
Slide 4: 2016 Achievements
2016 ACHIEVEMENTS • 93.2% combined operating ratio(1) (2015 94.3%)(2) UNDERWRITING • 9.7% insurance profit margin (2015 9.0%)(2) PERFORMANCE • Continued track record of positive prior year development • ROE 8.1% (2015 7.5%) (2) • ANZO 2H16 attritional claims ratio improves by 340bps vs 1H16 OPERATIO
Slide 5: 2016 Divisional Results
2016 DIVISIONAL RESULTS Australia & North New Emerging 2016 America Europe Zealand Markets Equator Re Group GWP ($M) 4,647 4,076 3,933 1,632 1,532 14,395 GEP ($M) 4,657 3,878 3,924 1,588 1,429 14,276 NEP ($M) 2,731 2,949 3,410 1,328 651 11,066 Net claims ratio (%) 56.0 56.2 63.7 54.3 69.6 58.2 Net c
Slide 6: Key Performance Drivers
KEY PERFORMANCE DRIVERS Positive prior accident year development Large risk & catastrophe claims stable 3.8% PoA increased to 89.5% Post GLRC 2.5% 1.8% $218M 1.1% 1.1% $148M $132M 15.3% 8.7% 9.1% 10.4% 9.5% 9.5% $69M $68M 2H14 1H15 2H15 1H16 2H16 FY11 FY12 FY13 FY14 FY15 FY16 Solid underwriting perf
Slide 7: Pat Regan, Group Chief Financial Officer
Pat Regan Group Chief Financial Officer 7
Slide 8: 2016 Financial Results Summary
2016 FINANCIAL RESULTS SUMMARY For the year ended 31 December 2015(1) 2016 GWP $M 14,782 14,395 NEP $M 12,213 11,066 COR % 94.0 94.0 COR (ex discount rate) % 94.3 93.2 Insurance profit $M 1,099 1,075 Insurance profit to NEP % 9.0 9.7 Net profit after income tax $M 807 844 Cash profit after tax $M 89
Slide 9: ANZO: Remediation Plan in Place to Improve Profitability
ANZO: REMEDIATION PLAN IN PLACE TO IMPROVE PROFITABILITY 2016 AUSTRALIAN PREMIUM RATE MOMENTUM 2016 RETENTION REASONABLY STABLE 80% 4.5% 2.2% 0.4% (0.8%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 IMPROVEMENT IN ATTRITIONAL CLAIMS RATIO CONTINUED POSITIVE CLAIMS DEVELOPMENT $75M $83M $64M $45M 62.0% 58.6% 1H15 2H15 1H
Slide 10: LMI NEP Relatively Stable
LMI NEP RELATIVELY STABLE NEP RELATIVELY STABLE ALLOWING FOR MODERATION LMI NEP (A$M) Combined operating ratio (%) 321 305 61 287 52 245 210 35 31 23 2012 2013 2014¹ 2015¹ 2016 2017F 2012 2013 2014¹ 2015¹ 2016 2017F NPAT 150 136 195 216 187 (A$M): Note: Includes Hong Kong operations (1) 2014 and 201
Slide 11: Further Improvement in North American Operations
FURTHER IMPROVEMENT IN NORTH AMERICAN OPERATIONS IMPROVED • COR(1) 97.7% (2015 99.8%) demonstrating improved profitability PROFITABILITY • 2nd year of dividend payment BUILDING A • Outstanding crop result: market-leading brand and franchise SPECIALTY • Continued strong speciality growth FRANCHISE •
Slide 12: Investment Performance
INVESTMENT PERFORMANCE FIXED INCOME DURATION (YEARS) YIELD CURVES Yield curve steepening (5 year less 2 year) over past 12 months (QBE currency weighted) 0.60 0.54 0.50 1.5 1.3 0.40 0.9 0.30 0.20 FY15 1H16 FY16 INVESTMENTS & CASH - $25.2BN INTEREST BEARING FINANCIAL ASSETS(1) Govt bonds 23.8% Cash 3
Slide 13: Financial Strength
FINANCIAL STRENGTH S&P CAPITAL DIVIDEND Final dividend 33 Australian cents per share FY16 total dividend 54 Australian cents 2016 APRA PCA: 1.79x per share (up 8% from 2015) CASH REMITTANCES SHARE BUYBACK Up to A$1 billion cumulative three year $1,106M $715M on-market buyback facility announced 2015
Slide 14: Outlook
Outlook John Neal Group Chief Executive Officer 14
Slide 15: Key Priorities
KEY PRIORITIES • Underwriting excellence remains our #1 priority UNDERWRITING • Areas to improve – ANZO attritional, NA P&C and LatAm EXCELLENCE • Selective organic premium growth • Reinsurance savings of $350M+ achieved from 1 Jan 2017 OPERATIONAL • Execute on further $150M expense savings by 2018
Slide 16: 2017 Financial Targets
2017 FINANCIAL TARGETS GROSS WRITTEN Relatively stable(1)(2) PREMIUM COMBINED OPERATING 93.5% - 95.0%(3)(4)(5) RATIO INVESTMENT RETURN 2.5% - 3.0% (1) Premium target is based on assumed average foreign exchange rates relative to the US dollar as follows: AUD 0.73; GBP 1.25; and EUR 1.10. (2) Net ear
Slide 17: Investor Thesis
INVESTOR THESIS FRANCHISE PERFORMANCE GROWING WELL STRENGTH IMPROVEMENT DIVIDENDS CAPITALISED $ $ • Attractive market positions • Underwriting excellence • Established cash • S&P ‘A+’ rated or better • Deep distribution and • Operational efficiency remittance framework • Resilient to downside custom
Slide 18: Questions & answers
Questions & answers ® QBE
Slide 19: Disclaimer
DISCLAIMER The information in this presentation provides an overview of the results for the year ended 31 December 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 available
Slide 20: Appendices
Appendices ® QBE
Slide 21: 2016 Attritional Claims Ratio Analysis
2016 ATTRITIONAL CLAIMS RATIO ANALYSIS 2015(1) 2016 NEP Attritional NEP Attritional US$M % US$M % Rest of world 11,282 49.3 11,093 51.9 US multi-peril crop insurance 556 69.0 543 59.0 M&LS (2) 375 38.3 - - QBE Group adjusted 12,213 49.9 11,636 52.2 (1) Prior year analysis included an adjustment for
Slide 22: 2016 Claims Ratio Analysis
2016 CLAIMS RATIO ANALYSIS 2015 2016 1H15 2H15 FY15 1H16 2H16 FY16 NEP $M 6,229 6,085 12,314 5,615 5,451 11,066 Attritional claims % 54.2 49.5 51.9 54.5 55.5 54.9 Large individual risk and catastrophes % 8.9 8.5 8.7 9.8 9.3 9.6 Claims settlement costs % 2.8 3.2 3.0 3.0 2.8 2.9 Claims discount % (6.6
Slide 23: 2016 Movement in Weighted Average Discount Rate
2016 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2015 30 June 2016 31 Dec 2016 Australian dollar 2.37 1.77 2.26 US dollar 1.80 1.20 2.04 Sterling 1.47 0.56 0.68 Euro 0.59 (0.16) 0.19 Group weighted average (ex Argentine
Slide 24: FX Rates versus US$
FX RATES VERSUS US$ December 2015 June 2016 December 2016 2017 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.73 0.75 0.75 0.73 0.72 0.74 0.73 GBP 1.47 1.53 1.33 1.43 1.23 1.35 1.25 EUR 1.09 1.11 1.11 1.12 1.05 1.11 1.10 ARS 0.08 0.11 0.07 0.
Slide 25: North America
NORTH AMERICA 2015 (1)2016 • Premium rates broadly flat overall Gross written premium $M 4,961 4,647 • Excluding M&LS, GWP grew 2% due to continued strong growth in Specialty partially offset by Gross earned premium $M 4,930 4,657 reductions in Crop and Property & Casualty • Net claims ratio of 64.2
Slide 26: Europe
EUROPE 2015 (1)2016 • Premium rates down 2.4% on average, reflecting a Gross written premium $M 4,386 4,076 slight improvement from a 3.2% decline in 2015 Gross earned premium $M • GWP and NEP down 3% and 6% respectively on a 4,338 3,878 constant currency basis Net earned premium $M • Despite the de
Slide 27: Australia & New Zealand
AUSTRALIA & NEW ZEALAND 2015 2016 • Premium rates up 1.7% in Australia due to Gross written premium $M 3,787 3,933 implementation of pricing initiatives during 2H16 • GWP up 5% on a constant currency basis, largely Gross earned premium $M 3,753 3,924 due to strong rate-driven premium growth NSW CTP,
Slide 28: Emerging Markets
EMERGING MARKETS 2015(1) 2016 • GWP up 10% on a constant currency basis, Gross written premium $M 1,728 1,632 reflecting 3% growth in Asia Pacific and 16% growth in Latin America with strong growth across Gross earned premium $M 1,687 1,588 specialty, commercial, SME and personal lines (with strateg
Slide 29: Equator Re
EQUATOR RE 2015 (1)2016 Gross written premium $M 1,007 1,349 • GWP up 34% due to Equator Re providing higher limits on divisional treaties, and growth in the proportional Gross earned premium $M book 994 1,246 • NEP up 28% from the prior period Net earned premium $M 367 468 • Net claims ratio substa
Slide 30: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY As at 31 Dec 2015 31 Dec 2016 Summary balance sheet $M $M • Favourable PYD of $366M Investments and cash 26,708 25,235 Reserving • $80M adverse discount rate impact • PoA of 89.5% (FY15 89.0%) Trade and other receivables 4,950 4,831 Intangibles 3,604 3,627 Other asse
Slide 31: APRA PCA Calculation
APRA PCA CALCULATION $M 2015(2) 2016(1) Ordinary share capital and reserves 10,560 10,333 Net surplus relating to insurance liabilities 764 674 Regulatory adjustments to Common Equity Tier 1 Capital (4,424) (4,440) Common Equity Tier 1 Capital 6,900 6,567 Additional Tier 1 Capital - Capital securiti
Slide 32: Borrowings
BORROWINGS • $3,474M at 31 December 2016 Borrowings • Weighted average cost of borrowings 5.9% Debt to • Ratio within 25% - 35% benchmark range equity • Debt to tangible equity up slightly to 52.1% (1) Based on first call date 32
Slide 33: QBE's 2017 Global Reinsurance Program
QBE’S 2017 GLOBAL REINSURANCE PROGRAM 33