Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2009 Earnings Presentation
33 slides from Qbe Insurance's earnings presentation, Aug 20, 2009
Slide 1: Cover letter to ASX for half year results
QBE INSURANCE GROUP LIMITED ABN 28 008 485 014 Head Office 82 Pitt Street For personal use only Sydney NSW 2000 AUSTRALIA Postal Address 20 August 2009 GPO Box 82 Sydney NSW 2001 AUSTRALIA Telephone: +61 (2) 9375 4444 The Manager Facsimile: +61 (2) 9231 6104 DX 10171 Sydney Stock Exchange Company An
Slide 2: 2009 Half Year Results Announcement
QBE QBE INSURANCE GROUP 2009 Half Year Results Announcement Presented by: Frank O'Halloran, CEO QBE Insurance Group Ltd, 20 August 2009 All amounts in Australian dollars unless otherwise stated, a
Slide 3: Overview: key takeaway messages
2 Overview: key takeaway messages Record first half year profit after tax Premium rates improved in all major markets Premium growth in original currency on track Solid investment returns despite market volatility Benefit of agency acquisitions reflected in lower acquisition cost ratios Increased ri
Slide 4: Overview: key takeaway messages
3 Overview: key takeaway messages Continued claims related to GFC from trade credit and other credit related insurance portfolios S&P recent extensive review — upgraded holding company credit rating to A stable outlook — main insurance subsidiaries, financial strength rating of A+ stable outlook con
Slide 5: Financial results on track
Financial results on track 7 2009 FY 2009 1H Actual 1H 2008 Target Comparative Profit after tax Greater than 2008 v +19% to $1.02bn $0.86bn Insurance profit margin 16% to 18% Lv] 17.5% 21.8% Combined operating ratio Less than 88% 89.3% 85.8% GWP and NEP increase Greater than 20% iy 22% and 21% 1% an
Slide 6: GFC impact on net profit before tax
GFC impact on net profit before tax 2009 1H 2008 1H $m $m Base net profit before tax 1,318 1,173 Credit related claims") (145) _ Net realised and unrealised equity losses (144) (86) Lower cash and fixed interest yields (115) _ FX gains 282 8 Profit on repurchase of QBE debt securities 66 _ Reported
Slide 7: Operational performance goals in line with plans
Operational performance goals in line with plans Customer retention remains high on quality renewal business [Y Premium rate increases of 4% in line with expected TV increase for the full year Contributions from 2008 acquisitions tracking on target in local currency [vy Surplus regulatory capital ov
Slide 8: Top line up 22% assisted by FX
Top line up 22% assisted by FX Reconciliation of gross written premium movements 2009 1H 2008 1H Prior period GWP 6,603 6,520 FX impact 1,105 (617) Acquisitions 264 760 Impact of rates & business gained/(lost) 85 (60) Actual GWP 8,057 6,603 Zz 1H 2009 Results QBE
Slide 9: Volatile exchange rate movements
Volatile exchange rate movements Cumulative average rate of Closing rate of exchange for the period to exchange as at 30 June 30June Movement* 30 June 31 Dec Movement 2009 2008 % 2009 2008 % USD 70.8 92.4 (23.4) 80.7 70.2 15.0 Sterling 47.4 46.5 1.9 49.0 48.1 1.9 Euro 52.9 60.3 (12.3) 67.5 50.2 14.5
Slide 10: Underwriting result analysis
Underwriting result analysis 2009 1H Ratio 20081H Ratio to $m to NEP $m NEP Attritional underwriting profit 1,276 20.6% 1,130 22.1% Large individual and catastrophe claims (612) (8.3%) (434) (8.5%) GFC claims (145) (2.3%) - - (Increase)/decrease in risk margins (115) (1.9%) 13 0.2% Agency profits 16
Slide 11: Claims incurred: impacted by GFC and increased risk margins
Claims incurred: impacted by GFC and increased risk margins raneeeralis AOREY 20091H 20081H 2008FY 2007FY 2006 FY % % % % % Attritional 49.0 48.3 46.4 47.5 47.7 47.4 Large and catastrophe 10.0 8.3 8.5 8.4 6.6 8.9 GFC claims 2 2.3 - 1.8 = - Risk margin adjustment - 1.9 (0.2) (0.1) 0.1 1.4 Net claims
Slide 12: Claims development: prior years release reinvested in current year
Claims development: prior years release reinvested in current year 30 June 30 June 2009 2008 $m $m Current accident year (including risk margins)» 3,988 3,158 Prior accident years® (230) (368) Total net discounted claims incurred 3,758 2,790 (1) 2009 Current year includes $310 million of net additio
Slide 13: Agencies profit before tax: contribution to underwriting profit
Agencies profit b efore tax: contribution to underwriting profit 30 June COR 30 June COR 31 Dec COR 2009 ~=—impact 2008 impact 2008 impact $m $m $m Australia 18 0.3% 9 0.2% 32 0.3% The Americas 142 2.3% 9 0.2% 41 0.4% ote aeney, 160 2.6% 18 0.4% 73 (0.7% contribution”) Acquisition cost? to date $1,4
Slide 14: Outstanding claims provisions: risk margins strengthened in 1H 2009
For personal use only Outstanding claims provisions: risk margins strengthened in 1H 2009 18000 94.1% 94.6% 94.0% 86.1% 89.0% 16000 Cc 14000 2 ‘E 12000 An fi 10000 E Q 8000 xe) D & 6000 3 iS Z 4000 3 O 2000 o 2005 FY 2006 FY 2007 FY 2008 FY 2009 H1 ‘= Central Estimate fm Risk Margins “Probability of
Slide 15: Risk margins: restated for comparison and sensitivity
Risk margins: restated for comparison and sensitivity to FX and discount rates 18 1.59 ua 4.51 1.39 < 14 Ss 2 1.24 ie 3" 1.23 123 2 Ha 411 a 1 o 10 & 083 fe) i ost & os = x % 06 ia o4 02 00 2005 FY 2006 FY 2007 FY 2008 FY 2009 Ht 1 Original perfinancial statements Adjusted 30 June "09 FX & discount
Slide 16: Investment yields: impacted by GFC
t yields: impacted by GFC 30 June 2009 Policyholders’ Shareholders’ Total 30 June 2008 funds $m funds $m $m $m Equity income = (114) (114) (53) Fixed interest income 392 149 541 563 Property and other income 5 9 14 3 Gross investment income 397 44 441 513 Gross investment yield 4.3% 1.0% 3.3% 4.3% F
Slide 17: Investments: low risk and high quality portfolio
16 Investments: low risk and high quality portfolio Continued low risk strategy Increased exposure to high quality corporate bonds to 30% of cash and fixed interest Average duration of cash and fixed interest portfolio 0.6 yrs 84% rated Moody's Aa3 or better (31 Dec: 94%) due to higher exposure to c
Slide 18: Shareholder returns
Shareholder returns 12.6% -11% 10.0% 18.3% 24.5% 23.9% 26.1% 26.1% 20.9% + 19.0% 350 30% 217.3 205.9 300 25% o g 250 wm > awd D200 + ie y ® 15% 2 Q 150 rot n D 10% € = 100 3 oO 5% ws * ° 0% ‘50 2000 ©2001. ~= 2002-2003» 2004-2005 ©2006.» 2007 2008 © 1H. 2009, 5% mm 1H diluted EPS sem FY diluted EPS
Slide 19: Dividend performance
Payout $million 18 Dividend performance jae —2 20 35 a 54 1" 95 2009 interim dividend 62.0 cents per share, 20% franked — Ex div date 26 August 2009 1200 — Record date 1 September 2009 — Payment date 22 September 2009 1000 800 600 400 4331 164 =m Interim fem Final 1H 2009 Results 122 426 7187 4,068
Slide 20: Australia: excellent technical result despite trade credit loss
Australia: excellent technical result despite trade credit loss First Half 2009 ©2008 Strong premium growth aided by agency and LMI acquisitions Gross written premium $m 1,630. 1,480 . Overall average rate increases Gross earned premium sm 1,542 1,352 of 6% on renewal business Householders’, farm an
Slide 21: QBE Lenders' Mortgage Insurance: exceeding targets
QBE Lenders’ Mortgage Insurance: exceeding targets First half 2009 Gross written premium $m 106 Gross earned premium $m 140 Net earned premium $m 131 Claims ratio % 32.8 Commission ratio % 3.41 Expense ratio % 18.3 Combined operating ratio % 54.2 20 4H 2009 Results No release of total risk margins T
Slide 22: Asia Pacific: solid organic growth
Asia Pacific: solid organic growth First Half 2009 ©2008 Gross written premium $m 363 303 Gross earned premium $m 346 291 Net earned premium $m 246 207 Claims ratio % 48.4 43.9 Commission ratio % 21.4 20.8 Expense ratio % 19.5 21.3 Combined operating ratio % 89.0 86.0 Insurance margin % 15.0 21.3 21
Slide 23: European operations: continuing strong technical results
European operations: continuing strong technical results First Half 2009 2008 Gross written premium $m 3,147 2,672 Gross earned premium $m 2,545 2,211 Net earned premium $m 1,680 1,567 Claims ratio % 62.7 51.8 Commission ratio % 16.8 16.3 Expense ratio % 10.4 155 Combined operating ratio % 89.9 83.6
Slide 24: The Americas: excellent results reflect benefits from acquired agencies
the Americas: excellent results reflect benefits from acquired agencies First Half 2009 2008 Gross written premium $m 2,917 2,148 Gross earned premium $m. 2,685 2,104 Net earned premium $m 1,739. 1,469 Claims ratio % 69.3 57.3 Commission ratio % 15.3 19.3 Expense ratio % 12.0 14.6 Combined operating
Slide 25: Equator Re: captive reinsurer
Equator Re: captive reinsurer Assists in managing retentions First Halt Zot) 2008 throughout the Group and . 5 to optimise regulatory Gross written premium $m 1,718 = 1,038 capital levels Gross earned premium $m 1,262 763 Premium growth due to increased quota share Net earned premium $m 1,233 734 pa
Slide 26: Group capital adequacy: remaining strong
Group capital adequacy: remaining strong 1.7x Capital Base $ million o o f=] o 4,544 3,612 2004 2005 2006 2007 2008 1H 2009 @ Minimum Capital Requirement @ Excess Capital 25 1H 2009 Results & QBE Points of interest on regulatory capital $1.45 billion spent on underwriting agencies since 2007 is not
Slide 27: Borrowings: lower debt/equity ratio
Borrowings: lower debt/equity ratio 30 June 31 Dec 2009 2008 Repayment profile “) $m $m Less than 1 year @) 1,383 1,120 1-5 years 1,269 1,333 More than 5 years 343 1,213 Total 2,995 3,666 Debt/equity ratio 29.3% 32.9% (1) assuming settled at first call date Weighted average cost of borrowings 6.6% (
Slide 28: Elders Insurance and agency acquisition
Elders Insurance and agency acquisition Long term regional/rural insurer and agency distribution — over 400 outlets in Australia Includes Elders Insurance, Elders Insurance Agency and the insurance distribution arm of Elders Rural Services Cost $270 million with NTA of $105 million Implied valuation
Slide 29: Premium outlook 2009: on track in local currency
Premium outlook 2009: on track in local curren Original Revised Original Revised Forecast GWP - local GWP - local GWP GWP. NEP currency bn currency bn AS bn A$ bn (1) A$ bn Australia A$3.3 A$3.4 3:3, 3.4 2.7 Asia Pacific A$0.8 A$0.8 0.8 0.8 0.5 Europe £2.65 £2.60 5.9 5.4 3.5 The Americas US$4.2 US$4
Slide 30: Summary and outlook: improved margins with appreciating $A
Summary and outlook: improved margins with appreciating $A impacting top line Subject to the usual caveats, i.e. no material change in current exchange rates, large individual risk and catastrophe claims not exceeding the significant allowance in our business plans; and no major fall in equity marke
Slide 31: Summary and outlook: improved margins with appreciating $A
Summary and outlook: improved margins with appreciating $A impacting top line Subject to the usual caveats, i.e. no material change in current exchange rates; large individual risk and catastrophe claims not exceeding the significant allowance in our business plans; and no major fall in equity marke
Slide 32: 2009 FY reforecast targets
2009 FY reforecast targets FY 2009 Profit after tax Greater than 2008 Insurance profit margin Top end of range 16% to 18% Combined operating ratio GWP and NEP increase Reinsurance expense ratio (to GEP) Combined commission & expense ratio Tax rate Gross investment yield Group capital adequacy multip
Slide 33: For personal use only
For personal use only