Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — FY2022 Earnings Presentation
37 slides from Qbe Insurance's earnings presentation, 2023
Slide 1: 2022 Full Year Result
2022 Full Year Result QBE INSURANCE GROUP LIMITED All figures are in US$ unless otherwise stated. This presentation should be read together with the basis of presentation information detailed on page 25
Slide 2: Andrew Horton, Group Chief Executive Officer
Andrew Horton Group Chief Executive Officer
Slide 3: Key messages
Key messages Resilient profitability: FY22 COR of 93.7% Strategic Priorities: momentum continues Group COR of 93.7% improved on 95.0% in the prior year, and was in line In 2022 we established our six Strategic Priorities. As we’ve integrated the with original FY22 outlook for a Group COR better than
Slide 4: Strategic priorities: Progress and focus
Strategic priorities: Progress and focus Positive operating leverage to support expanded 2023 business planning more deliberately calibrated to investment in people and capability surrounding growth multi-year enterprise portfolio mix targets focus areas Portfolio Refined property CAT appetite to re
Slide 5: Integrating sustainability
Integrating sustainability Our Strategic Priorities Portfolio Sustainable Modernise Our Our Bring the optimisation growth our business People Culture enterprise together Three new Strategic Focus Areas Foster an orderly and inclusive Enable a sustainable Partner for growth through innovative, 1 tran
Slide 6: Performance update
Performance update Performance Rate and growth Investments Balance sheet Statutory COR (incl RFR) 85.7% Group-wide renewal rate FY22 net investment return of Regulatory capital at 1.79x Adjusted COR 93.7% increases averaged 7.9% 2.0% ex RFR Ex cat claims ratio 58.2% Continued gross written premium 4
Slide 7: Gross written premium
Gross written premium Constant currency growth of 13% Growth ex rate 8% 9% 14% $20,054M 4% $18,453M 13% growth FY21 FX North America International Australia Pacific FY22 North America International Australia Pacific Premium growth • Momentum continued with Group GWP growth of 13%, or 10% excluding C
Slide 8: Premium momentum
Premium momentum Continued group-wide premium rate increases +7.9% • Compound premium rate increases continue across each division 9.7% 8.1% 7.7% • Rate increases have moderated in lines where rate adequacy has 10.0% 9.4% 7.9% 8.2% 8.4% improved most, particularly across casualty classes 7.1% • Rate
Slide 9: Inder Singh, Group Chief Financial Officer
Inder Singh Group Chief Financial Officer
Slide 10: Result snapshot
Result snapshot Key result highlights FY21 FY22 • Strong constant currency GWP growth +13% (10% ex Crop) Gross written premium $M 18,453 20,054 • Constant currency NEP growth of +13% (14% ex Crop) Net earned premium $M 13,779 14,770 • Underwriting profit of $933M, excludes $1,234M positive risk-free
Slide 11: Group performance
Group performance GWP Premium growth • Improved and more resilient result despite particularly challenging year for the 14% insurance industry $20,054M 9% • Material improvement in total acquisition costs due to disciplined expense 13% from FY21 management, positive operating leverage and higher rei
Slide 12: Reinsurance update
Reinsurance update Division maximum event retention scenarios ($M) 2023 reinsurance update Assumes event isolated within each division North America International Australia Pacific • 2023 reinsurance renewal completed largely as expected Peak 1,2 Non-peak 1 Peak 1,2 Non-peak 1 Peak 1 Non-peak 1 • 20
Slide 13: Reserve transaction
Reserve transaction Upfront financial impact Undiscounted reserves $1.9B Reinsurance premium $1.9B • QBE has entered into a broad-based reinsurance transaction with Enstar (NASDAQ: ESGR), that de-risks the Group’s exposure to Discounted reserves totalling ~$1.9B. The transaction is subject to regula
Slide 14: North America
North America Combined operating ratio GWP 112.7% • GWP growth of 16%, or 4% excluding Crop. Supportive market conditions for 102.9% targeted growth in commercial lines offset by reduced program exposure $7,274M 14.0 14.5 11.6 12.9 98.9% 11.8 • Pleasing return to underwriting profitability for the f
Slide 15: International
International Combined operating ratio GWP 91.3% 90.6% 92.5% • GWP growth of 14%, with ex rate growth of 9% driven by solid retention and organic growth across most segments $7,546M 13.6 13.1 11.4 17.4 • COR deterioration driven by PYD and elevated catastrophe experience 18.3 17.7 14% from FY21 • Ad
Slide 16: Australia Pacific
Australia Pacific Combined operating ratio GWP 92.8% 91.4% • GWP growth of 9%, with premium rate increases averaging 9.5%, up from 8.3% in 90.1% $5,241M 15.3 14.7 14.1 14.1 13.3 13.5 • the prior period and steadily built over the course of the year Ex rate growth of 2% reflected ongoing momentum in
Slide 17: Investment portfolio performance
Investment portfolio performance Investment portfolio FY22 investment return $M % Fixed income running yield Credit Spread Contribution FI yield (ex risk-free rate) 671 2.6 Weighted Average RFR 4.1% $28.2B Credit spreads MTM (128) (0.5) 3.7% Risk assets 47 1.2 2.5% Expenses and other (23) (0.1) Corp
Slide 18: Balance sheet and capital management
Balance sheet and capital management APRA capital Borrowings Adjusted cash return on equity Debt to total capital target range: 15 – 30% $3.2B 0.06x $3.1B 1.80x $3.0B 0.04x 1.79x 10.3% 10.5% 0.05x $2.8B 1.75x $2.7B FY21 FY22 Reserve FY22 FY22 transaction final pro forma dividend FY18 FY19 FY20 FY21
Slide 19: IFRS 17
IFRS 17 Key objectives of IFRS 17 Key changes Consistent accounting for all insurance contracts Presentation Risk adjustment New across general, life and health insurance of statutory measurement to replace financial model for LMI risk margin statements Comparability with non-insurance sectors Great
Slide 20: IFRS 17 transition impacts
IFRS 17 Transition impacts Risk adjustment target range On transition to IFRS17 a transition adjustment will be Under IFRS17 the risk adjustment serves a similar booked to opening retained earnings to account for the purpose to the risk margin under AASB1023, retrospective application of the standar
Slide 21: Andrew Horton, Group Chief Executive Officer
Andrew Horton Group Chief Executive Officer
Slide 22: Portfolio optimisation update: Volatility
Portfolio optimisation update: Volatility Increase confidence level in achieving Plan financial returns Current accident year Prior accident year Investments Set catastrophe allowance at higher probability of More resilient initial loss picks over recent years, Fixed income credit mix at A+ average
Slide 23: Outlook
Outlook • Premium rate increases expected to continue GWP 2023 constant currency GWP growth expected in the mid-to-high single digits • Market conditions remain conducive for further targeted organic growth Combined Consistent low-to-mid 90s COR through-cycle • IFRS17 adoption in 2023 may lead to a
Slide 24: Questions and answers
Questions and answers
Slide 25: Important information
Important information Basis of presentation (unless otherwise stated) 1. All figures are in US dollars 9. 2021 balance sheet metrics and PCA on a pro forma basis adjust for GBP327 million pre-funded May 2022 debt repayment 2. Combined operating ratios (COR) and underwriting results exclude the impac
Slide 26: Disclaimer
Disclaimer The information in this presentation provides an overview of the results for the materially from those either expressed or implied in such statements. There can year ended 31 December 2022. be no assurance that actual outcomes will not differ materially from these statements. You are caut
Slide 27: Appendices
Appendices
Slide 28: Key metrics summary
Key metrics summary Group North America International Australia Pacific FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22 Gross written premium $M 14,685 18,453 20,054 4,775 6,289 7,274 5,856 6,958 7,546 4,079 5,215 5,241 Net earned premium (ex Crop & LMI) $M 10,760 12,407 13,346 2,475 2,7
Slide 29: Key metrics summary
Key metrics summary Underwriting result FY21 FY22 Investment result FY21 FY22 Statutory Underwriting result $M 1,138 2,042 Fixed income $M 27,185 25,019 Risk assets $M 1,782 3,148 Adjustments – CTP LPT (2021) / Aust PPR & E&S LPT (2022) $M (3) (125) Total cash and investments – closing $M 28,967 28,
Slide 30: Key metrics summary
Key metrics summary FY21 FY22 GWP by currency FY21 $M % FY22 $M % Net profit after tax $M 750 770 US dollar 8,857 48 10,680 53 Amortisation and impairment of intangibles after tax $M 53 72 Australian dollar 4,907 27 4,980 25 Write-off of deferred tax assets $M - - Sterling 1,805 10 1,762 9 Write-off
Slide 31: APRA regulatory capital
APRA regulatory capital APRA PCA calculation ($M) 31 DEC 31 DEC APRA Tiers of Capital Requirement 2021 2022 Ordinary share capital and reserves 7,996 8,105 CET1 > Common Equity 60% of PCA Tier 1 Capital Total Tier 1 > Net surplus relating to insurance liabilities 1,251 1,287 80% of PCA Additional Ti
Slide 32: Balance sheet and ratings
Balance sheet and ratings Summary balance sheet ($M) Capital and borrowings 31 DEC 2021 31 DEC 2022 • Repaid GBP327 million of subordinated Tier 2 notes in May 2022 Investments and cash 28,967 28,167 • Debt to total capital ratio 23.4% (FY21 24.1%) Trade and other receivables 7,109 8,341 Rating agen
Slide 33: Capital markets issuance profile
Capital markets issuance profile QBE has access to A$MTN, EMTN and US144A capital markets Date to first call ($M) Weighted average time to first call: 2.8yrs 300 886 861 AT1 6 699 478 Tier 2 400 Senior 2023 2024 2025 2026 2027 2028 Balance Issued Nominal value Issue date Currency First call date Cou
Slide 34: Simplified reinsurance program
Simplified reinsurance program 1 Risk XOL Cat XOL Key covers 1 Catastrophe Other covers not highlighted Main Cat XOL (Worldwide) Select event non-peak 2 buy down Buy down • $2.1B xs $400M • $300M xs $100M • 1 reinstatement • Sub-limits apply • Partial placement Risk Select event non-peak 2 buy down
Slide 35: Our strategy
Our strategy Our purpose Our vision To be the most consistent and innovative risk partner Portfolio Sustainable Bringthe Modernise Our Our optimisation growth enterprisetogether our business people culture • Actively manage for • Harness the depth and • Leverage expertise and • Complete the • Activa
Slide 36: Our sustainability commitments include:
Our sustainability commitments include: Foster an orderly and inclusive Enable a sustainable and resilient Partner for growth through innovative, transition to a net-zero economy workforce sustainable and impactful solutions • Set interim targets for our underwriting portfolio as per Net-Zero Insura
Slide 37: Evabling a move vesilient future
Evabling a move vesilient future ® QBE