Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — H1 2019 Earnings Presentation
33 slides from Qbe Insurance's earnings presentation, Aug 15, 2019
Slide 1: QBE results presentation for the half year ended 30 June 2019
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.qbe.com 15 August 2019 The Manager Market Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge Stre
Slide 2: All figures in US$ unless otherwise stated
All figures in US$ unless otherwise stated
Slide 3: Pat Regan
Pat Regan
Slide 4: Brilliant Basics and 1H19 performance summary
Cell Brilliant Pricing Results Investments Balance sheet reviews Basics momentum Focused performance Capability continuing 1H19 average rate Combined operating Annualised net return Strong regulatory and management to improve increase of ~5%2,3 ratio 95.2%4,5 of 6.8% (~4.5% ex rfr) rating agency cap
Slide 5: Gross written premium, rate increases and combined operating ratio
Gross written premium ($M) Premium rate increases2 Combined operating ratio3 7,887 5.5% Disposals 7,637 4.6% 4.7% 95.8% FX 95.2% 1H18 1H19 1H18 2H18 1H19 1H18 1H19 Attritional claims ratio4 Cash profit RoE5 Dividends per share (A¢) 13.4% 25.0 51.3% 22.0 50.2% 9.6% 47.7% 1H18 FY18 1H19 1H18 1H19 1H18
Slide 6: Continued Group-wide premium rate increases
Continued Group-wide premium rate increases1 5.5% • Strong premium rate increases across the Group 4.6% 4.7% • Very strong premium rate momentum in London Market 2.7% insurance business • Retention stable in International and Australia Pacific; down on targeted portfolios in North America 2H17 1H18
Slide 7: Attritional claims ratio improvement
Group2,3 55.0% • Down 6.6% from 54.3% peak in 2H17 53.0% 51.0% 53.1% • Improvement continuing in all divisions 51.3% 49.0% 50.2% 47.0% 47.7% 45.0% 1H16 FY16 1H17 FY17 1H18 FY18 1H19 North America2 International Australia Pacific3 54.0% 50.0% 66.0% 53.0% 49.0% 64.0% 52.0% 51.5% 48.0% 62.0% 48.5% 51.0
Slide 8: Underlying growth of ~3%
Underlying growth of ~3% +3% +4% $7,887M +3% $7,637M ~3% growth 2 1H18 FX Disposals Other North America International Australia Pacific 1H19 1. Continuing operations 2. LMI normalisation and the repositioning of corporate and excess & surplus lines in North America
Slide 9: Underwriting profit by division
Group1,2 U/W Profit • Earnings consistency is improving in all divisions Unacceptable • Australia Pacific impacted by catastrophe activity in 1H19 U/W Loss 1H18 Acceptable 1H19 accident year accident year North America1 International Australia Pacific2 Optimal 1H18 1H19 accident year accident year 1
Slide 10: Pricing, Underwriting, Claims
Pricing Underwriting Claims • Global pricing framework and • GCUOs office establishing • Data-led decision-making standards global oversight • Core claims handling • Enhanced capability and • Reducing high hazard grades capabilities models • Optimising line sizes • Optimising and improving • Utilisa
Slide 11: Examples: Australian commercial property
Examples: Australian commercial property International D&F1 Property: cat AALs2 lowered by reducing 19k primary exposures: 13k - 65% less exposures >$20M - 40%-65% reduction in peak catastrophe exposures 67% reduction in high hazard NA D&O: Portfolio-wide reduction large claims 19k in averag
Slide 12: Inder Singh
Inder Singh
Slide 13: Operating results, cash profit RoE and shareholder payout
Operating results Cash profit RoE3 13.4% 1H18 1H19 9.6% GWP $M 7,887 7,637 NEP $M 5,837 5,671 Net claims ratio % 63.9 68.4 1H18 1H19 Net commission ratio % 16.2 16.1 Expense ratio % 15.0 14.8 Shareholder payout COR % 95.1 99.3 A$503M A$397M COR (ex discount rate) % 95.8 95.2 Annualised net investmen
Slide 14: Underwriting margin improved despite headwinds
Underwriting margin improved despite reinsurance, Crop and LMI headwinds • Continued attritional claims 95.8% ratio improvement 95.2% (~1)% • Crop current accident year (~1)% COR of ~98% (1H18 ~93%) • Reduced contribution from LMI; COR to ~58% (1H18 ~51%) • 2019 reinsurance structure; higher retaine
Slide 15: Australia Pacific: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $1,960M +3% from 1H182 95.4% (4.9)% 93.2% (4.2)% 90.5% COR 92% 90.7%91% 89.0% 90.5% 1H18 89.0% Attritional3 1H18 1H19 1H18 1H19 1H18 1H19 52.8% 1H18 56.3% • Attritional claims ratio improved 3.5%3 and large individual risk claims reduci
Slide 16: International: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $2,880M +4% from 1H182 1.6% 96.8% 95.2% 1.4% 94.3% COR 92.9% 92% 90.7%91% 94.3%3 1H18 96.8%4 Attritional 1H184 1H19 1H185 1H193,6 1H184 1H193 43.2% 1H18 46.1%4 • Attritional claims ratio improved 2.9%4, albeit offset by increase in larg
Slide 17: North America: GWP and COR
Current Prior year GWP accident year + reserve = COR COR change $2,804M +3% from 1H182 1.1% 99.9% 99.6% (0.6)% 98.8% 99.0% COR 92% 99.9% 1H18 99.0% Attritional3 1H18 1H19 1H184 1H194 1H18 1H19 48.4% 1H18 51.4% • Attritional claims ratio improved 3.0%3 • Expense ratio improved 1.5% • COR adversely im
Slide 18: >$20M underlying savings achieved YTD
$919M $874M $839M 15.0% 15.3% 14.8% 1 1 1 1H18 2H18 1H19 >$20M underlying savings achieved YTD >$200M gross savings by 2021 Expense ratio 14.8% (1H18 15.0%) ~$130M net reduction in expenses by 2021 $15M restructuring spend YTD One-time regulatory project cost FY20 (~$30M) Target expense rati
Slide 19: Investment returns and net investment yield
Annualised net investment yield2 Fixed income running yield Duration 6.8% 2.3 years Impact of movement in risk-free rates 2.1% 1.6 years 1.6% 2.4% 4.5% 2.1% 1H18 1H19 1H18 1H19 1H18 1H19 • Growth asset returns of 7.6% (1H18 4.5%) • Fixed income returns of 2.7% (1H18 0.6%) • Funds under management $2
Slide 20: Strong capital
Strong Lower Shareholder capital gearing payout 1.75x 36.8% A$0.5Bn PCA towards upper end of target range • Progressing share buyback; A$646M - 58.6M shares 1.78x 1.75x • Further $195M debt buyback completed; ~$600M since 2017 • Ratings affirmed FY18 Risk charges Net capital generation 1H19
Slide 21: Outlook
Outlook
Slide 22: Deliver the 2019 plan
Deliver the Brilliant Talent and Customer Operating Managing Future 2019 plan Basics culture focus sustainably risk focus Targeted rate Underwriting, pricing Continue to add Global rollout of Further improve our Stronger and more More digitally increases and claims and develop talent EQUITY customer
Slide 23: 2019 combined operating ratio and investment return guidance
COMBINED OPERATING RATIO 94.5% – 96.5%1,2 INVESTMENT 3.00% – 3.50%1 RETURN 1. Assumes risk-free rates as at 31 December 2018 2. Excludes one-off impact of the Ogden decision in the UK
Slide 24: Questions & Answers
Questions & Answers
Slide 25: Important information and forward-looking statements
The information in this presentation provides an overview of the and other factors, many of which are beyond the control of QBE results for the half year ended 30 June 2019. that may cause actual results to differ materially from those either expressed or implied in such statements. There can be no
Slide 26: Appendices
Appendices
Slide 27: Total investments and cash, gross written premium by currency
Total investments and cash ($M) 1H18 1H19 US dollar 6,940 30% 7,349 32% Australian dollar 7,052 30% 6,565 28% Sterling 4,355 19% 3,708 16% Euro 2,463 10% 3,005 13% Canadian dollar 1,089 5% 1,191 5% New Zealand dollar 376 2% 378 2% Hong Kong dollar 375 2% 367 2% Singapore dollar 180 1% 184 1% Other 4
Slide 28: North America results
• Excluding the impact of disposals and business intentionally lapsed, 1H18 1H19 underlying gross written premium growth was around 3% Gross written premium $M 2,896 2,804 • Net earned premium grew by 5% primarily due to growth in Crop coupled with lower reinsurance costs following the restructure o
Slide 29: International results
• GWP increased 4% on a constant currency basis, reflecting the 1H181 1H192 positive pricing environment and targeted growth Gross written premium $M 2,896 2,880 • Average premium rate increase of 3.8% (1H18 4.5% which included significant Ogden related increases in QBE Re); Gross earned premium $M
Slide 30: Australia Pacific results
• GWP increased 3% on a constant currency basis (excluding 1H18 1H19 LMI normalisation and Travel divestment) reflecting premium rate increases across majority of the portfolio and targeted Gross written premium $M 2,106 1,960 growth in selected portfolios Gross earned premium $M 2,095 1,951 • Avera
Slide 31: Summary balance sheet
Summary balance sheet ($M) 31 Dec 2018 30 Jun 2019 Reserving Investments and cash 22,887 23,094 • Positive prior accident year claims Trade and other receivables 5,185 6,126 development of $47M1 (1H18 $40M) Intangibles 2,800 2,774 • $231M negative discount rate impact (1H18 $40M positive) Other asse
Slide 32: APRA PCA calculation
APRA PCA calculation ($M) 31 Dec 20181 30 Jun 20192 Ordinary share capital and reserves 8,400 8,379 Net surplus relating to insurance liabilities 818 835 Regulatory adjustments to Common Equity Tier 1 Capital (3,311) (3,286) Common Equity Tier 1 Capital 5,907 5,928 Additional Tier 1 Capital – Capita
Slide 33: 2019 reinsurance program
Risk XOL Cat XOL Cat Agg Key features of 2019 reinsurance program include: $500M • significantly reduced catastrophe event retention; xs $2.8Bn • greatly increased protection against cat severity; Worldwide • protection against frequency of medium-sized cats; $300M • significantly reduced large indi