Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Citigroup Conference – London 2008
23 slides from Qbe Insurance's conference presentation, Mar 10, 2008
Slide 1: ASX cover letter for CEO presentation
QBE INSURANCE GROUP LIMITED ABN 28 008 485 014 82 Pitt Street Sydney NSW 2000 For personal use only Postal Address GPO Box 82 Sydney NSW 2001 10 March 2008 Telephone: (02) 9375 4444 Facsimile: (02) 9231 6104 DX 10171 Sydney Stock Exchange The Manager Company Announcements ASX Limited Level 6 Exchang
Slide 2: QBE Insurance Group – Citigroup Conference London
For personal use only QBE INSURANCE GROUP Presented in week commencing 10 March 2008 Citigroup Conference – London Goldman Sachs JB Were – New York Presented by Frank O’Halloran CEO, QBE Insurance Group All amounts in Australian dollars unless otherwise stated.
Slide 3: QBE performance post WTC
QBE performance post WTC – six successive years of top and bottom line growth For personal use only 100.0% 30.0% A$12.4bn 98.0% 25.0% 96.0% A$10.4bn A$9.4bn Combined Operating Ratio 94.0% A$8.8bn A$8.4bn 20.0% Return on equity 92.0% A$7.7bn 90.0% 15.0% 88.0% 10.0% 86.0% 84.0% 5.0% 82.0% 80.0% 0.0% 2
Slide 4: 2007 profit targets exceeded, but gross premium hit by strong A$
QBE performance 2007 profit targets exceeded, but gross premium hit by strong A$ For personal use only 2006 actual 2007 target 2007 actual % % % Gross written premium growth A$ 10.0 Close to 30.0 20.0 Gross written premium growth US$* 9.0 N/A 33.0 Insurance margin 21.9 17.5 to 18.5 22.2 Investment y
Slide 5: Highlights year ended December 2007
Highlights year ended 31 December 2007 For personal use only • Record net profit after tax, up 30% to $1,925 million (2006: $1,483 million) • Insurance profit up 27% to $2,262 million (2006: $1,788 million) or 22.2% of net earned premium (2006: 21.9%) after the adverse impact of lower US and UK disc
Slide 6: Highlights year ended December 2007
Highlights year ended 31 December 2007 For personal use only • Gross written premium growth mainly due to 2007 acquisitions supported by high retention of business • Gross written premium growth lower than original target of 30%, adversely affected by appreciation of A$ (6%), reduced inward reinsura
Slide 7: Analysis of claims incurred
Analysis of claims incurred restated to include the US acquisitions for all years For personal use only 2007 2006 2005 % % % Net claims ratio (1) 54.4 57.7 60.5 Analysis of claims ratio: - attritional 47.7 47.4 48.5 - large and catastrophe (2) 6.6 8.9 10.1 - risk margin upgrade 0.1 1.4 1.9 54.4 57.7
Slide 8: Highlights year ended December 2007
Highlights For personal use only year ended 31 December 2007 • Additional risk margins of $206 million were taken up in risk margins in outstanding claims to support a probability of adequacy at 94.0%. We believe this is appropriate given the current economic climate • Risk margins likely be used to
Slide 9: Worldwide operations
Worldwide operations year ended 31 December 2007 For personal use only GWP Growth COR Net profit after tax 2007 2007 2007 2006 2007 2006 $m % % % $m $m Australia 2,596 4 82.9 82.9 445 387 Asia Pacific 583 - 82.7 82.7 89 73 QBE Insurance Europe 2,503 (5) 92.1 88.9 341 399 Lloyd’s division 2,634 (3) 7
Slide 10: Worldwide portfolio mix
Worldwide portfolio mix gross earned premium - year ended 31 December 2007 For personal use only Professional indemnity Marine, energy and aviation 6.9% (9.0%) 9.9% (11.4%) Workers’ compensation 8.4% (8.1%) Financial and credit 2.0% (2.5%) Property 26.2% (26.3%) Liability 19.6% (19.3%) Other Acciden
Slide 11: Dividend performance
Dividend performance For personal use only • Full year 2007 dividend payout up 38% to $1,069 million or 1100 55% of net profit after tax 122.0 1000 • Dividends per share for 2007 up 28% to 122 cents • Compound annual average growth in dividend payout over 900 10 years was 27.5% 800 95.0 700 Dividend
Slide 12: Balance sheet
Balance sheet 31 Dec 2007 31 Dec 2006 $m $m ASSETS For personal use only Investments and cash 24,606 19,972 Receivables 4,876 3,934 Recoveries on outstanding claims 4,360 3,624 Deferred insurance costs 1,683 1,409 Intangibles 2,493 1,475 ABC financial assets pledged for funds at Lloyd’s 900 995 Fixe
Slide 13: Net invested funds
Net invested funds 31 Dec 2007 31 Dec 2006 For personal use only $m % $m % Cash 988 4.0 1,019 5.1 Short term money 16,317 66.3 10,040 50.3 Fixed interest securities and other 5,552 22.6 7,134 35.7 Equities 1,656 6.7 1,741 8.7 Investment properties 93 0.4 38 0.2 Total investments and cash (1) 24,606
Slide 14: Balance sheet – Receivables
Balance sheet Receivables For personal use only • Premium and reinsurance receivables over 90 days have decreased compared with last year with conservative provisions held for doubtful debts. Continued low bad debt experience. • Reinsurance recoveries on outstanding claims increased to $4.4 billion
Slide 15: Insurance liabilities
Insurance liabilities For personal use only 2007 2006 2005 2004 2003 Outstanding claims QBE’s record of claims development demonstrates our prudent management of claims Prior year release – net undiscounted $m 931 528 618 140 44 Total net outstanding claims (discounted) $m 13,871 11,645 10,870 9,462
Slide 16: Balance sheet – Borrowings
Balance sheet For personal use only Borrowings • Borrowings* increased by $1,094 million to $3,458 million to assist funding US acquisitions • Borrowings* to shareholders’ equity 40.8% (2006: 37.6%) • Debt* is 9% short term, 71% long term subordinated debt and 20% hybrid securities • Weighted averag
Slide 17: Major acquisitions by division since 2003
Potential gross annual APACE Americas European Major acquisitions by premium A$m operations division since 2003 Syn. 980 Ensign 320 Reliance Brazil - Aon portfolio 5 For personal use only ING Australian JV 650 Tolson Messenger 12 • Acquisition strategy 32 Zurich Singapore - bolt-ons Australian u/w a
Slide 18: Company history
Company history QBE has a history of growth and profitability supported by over 100 acquisitions in the past 25 years For personal use only Gross Gross COR Insurance Insurance Total Net profit written written profit profit investments after tax premium premium margin . . . % A$m US$m (2) % A$m A$m A
Slide 19: 2008 outlook
2008 outlook For personal use only Subject to no material movement in budgeted exchange rates; large individual risk and catastrophe claims not exceeding the allowance in our business plans; no major fall in equity markets or interest rates; and regulatory approvals for acquisitions, we expect: • gr
Slide 20: 2008 outlook
2008 outlook For personal use only • a combined commission and expense ratio of 31.5% or less • income tax expense to continue to benefit from income in lower tax paying jurisdictions – target 24% of pre-tax profit • the probability of adequacy of outstanding claims, after US acquisitions, to be mai
Slide 21: History of premium income - a growth story
History of premium income - a growth story For personal use only $ Bn 14 12 Compound average growth rates over last 10 years: - gross earned premium 21.3% GEP $12.4 Bn 10 - net earned premium 21.5% 8 NEP $10.2 Bn 6 4 2 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20 QBE INSURANCE GROUP
Slide 22: Summary
Summary For personal use only • Excellent 2007 results • Strong balance sheet • History of growth • History of successful acquisitions and pipeline • Quality geographic and product diversification • Solid 2008 outlook excluding acquisition but be aware of impact of rising A$ 21 QBE INSURANCE GROUP
Slide 23: www.qbe.com
For personal use only QBE INSURANCE GROUP www.qbe.com 22
QBE Insurance Group — Citigroup Conference – London 2008 on 6ix