Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2002 Earnings Presentation
45 slides from Qbe Insurance's earnings presentation, Mar 6, 2003
Slide 1: Cover letter to ASX on QBE results and outlook
6 March, 2003 Manager, Com Australian St Exchange Centre 20 Bridge Street SYDNEY NSW 2000 ¥ Announcements Dye xchange Limited Dear Sir/Madam, ret QBE Results and Outlook for the year ended 31 December 2002 Further to the Compariy’s release to the market today please find « of a powerpoint presentati
Slide 2: QBE Insurance Group - Results & Outlook
QBE INSUR NCE GROU! - RESULTS & OUTLOO!
Slide 3: Insurance profit highlights
Insurance profit $406 mil of net earned premium (2001 million to $1,511 million —
Slide 4: Gross written premium up 14% to $7.7 billion
Gross written premium up 14% to $7.7 billion, gross. earned premium up14% to. $7.2 billion : Average premium rate. increases exceeded OUr = -expectation of 20% in: 2002 s Net earned premium up 22% to $5. 6 bition. Combined operating ratio: (Ci (101.7% excluding the WTC : COR less than 100% in all fi
Slide 5: Year ended December 2002 claims and reinsurance
year. ended 31 December 2004, Gross claims incurred ratio reduced m 99. 7% (80. excluding the WTC loss) to 65.1%. Net claims ratio reduced from 76.6% (69. 4% excluding the WIC lose) to 67.6% . Reinsurance costs decreased from 26%. to 22% of gross earned premium. ‘Premium rate increases than offset h
Slide 6: Investment income $181 million
Investment incor e $181 million down from $344, million last year companies
Slide 7: Year ended December 2002
~ year ¢ ended 31 Dece: ber 2002 * The basis used for measurement of FChagemil : operational performance is the seven year spread basis of accounting million last year
Slide 8: Shareholder
Shareholder ~ year ended 31 December 2002 = Final dividend 18. 5¢ per share, 1 Rived, oft with 13.5¢. Total dividend for 2002 was 35. O¢ #2001. 30. 0.08) Shares on issue 615 million (2001 : 585 million Final dividend payout $1 14 million, up 43% ~ Dividend reinvestment. plans continue at 2. Si Retur
Slide 9: QBE outperformed the Australian All Ordinaries
An investment in QBE has outperformed the Australian All Ordinaries In rowth rate of 12.0% 48 www QBE share price performance —QBE share price performance including reinvestment of dividends ——ASX All Ordinaries Accumulation Index
Slide 10: Dividend performance
AS. | 2 Dividend performance - “year ended 31 Dece
Slide 11: History of growth
History © of gr “year ended 31 De mber 2002 args ang net earned prerpilit Compound average growth rates. over Piast 1 0 years: . . - gross. eamed premium 23. 2% $M - net earned premium 22.3% 8,000 6,000 4,000 2,000 1993 ghO 0G pomp 29 Pisnng gy 208
Slide 12: Combined operating ratio and insurance profit
~ Combined operating ratio (COR) and insurance profit to net earned premium a = COR% * —eIns profit % * 1992 1994 ~ 1995 1993 1996
Slide 13: Net earned premium, claims, commission and expense ratios
Net earned premium $M Claims ratio % Commission ratio %_ Expense ratio % * * All expenses other than investment expenses, borrowing costs and good) are allocated to the underwriting re: =
Slide 14: Gross written premium by division
Australia Asia-Pacific the Americas European companies Lloyd’s division “2,249 2,276 Group 7,723 General insurance Inward reinsurance *~ 5,549 2,174 Group 7,723. “Inward reinsurance reduced as.a_pro
Slide 15: Gross earned premium by region
eeerecrertn 7 » gross earned premium aS Lloyd’s division... Australia oe 20.1% (19.1%). : A Ly Fo / Wy TL, Wee i ON ee 4 7 LLM GE Cog. \ ic . LMM LLL oe Asia OD YO ; ge . . Wey yy a _ v | 8. 4% : WEY Ye “rus . a V7, Z , ; — 9% (10.4%) realty,
Slide 16: Gross earned premium by class of business
“ year.ended 31 December 2002). _y.gross earned premium Marine and aviation 9.3% (13.5%) Workers’ compensation. --/ 9.2% (5.8%) 4 Professional indemnity | 9.1% (7.1%)¥ 4 Property 127.3% (23.7% Liability 12.6% (13.5%) Financial and credit 2.9% (3.1%) - Motor and motor casualty. 10.8% (15.6%
Slide 17: Balance sheet
002 31 Dec 21 Assets Investments and cash Receivables — Recoveries on outstanding clai Deferred insurance costs Intangibles ; Fixed and other assets Total assets Liabilities ~ Outstanding claims Unearned premium Borrowings Other creditors and provisions Total liabilities Net assets Equity - : Equity
Slide 18: Investments and cash increased
= Investments and-cash increased by 2.3 billion to $1 billion reflecting strong cash flow and increased. _ borrowings ye Listed equities at 7.9' 60 with 43% of equities’ in / 14% in USA and 10% other Quality fixed interest portfolio a average 1.6 years. duration. No exposure to recent con yo total i
Slide 19: Receivables and reinsurance recoveries
¢ Receivables over 90 days have reduced. Conservative : provision held for doubtful premium debtors. Bad debts . experience over the years has been low coe Reinsurance recoveries on outstanding claims and Asia
Slide 20: Debt increased to $1,456 million
Debt increased to $1,456 million; 20% short term, long term subordinated debt and 55% hybrid 20 year zero coupon securities, with flexibility for conversion: Overall borrowing costs reduced to 4. 8% per annum from7.0% ow } Prudential margins exceed Gr probability of adequacy _ Level of prudential ma
Slide 21: Capital adequacy and rating
portion of policies in force. Includes substantial premium rate increases to be earned in fetes a of policies Strong Group cacital adequacy Australian Prudential Regulation minimum requirement — - Standard & Poor's A+ rating reaffin
Slide 22: Australia division results
Gross written premium $M — Gross earned premium $M _ Net earned premium $M. = Claims ratio % ~ Commission ratio % -Expense ratio % 7 -* Gross writer? premium growth of 18% improved customer ralep ion and. 200
Slide 23: Australian general insurance
ay Ce ‘reducing expense ratio - Joint venture underwriting agency. with ING exceeded Australian general inst year € pnded 31) December 2002 » premium and profit expectations. Awarded National Insurance Brokers’ Underwriter of the Year _ CTP, workers’ compensation, Western QBE and’ trade: = "i credit
Slide 24: Asia-Pacific results
Gross written premium. $M Gross earned premium $M Net earned premium $M Claims ratio % Commission ratio % Expense ratio % * Gross written:premium growth of 20% increases and the. effe acquisitions - PNG. and Singapore i aetitens
Slide 25: Asia-Pacific general insurance
a “Asia-Pacific genere insuré “year ended 31 December 2002 * 13 of 18 operations recorded, underwriting profits oe * Good results from Hong Kong, Singapore, Fiji, New. Zealand, French Territories and PNG gs * Malaysia incurred integration costs from MBF Merger and Japan incurred costs of closure ~ *
Slide 26: The Americas results
~ Gross written premium $M Gross earned premium’$M Net earned premium $M Claims ratio % Commission ratio % - * 2001: 106.5% excluding the WTC loss 2001: (0.1%) excluding the WTC loss
Slide 27: The Americas focus on core products
- by focusing on core” SFeducts— vag: « 2003. target goss written ‘premium: $1.2 oO bi
Slide 28: European companies results
© European com Gross written premium $M Gross earned premium $M. Net earned premium $M Claims ratio % Commission ratio % Expense ratio % * 2001: 101.9% excluding the WTC loss ™ 2001: 5.1%.excluding the WTC'loss. . * Gross written premium: - rates and new business fro _ actions taken on,under pert of
Slide 29: European company operations
AN © Euro ropee in con pany operations year ended 31 December 2004 Actions taken in 2001 anda lower frequency of claims in 2002 more than offset prior year deterioration . Risk profile of portfolios reduced and business written. benefited from improved. terms and conditions and premium rate increase
Slide 30: Lloyd's division results
Gross written premium $M Gross earned premium $f Net earned premium $M Claims ratio % Commission ratio % Expense ratio % * 2001: 101.0% excluding the WTC loss *.2001: 5.9% excluding the WTC loss + Gross writtén premit - and property capaci
Slide 31: Lloyd's division (Limit)
a (= \ a) opportunities arise, Lloyd’ s division (Limi year ended 31 December 2002 =. Strengthened our position in thre c: Peicialist 8 non-marine liability (ex USA), marine and energy insurance and non-marine reinsurance. Mast: portfolios now in profit. Expense ratio up due to higher Lloyd's levy,
Slide 32: Quarterly movements in insurance rates 2000-2002
Quarterly movements in insurance rates 2000 - 2002 Index
Slide 33: Movements in insurance rates 1992-2003
Poe ~ Movements in insurance rates — 1992 - 2003 (e ast 1995 1996 997 1998 ia en _ . a on 1999 2000 2001 2002
Slide 34: Quarterly rate movements by year
% |1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 ai) 5s |12|6 |e 6 | 6 5 9 5 1 a2 | 9 | 15 >| -7 fo 9 | 15 Q3 21 a4 Qs 27 44 51 79°
Slide 35: Five managed syndicates
Five managed syndicates Syndicate Total ~ QBE a = capacity. share® » Type of business: 2002 2003. a : £M EM % 386/2386 350. 450 — 50. Non-marine ne liability (ex. U 566 180 161. -- Property & aviation.f 1036 75. 90 Direct marine & er 2000 “145 176 100 2724 130. 163. = 40 880. 1,040 rect marine «Limi
Slide 36: Investment portfolio composition
Cash Short term money Fixed interest securities 52.8 Equities * 8.9 . ~ Property. Total investments and cash - 11,508 Borrowings (1,456) Net invested funds * Listed equities 7.9% (2001: 9.4%)
Slide 37: Investment income
| memes i myeerpndad 31D Investment i income before realised and unrealise performance from cash ahd fix ix yield of 4.5% (2001: 5. B%)ye Weighted average. duration af ve 3 better,
Slide 38: Equities and properties; liquidity
‘million and properties ps million - + Equity collars expired in May 2002 - not rep : to pricing constraints * 98% of investments liquid.
Slide 39: Cash flow and movement in net invested funds
Cash flow from operations. New funds from acquisitions Lloyd’s capacity increase . Subtotal Capital raising Stronger A$ Dividends paid - Market value movements a Net plant and equipment: purchased - Total increase in net invested fund 5
Slide 40: Sound, practical corporate governance
Sound, practical corporate goverr Assumptions in detailed product plans subiect to rigorous management review Disciplined underwriting process with integrated actuarial support wy Detailed limits and ‘author es fall levels. of organisation Performance against plan’ carefully. pea tored ona regular b
Slide 41: Conservative risk management
= Conservative risk man: gement - ¢ Reinsurance agangements: with: approved highly rat ‘reinsurers - Business plans allow for catastrophe and large losses. ei to cover estimated four times the maximum event retention based onrobust disaster scenarios. ‘* Relatively modest retention basis, substantia
Slide 42: Subject to the usual caveats
Subject to the usual caveats.. ~ Maximise opportunities in current hard market average increase in premium rates of 10% to 15% expected i in
Slide 43: Business strategy and objectives
Business stra ‘egy and Achieve returnon equity in excess of 1 5 times WA (estimate around 13.5%) ~ Reinsurance costs to. remain around 22% of gross. — earned premium Further reduce risk. pro ile Continue focus on aggregate x maximum event retention: ~~ Further reduce inward reinsurance | total premi
Slide 44: Investment, capital and tax targets
Increase net invested funds. by over $1. 5 billion from strong cash flow and Lloyd’ s reinsurance to close Continue low risk strategy for investments - target gross. oon investment yield of 4 a i ; : APRA minimum ‘requirerniente Maintain borrowing and capital adec us S&P AA rating category Tax expen
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