Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — JP Morgan New York and Edinburgh Conferences 2009
35 slides from Qbe Insurance's conference presentation, Oct 6, 2009
Slide 1: ASX cover letter: CFO presentation to JP Morgan conferences
® QBE Insurance Group 6 October 2009 The Manager Company Announcements ASX Limited Level 6 Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, QBE INSURANCE GROUP LIMITED ABN 28 008 485 014 Head Office 82 Pitt Street Sydney NSW 2000 AUSTRALIA Postal Address GPO Box 82 Sydney NSW 2001 AU
Slide 2: QBE Insurance Group: JP Morgan New York and Edinburgh conferences
For personal use only QBE INSURANCE GROUP JP Morgan New York and Edinburgh conferences Presented by: Neil Drabsch, CFO, QBE Insurance Group October 2009 All amounts in Australian dollars unless otherwise stated.
Slide 3: Introduction
For personal use only Introduction JP Morgan New York and Edinburgh conferences 2 October 2009
Slide 4: Introduction to QBE
Introduction to QBE For personal use only Beginnings in 1886 Listed on the Australian Securities Exchange (“ASX”) in 1973 with the Group head office function located in Sydney Historically, has primarily grown through acquisitions, with over 120 businesses or portfolios acquired throughout the world
Slide 5: QBE's relative strengths
QBE's relative strengths For personal use only Strong balance sheet with no significant legacy issues, stable and growing profits and financial flexibility – quality assets/excess capital/liquidity/risk margins Prudent approach to managing insurance and investment risk including: – Diversity by geog
Slide 6: Strategy
Strategy For personal use only Modest risk retention per risk or event Spread of risk through diversity by product and geographic location Continuing focus on key profit drivers Organic growth pursued in hard markets / niches Growth mainly targets acquisitions Acquisition strategy targeted at: – bol
Slide 7: QBE business mix: portfolio and segment
QBE business mix: portfolio and segment For personal use only Worldwide portfolio mix Segmental analysis - gross earned premium - gross earned premium Property (27.0%) Australia (21.7%) Motor & motor casualty (20.0%) Public/product liability (16.1%) Asia Pacific (4.9%) Marine, energy and aviation (1
Slide 8: Financial performance
For personal use only Financial performance JP Morgan New York and Edinburgh conferences 7 October 2009
Slide 9: Historical financial information
Historical financial information For personal use only Target Half year year ended ended 31 Dec 30 June Year ended 31 December 2009 2009 2008 2007 2006 2005 Gross written premium $m 15,100 8,057 13,142 12,406 10,372 9,408 Net earned premium $m 12,500 6,186 11,087 10,210 8,158 7,386 Combined operatin
Slide 10: QBE performance
QBE performance For personal use only Consistently produced underwriting profits and return on equity in top quartile of top 25 global insurance companies Outstanding businesses in 45 countries with substantial majority producing underwriting profits Continued focus on allocating capital to products
Slide 11: Overview: half year results, key takeaway messages
Overview: half year results, key takeaway messages For personal use only Record first half year profit after tax - up 19% to $1,018m Premium rates improved in all major markets - up 4% on average Premium growth in original currency on track - GWP up 22% Solid investment returns despite market volati
Slide 12: Overview: half year results, key takeaway messages (continued)
Overview: half year results, key takeaway messages For personal use only Continued GFC related claims - $145m from trade credit and other credit related insurance portfolios S&P recent extensive review – upgraded holding company credit rating to an A stable outlook – main insurance subsidiaries, fin
Slide 13: Claims incurred: impacted by GFC and increased risk margins
Claims incurred: impacted by GFC and increased risk margins For personal use only Actual Analysis of Target net claims ratio 2009 FY 2009 1H 2008 FY 2007 FY 2006 FY % % % % % Attritional 49.0 48.3 47.5 47.7 47.4 Large individual risk and 10.0 8.3 8.4 6.6 8.9 catastrophe GFC claims - 2.3 1.8 - - Risk
Slide 14: Release of risk margins in claims incurred
Release of risk margins in claims incurred For personal use only 30 June 31 Dec 31 Dec 31 Dec 31 Dec 2009 2008 2007 2006 2005 From the cash flow statement Gross paid claims 4,208 7,651 7,053 6,025 4,620 Reinsurance paid recoveries 538 1,396 1,665 1,805 1,309 Net paid claims 3,670 6,255 5,388 4,220 3
Slide 15: Risk margins: restated for comparison and sensitivity to FX and discount rates
Risk margins: restated for comparison and sensitivity to FX and discount rates For personal use only 1.8 1.59 1.6 1.51 1.39 1.4 Risk Margins - $ billion 1.24 1.24 1.23 1.23 1.20 1.2 1.11 1.0 0.83 0.81 0.8 0.6 0.4 0.2 0.0 2005 FY 2006 FY 2007 FY 2008 FY 2009 H1 Original per financial statements Adjus
Slide 16: Balance sheet
For personal use only Balance sheet JP Morgan New York and Edinburgh conferences 15 October 2009
Slide 17: Balance sheet
Balance sheet For personal use only 30 June 2009 31 Dec 2008 31 Dec 2007 ASSETS $m $m $m Investments and cash 25,647 28,541 24,606 Receivables 5,605 5,041 4,616 Recoveries on outstanding claims 4,612 5,043 4,360 Deferred insurance costs 2,221 1,987 1,683 Intangibles 5,129 5,586 2,493 ABC financial a
Slide 18: Balance sheet – investments and cash
Balance sheet – investments and cash For personal use only 30 June 2009 31 Dec 2008 31 Dec 2007 $m % $m % $m % Cash 1,667 6.5 2,736 9.6 988 4.0 Short term money 11,802 46.0 16,885 59.2 16,317 66.3 Fixed interest securities and other 10,660 41.6 7,219 25.2 5,552 22.6 Equities 1,421 5.5 1,589 5.6 1,65
Slide 19: Balance sheet - insurance liabilities
Balance sheet - insurance liabilities For personal use only 30 June 31 Dec 31 Dec 31 Dec 31 Dec 2009 2008 2007 2006 2005 QBE’s record of claims development demonstrates our prudent management of claims Prior year release - net discounted $m 230 665 313 306 232 Outstanding claims Total net outstandin
Slide 20: Capital and funding
For personal use only Capital and funding JP Morgan New York and Edinburgh conferences 19 October 2009
Slide 21: Group capital adequacy: remaining strong
Group capital adequacy: remaining strong For personal use only 10,000 9,000 2.4x 1.7x 8,000 2.4x 1.7x Capital base $ million 7,000 4,995 3,301 3,012 6,000 1.9x 5,000 1.8x 4,295 4,000 2,573 2,086 3,000 4,621 4,544 2,000 3,612 2,555 2,846 3,013 1,000 0 2004 2005 2006 2007 2008 1H 2009 Minimum capital
Slide 22: Borrowings: lower debt/equity ratio
Borrowings: lower debt/equity ratio For personal use only 30 June 31 Dec Weighted average cost 2009 2008 of borrowings 6.6% (31 Dec 2008: 6.5%) Movement for the period: Repayment profile (1) - repayment of $301m of short term loans $m $m - repurchase of $175m of QBE debt securities Less than 1 year
Slide 23: Market Conditions
For personal use only Market Conditions JP Morgan New York and Edinburgh conferences 22 October 2009
Slide 24: Market conditions: world rate on line index
Market conditions World rate on line index - reinsurance catastrophe premiums For personal use only The world rate on line index (ROL) increased by 8% on average through the 2009 renewal season compared with declines of 6% in 2008 and 10% in 2007 Reinsurers’ balance sheets affected by the GFC and lo
Slide 25: Market conditions
Market conditions For personal use only Premium rate increases on average up on renewed business Reinsurance rates hardening although demand flat Fixed interest investment market more stable – credit spreads narrowing and liquidity improving Equity markets improving Acquisition opportunities emergin
Slide 26: Market conditions: Americas perspective
Market conditions: Americas perspective For personal use only Overall premium rates slightly positive across the Americas portfolio and ahead of plan; market however still soft, particularly in commercial lines Renewal retention ratios in the mid 80% range, in line with expectations General economic
Slide 27: Market conditions: European perspective
Market conditions: European perspective For personal use only European Operations rate increases at +4.5% for year to date Strongest rate increases on US catastrophe exposed classes, energy +30%, reinsurance +10% Lagging classes are predominantly various global casualty classes at -1% Reinsurance ra
Slide 28: Summary
For personal use only Summary JP Morgan New York and Edinburgh conferences 27 October 2009
Slide 29: Summary
Summary For personal use only Excellent 2008 and half year 2009 underwriting results Effective management of global economic conditions and volatility - cautious approach to continue Strong balance sheet - recent holding company and rating upgrades Financial flexibility History of successful acquisi
Slide 30: Financial results on track
Financial results on track For personal use only 2009 FY 2009 1H Actual Target Profit after tax Greater than 2008 +19% to $1.02bn Insurance profit margin 16% to 18% 17.5% Combined operating ratio Less than 88% × 89.3% GWP and NEP increase Greater than 15% 22% and 21% Reinsurance expense ratio (to GE
Slide 31: Appendices
For personal use only Appendices JP Morgan New York and Edinburgh conferences 30 October 2009
Slide 32: Share price performance
Share price performance For personal use only Securities Currency Prc Appr Total Ret Annual Equity QBE AU Equity AUD 312.09% 548.01% 20.53% QBE AU Equity GBP 436.47% 743.65% 23.75% QBE AU Equity USD 442.76% 751.90% 23.87% * Source: Bloomberg JP Morgan New York and Edinburgh conferences 31 October 20
Slide 33: Top P&C insurers competitor performance 2004 - 2008
Top 10 P & C insurers Competitor performance 2004 - 2008 For personal use only Average combined operating ratio Average return on equity Combined Operating Ratio Return on Equity Weighted Weighted Rank Company 2004 2005 2006 2007 2008 Average Rank Company 2004 2005 2006 2007 2008 Average % % % % % %
Slide 34: Financial Model
Financial Model For personal use only Financial model 2009 2008 2007 2006 2005 June Sensitivity(2) Actual Actual Actual Actual Actual NCOR 88.0% 89.3% 88.5% 85.9% 85.3% 89.1% Period premium held 1.5 1.49 1.55 1.37 1.51 1.48 Yield on insurance funds 5.5% 4.5% 5.3% 5.9% 4.8% 4.4% Insurance profit/NEP
Slide 35: QBE Insurance Group
For personal use only QBE INSURANCE GROUP www.qbe.com
QBE Insurance Group — JP Morgan New York and Edinburgh Conferences 2009 on 6ix