Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2016 Earnings Presentation
34 slides from Qbe Insurance's earnings presentation, Aug 17, 2016
Slide 1: ASX cover letter: QBE results presentation for half year ended 30 June 2016
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.gbe.com 17 August 2016 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Stre
Slide 2: QBE Insurance Group 2016 half year results presentation
For personal use only 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 3: John Neal, Group Chief Executive Officer
For personal use only John Neal Group Chief Executive Officer 2
Slide 4: 1H16 Results Snapshot
1H16 RESULTS SNAPSHOT For personal use only 3
Slide 5: Progress on our strategic agenda
PROGRESS ON OUR STRATEGIC AGENDA For personal use only 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 $2
Slide 6: Progress in North American operations
PROGRESS IN NORTH AMERICAN OPERATIONS For personal use only 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 CUS
Slide 7: 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 For personal use only • 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
Slide 8: Comprehensive program of remedial actions underway in Australia
COMPREHENSIVE PROGRAM OF REMEDIAL ACTIONS UNDERWAY IN AUSTRALIA For personal use only 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 ma
Slide 9: Pat Regan, Group Chief Financial Officer
For personal use only Pat Regan Group Chief Financial Officer 8
Slide 10: 1H16 Financial Results Summary
1H16 FINANCIAL RESULTS SUMMARY For personal use only 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 $M 610 326 Insurance profit to NEP % 10.0 5.8 Prof
Slide 11: 1H16 Divisional Results
1H16 DIVISIONAL RESULTS For personal use only North Australia & Emerging 1H16 America Europe New Zealand Markets Equator Re Group GWP ($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
Slide 12: Key Performance Drivers
KEY PERFORMANCE DRIVERS For personal use only (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 13: Investment Performance by Asset Class
INVESTMENT PERFORMANCE BY ASSET CLASS For personal use only 12
Slide 14: Financial Strength
For personal use only FINANCIAL STRENGTH 13
Slide 15: Outlook
For personal use only Outlook John Neal Group Chief Executive Officer 14
Slide 16: Updated 2016 Financial Targets
UPDATED 2016 FINANCIAL TARGETS For personal use only 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 develop
Slide 17: Key Priorities for 2H2016
KEY PRIORITIES FOR 2H2016 For personal use only 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
Slide 18: Questions & answers
For personal use only Questions & answers 17
Slide 19: Disclaimer
DISCLAIMER For personal use only 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 l
Slide 20: Appendices
For personal use only 19 Appendices
Slide 21: 1H16 Claims Ratio Analysis
1H16 CLAIMS RATIO ANALYSIS For personal use only 2015 2016 1H15 2H15 FY15 1H16 NEP $M 6,229 6,085 12,314 5,615 Attritional claims % 54.2 49.5 51.9 54.5 Large individual risk and catastrophes % 8.9 8.5 8.7 9.8 Claims settlement costs % 2.8 3.2 3.0 3.0 Claims discount % (6.6) (1.1) (3.9) (1.3) Acciden
Slide 22: 1H16 Attritional Claims Ratio Analysis
1H16 ATTRITIONAL CLAIMS RATIO ANALYSIS For personal use only 1H15 1H16 NEP Attritional NEP Attritional US$M % US$M % 5,607 (1)48.0 5,484 51.1 Rest of world US multi-peril crop insurance 216 85.1 307 83.1 M&LS (2) 261 39.7 - - UK long tail liability reinsurance premium - - (176) - QBE Group adjusted
Slide 23: 1H16 Movement in Weighted Average Discount Rate
1H16 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2015 31 Dec 2015 30 June 2016 Australian dollar 2.43 2.37 1.77 US dollar 1.59 1.80 1.20 Sterling 1.53 1.47 0.56 Euro 0.75 0.59 (0.16) Group weighte
Slide 24: 2016 Premium Outlook
2016 PREMIUM OUTLOOK For personal use only 2016 revised 2016 revised target target 2016 previously stated 2016 previous stated GWP(1)(2) GWP target NEP(1)(3) NEP target North America 4.5 4.8 3.5 3.6 Europe 4.1 4.3 3.2 3.4 Australia & New Zealand 3.7 3.5 3.3 3.1 Emerging Markets 1.6 1.8 1.3 1.4 Equat
Slide 25: FX Rates versus US$
FX RATES VERSUS US$ For personal use only 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
Slide 26: North America
NORTH AMERICA For personal use only 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 di
Slide 27: Europe
EUROPE For personal use only 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
Slide 28: Australia & New Zealand
AUSTRALIA & NEW ZEALAND For personal use only 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 constan
Slide 29: Emerging Markets
EMERGING MARKETS For personal use only 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 Ma
Slide 30: Equator Re
EQUATOR RE For personal use only 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
Slide 31: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY For personal use only 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 Intangible
Slide 32: APRA PCA Calculation
APRA PCA CALCULATION For personal use only $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 Capi
Slide 33: Borrowings
BORROWINGS For personal use only • $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 34: QBE's 2016 Global Reinsurance Program
QBE’S 2016 GLOBAL REINSURANCE PROGRAM For personal use only 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 Equato