QBE Insurance Group Limited · ASX:QBE
QBE Insurance — Shareholder Meeting (April 2008)
48 slides from QBE Insurance's shareholder meeting presentation, Apr 4, 2008
Slide 1: 2008 Annual General Meeting
QBE INSURANCE GROUP 2008 Annual General Meeting 4 April 2008 All amounts in Australian dollars unless otherwise stated.
Slide 2: John Cloney, Chairman
John Cloney Chairman 2 QBE INSURANCE GROUP
Slide 3: Results of proxy voting
Results of proxy voting A total of 3,993 valid proxy forms were received. The respective votes have been accumulated and summarised by Link Market Services Limited as set out below: Resolution For Against Open Abstain 2 523,206,088 40,356,604 5,615,407 3,973,559 3 396,341,478 170,172,371 3,766,605 5
Slide 4: Results year ended December 2007
Results year ended 31 December 2007 • Record net profit after tax, up 30% to $1.925 billion • Earnings per share, fully diluted for all hybrid securities, up 25% to 217.3 cents • Return on average shareholders’ funds unchanged from last year at 26.1% • Total dividends per share up 28% to 122 cents •
Slide 5: QBE share price
QBE share price year ended 31 December 2007 • Quality result and overall strength of QBE’s business overshadowed by decline in QBE’s share price • In the 21 days following announcement of the 2007 results, around 24% in volume of QBE’s issued shares were traded (around 9% for same period last year)
Slide 6: Dividend
Dividend • Final dividend of 65 cents per share, up 18% (2006: final dividend 55 cents) • Final dividend 50% franked and paid last week • $138.6 million of our 2007 payout was reinvested • Success and increased profitability of overseas businesses has resulted in higher dividends • Forecasts indicat
Slide 7: Shareholders' funds
Shareholders’ funds • Total assets at the end of 2007 of $40 billion • Shareholders’ funds up 35% to $8.5 billion • Increase due to funding US acquisitions, higher retained profits and conversion of hybrid securities • Total funds raised $2.5 billion in the year from: - $0.4 billion - share placemen
Slide 8: Net invested funds
Net invested funds 31 Dec 2007 31 Dec 2006 $m % $m % Cash 988 4.0 1,019 5.1 Short term money 16,317 66.3 10,040 50.3 Fixed interest securities and other 5,552 22.6 7,134 35.7 Equities 1,656 6.7 1,741 8.7 Investment properties 93 0.4 38 0.2 Total investments and cash 24,606 100.0 19,972 100.0 Borrowi
Slide 9: Borrowings
Borrowings • Borrowings* to shareholders’ equity at end of 2007 were 41% (2006: 38%) • Majority of borrowings mature beyond ten years • Weighted average interest rate at 31 December 2007 of 6.7% (31 December 2006: 5.8%) • Interest rates are fixed for a number of years for the majority of our borrowi
Slide 10: Capital adequacy
Capital adequacy • The Group’s regulatory capital remains strong at an estimated 2.4 times the minimum capital requirement* • Large portion of excess capital will be used to fund future acquisitions • Main rating agencies confirmed A+ or equivalent insurer financial strength rating * using APRA’s ri
Slide 11: Acquisitions
Acquisitions • Long standing and successful strategy of growth through acquisition • Successfully completed acquisitions of Praetorian Financial Group and Winterthur US; integration on target and ahead of plans • North Pointe Holdings, a specialist US property and casualty insurer expected to be com
Slide 12: Corporate governance
Corporate governance • The annual report includes a number of statements on QBE’s corporate governance structure and risk management framework • The Group operates in 45 countries and multiple statutory, regulatory and financial rating regimes • Annual compliance costs for the Group now exceed $100
Slide 13: QBE people
QBE people • QBE is strongly focused on staff development, succession planning and the reward and retention of our quality people • Our culture and values are key to: - increasing the long term wealth of shareholders - customer satisfaction and retention - employee motivation - maintaining integrity
Slide 14: Results for 1st quarter 2008
Results for 1st quarter 2008 • On track to meet our targeted full year insurance profit margin of 19% to 20% • Expecting increases of close to 7.5% in gross written premium and 10% in net earned premium • Forecasts subject to usual caveats e.g. large losses and catastrophes not exceeding the signifi
Slide 15: Frank O'Halloran, Chief Executive Officer
Frank O’Halloran Chief Executive Officer 15 QBE INSURANCE GROUP
Slide 16: Summary of 2007 results
Summary of 2007 results • Record year for QBE profitability • Completed two major acquisitions in the US • Outstanding financial results: - profit after tax up 30% to $1.925 billion - diluted earnings per share up 25% to 217.3 cents - return on average shareholders’ funds of 26.1% - total dividends
Slide 17: Summary of 2007 results
Summary of 2007 results • Gross written premium up 20% to $12.4 billion • Net earned premium up 25% to $10.21 billion • Insurance profit up 27% to $2.26 billion • Ratio of insurance profit to net earned premium increased from 21.9% to 22.2% • Combined operating ratio was 85.9% compared with 85.3% •
Slide 18: Comparison with original targets
Comparison with original targets • Gross written premium target of 30%, actual was 20%; lower primarily due to higher Australian dollar • Exceeded target for insurance profit of 17.5% to 18.5% by a considerable margin • Exceeded our target for profit after tax of $1.78 billion by 8% • Target average
Slide 19: QBE performance
QBE performance • Consistently produced underwriting profits and return on equity in top quartile of top 25 global insurance companies • Outstanding businesses in 45 countries with substantial majority producing underwriting profits • Continued focus on allocating capital to products that meet our m
Slide 20: QBE share price
QBE share price Comparison with other Australian financial shares 31 October 1 April Movement Movement 2007 2008 . . $ $ $ % QBE 32.50 22.48 (10.02) (30.8) IAG 4.70 3.67 (1.03) (21.9) SUN 20.28 12.94 (7.34) (36.2) AXA 8.16 5.47 (2.69) (33.0) AMP 10.19 7.86 (2.33) (22.9) CBA 61.50 41.91 (19.59) (31.9
Slide 21: QBE performance
QBE performance • Our proven strategy of growth mainly through acquisitions and focus on profitability will continue • Compound annual growth in premium income exceeded 18% in past 20 years despite rising Australian dollar • QBE’s gross written premium growth: - $412 million in 1987 - $1.85 billion
Slide 22: Strong QBE balance sheet
Strong QBE balance sheet • Low risk investment portfolio of $24.6 billion at year end including 7% in equities and 93% cash and fixed interest securities with average duration of 8 months • Equities fully hedged until recently; now 50% hedged • No sub-prime mortgage backed securities, collaterised d
Slide 23: Acquisitions in 2007
Acquisitions in 2007 • Acquired Praetorian Financial Group in the US effective 31 March 2007 • Acquired Winterthur US Holdings, now called “QBE Regional Insurance” effective 31 May 2007 • Entered into a joint venture agreement in India to establish a general insurance operation • Acquired Cumbre Seg
Slide 24: Terry Ibbotson, CEO Australia
Terry Ibbotson Chief Executive Officer – Australia 24 QBE INSURANCE GROUP
Slide 25: Australia
Australia year ended 31 December 2007 2007 2006 Gross written premium $m 2,596 2,491 Gross earned premium $m 2,518 2,428 Net earned premium $m 2,141 2,051 Claims ratio % 55.2 55.9 Commission ratio % 12.0 11.8 Expense ratio % 15.7 15.2 Combined operating ratio % 82.9 82.9 Insurance margin % 25.6 24.7
Slide 26: Mike Goodwin, CEO Asia Pacific
Mike Goodwin Chief Executive Officer – Asia Pacific 26 QBE INSURANCE GROUP
Slide 27: Asia Pacific
Asia Pacific year ended 31 December 2007 2007 2006 Gross written premium $m 583 583 Gross earned premium $m 570 570 Net earned premium $m 416 446 Claims ratio % 41.3 42.6 Commission ratio % 20.0 20.4 Expense ratio % 21.4 19.7 Combined operating ratio % 82.7 82.7 Insurance margin % 25.0 23.3 • 2007 g
Slide 28: Steven Burns, CEO European operations
Steven Burns Chief Executive Officer – European operations 28 QBE INSURANCE GROUP
Slide 29: European operations
European operations year ended 31 December 2007 QBE Insurance Lloyd’s Total European Europe division operations 2007 2006 2007 2006 2007 2006 Gross written premium $m 2,503 2,646 2,634 2,711 5,137 5,357 Gross earned premium $m 2,537 2,720 2,621 2,475 5,158 5,195 Net earned premium $m 2,026 2,326 1,6
Slide 30: Tim Kenny, CEO the Americas
Tim Kenny President & Chief Executive Officer – the Americas 30 QBE INSURANCE GROUP
Slide 31: the Americas
the Americas year ended 31 December 2007 2007 2006 Gross written premium $m 3,656 1,941 Gross earned premium $m 3,976 1,876 Net earned premium $m 2,574 1,153 Claims ratio % 59.4 55.9 Commission ratio % 22.8 25.6 Expense ratio % 11.4 8.2 Combined operating ratio % 93.6 89.7 Insurance margin % 12.8 13
Slide 32: Des Fogarty, President Equator Re
Des Fogarty President – Equator Re 32 QBE INSURANCE GROUP
Slide 33: Equator Re - captive reinsurer
Equator Re - captive reinsurer year ended 31 December 2007 2007 2006 Gross written premium $m 1,990 901 Gross earned premium $m 1,631 678 Net earned premium $m 1,426 538 Claims ratio % 54.6 63.6 Commission ratio % 22.0 13.0 Expense ratio % 3.9 4.8 Combined operating ratio % 80.5 81.4 Insurance margi
Slide 34: Mark ten Hove, Group General Manager Investments
Mark ten Hove Group General Manager – Investments 34 QBE INSURANCE GROUP
Slide 35: Investment division
Investment division • Investment portfolio of close to $25 billion held in over 100 portfolios in 45 countries and numerous currencies around the world • Investment performance exceeded internal benchmarks and actual investment income well ahead of budget • Low risk, absolute return strategy will co
Slide 36: Expectations for 2008
Expectations for 2008 • Focus on a number of key profit drivers – retention of quality customers, better claims management, improved efficiencies and effective use of excess capital • Growth in the short term will be from acquisition of companies, insurance portfolios, distribution channels and unde
Slide 37: Expectations for 2008
Expectations for 2008 • Target insurance profit margin for 2008 is 19% to 20% of net earned premium • Targets include allowance for large losses and catastrophes and increased risk margins of $950 million or 8.5% of net earned premium • Reinsurance protections in place to ensure that largest single
Slide 38: QBE's position in the market
QBE’s position in the market • In the top 25 insurance/reinsurance businesses around the world measured by net written premium • Minimum return on equity targets in many cases higher than maximum returns set by our peers • Our culture is supported by our successful OPENUP QBE staff development progr
Slide 39: Total employees = 10,692 at 31 December 2007
the Americas - 3,197 Investments - 54 Equator Re - 10 Group - 72 Total employees = 10,692 Australia - 3,436 Asia Pacific - 1,218 at 31 December 2007 European Operations - 2,705 39 QBE INSURANCE GROUP
Slide 40: QBE Group head office management
QBE Group head office management Vince McLenaghan Neil Drabsch Duncan Ramsay Jenni Smith George Thwaites Blair Nicholls 40 QBE INSURANCE GROUP
Slide 41: Thank you to my fellow employees
Thank you to my fellow employees for your loyalty, support and focus on delivering excellent returns to our shareholders during the past year. 41 QBE INSURANCE GROUP
Slide 42: Item 1: Receive and consider the financial statements
Item 1: Receive and consider the financial statements 42 QBE INSURANCE GROUP
Slide 43: Item 2: Adopt the remuneration report
Item 2: Adopt the remuneration report 43 QBE INSURANCE GROUP
Slide 44: Item 3: Approval of conditional rights and options for the CEO
Item 3: Approval of conditional rights and options over the Company’s ordinary shares under the 2007 Deferred Compensation Plan to the Chief Executive Officer 44 QBE INSURANCE GROUP
Slide 45: CEO's incentives
CEO’s incentives The CEO’s 2007 incentives are based on the achievement of a 28% ROE using QBE’s seven year spread basis of accounting. This exceeded the maximum hurdle rate of 21% ROE . No of shares $ or options Short term incentive – cash component 2,506,036 Deferred compensation incentives (1) Co
Slide 46: Item 4: Re-election of Charles Irby as non-executive director
Item 4: The re-election of Charles Irby as a non-executive director 46 QBE INSURANCE GROUP
Slide 47: Charles Irby
Charles Irby Non-executive director of QBE Group • Non-executive director of QBE Group since June 2001 • Member of investment committee and European Operations, Audit Committee • Chairman of Aberdeen Asset Management • Director of Great Portland Estates and North Atlantic Smaller Companies Investmen
Slide 48: www.qbe.com
QBE INSURANCE GROUP www.qbe.com 48
QBE Insurance Group — Shareholder Meeting (April 2008) on 6ix