Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — 1H17 Earnings Presentation
32 slides from Qbe Insurance's earnings presentation, Aug 17, 2017
Slide 1: QBE Insurance Group 2017 half year results presentation
QBE Insurance Group 2017 half year results presentation John Neal • Group Chief Executive Officer Pat Regan • Group Chief Financial Officer Thursday 17 August 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: 1H17 Results Snapshot
1H17 RESULTS SNAPSHOT GWP NEP CLAIMS RATIO4 EXPENSE RATIO +3% growth1 +6% growth1 $7,892M2 $8,044M2 $5,791M3 $6,045M 61.3%3 63.1%5 16.1%3 15.2% 1H16 1H17 1H16 1H17 1H16 1H17 1H16 1H17 COR4 CAY COR6 INSURANCE MARGIN ROE 94.5%3 95.3%5 5.6%3 9.3%5 5.1% 8.8%5 97.9%3 97.1% 1H16 1H17 1H16 1H17 1H16 1H17 1
Slide 4: 1H17 Update
1H17 UPDATE • 95.3% combined operating ratio1,2 (1H16 94.5%)2,3 UNDERWRITING • 9.3% insurance profit margin1 (1H16 5.6%)3 PERFORMANCE • Sixth consecutive half of positive prior accident year development • ROE 8.8%1 (1H16 5.1%)`3 • Emerging Markets disappointed with COR of 110.8%2 (1H16 99.5%)2 OPERA
Slide 5: 1H17 Divisional Results
1H17 DIVISIONAL RESULTS Australia & North New Emerging 1H17 America Europe1 Zealand Markets Equator Re Group1,2 GWP ($M) 2,803 2,393 2,007 857 1,375 8,044 GEP ($M) 2,187 1,915 2,024 804 798 6,909 NEP ($M) 1,712 1,532 1,705 679 419 6,045 Net claims ratio (%) 66.8 53.3 63.6 64.9 68.7 62.7 Net commissi
Slide 6: Emerging Markets: Impacted by Higher Frequency of Mid-Sized Claims
EMERGING MARKETS: IMPACTED BY HIGHER FREQUENCY OF MID-SIZED CLAIMS ACROSS SEVERAL PORTFOLIOS COMBINED OPERATING RATIO1 VS PRIOR YEAR 0.8% 0.3% 110.8% 4.0% Despite the completion of the sale of Chile, flooding prior to sale 2 closure contributed to 5.0% the loss 1 < Asia Pacific 1.2% < Latin America
Slide 7: Comprehensive Program of Remedial Actions Underway in Asia Pacific & Latin America
COMPREHENSIVE PROGRAM OF REMEDIAL ACTIONS UNDERWAY IN ASIA PACIFIC & LATIN AMERICA ASIA LATIN PEOPLE & MAJOR TRADING PACIFIC AMERICA ORGANISATION PARTNERS • Revised pricing • Significant reduction in • Revert to two division models for property, acquisition costs structure to enhance marine and work
Slide 8: Key Performance Drivers
KEY PERFORMANCE DRIVERS 3% CONSTANT CURRENCY GWP GROWTH POSITIVE PRIOR ACCIDENT YEAR DEVELOPMENT 22 91 PoA stable at 89.5% 1.9% Average PYD 11 over the 6 halves 105 (77) 8,044 7,892 $132M $69M $196M $145M $107M $63M 1H161 FX/Other NA2 EO ANZO EM 1H171 2H14 1H15 2H15 1H16 2H16 1H17 Note: Excludes of
Slide 9: Pat Regan, Group Chief Financial Officer
Pat Regan Group Chief Financial Officer 9 •
Slide 10: 1H17 Financial Results Summary
1H17 FINANCIAL RESULTS SUMMARY For the half year ended 30 June 1H161,2 1H171,3 Change GWP $M 7,892 8,044 3%4 NEP $M 5,791 6,045 6%4 COR % 99.1 94.9 4.2ppt COR (ex discount rate) % 94.5 95.3 0.8ppt Insurance profit $M 324 562 73% Insurance profit to NEP % 5.6 9.3 3.7ppt Net profit after income tax $M
Slide 11: Australia & New Zealand – Remediation Momentum
AUSTRALIA & NEW ZEALAND – REMEDIATION MOMENTUM CONTINUES TO IMPROVE PROFITABILITY RATE MOMENTUM CONTINUES; RETENTION STABLE IMPROVEMENT IN ATTRITIONAL RATIO CLAIMS(EX RATIO LMI) 8.0% -4.2% 83.4% 83.1% 83.4% 6.0% 81.8% -3.3% 4.0% 85.8% 83.4% 1.7% 5.2% 2.0% 65.2% 58.7% 61.0% 62.0% 0.0% (2.0%) (0.1%) 1
Slide 12: Investment Performance
INVESTMENT PERFORMANCE FIXED INCOME DURATION (YEARS) QBE PORTFOLIO RETURN VS MARKET1 Market return QBE return 1.83 1.54 1.42 1.29 1.00 0.89 0.9 1.5 1.6 1.38 1.49 0.44 1.25 0.28 1.08 FY15 FY16 1H17 2H14 1H15 2H15 1H16 2H16 1H17 1. Asset weighted aggregation of all underlying asset classes and currenc
Slide 13: Financial Strength
FINANCIAL STRENGTH S&P CAPITAL CAPITAL 1H17 APRA PCA: 1.7x S&P maintain “positive” outlook CASH REMITTANCES DIVIDEND & SHARE BUYBACK 2017 interim dividend up 5% to 22 Australian cents per share 61% of cash profit, 30% franked $413M $379M $201M $648M $653M Share buyback active in 2H17 1H13 1H14 1H15
Slide 14: Outlook
Outlook John Neal Group Chief Executive Officer 14 •
Slide 15: Key Priorities for 2H17
KEY PRIORITIES FOR 2H17 • Maintain underlying improvement in ANZO PERFORMANCE • Execute on profit improvement plans in North America IMPROVEMENT • Maintain underwriting discipline in challenging European markets • Implement Asia Pacific underwriting remediation ASIA PACIFIC & • Strategic review of L
Slide 16: Questions & answers
Questions & answers ® QBE
Slide 17: Disclaimer
DISCLAIMER The information in this presentation provides an overview of the results for the half year ended 30 June 2017. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lodgements are availabl
Slide 18: Appendices
Appendices ® QBE
Slide 19: 1H17 Attritional Claims Ratio Analysis
1H17 ATTRITIONAL CLAIMS RATIO ANALYSIS 1H16 1H17 NEP Attritional NEP Attritional US$M % US$M % Rest of world 5,484 51.1 5,672 51.5 Crop insurance 307 83.1 373 80.6 QBE Group adjusted 5,791 52.8 6,045 53.3 19
Slide 20: 1H17 Claims Ratio Analysis
1H17 CLAIMS RATIO ANALYSIS 30 June 2016 30 June 2017 Statutory 1Adjusted Statutory 2Adjusted NEP $M 5,615 5,791 6,043 6,045 Attritional claims % 54.5 52.8 53.3 53.3 Large individual risk and catastrophes % 9.8 9.5 9.7 9.7 Claims settlement costs % 3.0 2.9 3.1 3.0 Claims discount % (1.3) (1.3) (1.8)
Slide 21: Currency Mix
CURRENCY MIX Currency mix of interest bearing financial assets 30 JUNE 2017 31 DECEMBER 2016 US$M % US$M % Australian dollar 7,043 27 7,993 32 US dollar 8,320 32 7,786 31 Sterling 4,819 19 4,473 17 Euro 2,473 10 2,104 8 Canadian dollar 1,025 4 941 4 Hong Kong dollar 484 2 497 2 New Zealand dollar 40
Slide 22: 1H17 Movement in Weighted Average Discount Rate
1H17 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2016 31 Dec 2016 30 June 2017 Australian dollar 1.77 2.26 2.17 US dollar 1.20 2.04 2.05 Sterling 0.56 0.68 0.80 Euro (0.16) 0.19 0.46 Group weighted average (ex Argentin
Slide 23: FX Rates versus US$
FX RATES VERSUS US$ June 2016 December 2016 June 2017 2017 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.75 0.73 0.72 0.74 0.77 0.75 0.75 GBP 1.33 1.43 1.23 1.35 1.30 1.26 1.26 EUR 1.11 1.12 1.05 1.11 1.14 1.08 1.08 ARS 0.07 0.07 0.06 0.07 0
Slide 24: North America
NORTH AMERICA 1H16 1H17 • Premium rates up 1% Gross written premium $M 2,818 2,803 • Current accident year underwriting profitability stable • Return to top-line growth with underlying GWP up 4%1 Gross earned premium $M 2,184 2,187 • Continued growth trajectory in Specialty, with GWP up 27% on the p
Slide 25: Europe
EUROPE 1H161 1H172 • Overall premium rates down 1%, reflecting a slight improvement from 1H16 Gross written premium $M 2,508 2,393 • Modest GWP growth on a constant currency basis Gross earned premium $M 1,930 1,915 • Targeted growth achieved in Continental Europe insurance portfolio and QBE Re Net
Slide 26: Australia & New Zealand
AUSTRALIA & NEW ZEALAND 1H16 1H17 Gross written premium $M 1,861 2,007 • GWP grew 5% on a constant currency basis reflecting 5% premium rate increases on the back of further rate increases in short-tail personal and Gross earned premium $M 1,871 2,024 commercial lines, coupled with improved risk sel
Slide 27: Emerging Markets
EMERGING MARKETS 1H16 1H17 • The result significantly impacted by adverse claims experience across a number of portfolios in Latin Gross written premium $M 850 857 America and Asia Pacific • Deterioration in COR to 110.8% from 99.5% due to Gross earned premium $M 793 804 increased frequency of mid-s
Slide 28: Equator Re
EQUATOR RE 1H16 1H17 • GWP up 22% driven by an increase in proportional Gross written premium $M 1,125 1,375 business underwritten to the divisions • NEP up 113% from the prior period, largely from growth Gross earned premium $M 583 798 in the proportional book and new bespoke treaties • Net claims
Slide 29: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY As at 31 Dec 2016 30 June 2017 Summary balance sheet $M $M • Favourable PYD of $107M1 Investments and cash 25,235 25,665 Reserving • $29M favourable discount rate impact • PoA of 89.5% (FY16 89.5%) Trade and other receivables 4,831 6,926 Intangibles 3,627 3,737 1. Ex
Slide 30: APRA PCA Calculation
APRA PCA CALCULATION FY161 1H172 $M $M Ordinary share capital and reserves 10,334 10,716 Net surplus relating to insurance liabilities 674 726 Regulatory adjustments to Common Equity Tier 1 Capital (4,441) (4,571) Common Equity Tier 1 Capital 6,567 6,871 Additional Tier 1 Capital - Capital securitie
Slide 31: Borrowings
BORROWINGS Borrowings profile (%) • $3,498M at 30 June 2017 Borrowings • Weighted average cost of borrowings 5.52% Repayment profile (%) Debt to • Ratio within 25% - 35% benchmark range 64 62 equity • Debt to tangible equity down to 50.5% 31
Slide 32: QBE's 2017 Global Reinsurance Program
QBE’S 2017 GLOBAL REINSURANCE PROGRAM 32