QBE Insurance Group Limited · ASX:QBE
QBE Insurance — Shareholder Meeting (April 2007)
51 slides from QBE Insurance's shareholder meeting presentation, Apr 4, 2007
Slide 1: 2007 Annual General Meeting
QBE INSURANCE GROUP 2007 Annual General Meeting 4 April 2007 All amounts in Australian dollars unless otherwise stated.
Slide 2: John Cloney, Chairman
John Cloney Chairman QBE INSURANCE GROUP 2
Slide 3: Results of proxy voting
Results of proxy voting A total of 2,920 valid proxy forms were received. The respective votes have been accumulated and summarised by Link Market Services Limited as set out below: Resolution For Against Open Abstain 2 496,695,188 31,083,594 3,420,675 441,991 3 520,381,703 5,279,139 1,983,321 419,0
Slide 4: Results
Results year ended 31 December 2006 • Record net profit after tax, up 36% to $1,483 million • Excellent technical and financial result supported by higher interest yields • Earnings per share, fully diluted for all hybrid securities, up 32% to 173.5 cents • Return on average shareholders’ funds was
Slide 5: Dividend
Dividend • Final dividend of 55 cents per share, up 45% • Final dividend 60% franked • Unfranked portion of dividends payable to non-resident shareholders will receive a Conduit Foreign Income tax credit and will not be subject to Australian withholding tax • Total dividend payout for 2006 was $774
Slide 6: Historical share price performance
Historical share price performance QBE Historical Share Price Performance - Last 20 Years $65.00 $60.00 QBE Share Price Performance QBE Share Price Performance Including Reinvestment of Dividends $55.00 ASX All Ordinaries Accumulation Index $50.00 $45.00 An investment in QBE has outperformed the ASX
Slide 7: Shareholders' funds
Shareholders’ funds • Total assets at the end of 2006 of $32 billion • Shareholders’ funds up 23% to $6.3 billion • Minimal foreign exchange impacts for QBE in 2006 • For 2007, a 1% appreciation or depreciation of the Australian dollar against all currencies is estimated to impact profit after tax b
Slide 8: Net invested funds
31 Dec 2006 31 Dec 2005 Net invested funds $M % $M % Cash 1,019 5.1 1,061 6.0 Short term money 10,040 50.3 8,292 47.1 Fixed interest securities and other 7,134 35.7 7,537 42.9 Equities 1,741 8.7 674 3.8 Investment properties 38 0.2 33 0.2 Total investments and cash 19,972 100.0 17,597 100.0 Borrowin
Slide 9: Borrowings
Borrowings • Issued $750 million of long term perpetual securities in September 2006 • These securities receive capital credit from regulatory and rating agencies • Borrowings* increased by $234 million to $2.4 billion in 2006 • Borrowings* to shareholders’ equity at end of 2006 was 38% (2005: 42%)
Slide 10: Capital adequacy
Capital adequacy • Capital adequacy multiple strengthened to an estimated 2.4 times the minimum capital requirement* • Large portion of excess capital will be used to fund recent acquisitions • Capital adequacy multiple estimated to be 2.0 times by end of 2007 • Main rating agencies confirmed A+ or
Slide 11: Acquisitions
Acquisitions • Long standing and successful strategy of growth through acquisition • Recently announced acquisitions of Praetorian Financial Group and Winterthur US expected to produce over $3.6 billion of premium income in the first full year • Total purchase price for the two acquisitions is $2.5
Slide 12: Corporate governance
Corporate governance • The annual report includes a number of statements on QBE’s corporate governance structure and risk management framework • Annual compliance costs for the Group continue to be around $100 million • QBE adopts practices which mitigate the risks of climate and other changes on ou
Slide 13: QBE people
QBE people • QBE is strongly focused on staff development, succession planning and the reward and retention of our quality people • Our culture and values are key to: - increasing the long term wealth of shareholders - ensuring customer satisfaction and retention - employee motivation - maintaining
Slide 14: QBE people
QBE people • Salary structures of our key employees include a large at risk component made up of 60% cash and 40% deferred compensation linked to QBE shares that vest in 3 to 5 years time • The success of our incentive schemes are best demonstrated by the extremely low turnover of senior employees a
Slide 15: Results for 1st quarter 2007
Results for 1st quarter 2007 • Subject to the usual caveats e.g. catastrophes and large losses not exceeding the significant allowances in business plans, material exchange rate movements and any unforeseen regulatory delays in completing the recent US acquisitions: – on track to meet our targeted f
Slide 16: Frank O'Halloran, Chief Executive Officer
Frank O’Halloran Chief Executive Officer QBE INSURANCE GROUP 16
Slide 17: QBE – a growth story
QBE – a growth story • Another rewarding year for shareholders with strong growth in premium income, record underwriting and after tax profits and conversion of acquisition opportunities • Core strategy over 25 years: – diversification through more than 95 acquisitions giving significant product and
Slide 18: QBE – a growth story
QBE – a growth story • Over past five years have converted acquisitions generating premium income slightly in excess of $7 billion • Premium growth in perspective: 1973/74 $78 million of gross written premium 1983 $298 million of gross written premium 1993 $1.0 billion of gross written premium 2003
Slide 19: Results for 2006
Results for 2006 • Record net profit after tax of $1.48 billion, a 36% increase from 2005 • Results assisted by a reduction in large individual risk claims and catastrophes representing 10.0% of net earned premium (2005: 11.7%) • Lower level of catastrophes in 2006 compared with 2005 substantially o
Slide 20: Results for 2006
Results for 2006 • All major operating divisions produced combined operating ratios of less than 90% and improved insurance profitability • Substantial majority of products and countries in which we operate produced strong underwriting profits • Gross written premium and net earned premium grew by 1
Slide 21: Results for 2006
Results for 2006 • Investment returns outperformed our internal investment benchmarks with gross investment income exceeding budget • Net investment income increased from $718 million to $822 million • Realised and unrealised gains on equities included in investment income reduced from $130 million
Slide 22: Balance sheet strength 2006
Balance sheet strength 2006 • Net outstanding claims of $11.6 billion include risk margins of $1.4 billion to give a probability of adequacy slightly in excess of 94% • A positive release of prior year claims over past ten financial years • Substantial releases from 2005 and prior years have been pu
Slide 23: Balance sheet strength 2006
Balance sheet strength 2006 • Ratio of borrowings* to shareholders’ funds reduced from 42% to 38% - will increase to around 43% following US acquisitions • Low risk investment portfolio* of $20 billion at year end - 8.7% in equities (currently 9.5%) - 91.1% in cash and fixed interest securities (cur
Slide 24: Acquisition initiatives
Acquisition initiatives • Acquisitions in 2006 and early 2007 will add approximately $4 billion of annualised gross written premium going forward • Acquisition initiatives in past year: - OneBeacon Agriculture division in US with expected gross written premium of $115 million in 2007 - General aviat
Slide 25: Distribution and other initiatives
Distribution and other initiatives • Commenced marketing more core products through distribution channels acquired in 2005 in Australia, France, Germany, Spain, the UK and the US • OPEN UP CLAIMS project designed to improve claims management • New IT projects • Increased utilisation of our captive r
Slide 26: Vince McLenaghan
Vince McLenaghan CEO - Australia Pacific Asia Central Europe (APACE) QBE INSURANCE GROUP 26
Slide 27: Australia Pacific Asia Central Europe (APACE)
Australia Pacific Asia Central Europe (APACE) year ended 31 December 2006 Australia PACE Total APACE 2006 2005 2006 2005 2006 2005 Gross written premium $M 2,491 2,431 727 691 3,218 3,122 Gross earned premium $M 2,428 2,405 704 688 3,132 3,093 Net earned premium $M 2,051 2,015 563 536 2,614 2,551 Cl
Slide 28: Steven Burns, CEO - European Operations
Steven Burns CEO - European Operations QBE INSURANCE GROUP 28
Slide 29: European Operations
European Operations year ended 31 December 2006 QBE Insurance Limit Total European (Europe) Operations 2006 2005 2006 2005 2006 2005 Gross written premium $M 2,502 2,558 2,711 2,236 5,213 4,794 Gross earned premium $M 2,586 2,370 2,475 2,273 5,061 4,643 Net earned premium $M 2,209 1,954 1,644 1,743
Slide 30: Tim Kenny
Tim Kenny President & CEO - the Americas QBE INSURANCE GROUP 30
Slide 31: the Americas
the Americas year ended 31 December 2006 2006 2005 Gross written premium $M 1,941 1,492 Gross earned premium $M 1,876 1,435 Net earned premium $M 1,153 843 Claims ratio % 55.9 60.0 Commission ratio % 25.6 25.5 Expense ratio % 8.2 7.4 Combined operating ratio % 89.7 92.9 Insurance margin % 13.9 10.3
Slide 32: Mark ten Hove
Mark ten Hove Group General Manager - Investments QBE INSURANCE GROUP 32
Slide 33: Investment division
Investment division • Investment portfolio of $20 billion held in over 100 portfolios in 44 countries and numerous currencies around the world • Investment performance exceeded internal benchmarks and actual investment income exceeded budget • Low risk, absolute return strategy will continue in 2007
Slide 34: US acquisitions
US acquisitions • Major acquisitions in 2006 and early 2007 were strategic moves for QBE at prices which are projected to be EPS accretive in year one • Expecting profit after tax and funding costs from the two acquisitions of $380 million in the first full year following completion • Also expecting
Slide 35: Expectations for 2007
Expectations for 2007 • Focus on a number of key profit drivers – retention of quality customers, better claims management, improved efficiencies and effective use of excess capital • Growth in the short term will be from acquisition of companies, insurance portfolios, distribution channels and unde
Slide 36: Expectations for 2007
Expectations for 2007 • Target insurance profit margin for 2007 is 17.5% to 18.5% of net earned premium • Allowance for large losses and catastrophes and increased risk margins of 14.0% of net earned premium • Reinsurance protections in place to ensure that largest single realistic disaster scenario
Slide 37: Expectations for 2007
Expectations for 2007 • Significant allowances in our business plans to achieve our targets • Insurance market - more discipline due to consolidation and shareholder, regulatory and rating agency pressure • First quarter large loss and catastrophe experience running below last year QBE INSURANCE GRO
Slide 38: QBE position in the market
QBE position in the market • In the top 25 insurance/reinsurance businesses around the world measured by gross written premium • In the top quartile of those insurers measured by underwriting profitability and return on equity • Minimum return on equity targets in many cases higher than maximum retu
Slide 39: Total employees
Total employees - APACE – 5,232 The Americas - 805 around 7,900 European Operations – 1,767 Investments - 49 Equator Re - 10 QBE INSURANCE GROUP 39
Slide 40: QBE Group executive team
QBE Group executive team Neil Drabsch Peter Grove Vince McLenaghan Blair Nicholls Duncan Ramsay Jenni Smith George Thwaites QBE INSURANCE GROUP 40
Slide 41: Thank you to my fellow employees
Thank you to my fellow employees for your loyalty, support and focus on delivering excellent returns to our shareholders during the past year QBE INSURANCE GROUP 41
Slide 42: Item 1: Receive and consider the financial statements
Item 1: Receive and consider the financial statements QBE INSURANCE GROUP 42
Slide 43: Item 2: Adopt the remuneration report
Item 2: Adopt the remuneration report QBE INSURANCE GROUP 43
Slide 44: Item 3: Increase the maximum aggregate fees payable to non-executive directors
Item 3: Increase the maximum aggregate fees payable to non-executive directors QBE INSURANCE GROUP 44
Slide 45: Item 4: Approval of conditional rights and options to the CEO
Item 4: Approval of conditional rights and options over the Company’s ordinary shares under the 2006 Deferred Compensation Plan to the Chief Executive Officer QBE INSURANCE GROUP 45
Slide 46: CEO's incentives
CEO’s incentives The CEO’s 2006 incentives are based on the achievement of a 29% ROE using QBE’s seven year spread basis of accounting. This exceeded the maximum hurdle rate of 21% ROE Over the period from 2002 to 2006: – the Company’s net profit after income tax has increased by on average of 52% p
Slide 47: Item 5: Re-election of Len Bleasel as a director
Item 5: Re-election of Len Bleasel as a director QBE INSURANCE GROUP 47
Slide 48: Len Bleasel
Len Bleasel • Non-executive director of QBE Group since January 2001 • Chairman of remuneration committee and member of audit committee • Chairman of ABN AMRO Australia Holdings Pty Ltd • Chairman of Zoological Parks Board of NSW and on the advisory boards of various charities Non-executive director
Slide 49: Item 6: Election of Duncan Boyle as a director
Item 6: Election of Duncan Boyle as a director QBE INSURANCE GROUP 49
Slide 50: Duncan Boyle
Duncan Boyle • Non-executive director of QBE Group since September 2006 • Member of audit and remuneration committees • Fellow of the Chartered Insurance Institute • 34 years of finance and insurance experience, working in Australia, New Zealand and the UK Non-executive director of QBE Group QBE INS
Slide 51: www.qbe.com
QBE INSURANCE GROUP www.qbe.com
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