Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Investor Presentation (May 2023)
29 slides from Qbe Insurance's investor presentation, May 30, 2023
Slide 1: AASB17 Investor Update Presentation
QBE Insurance Group Limited ABN 28 008 485 014 Level 18, 388 George Street, SYDNEY NSW 2000 Australia GPO Box 82, Sydney NSW 2001 telephone + 612 9375 4444 • facsimile + 612 9231 6104 www.qbe.com 30 May 2023 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Street
Slide 2: Basis of presentation
Unless otherwise stated, all figures are in US$M and discussion of financial performance in this report is on management basis. A detailed reconciliation between the statutory income statement and the management basis result is provided on page 15-16 of this presentation
Slide 3: Important notice and forward-looking statements
The information in this release provides an unaudited overview of historic future earnings and financial position and performance are also forward-looking performance. Any restatement of prior period results to AASB 17 results has not statements. been subject to external review and is subject to cha
Slide 4: AASB 17 overview and rationale
Consistent accounting for all insurance contracts across general, life and health insurance • EMEA • Bermuda Comparability with non-insurance sectors • UK (listed only) • Hong Kong Greater transparency in financial information reported by • Australia • Singapore insurers • New Zealand • Pacific Isla
Slide 5: No change to underlying business fundamentals or strategy
No change to underlying business fundamentals or strategy No material change to Group profitability, or shape of profit recognition No notable change to capital, gearing or dividend policy Consistent use of key metrics such as combined operating ratio and ROE 4
Slide 6: Accounting principles and impacts
Accounting principles and impacts ® QBE
Slide 7: Measurement models: General Model and Premium Allocation Approach
• General Model (GM) revenue recognition requires a segmentation of sub-components, ie present value of cash flows, risk adjustment and contractual service margin • Premium Allocation Approach (PAA) simplifies the above and earns ~2% revenue according to a single pattern, which is consistent with th
Slide 8: Risk adjustment replaces risk margin
Risk margin Risk adjustment ~$1.3B risk margin ~$1.3B risk adjustment 90.0% PoA1 8.0% of net CE2 Net central Net central estimate estimate 31 Dec 22 1 Jan 23 Risk margin Risk adjustment • The Risk adjustment serves a similar purpose to the Risk margin under AASB1023, despite some difference in the c
Slide 9: Claims discounting and presentation impacts
1 AASB 1023 Claims presentation Impact from changes in RFRs on Ex-cat claims 2 3 3.9% Illiquidity discounted claims liability Catastrophe claims 3.6% premium 0.3% Prior year development (PYD) Impact from changes in RFRs 1 Group 2 Benefit from initial Net claims weighted 3.6% discount of new average
Slide 10: Onerous contracts
• For those groups of contracts where ‘facts and Region 1 Region 2 Region 3 circumstances’ would suggest the likelihood of an underwriting loss, an onerous contract loss is recorded • Onerous contracts do not impact ultimate profitability, but impact the timing of revenue recognition (the assessed e
Slide 11: Impact on net assets at 31 December 2022
144 (2) (106) (102) • On adoption, QBE will retrospectively apply (55) the AASB 17 accounting standard to the FY22 comparative result • The impact associated with new accounting $8,992M $8,871M concepts will be recorded as an adjustment to opening equity in FY22 • On adoption, QBE currently expects
Slide 12: Impact on ROE, gearing and PCA multiple
10.2 1.81 10.5 23.4 23.6 1.79 1.79 8.4 AASB 1023 AASB 17 AASB 1023 AASB 17 AASB 1023 AASB 17 Limited impact to restated Definition of gearing Minimal impact on PCA ROE remains unchanged multiple 1. Relates to $160M pre-tax FY22 COVID-19 business interruption risk margin release. Refer to slide 19 11
Slide 13: Presentation and financial performance
Presentation and financial performance ® QBE
Slide 14: New income statement presentation
Insurance revenue GEP 18,765 Insurance revenue is consistent with ‘Gross earned premium’, while Insurance service Insurance service expenses (17,175) expenses represent an aggregation of gross claims, commission and underwriting Reinsurance expenses (4,001) expenses. Collectively these lines represe
Slide 15: Statutory to management income statement mapping
Insurance revenue GEP Gross written premium Insurance service expenses Insurance revenue GEP Reinsurance expenses Net insurance revenue NEP Reinsurance income Net claims Insurance service result Net commission 1• Preserving a net view of revenue and underwriting Other expenses Expenses and other inc
Slide 16: Insurance service result analysis
1 Statutory Insurance service result will be analysed as a) Net insurance Insurance revenue 18,765 - - - 18,765 revenue, b) Net claims expense, c) Net commission, and d) Expenses Insurance service expenses - (13,083) (2,478) (1,614) (17,175) and other income Reinsurance expenses (4,001) - - - (4,001
Slide 17: Management basis recurring adjustments
2 Recurring adjustments Insurance revenue 18,765 - - - 18,765 Non-attributable income / expense: will be recorded in Expenses and Insurance service expenses - (13,083) (2,478) (1,614) (17,175) other income, and remains within QBE’s insurance operating result Reinsurance expenses (4,001) - - - (4,001
Slide 18: Restated FY22 management result
Insurance revenue 18,695 Insurance service expenses (17,693) Reinsurance expenses (3,839) Reinsurance income 3,621 Insurance service result 784 Other expenses (226) Other income 74 Insurance operating result 632 Analysed as Gross written premium 19,993 Insurance revenue GEP 18,695 • Presentation of
Slide 19: Combined operating ratio components
2 3 (Favourable) / Unfavourable Ex-cat claims 1 3 61.8 Central 5.4 Catastrophe claims 7.1 1.0 1.0 estimate 3.8 Prior year development (PYD) 2 (2.2) Initial RA Unwind of (3.2) (less unwind Net claims ratio 66.7 (4.6) Risk adj within CAY1) Commission 17.1 (2.2) 1H22 FY22 Expenses and other income 11.9
Slide 20: Reconciliation of AASB 1023 to AASB 17 result
1.1 95.7 0.5 0.4 0.0 1.11 • Risk Margin $160M pre-tax (1.1pts impact on COR). Difference is attributable to COVID BI 94.6 Risk margin released under AASB 1023 which 93.7 would not feature under AASB 17 due to accounting definitions AASB 1023 Onerous E&S Other COVID BI AASB 17 Adjusted result contrac
Slide 21: Key line item movements
• Reinstatement premiums previously in Gross written / earned premiums move to Gross written premium $M 20,054 19,993 Reinsurance expenses and Insurance service expenses under AASB 17 • Ceding commissions previously recorded as part of Net commission expense move to Net earned premium / Reinsurance
Slide 22: Summary balance sheet
AASB 1023 AASB 17 Jun-22 Dec-22 Summary balance sheet Summary balance Sheet US$M US$M Cash and investments Cash and investments 26,713 28,132 • Under AASB 1023, the assets and liabilities Trade and other receivables Trade and other receivables 439 423 related to insurance and reinsurance contracts C
Slide 23: Conclusion and Q&A
Conclusion and Q&A ® QBE
Slide 24: No change to underlying business fundamentals or strategy
No change to underlying business fundamentals or strategy No material change to Group profitability, or shape of profit recognition No notable change to capital, gearing or dividend policy Consistent use of key metrics such as combined operating ratio and ROE 23
Slide 25: FY23 outlook: GWP growth and Plan COR
0.2 -0.1 • Constant currency GWP growth expected at ~10% • Group Plan combined operating ratio of ~94.5% ~94.5% ~94.5% • Plan COR continues to exclude upfront impact of reserve transaction announced in February FY23 Plan Ceding Other FY23 Plan AASB 1023 commissions AASB 17 (net of Crop subsidy) 24
Slide 26: Appendix
Appendix ® QBE
Slide 27: Glossary
AASB 1023 AASB 1023 General Insurance Contracts was the accounting standard that previously applied to accounting for insurance and reinsurance contracts. This standard was replaced by AASB 17 Insurance Contracts which became effective from 1 January 2023. Acquisition costs Commission and other cost
Slide 28: Glossary (continued)
Liability for incurred The amount of liability established for claims and attributable expenses that have occurred but have not been paid. This replaces the outstanding claims claims (LIC) liability under the previous insurance accounting standard, AASB 1023. Liability for remaining The amount of li
Slide 29: Thank you
THANK YOU Enabling a move vesilent future ® QBE
QBE Insurance Group — Investor Presentation (May 2023) on 6ix