Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2016 Earnings Presentation
34 slides from Qbe Insurance's earnings presentation, Feb 27, 2017
Slide 1: Cover letter: QBE Presentation on the 2016 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 27 February 2017 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: QBE Insurance Group 2016 full year results presentation
For personal use only QBE Insurance Group 2016 full year results presentation John Neal Group Chief Executive Officer Pat Regan Group Chief Financial Officer Monday 27 February 2017 All figures in US$ unless otherwise stated
Slide 3: John Neal, Group Chief Executive Officer
For personal use only John Neal Group Chief Executive Officer 2
Slide 4: 2016 Results Snapshot
2016 RESULTS SNAPSHOT For personal use only COR(1) CLAIMS RATIO(1) INSURANCE MARGIN GWP(3) EXPENSES ROE 7.5%(2) 8.1% 2015 2016 (1) Excludes the impact of changes in risk-free rates used to discount net outstanding claims (2) Excludes Argentine workers’ compensation business and M&LS deferred acquisi
Slide 5: 2016 Achievements
2016 ACHIEVEMENTS For personal use only • 93.2% combined operating ratio(1) (2015 94.3%)(2) UNDERWRITING • 9.7% insurance profit margin (2015 9.0%)(2) PERFORMANCE • Continued track record of positive prior year development • ROE 8.1% (2015 7.5%) (2) • ANZO 2H16 attritional claims ratio improves by 3
Slide 6: 2016 Divisional Results
2016 DIVISIONAL RESULTS For personal use only Australia & North New Emerging 2016 America Europe Zealand Markets Equator Re Group GWP ($M) 4,647 4,076 3,933 1,632 1,532 14,395 GEP ($M) 4,657 3,878 3,924 1,588 1,429 14,276 NEP ($M) 2,731 2,949 3,410 1,328 651 11,066 Net claims ratio (%) 56.0 56.2 63.
Slide 7: Key Performance Drivers
KEY PERFORMANCE DRIVERS For personal use only Positive prior accident year development Large risk & catastrophe claims stable 3.8% PoA increased to 89.5% Post GLRC 2.5% 1.8% $218M 1.1% 1.1% $148M $132M 15.3% 8.7% 9.1% 10.4% 9.5% 9.5% $69M $68M 2H14 1H15 2H15 1H16 2H16 FY11 FY12 FY13 FY14 FY15 FY16 S
Slide 8: Pat Regan, Group Chief Financial Officer
For personal use only Pat Regan Group Chief Financial Officer 7
Slide 9: 2016 Financial Results Summary
2016 FINANCIAL RESULTS SUMMARY For personal use only For the year ended 31 December 2015(1) 2016 GWP $M 14,782 14,395 NEP $M 12,213 11,066 COR % 94.0 94.0 COR (ex discount rate) % 94.3 93.2 Insurance profit $M 1,099 1,075 Insurance profit to NEP % 9.0 9.7 Net profit after income tax $M 807 844 Cash
Slide 10: ANZO: Remediation Plan in Place to Improve Profitability
ANZO: REMEDIATION PLAN IN PLACE TO IMPROVE PROFITABILITY For personal use only 2016 AUSTRALIAN PREMIUM RATE MOMENTUM 2016 RETENTION REASONABLY STABLE 80% 4.5% 2.2% 0.4% (0.8%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 IMPROVEMENT IN ATTRITIONAL CLAIMS RATIO CONTINUED POSITIVE CLAIMS DEVELOPMENT $75M $83M $64M $45M 62
Slide 11: LMI NEP Relatively Stable
LMI NEP RELATIVELY STABLE For personal use only NEP RELATIVELY STABLE ALLOWING FOR MODERATION LMI NEP (A$M) Combined operating ratio (%) 321 305 61 287 52 245 210 35 31 23 2012 2013 2014¹ 2015¹ 2016 2017F 2012 2013 2014¹ 2015¹ 2016 2017F NPAT 150 136 195 216 187 (A$M): Note: Includes Hong Kong opera
Slide 12: Further Improvement in North American Operations
FURTHER IMPROVEMENT IN NORTH AMERICAN OPERATIONS For personal use only IMPROVED • COR(1) 97.7% (2015 99.8%) demonstrating improved profitability PROFITABILITY • 2nd year of dividend payment BUILDING A • Outstanding crop result: market-leading brand and franchise SPECIALTY • Continued strong speciali
Slide 13: Investment Performance
INVESTMENT PERFORMANCE For personal use only FIXED INCOME DURATION (YEARS) YIELD CURVES Yield curve steepening (5 year less 2 year) over past 12 months (QBE currency weighted) 0.60 0.54 0.50 1.5 1.3 0.40 0.9 0.30 0.20 FY15 1H16 FY16 INVESTMENTS & CASH - $25.2BN INTEREST BEARING FINANCIAL ASSETS(1) G
Slide 14: Financial Strength
FINANCIAL STRENGTH For personal use only S&P CAPITAL DIVIDEND Final dividend 33 Australian cents per share FY16 total dividend 54 Australian cents 2016 APRA PCA: 1.79x per share (up 8% from 2015) CASH REMITTANCES SHARE BUYBACK Up to A$1 billion cumulative three year $1,106M $715M on-market buyback f
Slide 15: Outlook
For personal use only Outlook John Neal Group Chief Executive Officer 14
Slide 16: Key Priorities
KEY PRIORITIES For personal use only • Underwriting excellence remains our #1 priority UNDERWRITING • Areas to improve – ANZO attritional, NA P&C and LatAm EXCELLENCE • Selective organic premium growth • Reinsurance savings of $350M+ achieved from 1 Jan 2017 OPERATIONAL • Execute on further $150M ex
Slide 17: 2017 Financial Targets
2017 FINANCIAL TARGETS For personal use only GROSS WRITTEN Relatively stable(1)(2) PREMIUM COMBINED OPERATING 93.5% - 95.0%(3)(4)(5) RATIO INVESTMENT RETURN 2.5% - 3.0% (1) Premium target is based on assumed average foreign exchange rates relative to the US dollar as follows: AUD 0.73; GBP 1.25; and
Slide 18: Investor Thesis
INVESTOR THESIS For personal use only FRANCHISE PERFORMANCE GROWING WELL STRENGTH IMPROVEMENT DIVIDENDS CAPITALISED $ $ • Attractive market positions • Underwriting excellence • Established cash • S&P ‘A+’ rated or better • Deep distribution and • Operational efficiency remittance framework • Resili
Slide 19: Questions & answers
For personal use only Questions & answers 18
Slide 20: Disclaimer
DISCLAIMER For personal use only The information in this presentation provides an overview of the results for the year ended 31 December 2016. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lo
Slide 21: Appendices
For personal use only 20 Appendices
Slide 22: 2016 Attritional Claims Ratio Analysis
2016 ATTRITIONAL CLAIMS RATIO ANALYSIS For personal use only 2015(1) 2016 NEP Attritional NEP Attritional US$M % US$M % Rest of world 11,282 49.3 11,093 51.9 US multi-peril crop insurance 556 69.0 543 59.0 M&LS (2) 375 38.3 - - QBE Group adjusted 12,213 49.9 11,636 52.2 (1) Prior year analysis inclu
Slide 23: 2016 Claims Ratio Analysis
2016 CLAIMS RATIO ANALYSIS For personal use only 2015 2016 1H15 2H15 FY15 1H16 2H16 FY16 NEP $M 6,229 6,085 12,314 5,615 5,451 11,066 Attritional claims % 54.2 49.5 51.9 54.5 55.5 54.9 Large individual risk and catastrophes % 8.9 8.5 8.7 9.8 9.3 9.6 Claims settlement costs % 2.8 3.2 3.0 3.0 2.8 2.9
Slide 24: 2016 Movement in Weighted Average Discount Rate
2016 MOVEMENT IN WEIGHTED AVERAGE DISCOUNT RATE For personal use only Weighted average risk-free discount rates on outstanding claims % Currency 31 Dec 2015 30 June 2016 31 Dec 2016 Australian dollar 2.37 1.77 2.26 US dollar 1.80 1.20 2.04 Sterling 1.47 0.56 0.68 Euro 0.59 (0.16) 0.19 Group weighted
Slide 25: FX Rates versus US$
FX RATES VERSUS US$ For personal use only December 2015 June 2016 December 2016 2017 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.73 0.75 0.75 0.73 0.72 0.74 0.73 GBP 1.47 1.53 1.33 1.43 1.23 1.35 1.25 EUR 1.09 1.11 1.11 1.12 1.05 1.11 1.10
Slide 26: North America
NORTH AMERICA For personal use only 2015 (1)2016 • Premium rates broadly flat overall Gross written premium $M 4,961 4,647 • Excluding M&LS, GWP grew 2% due to continued strong growth in Specialty partially offset by Gross earned premium $M 4,930 4,657 reductions in Crop and Property & Casualty • Ne
Slide 27: Europe
EUROPE For personal use only 2015 (1)2016 • Premium rates down 2.4% on average, reflecting a Gross written premium $M 4,386 4,076 slight improvement from a 3.2% decline in 2015 Gross earned premium $M • GWP and NEP down 3% and 6% respectively on a 4,338 3,878 constant currency basis Net earned premi
Slide 28: Australia & New Zealand
AUSTRALIA & NEW ZEALAND For personal use only 2015 2016 • Premium rates up 1.7% in Australia due to Gross written premium $M 3,787 3,933 implementation of pricing initiatives during 2H16 • GWP up 5% on a constant currency basis, largely Gross earned premium $M 3,753 3,924 due to strong rate-driven p
Slide 29: Emerging Markets
EMERGING MARKETS For personal use only 2015(1) 2016 • GWP up 10% on a constant currency basis, Gross written premium $M 1,728 1,632 reflecting 3% growth in Asia Pacific and 16% growth in Latin America with strong growth across Gross earned premium $M 1,687 1,588 specialty, commercial, SME and person
Slide 30: Equator Re
EQUATOR RE For personal use only 2015 (1)2016 Gross written premium $M 1,007 1,349 • GWP up 34% due to Equator Re providing higher limits on divisional treaties, and growth in the proportional Gross earned premium $M book 994 1,246 • NEP up 28% from the prior period Net earned premium $M 367 468 • N
Slide 31: Financial Strength & Flexibility
FINANCIAL STRENGTH & FLEXIBILITY For personal use only As at 31 Dec 2015 31 Dec 2016 Summary balance sheet $M $M • Favourable PYD of $366M Investments and cash 26,708 25,235 Reserving • $80M adverse discount rate impact • PoA of 89.5% (FY15 89.0%) Trade and other receivables 4,950 4,831 Intangibles
Slide 32: APRA PCA Calculation
APRA PCA CALCULATION For personal use only $M 2015(2) 2016(1) Ordinary share capital and reserves 10,560 10,333 Net surplus relating to insurance liabilities 764 674 Regulatory adjustments to Common Equity Tier 1 Capital (4,424) (4,440) Common Equity Tier 1 Capital 6,900 6,567 Additional Tier 1 Capi
Slide 33: Borrowings
BORROWINGS For personal use only • $3,474M at 31 December 2016 Borrowings • Weighted average cost of borrowings 5.9% Debt to • Ratio within 25% - 35% benchmark range equity • Debt to tangible equity up slightly to 52.1% (1) Based on first call date 32
Slide 34: QBE's 2017 Global Reinsurance Program
QBE’S 2017 GLOBAL REINSURANCE PROGRAM For personal use only 33