Qbe Insurance Group Limited · ASX:QBE
Qbe Insurance — JP Morgan Australasian Investment Conference 2004
23 slides from Qbe Insurance's conference presentation, Oct 5, 2004
Slide 1: Cover letter to ASX: CFO's presentation at JP Morgan conference
Insurance Group 5 Octeber 2004 The Manager Company Announcements Australian Stock Exchange Limited Level 6 Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, re: CFO's presentation at JP Morgan conference Please see attached for the market’s information our CFO's presentation at an Aus
Slide 2: JP Morgan Australasian Investment Conference, Singapore
8 QBE INSURANCE GROUP LIMITED JP Morgan AUSTRALASIAN INVESTMENT CONFERENCE SINGAPORE OCTOBER 2004 Presenter: Neil Drabsch, CFO - me
Slide 3: Company overview
AB Company overviey wes * QBE is an Australian-based general insurance and reinsurance group and one of the world’s 25 largest insurers and reinsurers as measured by net written premium — Established in 1886 — Listed on ASX as QBE in 1973 following merger of three related companies — Operates in 36
Slide 4: Company overview: key financial information
“ys Company overview “aioe Key financial information Dec 2003 June 2004 The Group has ASbn USSbn ASbn USS4n ¢ total assets 20.5 14.3 25.8 18.0 * net assets 3.4 2.4 3.7 2.6 ¢ market capitalisation 7.5 3.1 9.3 6.5 * gross written premium 8.4 5.9 9.2* 6.4* * NPAT $M 572 400 320** 223** Half Yr. Ratios
Slide 5: Company overview: growth and insurance margin
&® Company overview Growth and insurance margin Gross written Insurance Insurance ‘Total premium COR profit profit investments A$M % % A$M co 1994 1,180 100.2 7.4 72 1995 1,336 100.4 8.0 88 1996 1,561 99.3 8.4 101 1997 2,054 99.5 7.2 116 1998 2,409 100.3 7.7 147 1999 2,877 103.9 2.5 56 2000 4,406 10
Slide 6: History of growth
&® History of growtl full year to 31 December 200. Gross written and net earned premiun Compound average growth rates over last 12 years: - gross written premium 21.7% ASM - net earned premium 20.1% 10,000” Projected GWP A$9.2 | NEP A$6.8 E 1994 1996 1998-2000. 2002
Slide 7: Growth strategy
@® Growin strategy * Organic premium growth pursued in hardening insurance environment in markets where QBE has specialised expertise and pricing power ¢ Alarge part of QBE’s growth over the past 15 years is from acquisitions - over 78 acquisitions in 20 years — These include teams of underwriters,
Slide 8: Corporate strategy
aS Corporate stralegy — * QBE’s underlying business strategy is to maintain operations in the key global insurance markets and for selected lines of business to be a lead underwriter, setting rates and conditions in the markets in which it operates * QBE’s strategy of diversification, by product and
Slide 9: Highlights: half year to June 2004
& MHQMHQITS os half year to 30 June 2004 ¢ Net profit after tax up 33% to $320 million (2003 : $241 million) ¢ Insurance profit up 58% to $409 million (2003 : $259 million) or 13.1% of net earned premium (2003 : 8.4%) * Cash flow from operations up 24% to $898 million (2003 : $726 million) ¢ Return
Slide 10: Worldwide operations
BS Worldwide operations wes half year to 30 June 2004 Net profit GWP Growth * COR after tax and minorities 2004 2004 2004 2003 2004 2003 ASM % % % ASM ASM Australia 951 1] 90.4 96.2 12] 75 Asia-Pacific 247 ~=—(10) 88.0 93.3 15 9 the Americas 692 (5) 91.8 95.7 22 19 European companies — 1,371 (5) 92.
Slide 11: Worldwide portfolio mix
AS Worldwide portfolio mi ~ half year to 30 June 2004 gross earned premium Professional indemnity Marine and aviation 9.2% (7.9% -276 (8.67) Workers’ compensation 10.6% (8.7% Financial and credit / 3.0% (3.6%, Property 32.4% (35.5%) Liability 18.4% (15.1%) iy “Aecidentandheaith Other 5.7% (6.4%) Die
Slide 12: Geographical diversification
Geographical diversificatio Gross earned premium half year to 30 June 2004 ie Lloyd’s division ==." || Australia 27% (27%) | 23% (21%) Asia-Pacific 6% (7%) European company operations _. 28% (30%) Percentages in parentheses. represent comparisons a 0 Junie 2003
Slide 13: Net invested funds
@&® wes Net invested funds 30 June 2004 31 Dec 2003 ASM % A$M % Cash 1,127 7.8 717 6.1 Short term money 3,960 27.4 3,499 29.5 Fixed interest securities and other 7,796 54.0 6,216 52.6 Equities 1,426 9.9 1,272 10.8 Property 126 0.9 119 1.0 Total investments and cash 14,435 100.0 11,823 100.0 Borrowin
Slide 14: Historical share price performance
AS Historical share price performance ‘na An investment in QBE has outperformed the Australian All Ordinaries Index and inflation with a compound average annual growth rate of 21.9% over 5 years, 21.1% over 10 years and 23.7% over 20 years to 30 June 2004 ~«- QBE Share Price Performance $24.00 — QBE
Slide 15: Capital & Solvency
@&® o Capital & Solvency Strategy focused on - Maximising regulatory capital adequacy and tier 1 and tier 2 balance - Maintaining our financial strength and credit rating - Meeting market expectations - Ensuring a competitive and realistic ROE * Solvency and capital adequacy: Solvency Capital Shareh
Slide 16: Insurance liabilities - reserve adequacy
AB insurance llapilities - reserve aaequacy wes ¢ Outstanding claims — 93.7% probability of adequacy at 30 June 2004 exceeds Group benchmark of 85% ¢ Level of prudential margins increased in 2003 and half year to June 2004, despite the impact of the stronger AS ¢ The Group's main asbestos-related cl
Slide 17: Acquisitions 2004
BS Acquisitions 2004 — ¢ Acquisition of the remaining 50% in the QBE Mercantile Mutual joint venture, ING’s general insurance subsidiaries in Australia and Zurich's insurance business in Singapore completed on 30 June 2004 ¢ Will add approximately A$325 million of gross written premium in the second
Slide 18: European operations restructure
mn, > European operations restructure * Two European operations merged into one under Steven Burns, previously CEO of Lloyd's division * Two marine syndicates merged and will be incorporated under umbrella syndicate 2999 ¢ Central and Eastern Europe operations now report to Vince McLenaghan, MD of A
Slide 19: Market conditions
LS Market conditions Coo ¢ Ayears of cumulative premium rate increases for most commercial lines of business ¢ Significant gains on terms and conditions across all portfolios — e.g. higher deductibles * More competition emerging, particularly for larger risks — however not irrational ¢ Recent US hur
Slide 20: Market conditions: US commercial premium rate changes
Market conditions Commercial US P & C market average premium rate changes by account size Average Commercial Premium Rate Changes by Account S 35% 30% 25% | 20% 15% 10% S% D% 8% | AD% ae - . 2 2g ©¢ 2 ¢ = «= es = & & @ &B 2 2 @ 2 + = &@ 8 $8 8 §€§ 5 & &B & & & &S & 8&8 8 8B 8S & & S$ ¢ ¢ 9 ¢ &@ &§ $
Slide 21: Market conditions: small commercial rate changes
2, ee es Market conditions Insurance Rate Changes, Small Commercial Accounts* Percentage of Survey Rate Increases Reported by Agents & Brokers in CIAB Survey Respondents (Accounts generating <$25,000 in annual commissions & fees) 100% + 80% - 80% 4 70% 4 (mip 30-5 lwUp 10-30% 60% | } wiUp 1-40% wiNo
Slide 22: Business strategy & 2004 target
@&® wes Business strategy & 2004 target Maximise opportunities in current market overall premium rate increases expected to meet claims inflation in 2004 improved policy terms and conditions gained over the last 2 years to continue maintain high customer retention ratio consider acquisitions as they
Slide 23: Business strategy & 2004 targets
AS Business strategy & 2004 targets ‘na * Continue focus on expense management - expense ratio target 12.4% or less * Increase net invested funds by over AS$1.7 billion to >A$14 billion from strong cash flow and acquisitions (subject to AS value changes) ¢ Continue low risk strategy for investments
QBE Insurance Group — JP Morgan Australasian Investment Conference 2004 on 6ix