Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — Debt Investor Presentation (September 2016)
44 slides from Qbe Insurance's debt investor presentation, Sep 5, 2016
Slide 1: ASX cover letter: 1H 2016 Credit Investor Update
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 5 September 2016 The Manager Markets Announcements Office ASX Limited Level 4 Exchange Centre 20 Bridge S
Slide 2: QBE Insurance Group 1H 2016 Credit Investor Update
QBE Insurance Group 1H 2016 Credit Investor Update September 2016 All figures in US$ unless otherwise stated
Slide 3: Presenters
Presenters Paul Byrne Ernest Claassen Group Chief Capital Officer Deputy Treasurer Responsible for: Responsible for: • Global Treasury & Markets • Debt Capital Markets • Group Capital Management & • Ratings Agencies 2 Credit Investor Update
Slide 4: Group Organisation & Overview
Group Organisation & Overview 3
Slide 5: Company Overview
Company Overview • QBE is one of the world’s largest insurance and reinsurance companies, with operations in 37 countries in all the major insurance markets • Market capitalisation ~A$14 billion • Net assets ~A$14 billion(1) • QBE is regulated on a consolidated basis by the Australian Prudential Reg
Slide 6: Company Overview (cont'd)
Company Overview (cont’d) QBE is organised into 5 different divisions as follows: • North American Operations - general insurance and reinsurance • European Operations - general insurance principally in the UK, mainland Europe and Canada. Our Lloyd’s syndicates writes both general insurance and worl
Slide 7: 1H 16 Earnings
1H 16 Earnings ® QBE
Slide 8: 1H 16 Financial Results Summary
H1 16 Financial Results Summary For the half year ended 30 June 2015(1) 2016 GWP $M 8,557 8,107 NEP $M 6,084 5,615 Underwriting profit $M 401 54 COR % 93.4 99.0 Adjusted COR (ex discount rate impact) % 94.1 94.0 Insurance profit $M 610 326 Insurance profit to NEP % 10.0 5.8 Profit before tax $M 595
Slide 9: Progress on our Strategic Agenda
Progress on our Strategic Agenda FRANCHISE PERFORMANCE GROWING WELL STRENGTH IMPROVEMENT DIVIDENDS CAPITALISE D $ $ GROWTH × Flat REINSURANCE Reinsurance optimisation generated savings of $54M UNDERWRITING EXCELLENCE × 3.1% deterioration in attritional claims ratio CLAIMS $218M positive prior ye
Slide 10: 1H 16 Results Snapshot
1H 16 Results Snapshot GWP AND NEP()(2) ($M) CLAIMS RATIO®) 8,593 7,877 7,918 7,892 6,140 5505 5,701 L J 7 | - - 60.5% 59.8% 1H13 1H14 1H15 1H16 1H13 1H14 1H15 1H16 GWP Mm NEP | EXPENSES ($M) If COMBINED OPERATING RATIO® 15.6% 1,142 1,134 1,055 931 94.8% 94.8% 94.196! 94.0% 1H13 1H14 1H15 1H16 1H13
Slide 11: Key Performance Drivers
Key Performance Drivers (1) GLRC attaches at 8.9% of net earned premium | (2) Excludes the impact of asset sales as presented in our 2015 interim report. (3) Excludes the impact of transactions to reinsure UK long tail liabilities | (4) Refer to slide 32 10 Credit Investor Update
Slide 12: 1H 16 Balance Sheet
1H 16 Balance Sheet ® QBE
Slide 13: Financial Strength & Flexibility
Financial Strength & Flexibility As at 31 Dec 2015 30 June 2016 Summary balance sheet $M $M • Favourable PYD of $218M Investments and cash 26,708 25,741 Reserving • $283M adverse discount rate impact • PoA of 89.0% (FY15 89.0%) Trade and other receivables 4,950 6,316 Intangibles 3,604 3,592 Other as
Slide 14: Investment Performance by Asset Class
Investment Performance by Asset Class 13 Credit Investor Update
Slide 15: Financial Strength
Financial Strength 14 Credit Investor Update
Slide 16: Borrowings
Borrowings • $3,482M at 30 June 2016 Borrowings • Weighted average cash cost of borrowings 5.8% Debt to • Ratio within 25% - 35% benchmark range equity • Debt to tangible equity up slightly to 51.7% • GBP & USD tender exchanges in May/June Market • Term structure extended / profile normalised Activi
Slide 17: APRA PCA Calculation
APRA PCA Calculation $M FY15(2) 1H 16(1) Ordinary share capital and reserves 10,560 10,384 Net surplus relating to insurance liabilities 764 806 Regulatory adjustments to Common Equity Tier 1 Capital (4,424) (4,470) Common Equity Tier 1 Capital 6,900 6,720 Additional Tier 1 Capital - Capital securit
Slide 18: Priorities & Outlook
Priorities & Outlook ® QBE
Slide 19: Key Priorities for 2H 2016
Key Priorities for 2H 2016 PORTFOLIO • Address the Australian & New Zealand attritional claims ratio MANAGEMENT • Maintain improvement in North America and Latin America • Achieve our $150M FY16 expense reduction target PERFORMANCE • Build-out and embed initiatives for claims to achieve $200M run IM
Slide 20: Updated 2016 Financial Targets
Updated 2016 Financial Targets GROSS WRITTEN PREMIUM $13.7 – $14.1Bn (1)(2) ($13.8 - $14.2Bn at constant currency) NET EARNED PREMIUM $11.5 – $11.9Bn (1)(3) ($11.6 - $12.0Bn at constant currency) COMBINED OPERATING 94% - 95% (4)(5) (includes positive prior accident year development) RATIO INSURANCE
Slide 21: 2016 Premium Outlook
2016 Premium Outlook 2016 revised target 2016 previously 2016 revised target 2016 previous GWP(1)(2) stated GWP target NEP(1)(3) stated NEP target North America 4.5 4.8 3.5 3.6 Europe 4.1 4.3 3.2 3.4 Australia & New Zealand 3.7 3.5 3.3 3.1 Emerging Markets 1.6 1.8 1.3 1.4 Equator Re - 0.4 0.3 Group
Slide 22: Questions & Answers
Questions & Answers ® QBE
Slide 23: Contacts
Contacts Paul Byrne Group Chief Capital Officer Telephone: + 61 2 9375 4226 Email: paul.byrne@qbe.com Ernest Claassen Deputy Global Treasurer - Markets Telephone: + 61 2 9375 4079 Email: ernest.claassen@qbe.com 22 Credit Investor Update
Slide 24: Disclaimer
Disclaimer The information in this presentation provides an overview of the results for the half year ended 30 June 2016. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange (“ASX”). Copies of those lodgements are availabl
Slide 25: Appendices
Appendices ® QBE
Slide 26: Appendix 1: H1 16 Earnings
Appendix 1: H1 16 Earnings 25
Slide 27: North America
North America 1H 15 1H 16 • Premium rates on average broadly flat 3,109 2,818 • Excluding the impact of M&LS sale, GWP was Gross written premium $M down 1% compared with the prior year. 2,309 2,184 • Net claims ratio of 71.6%, reflecting: Gross earned premium $M – 3.5% adverse discount rate impact N
Slide 28: Europe
Europe 1H 15 1H 16 • Premium rates down 3% on average Gross written premium $M 2,659 2,508 • GWP and NEP down 1% on a constant currency basis Gross earned premium $M 2,112 1,930 • Use of data & analytics enabling strong cross selling strategies to support new business volumes Net earned premium $M 1
Slide 29: Australia & New Zealand
Australia & New Zealand 1H 15 1H 16 • Premium rates broadly flat Gross written premium $M 1,928 1,861 • GWP down 3% in USD but up 3% on a constant currency basis with growth across a number of Gross earned premium $M 1,913 1,871 portfolios • NEP down 1% USD but up 6% on a constant Net earned premium
Slide 30: Emerging Markets
Emerging Markets 1H 15 1H 16 Gross written premium $M 929 850 • GWP up 10% and NEP up 7% on a constant currency basis, reflecting: Gross earned premium $M 864 793 - strong growth across Latin America - underlying growth in Asia, notably Indonesia, Net earned premium $M 741 655 Malaysia, the Philippi
Slide 31: Equator Re
Equator Re 1H 15 1H 16 • GWP up 15% due to Equator Re providing higher Gross written premium $M 976 1,125 limits on divisional treaties • NEP up 8% from the prior period Gross earned premium $M 485 583 • Net claims ratio of 58.9%: 182 197 – relatively benign large individual risk and Net earned prem
Slide 32: 1H 16 Claims Ratio Analysis
1H 16 Claims Ratio Analysis 2015 2016 1H 15 2H 15 FY15 1H 16 NEP $M 6,229 6,085 12,314 5,615 Attritional claims % 54.2 49.5 51.9 54.5 Large individual risk and catastrophes % 8.9 8.5 8.7 9.8 Claims settlement costs % 2.8 3.2 3.0 3.0 Claims discount % (6.6) (1.1) (3.9) (1.3) Accident year claims rati
Slide 33: 1H 16 Attritional Claims Ratio Analysis
1H 16 Attritional Claims Ratio Analysis 1H 15 1H 16 NEP Attritional NEP Attritional US$M % US$M % 5,607 (1)48.0 5,484 51.1 Rest of world US multi-peril crop insurance 216 85.1 307 83.1 M&LS (2) 261 39.7 - - UK long tail liability reinsurance premium - - (176) - QBE Group adjusted 6,084 49.1 5,615 54
Slide 34: Appendix 2: 1H 16 Balance Sheet
Appendix 2: 1H 16 Balance Sheet 33
Slide 35: Currency Mix of Investments - Update
Currency Mix of Investments - Update Currency breakdown by market value of total investments and cash • Currency mix matches policyholder funds • Diverse currency exposure creating a natural hedge against currency fluctuation Other 11% EUR 8% USD 31% Other EUR 10% 8% USD 31% 31 Dec 2015 30 June 2016
Slide 36: Borrowings Maturity - Update
Borrowings Maturity - Update 1st call date maturity ladder 1000 US$ 696M US$ 600M US$ 585M 500 US$ 455M US$ 386M US$ 300M US$ 300M US$ 149M US$ 11M 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Contractual maturity ladder 1000 US$ 696M US$ 600M US$ 585M 500 US$ 455M US$ 386M US$ 300M US$
Slide 37: APRA Capital Requirements
APRA Capital Requirements • Institutions must have in place a documented Internal Capital Adequacy Assessment process ‘ICAAP’ APRA Prudential • CET1 must be > 60% of PCA Standard – Capital • Tier 1 must be > 80% of PCA Adequacy • Compulsory annual disclosure of CET1, Additional Tier 1 and Tier 2 cap
Slide 38: Australian Insurance Regulatory Requirement
Australian Insurance Regulatory Requirement Capital Base / Tiers of Capital Point of Non-Viability Loss Absorption All Additional Tier 1 and Tier 2 must include loss Common Additional Tier 2 absorption provisions (via conversion or write-down) Equity Tier 1 Tier 1 upon a non-viability trigger even
Slide 39: Appendix 3: Rates
Appendix 3: Rates ® QBE
Slide 40: FX Rates versus US$
FX Rates versus US$ 2016 June 2015 December 2015 June 2016 assumed Closing rate Average rate Closing rate Average rate Closing rate Average rate Average rate AUD 0.77 0.78 0.73 0.75 0.75 0.73 0.72 GBP 1.57 1.53 1.47 1.53 1.33 1.43 1.36 EUR 1.11 1.12 1.09 1.11 1.11 1.12 1.10 ARS 0.11 0.11 0.08 0.11 0
Slide 41: 1H 16 Movement in Weighted Average Discount Rate
1H 16 Movement in Weighted Average Discount Rate Weighted average risk-free discount rates on outstanding claims % Currency 30 June 2015 31 Dec 2015 30 June 2016 Australian dollar 2.43 2.37 1.77 US dollar 1.59 1.80 1.20 Sterling 1.53 1.47 0.56 Euro 0.75 0.59 (0.16) Group weighted average (ex Argenti
Slide 42: Overview of QBE Entities
Overview of QBE Entities QBE Division QBE Insurance Group Limited Australia Emerging Markets Net assets $10,384M(1) North America Equator Europe QBE Insurance Holdings QBE Life QBE QBE Asia Investments QBE European QBE Emerging QBE AAP Holdings Pacific N America Operations Plc Markets Holdings Holdi
Slide 43: Global Regulatory Environment
Global Regulatory Environment QBE is directly regulated in over 40 jurisdictions, including 30 with differing capital requirements and is regulated on a Group basis by APRA Locally authorised Principle office (underwriting) Licensed (inc Lloyd’s) Local representative office Underwriting may be possi
Slide 44: Glossary of common terms
Glossary of common terms APRA: Australian Prudential & Regulatory Authority COR: Combined operating ratio CTP: Compulsory Third Party DM: Developed Markets EM: Emerging Markets FI: Fixed Income GLRC: Group large risk and catastrophe programme GWP: Gross written premium HY: High Yield LMI: Lenders’ m
QBE Insurance Group — Debt Investor Presentation (September 2016) on 6ix