Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2019 Earnings Presentation
42 slides from Qbe Insurance's earnings presentation, Feb 17, 2020
Slide 1: Cover letter to ASX: QBE Presentation on the 2019 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 17 February 2020 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: Full year results
QBE INSURANCE GROUP LIMITED a, New, full year results Monday 17 February 2020 All figures in US$ unless otherwise stated Q BE
Slide 3: Pat Regan
Pat Regan
Slide 4: FY19 results highlights and momentum
Cell reviews and FY19 average rate Combined operating Net return of 4.6% Strong regulatory and Brilliant Basics increase of 6.3% ratio 97.5%2,3,4 (~3.6% ex rfr) rating agency capital Cell review optimisation Average rate increase of 8.3% Underlying GWP growth 4%5 Successfully closed Surplus above S&
Slide 5: Key financial metrics FY19
8.3% 13,657 97.5% 13,442 FX 5.5% 95.7% Disposals 4.6% 4.7% FY18 FY19 1H18 2H18 1H19 2H19 FY18 FY19 53.1% 8.9% 8.0% 50.0 52.0 50.2% 28.0 27.0 Final 47.5% 22.0 25.0 Interim FY17 FY18 FY19 FY18 FY19 FY18 FY19 1. Continuing operations and adjusted basis as presented in annual and half year reports 2. Ex
Slide 6: Strong premium rate increases across the Group
6.3% 8.3% 5.0% • Strong premium rate increases across the Group – FY19 6.3%1 5.5% • Pricing momentum increased in all divisions 4.6% 4.7% 2.7% • +9.2% in 4Q19 2H17 1H18 2H18 1H19 2H19 2H 7.7% 2H 7.8% 2H 9.2% 7.3% 5.8% 7.1% 6.0% 5.9% 4.1% 4.1% 3.1% 0.7% (0.2)% FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18
Slide 7: Attritional claims ratio improvement
55.0% • 6.8% improvement from 2H17 (peak 54.3% 2H17) 53.1% 53.0% • Continued improvement across all divisions 51.0% 50.2% − North America 2H19 impacted by heightened small weather events 49.0% 47.5% − International and Australia Pacific realising benefits from Brilliant Basics 47.0% − Australia Paci
Slide 8: Gross written premium 4% growth
+3% +5% $13,657M +3% $13,442M 4% growth FY18 FX Disposals North America International Australia Pacific FY19 1. Continuing operations basis
Slide 9: Portfolios repositioned since 2017
106.5% ~98.5% FY19 Crop PYD Small weather events Normalised FY19 110% 110.0 • Since 2017, portfolios repositioned • New leadership team 100.0 to help avoid emerging industry • Premium rate accelerating: 4Q19 +9.2% 10yr 90.0 Avg inflationary trends ~90% • Targeted growth in Corporate 80.0 • A
Slide 10: Average NA D&O limit down
COR% >100% COR% 18% >100% 24% • Average NA D&O limit down COR% mid 90’s 30% since 2017; 8% COR% International down 12% high 90’s 6% 8% • NA Public company D&O cumulative rate increases 1% >30% since FY17 2017 & prior 2018 2019 2017 & prior 2018 2019 Avg limit Rate chg: public D&O Rate chg: all prof
Slide 11: Aviation portfolio actions
Fixed wing Helicopter Other 19% 250 25% 20% 20% 11% 12% COR% 20% 16% 10% 200 > 100% 15% 0% 10% 150 5% -10% COR % 0% 100 mid 90's -20% -5% Avg sum insured Avg premium change 50 -10% -15% (15)% 0 -20% 2017 & Prior 2018 2019 GWP change Rate Change 1. Underwriting year basis 2. AAL is average annual los
Slide 12: Actual premium rate change and rate adequacy
20% 15% Actual premium rate change 10% 5% 0% -5% -10% 100% 2019 Actual premium rate adequacy North America International AusPac Avg rate adequacy 2018 Avg rate adequacy 2019 1. Excludes Crop and LMI
Slide 13: Inder Singh
Inder Singh
Slide 14: Group financial summary
FY18 FY19 8.9% 8.0% Gross written premium $M 13,657 13,442 Net earned premium $M 11,830 11,609 Net claims ratio (ex discount rate) % 64.1 67.3 FY18 FY19 Net commission ratio % 16.4 15.6 Expense ratio % 15.2 14.6 COR (ex discount rate) % 95.7 97.5 ~A$1B ~A$1B Net investment yield (ex discount rate) %
Slide 15: Continued attritional claims ratio improvement
~2% • Continued attritional claims ratio improvement 97.5% ~1% • Large risk and cat in line with allowance 95.7% ~1% • PYD adverse $22M/(0.2)% (FY18 positive $92M/0.8%) • Crop COR of 107.5% (FY18 84.4%) • Expense ratio improving FY18 Change in Reduced PYD Crop impact Attritional Expenses Other FY19
Slide 16: Australia Pacific results
+ = 3% from FY182 93.7% (3.4)% 92.9% (2.9)% 90.3% 90.0% 92% FY18 90.3% FY18 FY19 FY18 FY19 FY18 FY19 FY18 55.3% • Attritional claims ratio improved 4.2%3 (10.9% since 1H16) • Catastrophe costs up 2.6% driven by Townsville floods and December bushfires • LMI COR of ~58%; outlook stabilising 1. Exclud
Slide 17: International results
+ = 5% from FY182 0.6% 0.3% 95.9% 95.3% 95.4% 95.1% 92% FY18 95.9%4 FY184 FY19 FY185 FY193,6 FY184 FY193 FY18 46.1%4 • Attritional claims ratio improved 3.0%4 • Large individual risk claims higher than allowance • Combined acquisition costs ratio improved by 1.3% 1. Excludes the impact of changes in
Slide 18: North America results
+ = 3% from FY182 2.8% 106.5% 103.7% Normalised result 98.5% 98.5% 0.2% 98.7% FY18 98.7% FY18 FY19 FY184 FY194 FY18 FY19 FY18 49.9% • Strong premium rate momentum (2H19 7.7%) • Small weather events impacted attritional claims ratio by 1.6%3 • 1.6% improvement in expense ratio 1. Excludes the impact
Slide 19: Expense ratio and savings targets
$1,959M $1,922M $1,793M $1,690M 15.7% 16.5% 15.2% 14.6% 14.6% FY16 FY17 FY18 FY19 ~$70M underlying savings >$200M gross savings by 2021 Expense ratio 14.6% (FY18 15.2%) ~$130M net reduction in expenses by 2021 $43M restructuring costs Target expense ratio <14% by 2021 1. Continuing operations and ad
Slide 20: Investment returns and portfolio
4.6% 3.7% 11.8% Impact of movement in risk-free rates 2.3% 3.6% 2.2% 6.2% 1.8% FY18 FY19 FY18 FY19 FY18 FY19 $24.4B $24.4B • Strong FI returns of 3.7% (FY18 1.8%) $22.9B • FI duration 2.6yrs (FY18: 2.1yrs, FY17: 1.6yrs) • Pro-forma running yield around 1.75%3 • Growth asset returns of 11.8% (FY18 6.
Slide 21: S&P capital remains above AA level
$3.6B A $3.2B $3.1B BBB AA 1.78x1.20 1.12 1.12 1.71x AAA 1 2 FY18 Asset risk Capital FY19 FY17 FY18 FY19 charges distributions Debt to Regulatory capital remains above the S&P Capital remains above ‘AA’ level Equity: 40.8 38.0 38.0 mid point of our 1.6x-1.8x target range Debt to Total Capital: 29.0
Slide 22: Outlook
Outlook
Slide 23: 2020 outlook: combined operating ratio and investment return
COMBINED OPERATING RATIO 93.5% – 95.5%1,2 INVESTMENT 2.5% – 3.0%1 RETURN 1. Assumes risk-free rates as at 31 December 2019 2. Excludes $30M one-off regulatory costs and other costs and the remaining $52 million of restructuring charges
Slide 24: Questions & Answers
Questions & Answers
Slide 25: Disclaimer
The information in this presentation provides an overview of the and other factors, many of which are beyond the control of QBE results for the year ended 31 December 2019. that may cause actual results to differ materially from those either expressed or implied in such statements. There can be no T
Slide 26: Appendices
Appendices
Slide 27: Investments and premium by currency
FY18 FY19 $M % $M % US dollar 7,185 31% 8,292 34% Australian dollar 6,678 29% 6,502 27% Sterling 4,144 18% 4,029 17% Euro 2,541 11% 3,054 12% Canadian dollar 1,055 5% 1,180 5% New Zealand dollar 418 2% 409 1% Hong Kong dollar 371 2% 366 1% Singapore dollar 165 1% 195 1% Other 330 1% 347 2% Total 22,
Slide 28: North America financial summary
FY18 FY19 Gross written premium $M 4,711 4,637 • Excluding disposals, GWP growth was around 3% Gross earned premium $M • NEP grew by ~4% primarily due to growth in Crop coupled with lower 4,612 4,646 reinsurance costs following the restructure of the Group’s reinsurance program Net earned premium $M
Slide 29: International financial summary
FY181 FY192 Gross written premium $M 4,876 4,924 • GWP increased 4% on a constant currency basis, reflecting the positive pricing environment and targeted growth, as well remediation activities in Gross earned premium $M 4,889 4,739 Asia • Average renewal rate increases of 6.0% (FY18 4.1%); European
Slide 30: Australia Pacific financial summary
FY18 FY19 Gross written premium $M 4,104 3,920 • GWP increased 3% on a constant currency basis (excluding travel disposal) reflecting premium rate increases across majority of the portfolio and Gross earned premium $M 4,103 3,885 targeted growth in selected portfolios • Average renewal rate increase
Slide 31: Balance sheet summary
31 DEC 2018 31 DEC 2019 $M $M Investments and cash 22,887 24,374 • Adverse prior accident year claims development of Trade and other receivables 5,185 4,621 $22M1 (FY18 $92M2 favourable) Intangibles 2,800 2,791 • $231M adverse risk-free rate impact Other assets 1,497 1,238 (FY18 $13M positive) Asset
Slide 32: APRA regulatory capital
31 DEC 20181 31 DEC 20192 $M $M Ordinary share capital and reserves 8,400 8,153 Net surplus relating to insurance liabilities 818 718 Regulatory adjustments to Common Equity Tier 1 Capital (3,311) (3,326) Common Equity Tier 1 Capital 5,907 5,545 Additional Tier 1 Capital – Capital securities 399 399
Slide 33: Reinsurance program
• Equator Re quota share protection significantly reduces $500M xs $2.8B claims volatility Worldwide • Low catastrophe retention • Protection against catastrophe severity and frequency $300M xs $2.5B of medium-sized catastrophes Worldwide • Protection against large individual risk claim severity • I
Slide 34: QBE
QBE
Slide 35: QBE international general insurance and reinsurance company
QBE is an international general insurance and reinsurance company, with meaningful operations in the major insurance hubs. QBE is listed on the Australian Securities Exchange and headquartered in Sydney, Australia. QBE is a specialty property and casualty insurer and reinsurer, with primary focus on
Slide 36: Capital and credit ratings highlights
• PCA multiple at 1.71x (1.6x-1.8x target range) • Remains above S&P ‘AA’ minimum levels • Shareholder returns of A$976M (including share buyback) • S&P, Moody’s, Fitch and AM Best affirmed QBE Group’s credit ratings • Ratings are supported by the Group’s globally diversified multiline business, str
Slide 37: Credit ratings
Long term Debt issue Rating FSR1 ICR2 Outlook affirmation A+ A- Stable May 2019 A (excellent) bbb+ Stable July 2019 A+ A- Stable July 2019 A1 A3 Stable April 2019 1. Insurance Financial Strength ratings (FSR) : reflects ability of an insurer to meet its obligations and claims. FSR is applicable to o
Slide 38: Debt maturity profile
weighted average maturity: 4.5 years Weighted average maturity: 21.2 years (ex AT1) 300 6 696 696 522 522 433 400 399 433 400 399 300 140 199 140 199 6 2020 2021 2022 2023 2024 2025 2026 2023 2040 2041 2042 2043 2044 2045 2046 Perp AT1 T2 Senior AT1 T2 Senior Outstanding value Issued debt Issue date
Slide 39: Regulatory capital tiers and loss absorption
Common Additional • All Additional Tier 1 and Tier 2 must include loss absorption provisions Tier 2 Equity Tier 1 Tier 1 (via conversion or write-down) upon a non-viability trigger event • Both sequential (loss absorption hierarchy) and partial loss absorption amongst parity securities are permitted
Slide 40: Capital instrument requirements: Australia and EU
AUSTRALIA LAGIC EU SOLVENCY II Instrument class Additional Tier 1 Tier 2 Restricted Tier 1 Tier 2 Permitted, no earlier Step-ups permitted No No No “An Additional Tier 1 Capital or Tier 2 Capital instrument than Year 10 must include a provision under which, on the occurrence of a non-viability trigg
Slide 41: Our Sustainability Framework
Our Sustainability Framework helps us drive performance, manage risks and identify opportunities across the areas of sustainability that are most important to our business, customers and stakeholders See the Sustainability section of our website for more information.
Slide 42: Sustainability commitments and climate actions
Developed a Group Energy Policy to support an orderly transition to Deliver on our ambition to grow our impact investments a lower carbon global economy to $2 billion by 2025. Refer to the Premiums4Good section of our website for more information Joined RE100 and committed to sourcing 100% renewable