Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2020 Earnings Presentation
41 slides from Qbe Insurance's earnings presentation, Feb 19, 2021
Slide 1: QBE Presentation on the 2020 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 19 February 2021 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: QBE Insurance Group 2020 full year results
| eee eae ys Se a ae QBE INSURANCE GROUP LIMITED 2OZO full year results Friday 19 February 2021 © QBE All figures in US$ unless otherwise stated (a
Slide 3: Richard Pryce
Richard Pryce
Slide 4: Momentum accelerating – Capital above S&P 'AA' level
Combined operating ratio FY20 average rate increase 9.8% Net investment return of 0.9%6 Strong balance sheet 104.2%1 COR 98.6%1 (ex. COVID-19) Momentum accelerating – 3Q20: Credit spreads narrowed Regulatory capital at 1.72x, above 9.8% and 4Q20: 12.6% significantly in 2H20 the mid-point of our rang
Slide 5: Premium, combined operating ratio and claims trends
$16B 9.8% 104.2% 14,685 5.6% COVID-19 $14B 13,328 13,657 13,442 97.5% 6.3% FX 5.0% 98.6% $12B 98.6% 1.8% $10B FY17 FY18 FY19 FY202 FY17 FY18 FY19 FY20 FY19 FY20 Post-GLRC 0.8% 53.1% 0.1% 50.2% 15.4% 13.7% 11.9% (0.2%) 47.5% 9.8% 10.3% 3.7% [1.71x] 5.8% Cat 44.6% 4.4% 8.2% 7.9% Large 5.1% 5.4% (3.1%)
Slide 6: Strong premium rate increases globally
11.3% • Strong premium rate increases globally 8.7% 8.3% • Material increase in pricing momentum across 2020, particularly in North 12.6% 10.2% 9.8% America and International 9.2% 7.5% 7.3% • Australia Pacific pricing momentum impacted by COVID-19 response 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 77% 78% 79% 8
Slide 7: +10% growth in gross written premium
$15B +6% +12% $14B +13% $13B $14,685M $13,442M $12B +10% growth $11B 1 2,3 2,3 2 FY19 FX Disposals North America International Australia Pacific FY20 1. Continuing operations basis 2. Excludes impact of COVID-19 3. Restated for the transfer of North America’s inward reinsurance business to Internati
Slide 8: Attritional claims ratio improvement
51.0% 50.2% 50.0% • 9.7%3 improvement from 54.3% peak in 2H17 49.0% 47.5% • Continued improvement across all divisions 48.0% 47.0% › Significant improvement in International reflects strong pricing momentum 46.0% 45.0% › Slightly positive impact from COVID-19 net of frequency benefits 44.6%3 44.0% 4
Slide 9: COVID-19 estimated net cost
$785M $130M FY21 estimate $24M $26M $60M $25M $185M $300M Risk margin Premium & $655M $95M expenses FY20 impact $335M $260M Claims 1H20 Risk margin Trade credit LMI Casualty Other2 Estimated ultimate net cost 1. Net of COVID-19 frequency benefits and reinsurance 2. Includes premium, expenses, Austra
Slide 10: COVID-19 exposure by line
Exposure minimal Exposure understood and protected Exposure uncertain - downside protected • Special leave sought to appeal • Requires physical damage AND all • UK insurance BI claims capped at Quarantine Act ruling, additional test policies have explicit virus exclusions $70M net cases on policy wo
Slide 11: Inder Singh
Inder Singh
Slide 12: Group financial results summary
FY191 FY20 FY20 (ex. COVID-19) Gross written premium $M 13,442 14,643 14,685 Net earned premium $M 11,609 11,708 11,785 Net claims ratio (ex discount rate) % 67.3 73.1 67.8 Net commission ratio % 15.6 16.1 16.1 Expense ratio % 14.6 15.0 14.6 COR (ex discount rate) % 97.5 104.2 98.6 Net investment yi
Slide 13: Group combined operating ratio bridge
1 + + + + = 10% from FY192 5.6% 104.2% 10 2.0 COVID-19 Impact 98.4% 0.2% 3.1% 0.4% Nil 97.5% 97 .0 (0.9%) 1.1% (0.2%) 98.6% 94.0% 92 .0 87 .0 FY19 97.5%4 82 .0 4 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 1 98.4% FY19 47.5% 94.0% FY19 Attritional Large Expenses Crop Commission Other
Slide 14: North America results
+ + + = 2 13% from FY193 3.0% 115.7% COVID-19 9.0% Impact 112.7% 1.9% Nil 105.6% 103.7% Nil 3.4% 100.3% FY19 105.6% FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 2 • Attritional claims ratio improved by 2.4%5 FY19 48.7% • Large individual risk claims ratio increased by 2.3%2 • $305M PYD from E&S
Slide 15: International results
+ + + = 12% from FY193 98.4% 1.3% Nil 96.8% 3.2% 94.5% (2.9%) COVID-19 90.6% 1.7% Impact 91.3% (1.0%) FY19 96.8%5 5 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 2 • Attritional claims ratio improved 4.0%2 FY19 44.2% • Large individual risk and catastrophe claims below allowance • COVID-19 impac
Slide 16: Australia Pacific results
+ + + = 6% from FY191 5.0% 97.8% COVID-19 0.9% 1.8% 92.0% 91.5% (0.5%) Nil 90.0% 92.8% (2.9%) FY19 90.0% FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 4 • Attritional claims ratio improved 1.7%3,4 (~14.3% since 1H16) FY19 51.1% • Catastrophe costs up 1.3%4 vs FY19 driven by summer bushfires and
Slide 17: ~$125M net cost savings achieved since 2018
• ~$125M net cost savings achieved since 2018, (one year $1,793M ahead of three year FY21 target of $130M): 15.2% 1,793 $1,690M Run rate 14.6% $1,690M1,2 1,690 ~14.3% expenses 1,6903,4 Operating model Streamlining Tactical savings North America • Next phase of cost savings driven by IT modernisation
Slide 18: Investment portfolio and FY20 exit return
FUM $24.4B $27.7B 2.2% Credit spread 100% 100% 0.4% A to BBB within BBB contribution Other 1% Unlisted 7% 7% 1.5% investments1 Equities 2% 15% 0.4% Sub-IG FI2 4% “Exit” 4% Wtd avg ~0.9% 10% 1.8% total risk-free rate 93% return5 Investment 1.1% 0.4% 86% Grade (IG) FI 6% 1% 0.3% 2% 0.1% FY19 FY20 Barc
Slide 19: Capital, reinsurance and regulatory capital position
$2.3B $3.6B MPCI 1.72x $1.6B QS 1.71x $3.2B $3.1B $1.5B Other1 $2.8B $1.0B $0.6B $0.7B Group 3 FY19 Crop US peak Syndicate Equator Other FY20 FY17 FY18 FY19 FY20 FY19 FY202 buy-down 1036 Re QS & TWA • Crop hail 90% quota share renewed to reduce • Regulatory capital remains above the mid Debt to 40.8
Slide 20: Richard Pryce
Richard Pryce
Slide 21: Maximise rate opportunity, targeted growth, portfolio optimisation
Maximise rate opportunity Targeted and disciplined growth Sharpen portfolio optimisation
Slide 22: FY21 outlook and combined operating ratio
98.4% • COVID-19 related economic uncertainty ~95% • Premium rate in excess of claims inflation 94.0% • PYD – reserves strengthened but lingering inflation uncertainty • Risk margins – recent strain exacerbated by lower risk-free rates FY19 Attritional Crop Large Other FY20 Cat R/I cost Crop FY20 al
Slide 23: Questions & Answers
Questions & Answers
Slide 24: 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 full year ended 31 December 2020. that may cause actual results to differ materially from those either expressed or implied in such statements. There can be
Slide 25: Appendices
Appendices
Slide 26: Investments and premium by currency
FY19 FY20 $M % $M % US dollar 8,292 34% 9,128 33% Australian dollar 6,502 27% 7,420 27% Sterling 4,029 17% 4,738 17% Euro 3,054 12% 3,751 13% Canadian dollar 1,180 5% 1,335 5% New Zealand dollar 409 1% 460 2% Hong Kong dollar 366 1% 372 1% Singapore dollar 195 1% 192 1% Other 347 2% 339 1% Total 24,
Slide 27: North America financial summary
FY19 FY202 • GWP growth 13%2,4, reflecting strong growth in Crop, property programs and Accident & Health (A&H) Gross written premium $M 4,361 4,775 - average renewal premium rate increase 10.2% 5 (FY19 5.7%5) Gross earned premium $M 4,375 4,551 - premium retention 73% (FY19 68%) Net earned premium
Slide 28: International financial summary
FY19 FY202 • GWP was up 12%2,4 reflecting accelerating pricing momentum and emerging Gross written premium $M 5,200 5,856 new business opportunities Gross earned premium $M - average renewal premium rate increase 12.8% (FY19 6.0%) 5,010 5,542 - premium retention 83% (FY19 80%) Net earned premium $M
Slide 29: Australia Pacific financial summary
FY19 FY201 • GWP was up 6%3 reflecting a moderation in pricing, and a deterioration in Gross written premium $M 3,920 4,079 economic conditions which impacted income in product lines where premiums adjust to turnover and/or payroll Gross earned premium $M 3,885 3,985 - average renewal premium rate i
Slide 30: Balance sheet summary
31 DEC 2019 31 DEC 2020 $M $M • ~$100M allowance for potential future COVID-19 related claims within Investments and cash 24,374 27,735 premium liabilities Trade and other receivables 4,621 5,760 • $344M risk margin strengthening (FY19 $23M release) Intangibles 2,791 2,534 - including $300M COVID-19
Slide 31: APRA regulatory capital
31 DEC 20191 31 DEC 20202 $M $M Ordinary share capital and reserves 8,153 7,606 Net surplus relating to insurance liabilities 718 1,194 Regulatory adjustments to Common Equity Tier 1 Capital (3,326) (3,125) Common Equity Tier 1 Capital 5,545 5,675 Additional Tier 1 Capital – Capital securities 399 8
Slide 32: 2021 reinsurance program
• Cat Top or Drop or Non-Peak1 US and Australia Non-Peak1 attachment increased to $175m $500m xs $2.9bn • US Peak Buy-Down Worldwide Attachment increased from $150m to $200m • Cat Top Layer $300m xs $2.6bn New purchase for 2021 Worldwide • Cat Top or Wrap or Agg $100m xs $2.5bn 1 Pre-paid Reinstatem
Slide 33: Fixed income
Fixed income investor update
Slide 34: Fixed income investor highlights
✓ QBE is one of Australia’s largest general insurance and reinsurance groups ✓ Diversified insurance operations across 27 countries ✓ ASX-listed and lead regulated by the Australian Prudential Regulation Authority (APRA) ✓ Robust capital with a PCA multiple of 1.72x1 ✓ QBE took decisive action to fo
Slide 35: QBE company overview
QBE is an international general insurance and reinsurance company, with substantial operations in North America, Europe and Australia. QBE also operates its captive reinsurer in Bermuda. QBE is listed on the Australian Securities Exchange, headquartered in Sydney, Australia and lead regulated by APR
Slide 36: PCA multiple at 1.72x
• PCA multiple at 1.72x1 (1.6x-1.8x target range) • Remains above S&P ‘AA’ minimum levels • S&P, Moody’s, Fitch and AM Best affirmed QBE Group’s credit ratings. Refer overleaf for updates on ratings • Ratings are supported by the Group’s globally diversified multiline business, strong market positio
Slide 37: Credit ratings
Long term Debt issue FSR1 ICR2 Outlook Effective date July A+ A- Stable 2020 December A1 A3 Negative 2020 December A+ A- Negative 2020 August A bbb+ Stable 2020 1. Insurance Financial Strength ratings (FSR) : reflects ability of an insurer to meet its obligations and claims. FSR is applicable to ope
Slide 38: Debt maturity profile and capital instruments
Weighted average maturity: 3.7yrs Pro forma weighted average maturity: 3.9yrs2 300 6 886 907 AT1 697 445 Tier 2 400 200 Senior 2021 2022 2023 2024 2025 2026 Balance sheet Issued instruments Issue date First call date Coupon Maturity date value3 ($M) Capital Notes Nov-17 May-25 5.250% Perp 393 Equity
Slide 39: Regulatory capital hierarchy and loss absorption
• All Additional Tier 1 Capital and Tier 2 Capital must include loss absorption provisions (via conversion or write-down) upon a non-viability trigger event Common Additional • Both sequential (loss absorption hierarchy) and partial loss absorption amongst Equity Tier 1 Tier 2 Capital Tier 1 Capital
Slide 40: 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 41: Sustainability achievements and commitments
Received A- in CDP disclosure, up from a B in 2019. Achieve our ambition to grow our impact investments to $2 billion by 2025. Refer to the Premiums4Good section of our website for more information. Joined the alliance committing to transition our investment portfolio to net-zero greenhouse gas emis