QBE Insurance Group Limited · ASX:QBE
QBE Insurance — Australia Conference May 2009
18 slides from QBE Insurance's conference presentation, May 7, 2009
Slide 1: Australia Conference – May 2009
QBE INSURANCE GROUP Australia Conference – May 2009 Presented by : Neil Drabsch - CFO, QBE Insurance Group 7 May 2009 All amounts in Australian dollars unless otherwise stated.
Slide 2: 2008 results highlights
2008 results highlights • A solid financial result considering the adverse impact of the global financial crisis – Net profit after tax $1,859 million (2007: $1,925 million); – Gross written premium up 6% to $13,142 million – Net earned premium up 9% to $11,087 million – Return on equity at 20.9% of
Slide 3: Insured global catastrophe losses, 1970 - 2008
Insured global catastrophe losses, 1970 - 2008 Year Number of Insured Loss Events US$bn 2008 311 52.5 2007 335 27.6 2006 349 15.9 2005 397 83.4 2004 332 48.6 2003 380 18.5 2002 344 13.5 2001 315 34.4 2000 351 10.6 1999 326 28.6 Source: Sigma Re: Overview of catastrophes, 1999 to 2008 3 QBE INSURANCE
Slide 4: Competitor performance
Competitor performance 2004 - 2008 Top 10 global P & C insurers Average combined operating ratio Average return on equity Combined Operating Ratio Return on Equity Weighted Weighted Rank Company 2004 2005 2006 2007 2008 Average Rank Company 2004 2005 2006 2007 2008 Average % % % % % % % % % % % % 1
Slide 5: Dividend performance
Dividend performance 126.0 • Full year dividend payout up 11% to $1,187 million 1200 • Dividend per share for 2008 up 3% to 126.0 cents 122.0 1100 • Compound annual average growth in dividend per share over 10 1000 years was 16.9% 900 95.0 800 2008 dividend – cents per share 700 Final 65 Payout $m I
Slide 6: Investor feedback post 2008 results
Investor feedback post 2008 results • Concern over QBE’s capital adequacy • Did QBE’s 2008 result benefit from excessive release of prior year risk margins? • QBE’s loan mortgage exposure following the PMI acquisition – Potential for surprise? • Capacity to achieve the target insurance margin of 16%
Slide 7: Capital adequacy
Sensitivity Capital adequacy QBE model 31 Dec 2008 31 Dec 2008 31 Dec 2007 $m $m $m Tier 1 Share capital and reserves 11,224 11,230 8,472 Perpetual securities 382 382 1,294 [1] Excess risk margins 1,830 1,162 1,577 Less deductions (5,977) (5,657) (3,481) 7,459 7,117 7,862 Tier 2 [2] Subordinated deb
Slide 8: Analysis of incurred claims and risk margins
Analysis of incurred claims and risk margins 2008 2007 2006 2005 $m $m $m $m Net claims incurred analysis (note 9) Current year 7,053 5,866 4,857 4,649 Prior year (net release) (665) (313) (306) (232) Net claims incurred 6,388 5,553 4,551 4,417 Claims ratio to NEP 57.6 % 54.3 % 55.8 % 59.9 % Insuran
Slide 9: Lenders' Mortgage Insurance
Lenders’ Mortgage Insurance • In 2008 QBE acquired PMI Australia (now QBE LMI) a consistently profitable residential LMI insurer for over 40 years, with S&P AA- rating • Gross earned premium $203 million (2007: $194 million) – Target 2009: $207 million • QBE LMI statutory entity net assets at 31 Dec
Slide 10: Insurance profit margin
Insurance profit margin Target 2009 2008 2007 2006 2005 % % % % % Insurance profit as a ratio to net earned 16.0 18.0 19.7 22.2 21.9 17.4 premium Comprising: Underwriting profit 11.5 13.5 11.5 14.1 14.7 10.9 Investment income on policyholders’ funds 4.5 4.5 8.2 8.1 7.2 6.5 Insurance profit margin 16
Slide 11: Analysis of claims incurred
Analysis of claims incurred 2009 2008 2007 2006 allowance % % % % Analysis of net claims ratio: – Attritional (2) 49.0 47.5 47.7 47.4 – Large and catastrophe (2) (3) 10.0 10.2 6.6 8.9 – Risk margin upgrade - (0.1) 0.1 1.4 Net claims ratio (1) (4) 59.0 57.6 54.4 57.7 1) Represents net claims incurred
Slide 12: Market conditions
Market conditions • Overall rates for QBE’s January 2009 renewals met expectations • Terms and conditions remain strong • Expect overall rate increases of around 4% for 2009 • Indications of a hardening market, although remain cautious of the impact of the economic downturn • Reinsurance market stab
Slide 13: Managing the global financial crisis
Managing the global financial crisis • Focus on protecting assets – high grade, lower risk investments – limit interest rate/credit spread risk – management of receivables – reinsurance counterparty risk • Maintain liquidity and reduce foreign exchange hedging risk • Opportunistic buyback of debt to
Slide 14: QBE's relative strengths
QBE's relative strengths • Strong balance sheet with no significant legacy issues, strong profitability and financial flexibility – quality assets/excess capital/liquidity/risk margins • Prudent approach to managing insurance and investment risk – diversity – geographic/products – reinsurance strate
Slide 15: Strategy
Strategy Operational performance goals 2009 • Protect our quality customer base and take advantage of hardening market conditions and rational competition • Focus on securing acquisitions that meet our proven criteria • Maintain attritional loss claims ratio at around 48% of NEP • Achieve target ret
Slide 16: Strategy
Strategy Financial performance targets 2009 • Achieve an insurance profit margin of 16% to 18% • GWP and NEP growth between 20% to 25% • Reinsurance ratio of less than 13% of GWP • Achieve a combined commission and expense ratio of 29.0% or less • Tax rate of around 24% • Maintain group capital adeq
Slide 17: QBE's challenges
QBE's challenges • Managing the impact of the global financial crisis • The effect of currency movements on profitability and assets and liabilities • Keeping our quality customers by ensuring that premium rates are realistic for the loss experience and exposure • Retaining our key people • Converti
Slide 18: www.qbe.com
QBE INSURANCE GROUP www.qbe.com All amounts in Australian dollars unless otherwise stated.