Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2015 Earnings Presentation
36 slides from Qbe Insurance's earnings presentation, Feb 23, 2016
Slide 1: QBE Insurance Group 2015 annual results presentation
QBE Insurance Group 2015 annual results presentation John Neal Group Chief Executive Officer Pat Regan Group Chief Financial Officer Tuesday 23 February 2016 All figures in US$ unless otherwise stated
Slide 2: John Neal, Group Chief Executive Officer
John Neal Group Chief Executive Officer 2 2015 annual results presentation
Slide 3: 2015 financial results summary
2015 financial results summary For the year ended 31 December 2015 2014(1) 2015(2) Change GWP $M 16,332 14,782 10% NEP $M 14,084 12,213 13% Underwriting profit $M 547 731 34% COR % 96.1 94.0 2.1ppt Insurance profit $M 1,074 1,099 2% Insurance profit to NEP % 7.6 9.0 1.4ppt Profit before tax $M 931 9
Slide 4: 2015 achievements – stability and predictability
2015 achievements – stability and predictability • Executed on our plans and met our financial targets Underwriting • Best COR since 2010 excellence • All divisions achieved an underwriting profit • A return to profitable growth • Engineered a significant turnaround in our North American business •
Slide 5: 2015 achievements – quality balance sheet
2015 achievements – quality balance sheet • Restructured and strengthened balance sheet Financial • Improved capital strength recognised by rating agencies strength • S&P capital comfortably AA equivalent (currently A+ stable) • Large risk and catastrophe claims < 9% of NEP Reinsurance • Significant
Slide 6: Pat Regan, Group Chief Financial Officer
Pat Regan Group Chief Financial Officer 6 2015 annual results presentation
Slide 7: 2015 adjusted profit reconciliation
2015 adjusted profit reconciliation ADJUSTED REPORTED 31 DEC 31 DEC 2015 2015 2015 2015 2014 ARGENTINE DISPOSALS WORKERS' ($M) COMP ($M) ($M) Gross written premium 14,782 179 131 15,092 16,332 Net earned premium 12,213 178 (77) 12,314 14,084 Underwriting result 731 (61) (41) 629 547 Net investment i
Slide 8: 2015 divisional results - adjusted
2015 divisional results - adjusted Australia & North New Emerging 2015 America Europe Zealand Markets Equator Re (1) Group GWP ($M) 4,961 4,386 3,787 1,728 1,007 14,782 GEP ($M) 4,930 4,338 3,753 1,687 994 14,606 NEP ($M) 3,666 3,454 3,282 1,436 367 12,213 Net claims ratio (%) 63.4 53.4 62.6 54.8 80
Slide 9: Delivering on our promises
Delivering on our promises Central estimate stability(1) Returned North America and Emerging GWP 2015 versus 2014(2) Markets to underwriting profit(2) 2014 2015 North American ($38M) Operations underwriting profit $30M ($34M) Emerging Markets Operations underwriting profit $11M (1) Refers to statuto
Slide 10: 2015 expense ratio versus 2014
2015 expense ratio versus 2014 10 2015 annual results presentation
Slide 11: Cash remittances
Cash remittances 2014 2015 • Final dividend 30 Australian cents per share Group head office cash flow at 31 Dec $M $M • FY15 dividend of 50 Australian cents per share, Opening head office cash balance 164 369 representing a 56% payout ratio on cash profit Total divisional dividend remittances 770 71
Slide 12: Investment performance by asset class
Investment performance by asset class 12
Slide 13: Financial strength
Financial strength (1) Indicative APRA PCA calculation at 31 December 2014 updated to be consistent with subsequently finalised APRA returns (2) Indicative APRA PCA multiple (3) Calculated as the ratio of net tangible assets to net earned premium 13 2015 annual results presentation
Slide 14: Outlook
Outlook John Neal Group Chief Executive Officer 14 2015 annual results presentation
Slide 15: Our priorities for 2016
Our priorities for 2016 Performance • Maintain underwriting discipline as challenging markets continue management • Meet or beat our performance targets North American • Further improve profitability in North America Operations • Medium term COR target of 95% or better Cost • $150M(1) of cost saving
Slide 16: 2016 targets
2016 targets Gross written $14.2 – $14.6Bn (1)(2) premium ($14.6 - $15.0Bn at constant currency) Net earned $11.6 – $12.0Bn (1) premium ($11.9 - $12.3Bn at constant currency) Combined operating ratio 94% - 95% (3)(4) Insurance profit margin 8.5% - 10% (3)(4)(5) (1) Premium targets are based on assum
Slide 17: Three year plan – May in Sydney
Three year plan – investor update May 10 in Sydney • Focus areas for growth include: Australian multi-channel, Emerging Growth Markets, Corporate Solutions & Specialty, Bancassurance and SME • Achieve COR of 95% or better North America • Complete build out of Specialty business • Expense ratio to im
Slide 18: Questions & answers
Questions & answers 18 2015 annual results presentation
Slide 19: Disclaimer
Disclaimer The information in this presentation provides an overview of the results for the year ended 31 December 2015. 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 available
Slide 20: Appendices
Appendices 20 2015 annual results presentation
Slide 21: 2015 statutory claims ratio analysis
2015 statutory claims ratio analysis 2014 2015 1H14 (1)2H14 (1)FY14 1H15 2H15 FY15 NEP $M 6,947 7,499 14,446 6,229 6,085 12,314 Attritional % (2)49.8 (2)51.6 (2)50.7 54.2 49.5 51.9 Large individual risk and catastrophes % (3)9.9 (3)12.3 (3)11.2 8.9 8.5 8.7 Claims settlement costs % 2.5 2.9 2.7 2.8 3
Slide 22: 2015 adjusted attritional claims ratio analysis
2015 adjusted attritional claims ratio analysis 2014 2015 NEP Attritional NEP Attritional US$M % US$M % Rest of world 12,701 47.0 11,571 48.1 Group large individual & catastrophe risk aggregate (1) - - (289) - US multi-peril crop insurance (2) 965 93.6 556 69.0 Lender-placed insurance (3) 544 43.6 3
Slide 23: 2015 movement in weighted average discount rates
2015 movement in weighted average discount rates Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2014 30 June 2015 31 Dec 2015 Australian dollar 2.46 2.43 2.37 US dollar 1.33 1.59 1.80 Sterling 1.30 1.53 1.47 Euro 0.58 0.75 0.59 Group weighted average (ex Argentine
Slide 24: 2016 premium outlook
2016 premium outlook 2015 actual 2016 target 2015 actual 2016 target GWP GWP(1) NEP NEP(1) North America 5.0 4.8 3.7 3.6 Europe 4.4 4.3 3.5 3.4 Australia & New Zealand 3.8 3.5 3.3 3.1 Emerging Markets 1.7 1.8 1.4 1.4 Equator Re 1.0 - 0.4 0.3 Equator Re elimination (1.0) - - - Corporate adjustments (
Slide 25: FX rates versus US$
FX rates versus US$ 2016 December 2014 June 2015 December 2015 forecast Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.82 0.90 0.77 0.78 0.73 0.75 0.70 GBP 1.56 1.65 1.57 1.53 1.47 1.53 1.44 EUR 1.21 1.32 1.11 1.12 1.09 1.11 1.09 ARS 0.12 0.12 0.11 0
Slide 26: Financial performance – underwriting expenses
Financial performance – underwriting expenses 26 2015 annual results presentation
Slide 27: North America
North America 2014 2015 • First underwriting profit since 2011 Gross written premium $M 5,310 4,961 • Premium rate increase of 0.4% on average, reflecting increased market competition, particularly in property Gross earned premium $M 5,457 4,930 • Excluding $383M of M&LS GWP, top-line fell due to: N
Slide 28: Europe
Europe 2014(1) 2015 • Premium rates down 3.2% on average as market Gross written premium $M 4,526 4,386 pressures continue Gross earned premium $M • GWP up 5% on a constant currency basis, despite 4,805 4,338 competitive market headwinds Net earned premium $M 3,929 3,454 • NEP down 5% on a constant
Slide 29: Australia & New Zealand
Australia & New Zealand 2014 2015 • Premium rates fell by ~2.4%, with a decrease of 2% Gross written premium $M 4,392 3,787 in Australia and 7.3% in New Zealand • GWP down 14% in USD but up 3% on a constant Gross earned premium $M 4,386 3,753 currency basis • Traditional commercial portfolio grew by
Slide 30: Asia Pacific
Asia Pacific(1) 2014 2015 Gross written premium $M 785 759 • Heightened competition across the region; premium rate reductions averaged 3.4% Gross earned premium $M 720 737 • GWP up 3% on a constant currency basis, with double-digit growth in Indonesia, Macau, Malaysia, Philippines and Vietnam Net e
Slide 31: Latin America
Latin America(1) (2)2014 2015 • GWP and NEP grew by 13% and 12% Gross written premium $M 1,394 969 respectively on a constant currency basis • Focus shifted to corporate, specialty and SME Gross earned premium $M 1,222 950 post sale of Argentine workers’ compensation • Colombian SOAT remediation con
Slide 32: Equator Re
Equator Re 2014 2015 • GWP up 57% due to Equator Re providing higher Gross written premium $M 642 1,007 limits on divisional treaties with Equator Re now purchasing the Group’s per risk and catastrophe treaties for its own account Gross earned premium $M 764 994 • NEP down due to reduction in underl
Slide 33: Financial strength and flexibility
Financial strength and flexibility As at 31 December 2014 2015 Summary balance sheet $M $M Reserving • Favourable prior accident year claims Investments and cash 28,583 26,708 development of $147M on an adjusted basis Trade and other receivables 4,748 4,950 ($137M on a statutory basis) • $38M favour
Slide 34: APRA PCA calculation
APRA PCA calculation $M 2014 2015 Ordinary share capital and reserves 11,082 10,560 Net surplus relating to insurance liabilities 1,199 711 Regulatory adjustments to Common Equity Tier 1 Capital (5,029) (4,424) Common Equity Tier 1 Capital 7,252 6,847 Additional Tier 1 Capital - Capital securities 2
Slide 35: Borrowings
Borrowings Borrowings profile % 2014 2015 Borrowings of $3,529M at 31 Dec 2015 Subordinated debt 61 74 • Weighted average cost of borrowings unchanged at 6.2% Senior debt 30 17 Capital securities 9 9 Debt to equity ratio within benchmark range of 25% - 35% • Gearing slightly above 2014 level due to
Slide 36: QBE's 2016 global reinsurance program
QBE’s 2016 global reinsurance program Risk XL Cat XL Large Risk and Catastrophe Group Risk XL & Cat XL covers all QBE Reinstatements Group Large Risk & business except inwards reinsurance (QBE Re), Catastrophe (GLRC) is Marine and Energy (Lloyd’s Syndicate 1036), Equator Equator designed to match QB