Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Investor Presentation (April 2020)
38 slides from Qbe Insurance's investor presentation, Apr 14, 2020
Slide 1: ASX cover letter: presentation on 2020 Q1 update and capital plan
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.gbe.com 14 April 2020 The Manager Company Announcements Office ASX Limited Level 4, Exchange Centre 20 Bridge Str
Slide 2: Not for distribution or release in the United States
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 3: Important notice and disclaimer
This document (the Presentation) is dated 14 April 2020 and has been prepared and authorised by QBE Insurance Group Limited (ABN 28 008 485 014) (the Company or QBE) in connection with QBE’s Q1 update and comprehensive capital plan, which includes the proposed capital raising (the Capital Raising),
Slide 4: Forward-looking statements
You are strongly cautioned not to place undue reliance on forward-looking statements, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption caused by the outbreak of COVID-19. Any such statements, opinions and estimates in this Presentation
Slide 5: Capital actions that form part of QBE's comprehensive capital plan
• Capital actions that form part of QBE’s comprehensive capital plan: › Fully underwritten ~US$750M institutional placement and non-underwritten Share Purchase Plan (“SPP”) to raise up to ~US$75M (together, the “Offer”) Comprehensive › Additional Tier 1 capital capital plan › Other non-dilutive init
Slide 6: Materially de-risked investment book and reinsurance actions
• Materially de-risked investment book including • Purchased additional reinsurance to cede • Fully underwritten ~US$750M institutional exiting all equities and emerging market & high 90% of Crop hail exposure placement and non-underwritten SPP to raise yield debt up to ~US$75M • Fixed income asset
Slide 7: Pro forma capital above S&P 'AA' levels
• Ordinary equity raising immediately strengthens PCA multiple towards the top end of our internal PCA range • Additional Tier 1 capital raising of around US$400M lifts PCA multiple above the top end of our internal PCA range • Pro forma capital above S&P ‘AA’ levels ~1.90x ~1.78x • Further capital
Slide 8: Premium growth and rate change
+2% 7.6% +10% 6.3% +12% 4.7% $4,533M 4.1% $4,329M +9% growth 1Q19 1H19 FY19 1Q202 1Q19 FX Disposals North International Australia 1Q202 America Pacific3 8.8% 7.0% 7.3% 7.5% 6.5% 6.8% 5.8% 6.0% 4.9% 4.1% 3.8% 2.4% 1Q19 1H19 FY19 1Q202 1Q19 1H19 FY19 1Q202 1Q19 1H19 FY19 1Q202 69% 67% 69% 71% 79% 81%
Slide 9: Global trade credit portfolio is well diversified
• Global trade credit portfolio is well diversified • Strong lending quality and equity buffers • Business interruption - requires physical damage across regions and credit quality trigger and/or pandemic is specifically excluded › Avg LVR of portfolio is ~51% • ~25% reduction to trade credit buyer
Slide 10: 92% investment grade fixed income
Other 100% 100% AAA BBB Profit/(Loss)2 Growth assets 12% 8% BBB+ Pro-forma 1Q201 HY/EM debt & loans 6% Key market sensitivities % US$M Credit spread movement – corp +/-0.5 (102) 92% interest-bearing financial assets Investment grade FI 82% AA A Credit spread movement – high +/-0.5 NIL yield and emer
Slide 11: Stress testing scenarios
Scenario #1 #2 #3 ~1.90x ~1.78x ~1.60x 31-Mar-20 Ordinary equity raise Pro-forma Planned AT1 Other Executed Pro-forma issuance capital plan Stress scenario parameters2 Scenario #1 Scenario #2 Scenario #3 conditions Economic Severe global recession: recovery in 2021 2021 2022 Equity markets: (S&P500)
Slide 12: Move above the top of our target PCA ratio
Negative economic outlook Positive or benign economic recovery ✓ Stay within target PCA ratio ✓ Move above the top of our target PCA ratio ✓ Demonstrably stronger capital and liquidity at start of down cycle ✓ Enhance capital mix and maintain balance sheet flexibility ✓ Positioned to weather severe
Slide 13: Details of the equity Offer
Details of the equity Offer
Slide 14: Placement size and structure
• Fully underwritten institutional placement (“Placement”) to raise approximately A$1.2BN Placement size and structure • Approximately 145.5M new shares to be issued, representing 11.1% of QBE’s existing shares on issue (“New Shares”) • Lift regulatory capital to top of target range in view of econo
Slide 15: Indicative timetable
Event Date1 Record date for the SPP 7pm (AEST) Thursday, 9-Apr-2020 Trading halt, announcement of the Placement and SPP Tuesday, 14-Apr-2020 Placement bookbuild Tuesday, 14-Apr-2020 Placement completion announcement Wednesday, 15-Apr-2020 Trading halt lifted Wednesday, 15-Apr-2020 Settlement of New
Slide 16: Investor risks
Slide 17: Investor risks: introduction
Introduction You should be aware that there are risks involved with participating in the Placement and holding Shares in QBE Insurance Group Limited (the “Company”, “QBE”, "we" or "us"). Certain of these risks are specific to an investment in the Company and certain others are specific to investing
Slide 18: COVID-19 and business interruption risk
The Group may also be adversely impacted by any policies, practices, laws, or regulations introduced by local, state, and federal governments which require or compel insurers to defer insurance premiums, pay claims in relation to COVID-19 losses which would not otherwise be payable under the relevan
Slide 19: Operational risk
Operational risk is the risk of financial loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk can materialise in a number of forms including fraud perpetrated by employees or by external parties (e.g. claims fraud or cyber-attacks
Slide 20: Cyclical nature of insurance and reinsurance industries
Cyclical nature of the insurance and reinsurance industries Our performance is affected by changes in economic conditions, both globally and in the jurisdictions in which the Group conducts its businesses. Premium and claim trends in the general insurance and reinsurance markets are cyclical in natu
Slide 21: Climate change and catastrophe risk
The Group is exposed to a number of climate change related risks. Material climate change related risks include: changes in demand for products due to regulatory and technological changes (transitional risk); increases in operating costs of assets due to carbon-pricing policies or other market mecha
Slide 22: Trade credit and lenders' mortgage insurance risk
Trade credit The Group's trade credit products provide protection over policyholders' accounts receivable in the event of debtor default on payment obligations. This business line is exposed to economic variables including economic activity, trade, supply, consumption and the accessibility and or th
Slide 23: Ability to access funds from subsidiaries
Our ability to access funds from our subsidiaries is limited As QBE Insurance Group Limited is a non-operating insurance holding company, we depend on dividends, distributions and other payments from our subsidiaries to make the payments due on our obligations, including outstanding debt, and pay di
Slide 24: Interest rates and crop insurance risk
Interest rates QBE is exposed to interest rate risk through its holdings including in interest-bearing assets, and debt investments. Financial instruments with a floating interest rate expose the Group to cash flow interest rate risk, whereas fixed interest rate instruments expose the Group to fair
Slide 25: Reinsurance risk
Reinsurance risk QBE enters into a significant number of reinsurance contracts to limit its risk. Under these arrangements, other reinsurers assume a portion of the claims and related expenses in connection with insurance policies QBE writes. The availability, amount and cost of reinsurance depends
Slide 26: Financial crime and compliance risk
QBE and its subsidiaries are subject to a wide range of law and regulation relating to the prevention of financial crime, including anti-money laundering, anti-bribery and corruption, counter terrorism financing, and sanctions laws ("AML Laws"). The Group seeks to comply with all such AML Laws, incl
Slide 27: Cyber risk
Although we have network security measures in place, experienced computer programmers and hackers may be able to penetrate our network and misappropriate or compromise confidential information, create system disruptions or cause shutdowns. As an insurer, we receive and are required to protect confid
Slide 28: Modelled scenarios and equity investment risks
Modelled Scenarios The scenarios provided in this presentation are not QBE forecasts. Future economic conditions, business performance, claims and catastrophe experience, FX and investment returns may differ to the inputs and assumptions in the stress testing scenarios contemplated and presented by
Slide 29: International offer restrictions
International offer restrictions
Slide 30: Offer restrictions: Canada
This document does not constitute an offer of New Shares of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside Australia except to the extent permitted
Slide 31: Offer restrictions: Canada and other jurisdictions
Section 138 of the Securities Act (Ontario) provides that no action shall be commenced to enforce these rights more than (a) in the case of any action for rescission, 180 days after the date of the transaction that gave rise to the cause of action or (b) in the case of any action, other than an acti
Slide 32: Offer restrictions: Korea and Malaysia
Korea The Company is not making any representation with respect to the eligibility of any recipients of this document to acquire the New Shares under the laws of Korea, including, without limitation, the Foreign Exchange Transaction Act and regulations thereunder. The New Shares have not been, and w
Slide 33: Offer restrictions: Switzerland and UAE
Switzerland The New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange or on any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the New Shares constitute
Slide 34: Offer restrictions: United States
United States This Presentation may not be distributed or released in the United States. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or any other jurisdiction in which such an offer would be illegal. The securiti
Slide 35: Disclaimer
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Slide 36: Summary information and market data
Summary information This Presentation contains summary information about the Group and its respective activities which are current as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete, nor does it contain all information
Slide 37: Financial data
Financial data All references to dollars, cents or $ in this document are to United States currency, unless otherwise stated. This Presentation includes certain historical financial information extracted from the Company's audited consolidated financial statements for the year ended 31 December 2019
Slide 38: Underwriter disclaimer
Disclaimer Neither Goldman Sachs Australia Pty Ltd and J.P. Morgan Securities Australia Limited (together the Underwriters), nor any of their or the Company's respective advisers nor any of their respective affiliates or related bodies corporate, nor any of their respective directors, officers, part
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