Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2005 Earnings Presentation
52 slides from Qbe Insurance's earnings presentation, Feb 23, 2006
Slide 1: QBE Presentation on the 2005 Results (ASX cover letter)
insurance Group 23 February 2006 The Manager Company Announcements Australian Stock Exchange Limited Level 6 Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, re: QBE Presentation on the 2005 Results Further to the Company’s release to the market today on its results for the year ende
Slide 2: Full year results announcement
‘Ay OBE INSURANCE GROUP PAD RESULTS ANNOUNCEMEN Ail amounts in Australian dollars unless otherwise stated. ” Comparative numbers for. ihe year.ended 31.December 2004 : have.been restated under Australian equivalents to International Financial Reporting Standards (AIFRS).
Slide 3: Highlights
Highlights ar ended 31 December 2005 091 million (2004: $857 million) illion (2004: $1,115 million) ion (2004: $928 milion) or 17.4% of net ecord for catastrophe losses forthe y strong at $1,987 million (2004: $2,110 ettlement of catastrophe claims ~ age shareholders’ funds (2004: 24. 5%): ® OBE INS
Slide 4: Highlights
Highlights fear ended 31 December 2005 08 ice . djusted for foreign exchange 0 million of annualised gross written . iillion % to 19% of gross earned premium | instate protections” ‘oved from 91:2% to 89.1%. improved underwriting profits with ® OBE INSURANCE GROUP:
Slide 5: Highlights
“Highlights ar ended 31 December 2005 — to 73.5% mainly as a result of higher 59.9% reflecting the benefit of our | ns in outstanding claims by 17% to phes were $2,080 million and $515 $320 million) - within the allowances ; claims of 94% (2004: 94%) btful reinsurance recoveries of $76 million fers.
Slide 6: Catastrophe losses
naeel losses ment has again worked for QBE. 2005 r catastrophe claims. - US$ billion ~ 36 37 49 80° ® OBE INSURANCE GROUP:
Slide 7: Highlights
- Highlights year ended 31 December 2005 aximum event retention from our largest st earned premium (2004: 4.3%) % to.16.9%, reflecting a change in mix - ustralian underwriting agencies in 2004 0 12.3% as a result of synergies‘from ves for improved profitability, | debts and one-off costs relating to
Slide 8: Highlights
Highlights ar ended 31 December 2005 343 million (2004: $637 million) ig costs and expenses increased to unrealised gains 0 on equities of $129 $718 million with a net at yield of 5.0% ® OBE INSURANCE GROUP:
Slide 9: Foreign exchange in 2005
ASI in 2005 cu rrencies - 2005 Gross written premium growth reduced by 2% due to impact of fx + FX management includes $6.8 billion in exchange forwards to match currencies + Net income statement and FCTR fx loss of $1 million in 2005 0.6, 0.88 : 0.5 ~." Gep-05 ”Deo-08 ® OBE INSURANCE GROUP:
Slide 10: Shareholder returns
nareholder returns ear ended 31 December 2005 franked (2004: 30.0¢, 50% franked) 6 March 2006. 0 March 2006. 9.March 2006.- up 42% from 2004 nillion (2004 : 745 million) of which 28 ue but discount rate of 2.5% suspended ® OBE INSURANCE GROUP:
Slide 11: Dividend payout
2002-2004 payout over.10.years was 13% 2005.
Slide 12: Worldwide operations
rldwide operations HALF YEAR | FULL YEAR. Jun 2005 Dec 2005 Dec 2005 Dec 2004 BABS 4,285.0 8,408 8,766 94331 4,840.0 ATT 8,571 3,506. 3,880. 7,386. 6,781 - 61.0 5B.9 9 89.9 61.3 ATO ABB ABQ 175 12.3 12.3 12.3 12.4 2 BOB BBO BNA Oo OLE 839 469 > “808°. 597 221A BBB BO 331 553. 735 1,288... 928 18.70
Slide 13: Worldwide operations
rldwide operations year ended 31 December 2005 : Net profit COR after tax 2005... 2004 2005... 2004 % % $M $M 83.6... -89.7- 360 254 3.0 82.3. 86.4 403. 62 V1 90.00 85.6 “314-183 (8) A.B O91 213 239 Bo 92.9 9B. 62 090 44 27 89.8 68.8 39 2-75 7 89.1 91.2 1,094 857 gin. 85.5 89.4.-- 981.0 719 “3 101.9
Slide 14: Reduction in opening shareholders' equity (AIFRS impact)
! $388 million reduction i in opening ‘shareholders’ equity IMPACT. ‘ined benefit ~ Total equity reduced by $142 million after tax at 31 December 2004 shares issued are no Share capital reduced by $90 million at 31 December 2004, which will be reinstated when loans are repaid nm employee gh the. inc
Slide 15: Geographical diversification
phical diversification ium — year ended 31 December 2005 Lleyd’s division — 25% (28%) .. Australia >.> 26% (25%) - Note: 2004 comparatives in parentheses - ® OBE INSURANCE GROUP:
Slide 16: Worldwide portfolio mix
lorldwide portfolio mix ium — year ended 31 December 2005 jarine and aviation 6.3% (6.6%) - Property 28.7% (29.9%) Accident and health» 6.2% (6.1%) Note: 2004 comparatives in parentheses : ® OBE INSURANCE GROUP:
Slide 17: Balance sheet
Balance sheet 31 Dec 2005 34 Dec 2004 $M $M 47,597 ~ 44,975 3,689 “3,294 4,213. 3,143 1,446 1358 1,382 0 4,088 1,032.” - 998 306 299 29,665 25,036 “45,083 12,605 4,287 3,948 2,130 1,805 4,015 968 1,991 1,618 24,506 20,944 5,159 4,092 5,093 4,032. 66 60 5,159 4,092 ® OBE INSURANCE GROUP:
Slide 18: Net invested funds
et invested funds 31 Dec 2004 31 Dec 2005 $M ——% $M % 1,061 6.0. 1,121 75 8,292 - 47.1 5,482". 36.6 7,537 42.9. 6,957. 46.5 674. 3.8 1,383 92 33 0.2 32 0.2 17,597. 100.0. 14,975. 100.0 (2,130) (1,805) 15,467 13,170
Slide 19: Balance sheet
Balance sheet 31 December 2005 | $15.5 billion due to strong operational rated Aa3 or better: > approach to our fixed interest ration at balance date (December years : ) 0% of total investments and cash, ® OBE INSURANCE GROUP:
Slide 20: Currency mix
~ Currency mix Market value of equities 2005 $674 million (2004: $1,383m) Sterling : _ Australian dollar 37.1% (28.2%). ~ 7 pe, 53.8% (36.7%) Other. 6.9% (12.3%) oo : US dollar ~~. 2.2% (22.8%) ® OBE INSURANCE GROUP:
Slide 21: Balance sheet
Balance sheet _ 31 December 2005 ith conservative provision held for ~ 9 claims increased from icant recoveries from current year ) urred but not reported of $1. ‘6 billion $291 million (2004: $200 million) - g eral provision, primarily covering. 1 382 million from acquisitions ® OBE INSURANCE GROUP
Slide 22: Balance sheet
Balance sheet 31 December 2005 3% (2004: 4. 8%) : 2,130-million principally from a $400 onversion of hybrid securities ; 31.December was 5.2% per annum m subordinated debt and 30% hybrid. ® OBE INSURANCE GROUP:
Slide 23: Claims provision
claims provision ates our-prudent management of claims 2004 2003-2002 2001 14044 42 462 9,462 7,595 7.994 6789 1.058750 656 483 “126 108 89 7 a) ee) ee ® OBE INSURANCE GROUP:
Slide 24: Claims development
ims development tilisation of prior year release $M 618 | reinsurance recoveries and - ® OBE INSURANCE GROUP:
Slide 25: Claims development
aims development _ discounted (note 9) Claims 2005 all Claims. -ratio > 0-years ratio $M % to NEP $M % to NEP 386 7,386 56.908 4,282 BB 6.0 185 2.6 4,649 62.9 4,417 59.9 gins and any excess central estimate as the ® OBE INSURANCE GROUP:
Slide 26: Claims provision - group reserve adequacy
y claims provision - Group reserve adequacy f adequacy ("POA") S at high end of POA change | -=1.5% 4.7% ; t4.7% sst ate (adjusted for inter company ® OBE INSURANCE GROUP:
Slide 27: Capital adequacy
Capital adequacy 31 December 2005 cy multiple at 1.9 times the minimum . subordinated debt are included as tier pital adequacy multiple defined. capital requirements for non- the final dividend net of reinvestment ‘Australian licensed insurers - ® OBE INSURANCE GROUP:
Slide 28: Capital adequacy
— Capital adequacy ® OBE INSURANCE GROUP: 31Dec 2005-31 Dec 2004 $M $M “3,263 “2,870 1,856 4204 41414 4,020 (423) (306) (196) (107) (1,382) (4,039) 4,529 3,642 668 645 222 354 890 999 5,419 4,641 2,846. 2,555 48 1.9
Slide 29: APACE
PACE Central Europe (apace) year ended 31 December 2005 TOTAL APACE 2005. 2004. ~—-2005.~——=«2004 694 672 3,122 2,774 688 684 «3,093 —«2,798 536 “514. 2,551 2,277 40.8. 43.6. 629 57.4 18.7. 18.1 14.0. 14.8 22.8... 24.7 16.4. 16.8 82.3. 864 833. 89.0 222° 179° 23.8 16.5 ® OBE INSURANCE GROUP: of ING’
Slide 30: APACE
APACE 7 year. ended 34 December 2005 % asa a result of. a lower frequency of ear-claims al joint venture - achieved $40 million of annualised savings by 2007. pensation, general liability, property, credit ory third party and Western QBE all ix of business and benefit of acquiring ainly due to.one-o
Slide 31: APACE
-APAC E ear ended 31 December 2005 mbined operating ratio of 82.3% mium rates and policy terms and ustralian dollar, a slight reduction i in mpetition ~~ : 0. 8% = frequency of claims at ded underwriting profits: ® OBE INSURANCE GROUP:
Slide 32: European operations
ropean operations year ended 31 December 2005 LIMIT. TOTAL EUROPEAN oe "OPERATIONS 2005 2004 2005° «2004 2,236 2,309) 4,794. 4,610. 2,273 2,265 4,643 4,419 1,743 --1,720 3,697... 3,507 63.6 59.3 629... 63.4 (20.3. 210-8 T1820 10.69 ALB ANB 94.5 916 924 937 12.4 13.9 14.7 11:7 quisitions. and higher
Slide 33: European operations
opean operations fear ended 31 December 2005 92. 1% (2004: 93.7%) despite marine, xposure to catastrophe losses 11.5% due to higher profit commission viders, partly offset by property and commercial motor business: S- overall premium rates expected to rise by ® OBE INSURANCE GROUP:
Slide 34: The Americas
| the Americas jear ended 31 December 2005 10.3 2005 2004 4492 1,382 4,435. 4,354. 843 766 60.0 69.3. 25.5. 87.0 TA 7.2 92.9 93.5. 7.0 ® OBE INSURANCE GROUP: wth up 11% in local currency, Inward. 9% of gross written premium. ;
Slide 35: The Americas
the Americas year ended 31 December 2005, ew in vline with our strategy of oe me business ae million i is proportional reinsurance on. ‘ spite the worst year on record for me prior year. claims - s benefited insurance profit of total GWP compared with 67% last j on general insurance business and : s
Slide 36: Reinsurer - Equator Re
urer — Equator Re of loss protections, below group bsidiaries .~ Group’s reinsurance protections . : excess of loss protections and other — $72 million) - lower Profit due to onal proportional reinsurance from the : subs ntially unchanged. Saeaey ® OBE INSURANCE GROUP:
Slide 37: ® OBE INSURANCE GROUP:
® OBE INSURANCE GROUP:
Slide 38: Investment performance
ar ended 31 December 2005 — ahead of absolute return targets uccessful in maximising yields and ovements ins of $129 million before tax (2004: e resulted i ina 17% i increase in net 13.2 billion) ® OBE INSURANCE GROUP:
Slide 39: Portfolio yields versus actual yields
versus actual yields ® OBE INSURANCE GROUP: eS Current Portfolio AAA mix by. ; currency%)| cash rate % alian dollar 30.2 5.5 23.3 4.5 33.8 4.5 12.7 2.3 hted average yield 100.0 “45
Slide 40: Financial model
® OBE INSURANCE GROUP: S intangibles 2003 93.8% 41:3 yrs” 3.2% 10.4% 52.0% 20.0% 4.3% 24.3% 24.6% 18.3% 20042 91.2% 1.4-yrs. 3.5% 13.7% 51.5% 26.6% 4.9% 31.5% 22.5%. 24.5% Financial model 2005 89.1% ° 1.5.yrs “4.3% ATA% 61.8% 28.2% 5.1% 33.2% “27.9% 23.9%
Slide 41: Growth initiatives in 2005
nitiatives | in 1 2005, gross written premium. 2006. expected gross written “premium $M 95 240 50 100 180 stralia and New Zealand and Austral ur trade.credit operations ® OBE INSURANCE GROUP:
Slide 42: Strategy and 2006 targets
and 2006 targets rrent exchange rates: large losses and ce in our business plans; and.no.major.-. ferest rates, we expect fo: 17% by more than 10% premium growth of 10% and 12.5% . 600 million gross written premium in | of around 4% — >. newal met expectations folio: and claims frequency expected -
Slide 43: Strategy and 2006 targets
y and 2006 targets SS of lapsed business, supported by: ms and conditions nger than previous cycles and expected ' by 2005 catastrophes ® OBE INSURANCE GROUP:
Slide 44: Strategy and 2006 targets
: and 2006 targets ance business including maximum event icant catastrophe risks. of:gross earned premium ense ratio slightly in 2006, with further gies on restructures and acquisitions: _ of net profit before tax nts:- target gross investment yield of / capital appreciation on equities ound $18 bil
Slide 45: Strategy and 2006 targets
gy and 2006 targets ple at more than 1.5 times minimum cy ratios within S&P. AA rating category ategy-a number. of opportunities in. investigated any major Australian competitor. sition initiatives ® OBE INSURANCE GROUP:
Slide 46: 2006 projected gross written premium
xecutive changes tire in July 2006 after 12 years of ~ ge. Thwaites; formerly CFO. of Pacific stralian operations for 11 years now elopment will retire on 31-October OBE INSURANCE GROUP:
Slide 47: Executive changes
Slide 48: Insurance margin
insurance margin “Insurance Insurance profit profit... ASM % BAL 101 720 TT AAT OS 25 86 6A 186 (2.6) L449) 720 806 104-0. 627 137 928 7A 4,288 46.0t0.17.0. ® OBE INSURANCE GROUP:
Slide 49: Gross and net earned premium
s and net earned premium _year ended 31 December 2005 : GEP $9.2Bn til | NEP $7.4 Bn 2004. - 2005 Se last 10 years: 2002 OBE INSURANCE GROUP:
Slide 50: Share price performance
price performance id the Australian All Ordinaries Index BE Share Price Performance I— QBE Share Price Performance Including Reinvestment of Dividends — ASX All Ordinaries Accumulation index 95... Dec-97.... ec-99 - Dec-01...Dec-03 ...Dec-05 . ® OBE INSURANCE GROUP:
Slide 51: ® OBE INSURANCE GROUP:
® OBE INSURANCE GROUP:
Slide 52: QBE Insurance Group
‘Ay OBE INSURANCE GROU Cz www.gbe:com