2022 Annual Report
QBE INSURANCE GROUP LIMITED
b
Important information
Basis of presentation
(unless otherwise stated)
All amounts in this report are US dollars.
Premium growth rates are quoted on a constant
currency basis.
Premium rate changes exclude North America
Crop and/or Australian compulsory third party
motor (CTP).
Adjusted net cash profit after tax adjusts
statutory net profit for Additional Tier 1 capital
coupon accruals, as well as any gain on disposal,
amortisation or restructuring costs.
APRA PCA calculations at 31 December 2022
are indicative. Prior period calculation has been
updated to be consistent with APRA returns
finalised subsequent to year end.
Basis of presentation (Section 1)
Results presented on statutory basis.
Combined operating ratio, net claims ratio and
underwriting result exclude the impact of changes in
risk-free rates used to discount net outstanding claims.
Basis of presentation (Section 2)
Combined operating ratio and net claims ratio
exclude the impact of changes in risk-free rates
used to discount net outstanding claims.
2022 figures exclude the transaction to reinsure
North America Excess & Surplus (E&S) lines
liabilities, and the charge in relation to the
Australian pricing promise review.
2021 figures exclude the impact of COVID-19 and
the transaction to reinsure Australian CTP liabilities.
Prior accident year claims development excludes
North America Crop development that is matched
by premium cessions under the MPCI scheme,
and any other divisional development that is
matched by an underwriting adjustment in the
current period.
Fixed income excludes enhanced fixed income
risk assets which comprise emerging market debt,
high yield debt and private credit.
2021 pro forma adjusts for GBP327 million
pre-funded May 2022 debt repayment.
2020 figures exclude the impact of COVID-19.
2019 is presented on a continuing operations basis
and adjusted basis as presented in prior year reports.
North America and International results (2019
and earlier) have been restated for the transfer
of North America’s inward reinsurance business
to QBE Re, part of International.
Analysis of the Group by division excludes
Corporate & Other segment.
Table of
SECTION 1
Performance overview
Chair’s message
2022 snapshot
SECTION 2
Operating and financial review
Group Chief Executive Officer’s report
Our strategic priorities
Group Chief Underwriting Officer’s report
Sustainability review
Group Chief Financial Officer’s report
North America business review
International business review
Australia Pacific business review
SECTION 3
Governance
Managing risk – our business
Climate change – our approach
to risks and opportunities
Board of Directors
Group Executive Committee
Corporate governance statement
SECTION 4
Directors’ Report
Directors’ Report
Remuneration Report
Auditor’s independence declaration
SECTION 5
Financial Report
Financial Report contents
Financial statements
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
SECTION 6
Other information
Shareholder information
Financial calendar
10-year history
Glossary
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8
10
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16
26
28
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44
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48
58
62
86
87
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163
171
174
175
176
QBE Insurance Group Limited
| ABN 28 008 485 014
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Our strategic priorities
Our purpose, vision and strategic priorities create
a foundation to further strengthen and grow our business
and to enable a more resilient future.
Page 8
Our areas of sustainability focus
Our Sustainability Framework helps us drive performance,
manage risks and identify opportunities across the areas
of sustainability that are most important to our business,
customers and stakeholders. Page 14
Group Chief Underwriting Officer’s report
We are striving for greater consistency
across everything we do.
Page 10
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Important information
Basis of presentation
(unless otherwise stated)
All amounts in this report are US dollars.
Premium growth rates are quoted on a constant
currency basis.
Premium rate changes exclude North America
Crop and/or Australian compulsory third party
motor (CTP).
Adjusted net cash profit after tax adjusts
statutory net profit for Additional Tier 1 capital
coupon accruals, as well as any gain on disposal,
amortisation or restructuring costs.
APRA PCA calculations at 31 December 2022
are indicative. Prior period calculation has been
updated to be consistent with APRA returns
finalised subsequent to year end.
Basis of presentation (Section 1)
Results presented on statutory basis.
Combined operating ratio, net claims ratio and
underwriting result exclude the impact of changes in
risk-free rates used to discount net outstanding claims.
Basis of presentation (Section 2)
Combined operating ratio and net claims ratio
exclude the impact of changes in risk-free rates
used to discount net outstanding claims.
2022 figures exclude the transaction to reinsure
North America Excess & Surplus (E&S) lines
liabilities, and the charge in relation to the
Australian pricing promise review.
2021 figures exclude the impact of COVID-19 and
the transaction to reinsure Australian CTP liabilities.
Prior accident year claims development excludes
North America Crop development that is matched
by premium cessions under the MPCI scheme,
and any other divisional development that is
matched by an underwriting adjustment in the
current period.
Fixed income excludes enhanced fixed income
risk assets which comprise emerging market debt,
high yield debt and private credit.
2021 pro forma adjusts for GBP327 million
pre-funded May 2022 debt repayment.
2020 figures exclude the impact of COVID-19.
2019 is presented on a continuing operations basis
and adjusted basis as presented in prior year reports.
North America and International results (2019
and earlier) have been restated for the transfer
of North America’s inward reinsurance business
to QBE Re, part of International.
Analysis of the Group by division excludes
Corporate & Other segment.
Table of
Performance overview
SECTION 1
Chair’s message
2022 snapshot
SECTION 2
Operating and financial review
Group Chief Executive Officer’s report
Our strategic priorities
Group Chief Underwriting Officer’s report
Sustainability review
Group Chief Financial Officer’s report
North America business review
International business review
Australia Pacific business review
SECTION 3
Governance
Managing risk – our business
Climate change – our approach
to risks and opportunities
Board of Directors
Group Executive Committee
Corporate governance statement
SECTION 4
Directors’ Report
Directors’ Report
Remuneration Report
Auditor’s independence declaration
SECTION 5
Financial Report
Financial Report contents
Financial statements
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
SECTION 6
Other information
Shareholder information
Financial calendar
10-year history
Glossary
2
4
6
8
10
12
16
26
28
30
32
34
44
46
48
58
62
86
87
88
92
162
163
171
174
175
176
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Group Chief Financial Officer’s report
We are focused on delivering improved and more
consistent financial performance.
Page 16
QBE Insurance Group Limited
| ABN 28 008 485 014
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6
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Chair's message
Commitment
to consistent
profitability
and growth
The past year has seen unique
challenges and uncertainties for
people and businesses across
the globe. We are acutely aware
that these challenges are global,
vast and complex, and we remain
conscious of their ongoing impact.
Providing
support in a
challenging year
As a global insurer,
we understand how
devastating natural
disasters are for our
customers and the
communities in
which we operate
Our purpose
of enabling a more
resilient future
remains acutely
relevant and
meaningful
2022 in review
Around the world, our changing climate
has brought significant challenges for
people and their way of life. As an insurer,
we witness first-hand the impact of these
events, working alongside our customers
to help restore their lives following
devastating catastrophes.
Flooding in the eastern states of Australia
through early 2022 was one of the largest
Australian catastrophes on record, while
Hurricane Ian in North America was the
second largest on record. Reflecting
on the devastation faced by many
communities, our purpose of enabling
a more resilient future remains acutely
relevant and meaningful.
We are living in extraordinary times. After
the global pandemic, we are faced with
heightened geopolitical tensions, global
inflationary pressures, significant market
volatility and supply chain challenges.
The situation in Ukraine remains deeply
saddening and we hope for a speedy
resolution to the crisis facing the
Ukrainian people.
Against this backdrop, QBE has maintained
its focus and its commitment to delivering
improved profitability and growth. We are
pleased with our statutory net profit after
tax of $770 million and the growth across
our divisions. Our capital position and
balance sheet remain prudently positioned.
Reflecting our confidence in the outlook,
the Board has declared a final dividend
of 30 Australian cents per share, compared
to the final dividend of 19 Australian cents
per share in 2021.
Operating sustainably
QBE remains dedicated to sustainably
meeting our commitments, today and for
the future. We continue to evolve to meet
the rapidly changing needs of our people,
environment, customers and community.
As Andrew Horton outlines in his Group
Chief Executive Officer's report, QBE has
refreshed its sustainability strategy and this
provides clear direction for our ongoing
sustainability commitments. We have
made pleasing progress against our
2022 Sustainability Scorecard which
can be found in the 2022 Sustainability
data book on our website.
2
3
Chair's message
Commitment
to consistent
profitability
and growth
The past year has seen unique
challenges and uncertainties for
people and businesses across
the globe. We are acutely aware
that these challenges are global,
vast and complex, and we remain
conscious of their ongoing impact.
Providing
support in a
challenging year
As a global insurer,
we understand how
devastating natural
disasters are for our
customers and the
communities in
which we operate
Our purpose
of enabling a more
resilient future
remains acutely
relevant and
meaningful
2022 in review
Around the world, our changing climate
Against this backdrop, QBE has maintained
has brought significant challenges for
its focus and its commitment to delivering
people and their way of life. As an insurer,
improved profitability and growth. We are
we witness first-hand the impact of these
pleased with our statutory net profit after
events, working alongside our customers
tax of $770 million and the growth across
to help restore their lives following
our divisions. Our capital position and
devastating catastrophes.
Flooding in the eastern states of Australia
through early 2022 was one of the largest
Australian catastrophes on record, while
Hurricane Ian in North America was the
second largest on record. Reflecting
on the devastation faced by many
communities, our purpose of enabling
a more resilient future remains acutely
relevant and meaningful.
We are living in extraordinary times. After
the global pandemic, we are faced with
heightened geopolitical tensions, global
inflationary pressures, significant market
volatility and supply chain challenges.
The situation in Ukraine remains deeply
saddening and we hope for a speedy
resolution to the crisis facing the
Ukrainian people.
balance sheet remain prudently positioned.
Reflecting our confidence in the outlook,
the Board has declared a final dividend
of 30 Australian cents per share, compared
to the final dividend of 19 Australian cents
per share in 2021.
Operating sustainably
QBE remains dedicated to sustainably
meeting our commitments, today and for
the future. We continue to evolve to meet
the rapidly changing needs of our people,
environment, customers and community.
As Andrew Horton outlines in his Group
Chief Executive Officer's report, QBE has
refreshed its sustainability strategy and this
provides clear direction for our ongoing
sustainability commitments. We have
made pleasing progress against our
2022 Sustainability Scorecard which
can be found in the 2022 Sustainability
data book on our website.
Over the past few years QBE
has refined its purpose and
operations, building a platform
for future success. In establishing
this platform, it is important
to recognise the vital role that
all our people play and to that
end I extend my sincere thanks
to the people of QBE who live
our purpose of enabling a more
resilient future and deliver each
day for our customers.
Andrew and the Group Executive
Committee have set a clear
strategy for the organisation,
underpinned by a purpose and
vision that resonates well with
our people. I also thank them for
the focus and leadership they have
displayed during the year.
Equally, I thank my Board
colleagues for their expertise and
perspectives which have guided
our collective and considered
decision making this year.
Finally, thank you to our
shareholders for your
continued support.
Mike Wilkins AO
Independent Chair
In January 2022, QBE was proud
to become the first Australian listed
insurer to join the United Nations
(UN)-convened Net-Zero Insurance
Alliance (NZIA), a group of leading
insurers and reinsurers that have
pledged to contribute to limiting warming
to 1.5 degrees by the end of 2100,
through a NZ2050 underwriting portfolio.
QBE is committed to transitioning our
insurance and reinsurance underwriting
portfolios to net-zero greenhouse
gas emissions (GHG) by 2050.
This commitment complements our
2020 commitment to become the first
Australian-based insurer to join the
UN-convened Net-Zero Asset Owner
Alliance (NZAOA), committing to
transition our investment portfolio to
net-zero GHG by 2050. We also set a
new target to achieve net-zero emissions
for our global operations by 2030 and
remain focused to reduce our overall
energy use and source 100% renewable
electricity for our operations by 2025.
In the past year, we have made pleasing
progress through our involvement with
the NZIA working groups. QBE has
participated in the collaborative working
group between the Partnership for
Carbon Accounting Financials (PCAF)
and NZIA members to develop the first
global GHG accounting and reporting
standard to measure and disclose
insurance-associated emissions for
specific commercial classes and private
motor. The first NZIA Target-Setting
Protocol (Protocol) was published in
January 2023 and QBE will publish one
or more interim targets in accordance
with the Protocol.
We remain proud of our impact investment
initiative, Premiums4Good, which achieved
another year of growth. There are now
108 securities invested to help make
a positive environmental and social impact
and now totals $1.6 billion. We maintain
our ambition to reach $2 billion in impact
investments by 2025.
Throughout 2022, we continued to use
our 2021 Human Rights Policy to guide
our approach and commitment to human
rights. Our consideration of human
rights in our employment, procurement,
investment, and underwriting practices
is part of how we enable a resilient future.
In January 2022, we launched our new
Inclusion of Diversity Policy. One of the
ways we are taking action is to drive
diverse leadership representation,
and across the Group we have a target
of 40% women in leadership by 2025.
Over the last year, we have seen
an increase from 35.9% to 38.6%,
supported by our ongoing focus on
inclusion at every stage of the employee
life cycle. Across QBE, we are cognisant
of gender diversity, as well as all the ways
we differ, including diversity of thought,
skills and experience.
The appointment of Yasmin Allen
to our Board in July 2022 supports
our commitment to diversity, with our
Board now comprising 44% women,
already meeting our target of 40% by
2025. Non-Executive Directors John
Green and Stephen Fitzgerald made the
decision to retire from the QBE Board in
May and we are grateful for their many
years of service and commitment to QBE.
Supporting our customers
and communities
Around the world, we continue
to experience increased catastrophe
events. The impact of these events
is often overwhelming for families,
businesses and communities.
Our teams have continued to respond
to these extreme weather events:
expanding and scaling up to be there for
our customers, paying claims efficiently
and working with partners and suppliers
to get people and businesses back on their
feet as quickly as possible. As an insurer,
this is fundamentally why we exist
– to deliver for our customers when they
need us most.
In October 2022, we were proud
to announce a new three-year global
Disaster Relief and Resilience
Partnership between QBE, Red Cross
and Save the Children. We increased
our funding to A$1.5 million for each
partner over three years. We have
a key emphasis on supporting strategic
initiatives focused on climate adaptation
and mitigation to support communities
to be better prepared and build resilience.
Since this unique partnership began
in 2019, we have helped over 490,000
people in 19 countries respond to and
recover from catastrophic events and
supported our partners to deliver their
programs and relief efforts through the
deployment of US$2.7 million. We look
forward to our continued partnership
efforts to help make a difference for
people and communities in need.
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snapshot 1
Shareholder highlights
Dividend per share (A¢)
39
2021 30
Dividend payout (A$M)
578
30% from 2021
2
5
A¢
60
45
30
15
0
A$M
1,500
1,125
9
3
750
375
0
0
3
4
2019
2020
2021
2022
Dividend per share (A¢)
Dividend payout (A$M)
Return on average
shareholders’ equity
– adjusted cash basis
10.5%
2021 10.3%
Basic earnings per
share – adjusted
cash basis (US¢)
57.2
2021 54.6
Sustainability highlights
Foster an orderly and inclusive transition to a net-zero economy
2025
Progressing our targets:
5% Investing in the transition 2 4.8%
25% energy reduction now 20%
RE100 3 target maintained
2030
Committed to net‑zero emissions
across our global operations
and one or more interim
targets for underwriting
2050
Committed to net‑zero
emissions across our
underwriting and
investment activities 4
Enable a sustainable and resilient workforce
Achieved our
2025 goal of
40%
Advanced our
2025 goal of
40%
women on
Group Board (44%)
women in
Leadership (38.6%)
Included in the Bloomberg
Gender-Equality Index
for the 6th year
Recognition of our
Culture Transformation
by AHRI
1 Financial information above is extracted or derived from the Group’s audited financial statements on pages 87 to 170 of this Annual Report.
The Group Chief Financial Officer’s report also provides further analysis of the results.
2 For more information, please see Climate change – our approach to risks and opportunities.
3 RE100 is a global corporate leadership initiative bringing together influential businesses committed to 100% renewable electricity by 2050.
4 Commitments as per UN-Convened Net-Zero Asset Owners Alliance for our investment portfolio, and Net-Zero Insurance Alliance for our underwriting portfolio.
4
5
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Gross written premium
by class of business
Financial highlights
Gross written premium by class of business (US$M)
Gross written premium
by class of business
2022
%
20,001
13% from 2021
2022
%
2021
%
Commercial &
domestic property
Agriculture
Public/product liability
Combined
Motor & motor casualty
operating ratio
Professional indemnity
Marine, energy & aviation
Workers' compensation
Accident & health
Financial & credit
Other
94.2%
29.5
19.8
11.9
10. 1
8.4
6.9
6.2
4.5
2.0
0.7
2021 93.7%
29.4
16.6
12. 1
11. 1
9.8
7.2
6.3
4.3
3.2
–
Commercial &
domestic property
Agriculture
Public/product liability
Motor & motor casualty
Professional indemnity
Marine, energy & aviation
Workers' compensation
Accident & health
Financial & credit
Other
29.5
19.8
11.9
10. 1
8.4
6.9
6.2
4.5
2.0
0.7
2021
%
29.4
16.6
12. 1
11. 1
9.8
7.2
6.3
4.3
3.2
–
Net earned
premium (US$M)
Net earned premium
by type
14,327
13% from 2021
Insurance profit (loss) (US$M)
90%
10%
direct and
facultative
insurance
inward
reinsurance
Insurance profit (loss) (US$M)
Underwriting
result (US$M)
Insurance
profit (US$M)
828
2021 837
1,533
2021 1,215
3
3
5
,
1
8
2
8
5
1
2
7 1
3
8
,
2022
2021
Underwriting result
Insurance profit
3
3
5
,
1
8
2
8
5
1
2
7 1
3
8
,
2022
2021
Underwriting result
Insurance profit
Net profit
after tax (US$M)
770
2021 750
Ex-cat claims ratio
North America
Group
60.1%
2021 59.4%
77.4%
International
51.6%
Australia Pacific
56.4%
Catastrophe
claims (US$M)
Catastrophe
claims ratio
1,060
15% from 2021
7.4%
2021 6.9%
Operational highlights
Gross written premium growth
Average renewal
premium rate increase
13%
2021 22%
Group
7.9%
2021 9.7%
North America
9.2%
International
6.5%
Australia Pacific
9.5%
Premium retention
84%
2021 84%
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snapshot 1
Shareholder highlights
Dividend per share (A¢)
39
2021 30
Dividend payout (A$M)
578
30% from 2021
2
5
A¢
60
45
30
15
0
1,125
9
3
0
3
A$M
1,500
750
375
0
4
2019
2020
2021
2022
Dividend per share (A¢)
Dividend payout (A$M)
Sustainability highlights
Return on average
shareholders’ equity
– adjusted cash basis
10.5%
2021 10.3%
Basic earnings per
share – adjusted
cash basis (US¢)
57.2
2021 54.6
Foster an orderly and inclusive transition to a net-zero economy
2025
Progressing our targets:
5% Investing in the transition 2 4.8%
25% energy reduction now 20%
RE100 3 target maintained
2030
Committed to net‑zero emissions
across our global operations
and one or more interim
targets for underwriting
2050
Committed to net‑zero
emissions across our
underwriting and
investment activities 4
Enable a sustainable and resilient workforce
Achieved our
2025 goal of
40%
women on
Advanced our
2025 goal of
40%
women in
Group Board (44%)
Leadership (38.6%)
Included in the Bloomberg
Gender-Equality Index
for the 6th year
Recognition of our
Culture Transformation
by AHRI
1 Financial information above is extracted or derived from the Group’s audited financial statements on pages 87 to 170 of this Annual Report.
The Group Chief Financial Officer’s report also provides further analysis of the results.
2 For more information, please see Climate change – our approach to risks and opportunities.
3 RE100 is a global corporate leadership initiative bringing together influential businesses committed to 100% renewable electricity by 2050.
4 Commitments as per UN-Convened Net-Zero Asset Owners Alliance for our investment portfolio, and Net-Zero Insurance Alliance for our underwriting portfolio.
6
Group Chief Executive Officer’s report
Building resilience
and strengthening
returns
Our new purpose of enabling
a more resilient future has been
a great foundation for QBE in
another particularly dynamic
year for the insurance industry.
Our vision to become the most
consistent and innovative risk
partner provides clear guardrails
as we seek to build deep and lasting
relationships with our customers.
Strong momentum
against strategic
priorities
Our new purpose,
vision and strategic
priorities launched
at the start of 2022
have been embraced
by our people
Bringing the enterprise
together sits at the
core of our strategy
As I reflect on my first year at QBE,
I am incredibly impressed and
proud of our people and how they
show up for our customers and
the communities we serve.
Our new purpose, vision and strategic
priorities launched at the start of 2022
have been embraced by our people,
helping to bring us together and become
a more consistent organisation. As part
of this strategy, we remain focused
on our commitment to culture and living
our QBE DNA, which is the heartbeat
of our organisation and supports
everything we do.
Earlier this year, QBE released a new
sustainability strategy following extensive
consultation and a thorough review of the
external landscape. Our refined strategy
has clear sustainability objectives that are
embodied within our strategic priorities.
These are to foster an orderly and inclusive
transition to a net-zero economy, enable
a sustainable and resilient workforce,
and partner for growth through innovative,
sustainable and impactful solutions.
The foundational work in 2022 will
allow us to move faster over the coming
12 months. I see great opportunity
to leverage the expertise across our
markets and unlock the value of our
global organisation. I look forward
to updating you on our progress and
achievements over the coming year.
Business performance
The operating backdrop has been
marked by a number of challenges
for the industry, including geopolitical
tensions, elevated catastrophe
experience and a surge in inflation.
Despite these headwinds, the business
is demonstrating improved resilience,
achieving a combined operating ratio
of 93.7% compared to 95.0% in the prior
period. Our return on equity of 10.5% has
been impacted by adverse investment
mark-to-market impacts, though this
should improve meaningfully into 2023
on account of higher interest rates.
6
7
Group Chief Executive Officer’s report
Building resilience
and strengthening
returns
Our new purpose of enabling
a more resilient future has been
a great foundation for QBE in
another particularly dynamic
year for the insurance industry.
Our vision to become the most
consistent and innovative risk
partner provides clear guardrails
as we seek to build deep and lasting
relationships with our customers.
Strong momentum
against strategic
priorities
Our new purpose,
vision and strategic
priorities launched
at the start of 2022
have been embraced
by our people
Bringing the enterprise
together sits at the
core of our strategy
As I reflect on my first year at QBE,
The foundational work in 2022 will
I am incredibly impressed and
proud of our people and how they
show up for our customers and
the communities we serve.
Our new purpose, vision and strategic
priorities launched at the start of 2022
have been embraced by our people,
helping to bring us together and become
a more consistent organisation. As part
of this strategy, we remain focused
on our commitment to culture and living
our QBE DNA, which is the heartbeat
of our organisation and supports
everything we do.
allow us to move faster over the coming
12 months. I see great opportunity
to leverage the expertise across our
markets and unlock the value of our
global organisation. I look forward
to updating you on our progress and
achievements over the coming year.
Business performance
The operating backdrop has been
marked by a number of challenges
for the industry, including geopolitical
tensions, elevated catastrophe
experience and a surge in inflation.
Earlier this year, QBE released a new
sustainability strategy following extensive
consultation and a thorough review of the
external landscape. Our refined strategy
Despite these headwinds, the business
is demonstrating improved resilience,
achieving a combined operating ratio
of 93.7% compared to 95.0% in the prior
has clear sustainability objectives that are
period. Our return on equity of 10.5% has
embodied within our strategic priorities.
been impacted by adverse investment
These are to foster an orderly and inclusive
mark-to-market impacts, though this
transition to a net-zero economy, enable
should improve meaningfully into 2023
a sustainable and resilient workforce,
on account of higher interest rates.
and partner for growth through innovative,
sustainable and impactful solutions.
The rating environment remained
supportive, and I am pleased with
the growth we have achieved,
which importantly has been calibrated
to refreshed medium-term portfolio mix
and growth targets. We expect recent
momentum will continue into 2023.
Achieving an appropriate risk-adjusted
return on capital in North America
remains a key priority, and the turnaround
in profitability this year is encouraging.
We are making good progress on our
strategy to further optimise and grow the
portfolio, to achieve better balance and
reduced volatility.
North America achieved a combined
operating ratio of 98.9%, compared
to 102.9% in the prior period. I am
pleased with the return to profitability
for the division in what was a tough
year in many aspects, though we have
further work to do to ensure the division
trends towards our Group combined
operating ratio target range.
We now have quite a narrow product
focus in the division, great people and
strong distribution relationships. I am
confident in our strategy for the division,
and see a clear pathway towards
improved and more consistent returns.
Strategic priorities
Our new direction will define our priorities
for the medium to long term and further
integrate our sustainability strategy. It is
my commitment to provide transparency
on our progress and focus on each of our
six strategic priorities, as we look to deliver
on our vision of being the most consistent
and innovative risk partner. In all this
work we are fundamentally guided by our
purpose of enabling a more resilient future.
We have made good progress against
our strategic priorities this year.
Work commenced on our portfolio
optimisation targets and these have been
incorporated into 2023 business planning.
Going forward, QBE will adopt a five-year
portfolio planning model and identify
the capabilities required to successfully
grow in selected classes.
To ensure sustainable growth,
we completed a comprehensive
reassessment of our geographical
footprint and lines of business that will
support QBE’s medium to long-term
growth aspirations. We will take
a longer-term view, and these growth
opportunities have been reflected in
business planning across the Group.
Work continues on initiatives for
cross-divisional opportunities and
establishing stronger links between our
growth initiatives, to be more aligned
with our broader strategic priorities.
Bringing the enterprise together sits
at the core of our strategy, and the key
objective is to unlock the value of QBE
through initiatives that help us better
organise and leverage capabilities
across our markets. The focus for 2023
is to build on our enterprise focus,
improve and simplify how we operate
to ensure that we can achieve greater
consistency and innovation across our
global organisation.
To support our ambition, we need to
thoughtfully modernise our business,
with many initiatives already underway.
We made good progress with our
digitisation efforts across divisions
and functions. There is ongoing focus
on core platforms and further IT estate
simplification, all centred around making
QBE an easier partner to deal with, and
work for, ensuring we fully leverage our
data and global scale.
Against our people priority, we have made
good progress in key areas of reward and
performance, leadership and capability;
and workforce planning. We launched
our 2022 Annual Performance Incentive
plan to enable a clear link between
culture and performance, which is driving
improved outcomes. We established
enterprise leadership capabilities through
three new leader forums to evolve the
way our leaders learn, connect and help
embed our enterprise strategy. We have
focused on workforce planning to better
understand capabilities, and plan and
ensure QBE has the right people in the
right roles to deliver on its priorities.
I am pleased with the progress made
in 2022 against our stated culture
priorities. We have clear objectives
through our Culture Blueprint initiatives,
including an enterprise recognition
program and programs aimed
at improving meeting effectiveness.
The Blueprint initiatives will continue
to be informed by data, employees,
and key stakeholders across QBE.
We established a new Culture
Governance approach to drive priority
enterprise initiatives and both the Group
Executive Committee and Board remain
engaged with our culture work through
regular updates on progress.
We remain focused on delivering our
strategic priorities and consistently
supporting our customers, partners
and communities. I am proud of
what we have achieved together
in 2022 and I am optimistic about
the year ahead.
We expect the risks associated
with inflation, ongoing economic
uncertainty and climate change
should serve to maintain pricing
discipline across the insurance
industry. Across property classes
in particular, these themes will
be compounded by the withdrawal
of property reinsurance capacity,
which should result in higher
reinsurance costs for the industry.
We expect gross written premium
growth to be in the mid-to-high
single digits in 2023, and our Plan
combined operating ratio on a AASB
1023 basis is ~93.5%.
It has been a pleasure to work
with my colleagues on the Group
Executive Committee and the
stability in our leadership team
has reflected positively across the
organisation. I thank our people for
their dedication and support of our
customers. I have been humbled
this year as I met so many people
across our divisions and witnessed
their genuine care and pride
in our company. I look forward
to continuing to work with them
to help enable a more resilient
future and demonstrate the positive
role insurance plays for economies
and people. Finally, I wish to thank
our shareholders for their support
over the year.
Andrew Horton
Group Chief Executive Officer
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8
Our purpose is to enable
a more resilient future.
As an organisation, we
have been helping our
customers grow, innovate,
explore, prepare and recover
from setbacks since 1886.
Our strategy should ensure
we build on this legacy.
building momentum
Portfolio optimisation
Strive for both improved and more consistent
risk-adjusted returns by actively managing
portfolio mix and volatility
Sustainable growth
Achieve consistent growth through innovative risk
solutions, leveraging improved digital capability
and existing skill set across the enterprise
Bring the enterprise together
Simplify what we do and achieve greater consistency
across the enterprise. Explore new ways to better
leverage our global footprint and scale
Modernise our business
Strategically innovate and invest in differentiating
capabilities that make things easier for our customers,
partners and people
Our people
Empower a sustainable and diverse pipeline
of leaders, while becoming an employer of choice
in our markets
Our culture
Be a purpose-led organisation. Strengthen the
alignment, trust and collaboration across the enterprise.
Make sure our purpose is visible every day, in all
our interactions
8
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Our purpose is to enable
a more resilient future.
As an organisation, we
have been helping our
customers grow, innovate,
explore, prepare and recover
from setbacks since 1886.
Our strategy should ensure
we build on this legacy.
building momentum
What we have achieved in 2022
Future focus
Portfolio optimisation
Strive for both improved and more consistent
risk-adjusted returns by actively managing
portfolio mix and volatility
• 2023 business planning more deliberately calibrated to multi-year
enterprise portfolio mix and growth targets
• Refined property catastrophe appetite to reduce volatility and
ensure more targeted deployment of in-demand capacity
Sustainable growth
Achieve consistent growth through innovative risk
solutions, leveraging improved digital capability
and existing skill set across the enterprise
• Positive operating leverage to support expanded investment
in people and capability surrounding growth focus areas
• With NZIA insured emissions measurement methodology now
finalised, work is progressing to set targets in accordance with the
NZIA Target-Setting Protocol
Bring the enterprise together
Simplify what we do and achieve greater consistency
across the enterprise. Explore new ways to better
leverage our global footprint and scale
• More structured collaboration across certain global lines
of business driving more consistency, and improved distribution
and capital allocation outcomes
• Simplification of internal delegated authorities to empower
leaders and lift pace of decisions and workflow
Modernise our business
Strategically innovate and invest in differentiating
capabilities that make things easier for our customers,
partners and people
• Establishment of multi-year Australia Pacific modernisation
program to support leading commercial market shares through
an uplift in digital capability
• Continued to execute on the simplification of our IT estate with
a significant shift of infrastructure and applications to the cloud
Our people
Empower a sustainable and diverse pipeline
of leaders, while becoming an employer of choice
in our markets
• New remuneration model launched for 2022 more directly
linked to culture (how) and performance (what) driving
organisational uplift across both areas
• QBE Voice people survey highlights improvement in employee
wellbeing, sense of belonging and engagement
Our culture
Be a purpose-led organisation. Strengthen the
alignment, trust and collaboration across the enterprise.
Make sure our purpose is visible every day, in all
our interactions
• Established Culture Insights Panel to inform ongoing culture
assessment and identification of new opportunities
• Developed bold new Inclusion of Diversity targets
for launch in 2023
• Further refine the Group's volatility
framework, with a focus to more deeply
integrate the framework into our cell review
and planning process
• Conduct strategic review of QBE's market
position and capability across select casualty
classes to refine growth and mix targets
• Market conditions expected to remain
supportive in 2023, with further opportunity
for selective growth across our focus areas
• To support a successful transition, focus
will continue on more deeply embedding
environment and social factors into our
planning and underwriting
• Accelerate and better define next wave of
enterprise opportunities unlocked through
better sharing of knowledge and relationships
• Build out capabilities to create a globally
consistent underwriting platform that can
leverage market opportunities and support
the resilience of our clients in an increasingly
complex risk environment
• Build and improve operational capability,
effectiveness and resilience in a sustainable
way as we grow
• Leverage the foundational investment over
recent years to further digitise underwriting
workflows across the business, and better
embed the use of data in decision making
• Develop globally consistent approach
in performance management, career and
development, underpinned by investment
in leadership capability
•
Increase the diversity of our workforce in line
with targets (such as HESTA’s 40:40 Vision)
including increasing representation of women
in all leadership roles
• Develop internal and external campaigns
to help further embed, and bring our new
purpose to life
• Embed our new Safety to Speak up framework
into our DNA, encouraging more inclusive and
respectful behaviours
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Group Chief Underwriting Officer’s report
Navigating
uncertainty
In a period characterised by
significant economic, geopolitical
and climate-related challenges,
QBE's underwriting performance
demonstrated strong discipline
and much improved resilience.
Material effort to improve
underwriting quality, consistency
and capability is now translating
into better financial outcomes
and deeper relationships with
our customers and partners.
Sam Harrison Group Chief Underwriting Officer
Average renewal
premium rate
increase (%)
7.9
1.8% from 2021
Underwriting result
(US$M)
933
238 from 2021
Group COR (%)
93.7
2021 95.0
QBE has demonstrated adaptability, discipline and resilience in a dynamic and
challenging year. The insurance industry navigated new geopolitical and inflation
challenges, alongside a continuation of COVID-19 litigation and extreme weather.
Despite challenges, we maintained our focus and pleasing progress was made around
performance, portfolio optimisation, and our desire to be a successful sustainable
insurer. We continue to modernise and improve data capability, which has supported
improved financial performance and enhanced relationships with our customers
and partners.
QBE achieved a combined operating ratio of 93.7% compared to 95.0% in the prior
year, which supported a double digit ROE of 10.5%, QBE's strongest in over a decade
following 10.3% achieved in the prior period. Looking ahead, we remain confident
in our primary ambition for QBE to achieve a consistent combined operating ratio
in the low-to-mid 90s.
Rate adequacy continued to improve in 2022, where markets remained disciplined
in most lines of business. While inflation was a significant challenge for the business,
I am pleased with our preparedness, collaboration and response. We expect higher
inflation will remain persistent in the year ahead, which, combined with the impact
of higher reinsurance costs and an uncertain economic outlook, suggests a pressing
need for further rate increases and discipline across the industry.
Our reinvigorated focus on portfolio optimisation and volatility has driven meaningful
cultural change over the year, resulting in continued refinement of our cell review
and planning process. We enter 2023 with more deliberate and defined enterprise
level portfolio growth and mix targets, with our first formal interim target for our
underwriting portfolio to be published in line with the Protocol. Environmental and social
considerations continue to play a larger role in our planning and underwriting process,
where we see a great opportunity surrounding QBE's role in supporting an orderly and
inclusive transition towards net zero.
10
11
Group Chief Underwriting Officer’s report
focus areas
Inflation: our experience and approach
Looking ahead
Inflation has proven a major challenge for the industry in 2022,
and question-marks around its persistency remain a key uncertainty
in the year ahead
While inflation was a significant challenge for the business, we
were well prepared with the early establishment of a co-ordinated
global inflation working group, which helped to both detect and
respond to inflation. Over the past two years, we have progressively
embedded higher inflation assumptions across a number of classes
of business to reflect a mix of experience, and uncertainty regarding
the emergence of inflation.
While there are increasing signals
suggesting inflation may have
peaked, the persistency of inflation
remains a key risk. We remain
focused on maintaining dynamic
feedback loops between claims,
pricing and underwriting teams,
and ensuring exposure and rating
remains commensurate with inflation.
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Portfolio optimisation: more deliberate planning
Looking ahead
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The portfolio optimisation strategy has been pivotal in leveraging
the foundational enhancement undertaken over recent years into
a more deliberate and focused enterprise planning process
Our global underwriting teams are collaborating more effectively than
ever before. This has supported the evolution and success of our portfolio
optimisation strategy, where our planning process is now calibrated
to more defined and deliberate portfolio mix targets, determined as an
enterprise. This cohesion has been particularly important in navigating
a more challenging reinsurance marketplace, in which we recalibrated
our global property catastrophe strategy and appetite.
Growth opportunities in 2023 remain
attractive, and we expect to achieve
further measured growth across
our focus areas. Our approach to
volatility has matured over the year,
and we continue to improve our
tools and data to better integrate
volatility analysis into our cell review
and planning process.
3
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Sustainability: underwriting a successful transition
Looking ahead
’
Our desire is for QBE to be a successful sustainable insurer, and
we have made pleasing progress around integrating environmental
and social considerations into our underwriting culture
We are proud to have played an active role in the NZIA, as the industry
works towards a consistent approach to measuring insured emissions.
With this methodology now finalised, QBE's focus for the year ahead
will centre around underwriting emission measurement and target setting.
This will be a significant and challenging body of work, though we see
great opportunities ahead as we begin working more closely with our
customers to ensure a successful transition.
To support our transition plan,
we remain focused on the ongoing
development of the tools needed to
improve our underwriting emission
measurement depth and quality.
We are optimistic and continue
to explore transition opportunities
that will arise, both relating to
nascent industries and technology,
and product innovation.
Future fit: an innovative underwriting culture
Looking ahead
We want to foster an innovative and modern underwriting culture,
and continually explore ways to modernise, expand our data capability
and assess new product lines and opportunities
In 2022, we successfully launched our new global property pricing tool, which
established an enterprise-consistent approach to risk selection, pricing and
terms. We continue to explore opportunities in cyber insurance and have
collaborated to take our existing capability and establish a new global product.
We remain focused on product innovation, particularly where we can encourage
and reward sustainable behaviours, and were proud to launch our new green
Lenders' Mortgage Insurance (LMI) product in Australia.
QBE has an underwriting platform
that continues to attract top
talent, and is known in our key
markets for being innovative and
dynamic. The benefit of material
positive operating leverage in
recent periods has allowed for the
opportunity to invest in further data
analytics capability and tools to
ensure we can maintain and build
on our leading reputation.
n
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Navigating
uncertainty
In a period characterised by
significant economic, geopolitical
and climate-related challenges,
QBE's underwriting performance
demonstrated strong discipline
and much improved resilience.
Material effort to improve
underwriting quality, consistency
and capability is now translating
into better financial outcomes
and deeper relationships with
our customers and partners.
Sam Harrison Group Chief Underwriting Officer
1.8% from 2021
and partners.
Average renewal
premium rate
increase (%)
7.9
Underwriting result
(US$M)
933
238 from 2021
Group COR (%)
93.7
2021 95.0
QBE has demonstrated adaptability, discipline and resilience in a dynamic and
challenging year. The insurance industry navigated new geopolitical and inflation
challenges, alongside a continuation of COVID-19 litigation and extreme weather.
Despite challenges, we maintained our focus and pleasing progress was made around
performance, portfolio optimisation, and our desire to be a successful sustainable
insurer. We continue to modernise and improve data capability, which has supported
improved financial performance and enhanced relationships with our customers
QBE achieved a combined operating ratio of 93.7% compared to 95.0% in the prior
year, which supported a double digit ROE of 10.5%, QBE's strongest in over a decade
following 10.3% achieved in the prior period. Looking ahead, we remain confident
in our primary ambition for QBE to achieve a consistent combined operating ratio
in the low-to-mid 90s.
Rate adequacy continued to improve in 2022, where markets remained disciplined
in most lines of business. While inflation was a significant challenge for the business,
I am pleased with our preparedness, collaboration and response. We expect higher
inflation will remain persistent in the year ahead, which, combined with the impact
of higher reinsurance costs and an uncertain economic outlook, suggests a pressing
need for further rate increases and discipline across the industry.
Our reinvigorated focus on portfolio optimisation and volatility has driven meaningful
cultural change over the year, resulting in continued refinement of our cell review
and planning process. We enter 2023 with more deliberate and defined enterprise
level portfolio growth and mix targets, with our first formal interim target for our
underwriting portfolio to be published in line with the Protocol. Environmental and social
considerations continue to play a larger role in our planning and underwriting process,
where we see a great opportunity surrounding QBE's role in supporting an orderly and
inclusive transition towards net zero.
12
review
QBE continues to focus
on embedding sustainability
into our business activities
and culture. Our sustainability
strategy focuses on the
environmental and social
challenges most relevant to our
business, and delivering on our
purpose of enabling a more
resilient future.
Climate risks and opportunities and the
associated economic, social and environmental
implications, remain a priority for our
stakeholders. Addressing the impacts of
severe weather and supporting the transition
to a net-zero economy will require considerable
capital investment, innovation, and change.
Additionally, we know that climate change
can exacerbate socio-economic inequalities
and that it will take focus for the transition
to a net-zero economy to be inclusive.
QBE supports an orderly and inclusive transition
to a net-zero economy. We have committed to
supporting the objectives of the Paris Agreement
by working towards being a net-zero emissions
organisation across our operations by 2030 and
through our investment and underwriting activities
by 2050 with consideration of the latest science.
We recognise the important role we can play
as an insurer. Our success is reliant on many
factors and is intrinsically linked to the progress
we all can make collectively, particularly in
developed countries with net-zero commitments.
Ensuring that sustainability is a fundamental
part of our organisational culture, and
partnering to develop innovative solutions
to address climate and other sustainability
challenges, form the other two focus areas
of our sustainability strategy.
The story so far…
2016
• Developed Sustainability Framework
• Launched Premiums4Good
• Developed Group Diversity & Inclusion Policy
• First participated in annual PSI public disclosures
2017
• Premiums4Good grew to $455 million in first year
• Signed up to the Women’s Empowerment
Principles (WEPs)
2018
• Adopted the Task Force on Climate-related
Financial Disclosures (TCFD)
• Achieved carbon neutrality 1 for our business
operations and have maintained this since
• Released our Supplier Sustainability Principles
2019
• Launched the Global Disaster Relief and
Resilience partnerships with Save the Children
and Red Cross
• Joined RE100, committing to 100% renewable
electricity across global operations by end of 2025
• Released our Group Environment Policy
• Developed our Sustainability Scorecard to drive
sustainability commitments
• Joined Business for Social Impact (B4SI) and
implemented social impact measurement framework
2020
• Net zero 2050 investment commitment in line
with UN-convened NZAOA
• Membership of the UN Global Compact (UNGC)
2021
2022
• Committed to net-zero emissions across global
operations by 2030
• Developed our Environmental and Social
Risk Framework
• Released our Group Human Rights Policy
• Celebrated 10 years of the QBE Foundation
with new strategy launch
• Net zero 2050 underwriting commitment in line
with UN-convened NZIA
• Extended our Global Disaster Recovery and
Relief Partnerships with Red Cross and Save
the Children for a further three years
Incorporated sustainability-aligned metrics
based on culture, women in leadership and risk
in executive variable remuneration scorecard
•
1 On defined emissions inventory related
to our operations, see Data Book.
12
13
2022 highlights
37 initiatives and targets completed or on track in 2022.
See our data book for progress on our 2022 scorecard.
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Sustainable
insurance
Laying the
foundation
to publish one or
more interim targets
in accordance
with the
NZIA
Target-Setting
Protocol
Impact and
responsible
investments
$1.6B
Market value of
Premiums4Good
investments
$200 million from 2021
108 securities
Number of
Premiums4Good
investments
25 securities from 2021
Operational
excellence
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Sourced 100% renewable
electricity for our
operations globally 1
20%
reduction
Energy usage
reduction against
baseline year of 2019
Customer and
community
People and
culture
408,698
People supported
through QBE Foundation
135,962 people in 2021
Recognition
of our
Culture
Transformation
by AHRI
Governance
99.4%
Percentage of employees
who completed
mandatory training
97.4% in 2021
1 On defined emissions inventory related
to our operations, see Data Book.
1 Based on RE100 Materiality Threshold guidance which excludes countries with small electricity loads
(<100MWh/year and up to a total of 500MWh/year) and where it is not feasible to source renewable electricity.
Relaunched our Global
Disaster Relief and
Resilience Partnership
for another three years
Awarded Platinum
Employer status in the
Australian Workplace
Equality Index
Winner of ANZIIF
ESG Change Award
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QBE continues to focus
on embedding sustainability
into our business activities
and culture. Our sustainability
strategy focuses on the
environmental and social
challenges most relevant to our
business, and delivering on our
purpose of enabling a more
resilient future.
Climate risks and opportunities and the
associated economic, social and environmental
implications, remain a priority for our
stakeholders. Addressing the impacts of
severe weather and supporting the transition
to a net-zero economy will require considerable
capital investment, innovation, and change.
Additionally, we know that climate change
can exacerbate socio-economic inequalities
and that it will take focus for the transition
to a net-zero economy to be inclusive.
QBE supports an orderly and inclusive transition
to a net-zero economy. We have committed to
supporting the objectives of the Paris Agreement
by working towards being a net-zero emissions
organisation across our operations by 2030 and
through our investment and underwriting activities
by 2050 with consideration of the latest science.
We recognise the important role we can play
as an insurer. Our success is reliant on many
factors and is intrinsically linked to the progress
we all can make collectively, particularly in
developed countries with net-zero commitments.
Ensuring that sustainability is a fundamental
part of our organisational culture, and
partnering to develop innovative solutions
to address climate and other sustainability
challenges, form the other two focus areas
of our sustainability strategy.
The story so far…
2016
• Developed Sustainability Framework
• Launched Premiums4Good
• Developed Group Diversity & Inclusion Policy
• First participated in annual PSI public disclosures
2017
• Premiums4Good grew to $455 million in first year
• Signed up to the Women’s Empowerment
Principles (WEPs)
2018
• Adopted the Task Force on Climate-related
Financial Disclosures (TCFD)
• Achieved carbon neutrality 1 for our business
operations and have maintained this since
• Released our Supplier Sustainability Principles
2019
• Launched the Global Disaster Relief and
Resilience partnerships with Save the Children
and Red Cross
• Joined RE100, committing to 100% renewable
electricity across global operations by end of 2025
• Released our Group Environment Policy
• Developed our Sustainability Scorecard to drive
sustainability commitments
• Joined Business for Social Impact (B4SI) and
implemented social impact measurement framework
2020
with UN-convened NZAOA
• Net zero 2050 investment commitment in line
• Membership of the UN Global Compact (UNGC)
• Committed to net-zero emissions across global
operations by 2030
• Developed our Environmental and Social
2021
Risk Framework
• Released our Group Human Rights Policy
• Celebrated 10 years of the QBE Foundation
with new strategy launch
2022
• Net zero 2050 underwriting commitment in line
with UN-convened NZIA
• Extended our Global Disaster Recovery and
Relief Partnerships with Red Cross and Save
the Children for a further three years
•
Incorporated sustainability-aligned metrics
based on culture, women in leadership and risk
in executive variable remuneration scorecard
1414
Our areas of
QBE’s purpose is enabling a more resilient future. We’ve been
enabling resilience for 136 years through products and services
that transfer risk and allow customers to recover after loss.
Focus area
1
Foster an orderly and inclusive transition to a net-zero economy
We support an orderly and inclusive transition to a net-zero
emissions economy. We recognise the importance of addressing
climate change and incorporating climate-related risks and
opportunities into our decision making, facilitating a resilient
future for our business, customers and people. QBE has
made net-zero commitments in relation to our own operations,
investments, and underwriting. In line with our NZAOA net zero
2050 investment portfolio commitments, we are progressing
on our interim targets for 2025.
Since joining the NZIA in 2022, we are laying the foundations
to set interim targets for our underwriting portfolio. QBE has
contributed to the development of insurance-associated
emissions through the Partnership for Carbon Accounting
Financials (PCAF) and NZIA. In January 2023, the NZIA issued
the first Target-Setting Protocol for the global insurance sector.
The Protocol will guide the form of QBE’s interim targets for 2030.
Our supply chain can also be a significant source of emissions
and we have committed to commencing formal engagement
on net-zero progress with large suppliers in our global supply
chain, with the goal of setting targets for those large suppliers
by 2025. We have initiated contact with a sub-set of suppliers,
with engagement scheduled to commence in early 2023.
Focus area 2
Enable a sustainable and resilient workforce
The culture and capability of our people are drivers of value
for QBE. A sustainable and resilient workforce is underpinned
by how we engage and connect our people to our purpose
and vision. Investing in our people’s career development,
and supporting flexibility and wellbeing can allow us to continue
to attract and retain the best talent.
Our people strategy is focused on driving culture through
performance and reward, growing leadership capability and
improved internal succession. We continue to prioritise investing
in our people and strategic workforce planning for the future.
Our strategy enables us to support our workforce and our
customers and communities to adapt in response to economic,
environmental and social changes, such as climate adaptation
and emissions reduction.
We recognise the value of developing our people. We will seek
to integrate sustainability and drive engagement by harnessing
the energy and enthusiasm of our people. Everyone will have
a role to play.
Focus area 3
Partner for growth through innovative, sustainable and impactful solutions
Our landscape is changing, presenting opportunities to partner
with our customers and others for growth through innovation.
There are opportunities beyond insurance products to partner
on impactful solutions through our investments, supplier and
broker relationships, the QBE Foundation and QBE Ventures.
We can explore ways to co-create solutions to meet the changing
needs of our customers, and support communities affected
by climate impacts, the net-zero transition and rising inequality.
1414
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Our areas of
QBE’s purpose is enabling a more resilient future. We’ve been
enabling resilience for 136 years through products and services
that transfer risk and allow customers to recover after loss.
We support an orderly and inclusive transition to a net-zero
emissions through the Partnership for Carbon Accounting
emissions economy. We recognise the importance of addressing
Financials (PCAF) and NZIA. In January 2023, the NZIA issued
climate change and incorporating climate-related risks and
the first Target-Setting Protocol for the global insurance sector.
opportunities into our decision making, facilitating a resilient
The Protocol will guide the form of QBE’s interim targets for 2030.
future for our business, customers and people. QBE has
made net-zero commitments in relation to our own operations,
investments, and underwriting. In line with our NZAOA net zero
2050 investment portfolio commitments, we are progressing
on our interim targets for 2025.
Our supply chain can also be a significant source of emissions
and we have committed to commencing formal engagement
on net-zero progress with large suppliers in our global supply
chain, with the goal of setting targets for those large suppliers
by 2025. We have initiated contact with a sub-set of suppliers,
Since joining the NZIA in 2022, we are laying the foundations
with engagement scheduled to commence in early 2023.
to set interim targets for our underwriting portfolio. QBE has
contributed to the development of insurance-associated
Focus area 2
Enable a sustainable and resilient workforce
The culture and capability of our people are drivers of value
Our strategy enables us to support our workforce and our
for QBE. A sustainable and resilient workforce is underpinned
customers and communities to adapt in response to economic,
by how we engage and connect our people to our purpose
environmental and social changes, such as climate adaptation
and vision. Investing in our people’s career development,
and emissions reduction.
and supporting flexibility and wellbeing can allow us to continue
to attract and retain the best talent.
We recognise the value of developing our people. We will seek
to integrate sustainability and drive engagement by harnessing
Our people strategy is focused on driving culture through
the energy and enthusiasm of our people. Everyone will have
performance and reward, growing leadership capability and
a role to play.
improved internal succession. We continue to prioritise investing
in our people and strategic workforce planning for the future.
Focus area
1
Foster an orderly and inclusive transition to a net-zero economy
Our ambition
2
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We are working to support an orderly and inclusive
transition to a net-zero economy, aligned with UN
objectives of limiting warming to 1.5 degrees by the end
of 2100. We will take actions within our control, engage
for impact and advocate to influence progress on the
decarbonisation of the real economy. We are setting interim
targets and engaging with our customers and other partners
to foster an orderly transition.
Our ambition includes consideration of the
social implications of climate risk and transition.
Through our QBE Foundation partners, we continue to
support initiatives that increase the resilience to, and
mitigation of, the impacts of a changing climate. We focus
on helping communities experiencing vulnerability to adapt
and expand their food and water security, especially those
at risk of displacement. We will continue to strive to meet our
existing sustainability commitments through our underwriting,
investments, own operations, and how we engage with our
supply chain. This includes turning our focus to sustainable
claims management practices.
3
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Our ambition
By 2025, we seek to increase our enterprise-wide
understanding of sustainability to better deliver
on our strategic priorities. We are strengthening
a sustainability connection to our purpose, vision and DNA,
and ensuring our people understand the role they play and
have opportunities to engage and meaningfully contribute.
Sustainability metrics are embedded into our executives’
variable remuneration and will evolve over time to reflect
our sustainability ambitions. In addition, we will expand
our Inclusion of Diversity targets beyond gender to focus
on ethnicity, disability, and LGBTIQ+ to continue to foster
a culture of belonging.
Across the enterprise, we will continue to strengthen and
build our workplace culture, and embed sustainability into
strategic decision making, linked to our purpose of enabling
a resilient future.
5
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Focus area 3
Partner for growth through innovative, sustainable and impactful solutions
Our ambition
Our landscape is changing, presenting opportunities to partner
broker relationships, the QBE Foundation and QBE Ventures.
with our customers and others for growth through innovation.
We can explore ways to co-create solutions to meet the changing
There are opportunities beyond insurance products to partner
needs of our customers, and support communities affected
on impactful solutions through our investments, supplier and
by climate impacts, the net-zero transition and rising inequality.
Our ambition by 2025 is to have explored new partnership
opportunities across the many stakeholders with which
we can work, to grow through innovative, sustainable and
impactful solutions. We will seek to amplify any successful
solutions in one division across our global enterprise
to improve outcomes for customers, communities, society,
the environment and the economy.
We continue to support programs that respond to
catastrophes, often caused by severe weather events, and
in October 2022, we renewed our three-year partnership with
the Red Cross and Save the Children. We will also continue
to collaborate with industry, government and civil society
to support the achievement of our priority UN Sustainable
Development Goals.
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Group Chief
Financial
Officer's
report
In a challenging backdrop
characterised by heightened
inflation and catastrophe
activity, geopolitical tensions
and significant investment
market volatility, QBE achieved
an improvement in profitability,
further growth, and importantly
demonstrated greater resilience
in its financial performance.
Financial performance
QBE reported a statutory net profit after
tax of $770 million compared with $750
million in the prior year.
Adjusted cash profit after tax increased
to $847 million from $805 million in the
prior year, and equates to an annualised
return on equity of 10.5%.
Statutory gross written premium
increased 13% as a result of continued
favourable premium rate increases, stable
retention and targeted new business
growth. For a second year, growth in our
Crop business was particularly strong,
supported by commodity prices and
organic momentum.
There was a remarkable recalibration of
interest rates globally, resulting in higher
risk-free rates across all currencies. This
resulted in a $1,214 million favourable
impact to the statutory underwriting
result, which was more than offset by
unrealised losses of $1,343 million in our
fixed income portfolio.
The statutory combined operating ratio
excluding the impact from risk-free
rates deteriorated to 94.2% from 93.7%
in the prior year. This largely reflected
the adverse impact from the Australian
pricing promise review, and the impact
of the transaction to reinsure North
America Excess and Surplus (E&S)
lines prior accident year liabilities. These
items impacted the underwriting result by
$60 million and $45 million respectively.
To support comparability of year-on-year
results, we have adjusted for these items.
On this basis, the combined operating
ratio improved to 93.7% from 95.0% in
the prior year, representing underwriting
profit of $933 million compared to $695
million in the prior period.
The total investment loss for the year
was $(776) million or (2.7)%, compared
with a return of $122 million or 0.4%
in the prior year. Excluding the impact
of risk-free rates, the investment return
was $567 million or 2.0%, compared with
$382 million or 1.3% in the prior year.
In fixed income, the portfolio running
yield increased materially over the year,
to an exit yield of 4.1%, from 0.7% in the
prior year. This supported higher core
yield income which was partially offset
by adverse credit spread marks. In risk
assets, unrealised losses on equities
and fixed income were more than offset
by favourable returns from infrastructure
and unlisted property.
In May, QBE sold the Westwood Insurance
Agency in North America for $374 million.
The transaction had an $8 million positive
impact in the period, after accounting
for $328 million of goodwill which was
allocated to Westwood, and $30 million
in restructuring expenses.
This transaction alongside improved
profitability and lower insurance and
asset risk charges primarily due to higher
risk-free rates, supported a meaningful
improvement in QBE’s capital position.
The indicative APRA PCA multiple
increased to 1.79x from the pro forma
view of 1.75x at 31 December 2021,
and is now at the top of our 1.6–1.8x
target range.
QBE’s effective statutory tax rate was
15.3% compared with 17.1% in the prior
year, and reflects the mix of corporate tax
rates in the countries where we operate,
alongside the recognition of $95 million
of previously unrecognised tax losses
in the North American tax group.
16
17
Group Chief
Group Chief
Financial
Financial
Officer's
Officer's
report
report
In a challenging backdrop
characterised by heightened
inflation and catastrophe
activity, geopolitical tensions
and significant investment
market volatility, QBE achieved
an improvement in profitability,
further growth, and importantly
demonstrated greater resilience
in its financial performance.
Financial performance
QBE reported a statutory net profit after
of the transaction to reinsure North
In May, QBE sold the Westwood Insurance
tax of $770 million compared with $750
America Excess and Surplus (E&S)
Agency in North America for $374 million.
million in the prior year.
lines prior accident year liabilities. These
The transaction had an $8 million positive
Adjusted cash profit after tax increased
to $847 million from $805 million in the
items impacted the underwriting result by
impact in the period, after accounting
$60 million and $45 million respectively.
for $328 million of goodwill which was
prior year, and equates to an annualised
To support comparability of year-on-year
return on equity of 10.5%.
results, we have adjusted for these items.
allocated to Westwood, and $30 million
in restructuring expenses.
Statutory gross written premium
increased 13% as a result of continued
favourable premium rate increases, stable
retention and targeted new business
growth. For a second year, growth in our
On this basis, the combined operating
This transaction alongside improved
ratio improved to 93.7% from 95.0% in
profitability and lower insurance and
the prior year, representing underwriting
asset risk charges primarily due to higher
profit of $933 million compared to $695
risk-free rates, supported a meaningful
million in the prior period.
Crop business was particularly strong,
The total investment loss for the year
supported by commodity prices and
was $(776) million or (2.7)%, compared
improvement in QBE’s capital position.
The indicative APRA PCA multiple
increased to 1.79x from the pro forma
view of 1.75x at 31 December 2021,
and is now at the top of our 1.6–1.8x
target range.
with a return of $122 million or 0.4%
in the prior year. Excluding the impact
of risk-free rates, the investment return
was $567 million or 2.0%, compared with
QBE’s effective statutory tax rate was
$382 million or 1.3% in the prior year.
15.3% compared with 17.1% in the prior
organic momentum.
There was a remarkable recalibration of
interest rates globally, resulting in higher
risk-free rates across all currencies. This
resulted in a $1,214 million favourable
impact to the statutory underwriting
In fixed income, the portfolio running
result, which was more than offset by
yield increased materially over the year,
unrealised losses of $1,343 million in our
to an exit yield of 4.1%, from 0.7% in the
fixed income portfolio.
The statutory combined operating ratio
excluding the impact from risk-free
rates deteriorated to 94.2% from 93.7%
in the prior year. This largely reflected
the adverse impact from the Australian
pricing promise review, and the impact
prior year. This supported higher core
yield income which was partially offset
by adverse credit spread marks. In risk
assets, unrealised losses on equities
and fixed income were more than offset
by favourable returns from infrastructure
and unlisted property.
year, and reflects the mix of corporate tax
rates in the countries where we operate,
alongside the recognition of $95 million
of previously unrecognised tax losses
in the North American tax group.
Summary income statement and underwriting performance
STATUTORY
ADJUSTMENTS
ADJUSTED BASIS
PRICING
REVIEW
2022
US$M
(53)
(53)
(53)
–
–
(7)
(60)
–
(60)
–
(15)
–
–
75
–
–
–
E&S
2022
US$M
–
–
(390)
327
–
(2)
(65)
–
(65)
–
–
–
–
–
–
–
(65)
CTP
2021
US$M
–
–
(365)
349
19
–
3
–
3
–
–
–
–
–
–
–
3
FOR THE YEAR ENDED 31 DECEMBER
Gross written premium
Gross earned premium
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Net investment (loss) income on policyholders’ funds
Insurance profit
Net investment (loss) income on shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Remediation
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit before income tax
Income tax expense
Profit after income tax
Non-controlling interests
Net profit after income tax
KEY RATIOS
Net claims ratio (ex risk-free rate)
Ex-cat claims
Prior accident year claims development
Risk margin (release) charge
Net commission ratio
Expense ratio
Combined operating ratio (ex risk-free rate)
Combined operating ratio
Insurance profit margin
2022
US$M
20,001
19,067
14,327
(8,330)
(2,119)
(1,836)
2,042
(509)
1,533
(267)
(245)
38
(7)
–
(106)
(27)
919
(141)
778
(8)
770
%
66.6
60.1
(0.5)
(0.4)
14.8
12.8
94.2
85.7
10.7
2021
US$M
18,457
17,035
13,408
(8,371)
(2,070)
(1,829)
1,138
77
1,215
45
(247)
–
(7)
–
(72)
(21)
913
(156)
757
(7)
750
%
64.6
59.4
(1.1)
(0.6)
15.5
13.6
93.7
91.5
9.1
COVID
2021
US$M
2022
US$M
2021
US$M
4 20,054 18,453
4 19,120 17,031
(6) 14,770 13,779
(8,861)
(2,091)
(1,831)
996
77
1,073
45
(247)
–
(7)
–
(72)
(21)
771
141 (8,657)
2 (2,119)
2 (1,827)
2,167
(509)
1,658
(267)
(230)
38
(7)
(75)
(106)
(27)
984
139
–
139
–
–
–
–
–
–
–
139
%
%
67.0
58.2
1.0
(0.2)
14.3
12.4
93.7
85.3
11.2
66.5
57.4
1.4
0.7
15.2
13.3
95.0
92.8
7.8
Significant items impacting the underwriting result
The summary income statement above
shows the statutory result excluding
the following items to provide better
year-on-year comparability of performance.
Australian pricing
promise review
As part of a broader industry review,
focused around the delivery of pricing
promises for retail products, QBE has
investigated pricing practices dating
back several years across a range
of retail products.
Following the review, QBE has identified
instances where the policy pricing promise
was not fully delivered.
$75 million (including $15 million
in financing and other costs) before tax
was recorded in the first half to account
for expected customer remediation,
interest payable and the costs associated
with administering the program.
North America E&S
reinsurance transaction
As reported at the first half result,
the Group entered into a transaction
to reinsure E&S prior accident year
liabilities. The transaction had a material
impact on the comparison of net earned
premium and key underwriting ratios.
The loss portfolio transfer reduced
net earned premium and net claims
expense by $390 million and $327 million
respectively, while impacting underwriting
expenses by $2 million.
As a result, the transaction had
a $65 million upfront net adverse impact
(including a risk-free rate impact of around
$20 million) on the underwriting result.
Unless otherwise stated, the Group
and business commentary following
excludes the impact of both items
from the 2022 result, along with the
previously disclosed CTP reinsurance
transaction and COVID-19 impacts
in the 2021 result.
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Premium income and pricing
Group
International
Gross written
premium (US$M)
20,054
13% from 2021
7,274
7,546
5,241
Net earned
0
premium (US$M)
7546
14,770
13% from 2021
Gross written premium increased 9%
on a headline basis to $20,054 million,
from $18,453 million in the prior year.
On a constant currency basis, gross
written premium increased 13%, reflecting
continued rate increases coupled with
steady retention levels, organic growth,
and another year of material growth
in Crop.
Excluding Crop, gross written premium
growth was 10% on the same basis.
The Group achieved an average renewal
premium rate increase of 7.9% compared
with 9.7% in the prior year. Rate increases
moderated in lines that have seen the
largest increases during the current cycle,
particularly casualty classes.
4,280
4,519
5,974
Excluding premium rate increases and
Crop, constant currency growth was 4%
compared to 10% in the prior period.
North America
International
Australia Pacific
Average renewal
premium rate
increase
Group
+7.9%
North America
International
Australia Pacific
+9.2%
+6.5%
+9.5%
North America
North America delivered 16% growth
in gross written premium. Excluding
Crop, premium increased by 4%, where
premium rate increases of 9.2% were
down marginally from 10.7% in prior year.
Crop premium increased by 31% as
a result of significantly higher commodity
prices coupled with strong organic growth.
Premium rate increases and growth
in Crop more than offset a planned
reduction in property catastrophe exposed
programs business. Excluding premium
rate increases and Crop, gross written
premium declined 1%.
International reported a 14% increase
in gross written premium.
Premium rate increases remained
supportive at 6.5%, albeit moderated
through the year from 10.2% achieved
in the prior year. Excluding premium rate
increases, constant currency growth
was 9%.
Premium growth was broad-based. Within
Insurance, premium increased by 12%,
with particularly strong contributions
from the International Markets and UK
segments. Within QBE Re, premium
growth of 25% reflected strong growth
across all segments and offices.
Australia Pacific
Australia Pacific reported a 9% increase
in gross written premium. Premium rate
increases built over the year to 9.5%,
compared with 8.3% in the prior year.
Growth across many segments,
particularly in commercial lines, was
partially offset by lower volumes in LMI.
Reinsurance expense
Reinsurance expense increased 34%
to $4,350 million from $3,252 million in
the prior year. The majority of the increase
can be attributed to Crop, where much of
the premium growth was ceded to a new
external quota share reinsurance contract,
and the government reinsurance program.
Average renewal premium rate increases
FOR THE YEAR ENDED 31 DECEMBER
North America
International
Australia Pacific
Group
2022
%
9.2
6.5
9.5
7.9
2021
%
10.7
10.2
8.3
9.7
2020
%
10.2
12.8
5.4
9.8
2019
%
5.7
6.0
7.3
6.3
Foreign exchange rates
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
PROFIT OR
LOSS
BALANCE
SHEET
PROFIT OR
LOSS
BALANCE
SHEET
Australian dollar
Sterling
Euro
A$
£
€
0.693
1.232
1.051
0.678
1.203
1.067
0.751
1.375
1.182
0.727
1.353
1.138
18
19
Premium income and pricing
Segment underwriting performance
Gross written
premium (US$M)
20,054
13% from 2021
Group
International
Gross written premium increased 9%
International reported a 14% increase
on a headline basis to $20,054 million,
in gross written premium.
from $18,453 million in the prior year.
Premium rate increases remained
On a constant currency basis, gross
supportive at 6.5%, albeit moderated
written premium increased 13%, reflecting
through the year from 10.2% achieved
continued rate increases coupled with
in the prior year. Excluding premium rate
steady retention levels, organic growth,
increases, constant currency growth
and another year of material growth
was 9%.
Excluding Crop, gross written premium
Insurance, premium increased by 12%,
growth was 10% on the same basis.
with particularly strong contributions
Premium growth was broad-based. Within
7,274
7,546
5,241
in Crop.
Net earned
0
premium (US$M)
7546
14,770
13% from 2021
The Group achieved an average renewal
premium rate increase of 7.9% compared
with 9.7% in the prior year. Rate increases
moderated in lines that have seen the
largest increases during the current cycle,
particularly casualty classes.
4,280
4,519
5,974
Excluding premium rate increases and
Crop, constant currency growth was 4%
compared to 10% in the prior period.
North America
International
Australia Pacific
Average renewal
premium rate
increase
Group
+7.9%
North America
International
Australia Pacific
+9.2%
+6.5%
+9.5%
North America
North America delivered 16% growth
in gross written premium. Excluding
Crop, premium increased by 4%, where
premium rate increases of 9.2% were
down marginally from 10.7% in prior year.
Crop premium increased by 31% as
a result of significantly higher commodity
prices coupled with strong organic growth.
Premium rate increases and growth
in Crop more than offset a planned
reduction in property catastrophe exposed
programs business. Excluding premium
rate increases and Crop, gross written
premium declined 1%.
from the International Markets and UK
segments. Within QBE Re, premium
growth of 25% reflected strong growth
across all segments and offices.
Australia Pacific
Australia Pacific reported a 9% increase
in gross written premium. Premium rate
increases built over the year to 9.5%,
compared with 8.3% in the prior year.
Growth across many segments,
particularly in commercial lines, was
partially offset by lower volumes in LMI.
Reinsurance expense
Reinsurance expense increased 34%
to $4,350 million from $3,252 million in
the prior year. The majority of the increase
can be attributed to Crop, where much of
the premium growth was ceded to a new
external quota share reinsurance contract,
and the government reinsurance program.
Combined
operating ratio
93.7%
98.9%
92.5%
90.1%
Underwriting result (US$M)
933
46
North America
International
Australia Pacific
447
446
North America
North America reported a combined
operating ratio of 98.9%, an
improvement from 102.9% in the
prior year, and an encouraging return
to underwriting profitability.
While elevated inflation and higher
claims in Crop had an adverse impact
on the ex-cat claims ratio, this was more
than offset by further improvement in
total acquisition costs, a reduced level
of adverse prior year development and
lower catastrophe claims.
Catastrophe claims decreased 1.9%
to 5.8% of net earned premium, and were
slightly below allowance. This included
the impact of Hurricane Ian, and a higher
frequency of smaller events.
Crop recorded a combined operating
ratio of 95.5% which deteriorated from
92.7% in the prior year, and reflected
higher claims primarily as a result of drier
conditions across a number of states.
This offset lower total acquisition costs
on account of improved scale, and new
external quota share reinsurance.
International
International reported a combined
operating ratio of 92.5% compared
with 90.6% in the prior year.
The result reflected a challenging
operating environment underpinned
by heightened inflation, costs relating
to the Russia/Ukraine conflict and
elevated catastrophe costs including
Hurricane Ian and the French storms.
The ex-cat claims ratio improved by 1.5%
to 51.6%, where the benefit of significant
rate increases partly offset increased
allowances for inflation, and higher claims
frequency in certain classes.
Adverse prior year development of $142
million or 2.4% compared with favourable
development of $66 million or 1.2% in the
prior year. This reflected additional, largely
proactive strengthening for inflation
across a number of classes, and an
adverse COVID-19 business interruption
court ruling.
Australia Pacific
Australia Pacific reported a combined
operating ratio of 90.1%, which improved
from 91.4% in the prior year.
The impact of severe weather was
exacerbated by short-tail inflationary
challenges, which resulted in
deterioration in the catastrophe and
ex-cat claims ratios.
This was more than offset by improved
operating leverage from premium
growth and efficiency initiatives,
alongside favourable prior accident
year development.
The LMI current accident year combined
operating ratio improved to 15.4%
from 35.4% in the prior year, where
delinquency and claim payment trends
remain supportive.
Average renewal premium rate increases
FOR THE YEAR ENDED 31 DECEMBER
North America
International
Australia Pacific
Group
2022
%
9.2
6.5
9.5
7.9
2021
%
10.7
10.2
8.3
9.7
2020
%
10.2
12.8
5.4
9.8
2019
%
5.7
6.0
7.3
6.3
Foreign exchange rates
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
PROFIT OR
LOSS
BALANCE
SHEET
PROFIT OR
Australian dollar
Sterling
Euro
A$
£
€
0.693
1.232
1.051
0.678
1.203
1.067
LOSS
0.751
1.375
1.182
BALANCE
SHEET
0.727
1.353
1.138
FOR THE YEAR ENDED 31 DECEMBER
North America
International
Australia Pacific
Corporate & Other
Group adjusted basis
Risk-free rate impact
Australian pricing promise review
E&S reinsurance transaction
NSW CTP reinsurance transaction
COVID-19 impact
Group statutory
GROSS WRITTEN
PREMIUM
NET EARNED
PREMIUM
COMBINED
OPERATING RATIO
UNDERWRITING
RESULT
2022
US$M
7,274
7,546
5,241
(7)
20,054
–
(53)
–
–
–
20,001
2021
US$M
6,289
6,958
5,215
(9)
18,453
–
–
–
–
4
18,457
2022
US$M
4,280
5,974
4,519
(3)
14,770
–
(53)
(390)
–
–
14,327
2021
US$M
3,965
5,545
4,265
4
13,779
–
–
–
(365)
(6)
13,408
2022
%
98.9
92.5
90.1
–
93.7
(8.5)
0.4
0.1
–
–
85.7
2021
%
102.9
90.6
91.4
–
95.0
(2.2)
–
–
(0.2)
(1.1)
91.5
2022
US$M
46
447
446
(6)
933
1,214
(60)
(45)
–
–
2,042
2021
US$M
(118)
522
370
(79)
695
301
–
–
3
139
1,138
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20
Claims
Net claims ratio
Incurred claims
67.0%
76.4%
63.7%
63.3%
Ex-cat claims ratio
58.2%
70.0%
51.6%
55.8%
Catastrophe claims ratio
7.2%
5.8%
7.3%
8.2%
North America
International
Australia Pacific
Prior accident year
claims development
(US$M)
(141)
2022
2021
2020
2019
(141)
(192)
(366)
(22)
Excluding the impact of changes
in risk-free rates used to discount net
outstanding claims, the net claims ratio
increased to 67.0% from 66.5% in the
prior year.
This increase was primarily driven by
an increase in the ex-cat claims ratio
alongside higher catastrophe claims.
Adverse prior year development of $141
million primarily reflected additional
strengthening of inflation allowances.
Consistent with normal practice the
calculation of prior year movements
excludes positive development relating
to Crop insurance that is matched by
additional premium cessions under the
MPCI scheme ($14 million, 2021 $1
million), and adverse development which
is more than offset by related adjustments
in the current period underwriting result
($137 million, 2021 $55 million).
The net risk margin movement reflects
the release of the COVID-19 risk margin,
offset by new business strain.
Catastrophe claims
The net cost of catastrophe claims
increased to $1,060 million or 7.2% of net
earned premium, from $905 million or
6.6% in the prior period. This exceeded
the Group's catastrophe allowance for
the year of $962 million.
Elevated catastrophe activity continued,
with industry insured losses expected
to settle around $130 billion in 2022.
Catastrophe costs were underscored
by Hurricane Ian, which is expected to
be the second-costliest North American
hurricane on record. On the east coast
of Australia, the February-March floods
have been declared the most costly
natural disaster in Australian history.
French storms in June, South African
flooding, plus storms Eunice and Elliot
also proved significant events for the year.
Catastrophe costs include an allowance
for the Russia/Ukraine conflict, which
reflects exposure through political risk,
political violence and aviation classes.
Ex-cat claims
The ex-cat claims ratio increased
to 58.2% from 57.4% in the prior year.
The ex-cat claims ratio of our Crop
business increased due to the impact
of adverse weather. Excluding Crop,
the Group ex-cat claims ratio increased
by 0.2% to 54.6%.
Higher inflation was observed across
all regions, though most concentrated
in short-tail classes. While higher inflation
assumptions were incorporated across
the business, rate increases remained
at or above inflation in most classes.
In North America, increased severity
observed in certain property segments
had an adverse impact.
In International, claims frequency
increased in some portfolios as economic
activity returned to more normal levels.
In Australia Pacific, an above normal
frequency of non-catastrophe weather
claims impacted many classes.
Prior accident year
claims development
Prior accident year claims development was
$141 million adverse or (1.0)% of net earned
premium, which reduced from $192 million
adverse or (1.4)% in the prior year.
North America reported $43 million of
adverse development, largely reflecting
strengthening in discontinued books.
International reported $142 million of adverse
development, reflecting higher inflation
allowances, and an adverse COVID-19
business interruption court ruling in the UK.
Australia Pacific reported positive
development of $44 million.
Weighted average risk-free rates
CURRENCY
31 DECEMBER
2022
30 JUNE
2022
31 DECEMBER
2021
Australian dollar
US dollar
Sterling
Euro
Group weighted
Estimated risk-free rate benefit
%
%
%
%
%
US$M
3.69
4.21
3.64
2.50
3.60
1,234
1 Estimated risk-free rate benefit for the six months to 30 June.
3.16
3.09
2.15
1.19
2.49
8041
1.12
1.44
0.86
(0.33)
0.87
301
20
Claims
Net claims ratio
Incurred claims
67.0%
Ex-cat claims ratio
58.2%
Catastrophe claims ratio
7.2%
76.4%
63.7%
63.3%
70.0%
51.6%
55.8%
5.8%
7.3%
8.2%
North America
International
Australia Pacific
Prior accident year
claims development
(US$M)
(141)
2022
2021
2020
2019
Excluding the impact of changes
in risk-free rates used to discount net
outstanding claims, the net claims ratio
increased to 67.0% from 66.5% in the
prior year.
This increase was primarily driven by
an increase in the ex-cat claims ratio
alongside higher catastrophe claims.
Adverse prior year development of $141
million primarily reflected additional
strengthening of inflation allowances.
Consistent with normal practice the
calculation of prior year movements
excludes positive development relating
to Crop insurance that is matched by
additional premium cessions under the
MPCI scheme ($14 million, 2021 $1
million), and adverse development which
is more than offset by related adjustments
Catastrophe costs include an allowance
for the Russia/Ukraine conflict, which
reflects exposure through political risk,
political violence and aviation classes.
Ex-cat claims
The ex-cat claims ratio increased
to 58.2% from 57.4% in the prior year.
The ex-cat claims ratio of our Crop
business increased due to the impact
of adverse weather. Excluding Crop,
the Group ex-cat claims ratio increased
by 0.2% to 54.6%.
Higher inflation was observed across
all regions, though most concentrated
in short-tail classes. While higher inflation
assumptions were incorporated across
the business, rate increases remained
at or above inflation in most classes.
in the current period underwriting result
In North America, increased severity
($137 million, 2021 $55 million).
observed in certain property segments
The net risk margin movement reflects
had an adverse impact.
the release of the COVID-19 risk margin,
In International, claims frequency
offset by new business strain.
Catastrophe claims
The net cost of catastrophe claims
increased to $1,060 million or 7.2% of net
earned premium, from $905 million or
6.6% in the prior period. This exceeded
the Group's catastrophe allowance for
the year of $962 million.
Elevated catastrophe activity continued,
with industry insured losses expected
to settle around $130 billion in 2022.
Catastrophe costs were underscored
by Hurricane Ian, which is expected to
be the second-costliest North American
hurricane on record. On the east coast
increased in some portfolios as economic
activity returned to more normal levels.
In Australia Pacific, an above normal
frequency of non-catastrophe weather
claims impacted many classes.
Prior accident year
claims development
Prior accident year claims development was
$141 million adverse or (1.0)% of net earned
premium, which reduced from $192 million
adverse or (1.4)% in the prior year.
North America reported $43 million of
adverse development, largely reflecting
strengthening in discontinued books.
(141)
(192)
(366)
(22)
of Australia, the February-March floods
International reported $142 million of adverse
have been declared the most costly
natural disaster in Australian history.
French storms in June, South African
flooding, plus storms Eunice and Elliot
development, reflecting higher inflation
allowances, and an adverse COVID-19
business interruption court ruling in the UK.
Australia Pacific reported positive
also proved significant events for the year.
development of $44 million.
Weighted average risk-free rates
CURRENCY
Australian dollar
US dollar
Sterling
Euro
Group weighted
31 DECEMBER
30 JUNE
31 DECEMBER
2022
3.69
4.21
3.64
2.50
3.60
1,234
2022
3.16
3.09
2.15
1.19
2.49
8041
2021
1.12
1.44
0.86
(0.33)
0.87
301
%
%
%
%
%
Estimated risk-free rate benefit
US$M
1 Estimated risk-free rate benefit for the six months to 30 June.
Underwriting expenses, commission and tax
Expense ratio
12.4%
2021 13.3%
Net commission ratio
14.3%
2021 15.2%
Tax rate
15.3%
2021 17.1%
Underwriting and
other expenses
The Group’s expense ratio improved
to 12.4% from 13.3% in the prior year,
reflecting disciplined cost management and
efficiencies, favourable business mix, and
ongoing benefit from operating leverage
as a result of strong premium growth.
International and Australia Pacific
achieved further improvement in their
expense ratios, as a result of cost control
coupled with positive operating leverage.
North America reported a minor
deterioration in its expense ratio to 11.8%
from 11.6% in the prior year, where the
benefit of positive operating leverage and
mix was offset by targeted reinvestment
and the loss of fee income following the
Westwood sale.
Net commission
The net commission ratio reduced
to 14.3% from 15.2% in the prior year,
primarily due to higher income from
the increased Crop quota share and
favourable business mix.
North America’s commission expense
ratio reduced following further growth
in Crop, where outwards commissions
are reimbursed by the US Government,
alongside higher commission income
from new quota share reinsurance.
International and Australia Pacific’s
commission ratio also improved on the
prior year due to favourable business mix
shift, and a continued focus on trading
and distribution negotiations.
Income tax expense
QBE’s effective statutory tax rate was
15.3% compared with 17.1% in the prior
year, and reflects the mix of corporate tax
rates in the countries where we operate,
alongside the recognition of $95 million
of previously unrecognised tax losses
in the North American tax group.
This recognition of tax assets was
supported by the improved outlook
for North America profitability, primarily
due to the higher running yield on
investment assets.
During the year, QBE paid $74 million
in corporate income tax globally, with
no payments in Australia due to our tax
loss position.
The balance of the franking account stood
at A$54 million as at 31 December 2022.
Having regard to QBE’s franked AT1
distribution commitments and our tax loss
position, the dividend franking percentage
is expected to remain around 10% for the
foreseeable future.
Operational efficiency
Underwriting and
other expenses (US$M)
1,827
6% on 2021 1
Expense ratio
12.4%
2022
2021
2020
2019
12.4
13.3
14.6
14.6
QBE has achieved considerable
momentum against efficiency targets,
calibrated to a Group expense ratio
of 13% by 2023.
The expected $150 million restructuring
charge related to the three-year
program has now been fully incurred,
with a $78 million expense recognised
in the current period.
While our efficiency agenda has delivered
material technology and operating cost
savings, we have benefited from positive
operating leverage supported by a stronger
and longer premium rate cycle than was
originally planned for.
This position now affords increased capacity
to pursue additional initiatives to modernise
the business and support growth.
Our modernisation agenda is primarily
focused on improving connectivity and
ease of doing business with our customers
and partners, supporting the digitisation
and efficiency of our core underwriting
and claims processes, better leveraging
data across our organisation and providing
better tools for our employees to meet
customer needs.
We have good alignment around the
key target growth opportunities across
the organisation. Our investment spend
will be targeted towards this pipeline
of opportunities across both our core
franchises as well as related adjacencies.
To support the expanded investment slate,
we continue to expect a Group expense
ratio of around 13% in 2023.
1 Constant currency basis.
21
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22
Investment performance and strategy
Total investment
(loss) income (US$M)
(776)
898 from 2021
Total investment return
(2.7)%
2021 0.4%
Fixed
income
Vs
Risk
assets
(3.1)%
1.2%
2021 (0.4)%
2021 13.5%
The total investment loss for the year was
$(776) million or (2.7)%, compared with
a return of $122 million or 0.4% in the prior
year. The result was heavily impacted
by unrealised losses associated with the
significant increase in bond yields over
the year.
Adjusting for the impact of changes
in risk-free rates on fixed income
securities, the total investment return
was $567 million or 2.0% for the year,
an increase from 1.3% in the prior year.
In fixed income, higher core yield income
was partially offset by adverse credit
spread marks. In risk assets, unrealised
losses on equities and enhanced
fixed income were more than offset
by favourable returns from infrastructure
and unlisted property.
Fixed income
The significant recalibration in global
interest rates supported meaningful
5,396
improvement in the fixed income running
yield, with the 31 December 2022 exit
running yield of 4.1% many multiples
higher than 0.7% at 31 December 2021.
833
Risk assets
The risk asset portfolio delivered a total
return of 1.2%. This portfolio has
meaningful exposure to asset classes
with a positive correlation to inflation,
partly in recognition of the corresponding
sensitivity of our claims liabilities.
To this end, our unlisted property and
infrastructure assets performed well,
delivering a 7.7% return for the year. This
helped to offset weaker performance
across other risk asset classes including
listed equities, high yield, and emerging
market debt.
Funds under management
13,649
The overall investment book remains
conservatively positioned, with around
89% invested in high quality fixed income
securities and the remaining 11% invested
in risk assets.
5,094
We continued to rebalance the portfolio
toward our 15% target risk asset
allocation, albeit we did slow the pace
of re-risking in recent months to reassess
opportunities and relative returns, given
significant market volatility.
47
Our corporate credit portfolio delivered
strong relative performance. Credit
quality remained sound with fewer
rating downgrades compared to
levels seen more broadly across
fixed income markets.
Cash and
equivalent
Short-term
money
13,649
958
834
747
Government
bonds
Corporate
bonds
Infrastructure
debt
Funds under management declined by
3% compared to the prior period, however
increased by 2% on a constant currency
basis after accounting for a $1,514 million
foreign exchange headwind. The balance
was also impacted by adverse mark-to-
market losses, the pre-funded redemption
of a Tier 2 note and the E&S transaction.
958
834
747
332
62
180
35
Enhanced
fixed
income
Developed
Emerging
market
equity
market
equity
Unlisted
property
trusts
Infrastructure
Alternatives Investment
assets
properties
5,396
5,094
833
47
Cash and
Short-term
Government
Corporate
Infrastructure
equivalent
money
bonds
bonds
debt
Total investments
XX,XXX
Total cash and investments (US$M)
332
62
180
13,649
Enhanced
fixed
income
Developed
market
equity
Fixed income
Emerging
market
25,019
equity
Unlisted
property
trusts
Infrastructure
assets
Total investments
XX,XXX
13,649
35
958
958
Alternatives Investment
properties
834
834
747
747
5,396
5,094
5,396
5,094
28,167
332
332
833
833
47
47
62
62
180
35
Investment properties
Risk assets
3,148
Alternatives
Infrastructure assets
Infrastructure
Unlisted property trusts
180
Corporate bonds
Emerging market equity
35
Alternatives Investment
properties
Developed market equity
Government bonds
Short-term money
Enhanced Fixed income
Cash and equivalent
Fixed income
Policyholders’ funds
Shareholders’ funds
Risk assets
Policyholders’ funds
Shareholders’ funds
Cash and
equivalent
Short-term
money
Investment properties
Alternatives
Government
Cash and
bonds
equivalent
Corporate
Short-term
bonds
money
Infrastructure
Government
debt
bonds
Corporate
bonds
Enhanced
Infrastructure
fixed
debt
income
Developed
market
equity
Emerging
Enhanced
market
fixed
equity
income
Unlisted
Developed
property
market
trusts
equity
Infrastructure
Emerging
assets
market
equity
Alternatives Investment
Unlisted
Infrastructure
properties
property
assets
trusts
Infrastructure assets
Unlisted property trusts
Infrastructure
Total investments
Corporate bonds
Emerging market equity
XX,XXX
Government bonds
Short-term money
Developed market equity
Enhanced Fixed income
Total investments
XX,XXX
Cash and cash equivalents
Short-term money
Government bonds
Corporate bonds
Infrastructure debt
Cash and equivalent
POLICY-
HOLDERS’
FUNDS
SHARE-
HOLDERS’
FUNDS
Fixed income
Policyholders’ funds
Shareholders’ funds
547
3,543
3,344
8,961
31
Risk assets
286
1,853
1,750
Investment properties
4,688
16
Alternatives
Alternatives
Investment properties
Policyholders’ funds
Shareholders’ funds
POLICY-
HOLDERS’
FUNDS
SHARE-
HOLDERS’
FUNDS
Enhanced fixed income
Developed market equity
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
Investment properties
629
218
41
490
548
118
23
329
114
21
257
286
62
12
Infrastructure assets
Infrastructure assets
Infrastructure
Infrastructure
Unlisted property trusts
Unlisted property trusts
Corporate bonds
Corporate bonds
Emerging market equity
Emerging market equity
Government bonds
Government bonds
Developed market equity
Developed market equity
Enhanced Fixed income
Enhanced Fixed income
Short-term money
Short-term money
Cash and equivalent
Cash and equivalent
Fixed income
Fixed income
Policyholders’ funds
Shareholders’ funds
Policyholders’ funds
Shareholders’ funds
Risk assets
Risk assets
Policyholders’ funds
Policyholders’ funds
Shareholders’ funds
Shareholders’ funds
22
23
Investment performance and strategy
Balance sheet and capital management
Capital
Net outstanding claims
Borrowings
Total investment
(loss) income (US$M)
(776)
898 from 2021
the year.
Total investment return
(2.7)%
2021 0.4%
Fixed
income
Vs
Risk
assets
(3.1)%
1.2%
The total investment loss for the year was
$(776) million or (2.7)%, compared with
a return of $122 million or 0.4% in the prior
year. The result was heavily impacted
by unrealised losses associated with the
significant increase in bond yields over
Adjusting for the impact of changes
in risk-free rates on fixed income
securities, the total investment return
was $567 million or 2.0% for the year,
an increase from 1.3% in the prior year.
In fixed income, higher core yield income
was partially offset by adverse credit
spread marks. In risk assets, unrealised
losses on equities and enhanced
fixed income were more than offset
by favourable returns from infrastructure
and unlisted property.
Fixed income
Risk assets
The risk asset portfolio delivered a total
return of 1.2%. This portfolio has
meaningful exposure to asset classes
with a positive correlation to inflation,
partly in recognition of the corresponding
sensitivity of our claims liabilities.
To this end, our unlisted property and
infrastructure assets performed well,
delivering a 7.7% return for the year. This
helped to offset weaker performance
across other risk asset classes including
listed equities, high yield, and emerging
market debt.
Funds under management
13,649
The overall investment book remains
conservatively positioned, with around
89% invested in high quality fixed income
securities and the remaining 11% invested
in risk assets.
yield, with the 31 December 2022 exit
running yield of 4.1% many multiples
higher than 0.7% at 31 December 2021.
833
Our corporate credit portfolio delivered
strong relative performance. Credit
quality remained sound with fewer
Cash and
Short-term
rating downgrades compared to
equivalent
money
levels seen more broadly across
fixed income markets.
allocation, albeit we did slow the pace
of re-risking in recent months to reassess
opportunities and relative returns, given
significant market volatility.
47
Funds under management declined by
Government
3% compared to the prior period, however
Infrastructure
Corporate
bonds
bonds
increased by 2% on a constant currency
debt
basis after accounting for a $1,514 million
foreign exchange headwind. The balance
was also impacted by adverse mark-to-
market losses, the pre-funded redemption
of a Tier 2 note and the E&S transaction.
2021 (0.4)%
2021 13.5%
The significant recalibration in global
interest rates supported meaningful
5,396
5,094
improvement in the fixed income running
We continued to rebalance the portfolio
toward our 15% target risk asset
958
332
Enhanced
fixed
income
Developed
market
equity
QBE’s indicative APRA PCA multiple
improved to 1.79x from 1.75x1 in the prior
year. The sale of the Westwood Insurance
Agency in North America added around
0.05x to the PCA multiple, which also
benefited from improved profitability, plus
lower insurance liabilities and asset risk
charges reflecting the material increase
in interest rates.
These factors more than offset capital
absorbed through organic growth,
investment portfolio rebalancing and
an increase in the insurance concentration
risk charge reflecting exposure growth
and the 2023 reinsurance renewal.
747
834
In May 2022, QBE redeemed GBP327
million of subordinated Tier 2 notes.
These notes were capital qualifying under
APRA’s capital adequacy framework.
The redemption was pre-funded by the
September 2021 issuance of GBP400
million of capital qualifying Tier 2.
QBE has $900 million of perpetual fixed
rate resetting capital notes that are AT1
180
qualifying under APRA’s capital adequacy
62
framework. The notes are classified as
equity, pay franked after-tax distributions
Emerging
and do not impact the weighted average
market
number of shares for earnings per share
equity
calculations (since the notes are written
off in whole or in part if APRA determines
QBE is, or would become, non-viable).
Unlisted
property
trusts
Infrastructure
assets
At 31 December 2022, the risk margin
was $1,287 million or 8.0% of the net
discounted central estimate of outstanding
claims, compared with $1,418 million and
8.8% at 31 December 2021.
Excluding foreign exchange and the E&S
reinsurance transaction, the risk margin
decreased by $34 million.
The result included significant strain
associated with ongoing momentum
in new business and exposure growth.
This was more than offset by the impact
of higher risk-free rates, which reduced
the net discounted central estimate,
and the release of remaining COVID-19
related risk margin of $160 million. This
release reflects reduced COVID-19
related uncertainty, particularly regarding
residual COVID-19 business interruption
risk following favourable court rulings
in Australia and the UK.
The probability of adequacy (PoA) of net
outstanding claims reduced to 90.0%,
at the midpoint of the Group’s 87.5–92.5%
35
target range.
At 31 December 2022, total borrowings
were $2,744 million, a reduction
of $524 million from $3,268 million
at 31 December 2021.
The decrease in borrowings primarily
reflects the redemption of GBP327 million
subordinated Tier 2 notes in May 2022.
Debt to total capital was 23.4% at
31 December 2022, a minor decrease
from 24.1% 1 at 31 December 2021.
Gross interest expense on borrowings
for the year was $166 million, down from
$177 million in the prior year, due to
the redemption of the 6.115% GBP327
million Tier 2 notes in May 2022, which
were pre-funded with 2.50% GBP400
million Tier 2 notes in September 2021,
representing an interest saving of
approximately GBP10 million per annum.
The average annualised cash cost
of borrowings at 31 December 2022
was 6.0%, an increase from 5.4% at
31 December 2021 due the pre-funding
of the Tier 2 notes redemption in May.
Adjusting for the pre-funding, the average
annualised cost of borrowings was 5.8%.
At 31 December 2022, all but $6 million
of the Group’s borrowings continued
to count towards regulatory capital.
Alternatives Investment
properties
The after-tax distribution on QBE’s AT1
capital was $50 million.
Key balance sheet and capitalisation metrics
13,649
958
5,396
5,094
332
833
47
Cash and
Short-term
Government
Corporate
Infrastructure
Enhanced
Developed
Emerging
Infrastructure
Alternatives Investment
equivalent
money
bonds
bonds
debt
assets
properties
62
Fixed income
Unlisted
property
market
25,019
equity
trusts
fixed
income
market
equity
834
747
Total cash and investments (US$M)
Total investments
XX,XXX
180
13,649
13,649
35
Total investments
XX,XXX
5,396
5,094
5,396
5,094
28,167
332
332
833
833
47
47
62
62
180
180
35
35
Cash and
Short-term
Government
Cash and
Short-term
Corporate
Government
Infrastructure
Corporate
Infrastructure
Enhanced
Developed
Enhanced
Emerging
Developed
Unlisted
Infrastructure
Emerging
Unlisted
Alternatives Investment
Infrastructure
Alternatives Investment
equivalent
money
equivalent
bonds
money
bonds
bonds
debt
bonds
fixed
market
market
property
market
assets
property
assets
properties
properties
debt
fixed
income
market
equity
income
equity
equity
trusts
equity
trusts
Investment properties
Alternatives
Infrastructure assets
Unlisted property trusts
Infrastructure
Emerging market equity
Total investments
Corporate bonds
Total investments
XX,XXX
Government bonds
XX,XXX
Cash and cash equivalents
Developed market equity
Short-term money
Enhanced Fixed income
Corporate bonds
Short-term money
Government bonds
Cash and equivalent
Infrastructure debt
POLICY-
HOLDERS’
FUNDS
SHARE-
HOLDERS’
FUNDS
286
1,853
547
3,543
3,344
8,961
31
958
958
Risk assets
Investment properties
834
834
747
747
3,148
Alternatives
AS AT
Net discounted central estimate
Risk margin
Net outstanding claims
Infrastructure assets
Unlisted property trusts
Infrastructure
Emerging market equity
Corporate bonds
Net assets
Less: intangible assets
Net tangible assets
Add: borrowings
Total tangible capitalisation
Developed market equity
Government bonds
Short-term money
Enhanced Fixed income
Cash and equivalent
Probability of adequacy
Risk margin to central estimate
Debt to total capital
Debt to equity
Debt to tangible equity
Premium solvency 2
POLICY-
HOLDERS’
FUNDS
SHARE-
HOLDERS’
FUNDS
Enhanced fixed income
Developed market equity
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
Investment properties
629
218
41
490
548
118
23
329
114
21
257
286
62
12
Fixed income
Policyholders’ funds
Shareholders’ funds
Risk assets
1,750
Investment properties
Investment properties
Policyholders’ funds
Shareholders’ funds
4,688
16
Alternatives
Alternatives
Infrastructure assets
Infrastructure assets
Unlisted property trusts
Unlisted property trusts
Infrastructure
Infrastructure
Emerging market equity
Emerging market equity
Corporate bonds
Corporate bonds
Developed market equity
Developed market equity
Government bonds
Government bonds
Short-term money
Short-term money
Enhanced Fixed income
Enhanced Fixed income
Cash and equivalent
Cash and equivalent
Fixed income
Fixed income
Policyholders’ funds
Shareholders’ funds
Policyholders’ funds
Shareholders’ funds
Risk assets
Risk assets
Policyholders’ funds
Policyholders’ funds
Shareholders’ funds
Shareholders’ funds
QBE's regulatory capital base
APRA's PCA
PCA multiple
1 Pro forma adjusting for GBP327 million pre-funded debt repaid in May 2022.
2 The ratio of net tangible assets to management net earned premium.
31 DECEMBER 2022
31 DECEMBER 2021
BENCHMARK
STATUTORY
STATUTORY
PRO FORMA 1
US$M
US$M
US$M
US$M
US$M
US$M
US$M
US$M
%
%
%
%
%
%
US$M
US$M
16,141
1,287
17,428
Fixed income
8,992
(2,018)
6,974
Policyholders’ funds
2,744
9,718
Shareholders’ funds
Risk assets
15–30
90.0
8.0
Policyholders’ funds
23.4
Shareholders’ funds
30.5
39.3
47.2
1.6–1.8x
10,373
5,797
1.79x
16,107
1,418
17,525
8,882
(2,449)
6,433
3,268
9,701
91.7
8.8
26.9
36.8
50.8
46.7
10,389
5,732
1.81x
16,107
1,418
17,525
8,882
(2,449)
6,433
2,826
9,259
91.7
8.8
24.1
31.8
43.9
46.7
9,947
5,699
1.75x
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24
Cash profit and dividends
Reconciliation of cash profit
FOR THE YEAR ENDED 31 DECEMBER
Net profit after tax
Amortisation and impairment of intangibles after tax 1
Write-off of deferred tax assets
Write-off of capitalised tax assets
Net cash profit after tax
Restructuring and related expenses after tax
Net gain on disposals after tax
Additional Tier 1 capital coupon
Adjusted net cash profit after tax
Return on average shareholders’ equity – adjusted cash basis (%)
Basic earnings per share – adjusted cash basis (US cents)
Dividend payout ratio (percentage of adjusted cash profit) 2
2022
US$M
770
72
–
–
842
93
(38)
(50)
847
10.5
57.2
48%
2021
US$M
750
53
–
–
803
52
–
(50)
805
10.3
54.6
41%
1 $63 million of pre-tax amortisation expense is included in underwriting expenses (2021 $50 million).
2 Dividend payout ratio is calculated as the total A$ dividend divided by adjusted cash profit converted to A$ at the period average rate of exchange.
Dividends per share
(A¢)
39
2022
2021
2020
2019
4
39
30
52
Dividend payout (A$M)
578
Dividends
The Group’s dividend policy is calibrated
to pay out 40%–60% of adjusted cash
profit annually. This approach provides
a balance between supporting the Group’s
growth ambitions and providing flexibility
to effectively navigate through phases
of the global insurance cycle.
The final dividend for 2022 is 30 Australian
cents per share, compared with the 2021
final dividend of 19 Australian cents
per share.
The final dividend will be 10% franked and
is payable on 14 April 2023. The Dividend
Reinvestment Plan and Bonus Share Plan
will be satisfied by the issue of shares
at a nil discount.
The combined 2022 interim and final
dividend of 39 Australian cents per share
is up from 30 Australian cents per share
in 2021, and equates to a total payout
of A$578 million or 48% of adjusted
cash profit.
QBE enters the new year with
conservative balance sheet settings and
a strong solvency position. The payout
for the current period reflects the strength
of the Group's capital position, as well
as what remains a positive outlook for
premium growth.
24
25
Cash profit and dividends
Closing remarks
Reconciliation of cash profit
FOR THE YEAR ENDED 31 DECEMBER
Net profit after tax
Amortisation and impairment of intangibles after tax 1
Write-off of deferred tax assets
Write-off of capitalised tax assets
Net cash profit after tax
Restructuring and related expenses after tax
Net gain on disposals after tax
Additional Tier 1 capital coupon
Adjusted net cash profit after tax
Return on average shareholders’ equity – adjusted cash basis (%)
Basic earnings per share – adjusted cash basis (US cents)
Dividend payout ratio (percentage of adjusted cash profit) 2
2022
US$M
770
72
–
–
842
93
(38)
(50)
847
10.5
57.2
48%
2021
US$M
750
53
–
–
803
52
–
(50)
805
10.3
54.6
41%
1 $63 million of pre-tax amortisation expense is included in underwriting expenses (2021 $50 million).
2 Dividend payout ratio is calculated as the total A$ dividend divided by adjusted cash profit converted to A$ at the period average rate of exchange.
Dividends per share
Dividends
(A¢)
39
2022
2021
2020
2019
4
578
39
30
52
The Group’s dividend policy is calibrated
The combined 2022 interim and final
to pay out 40%–60% of adjusted cash
dividend of 39 Australian cents per share
profit annually. This approach provides
is up from 30 Australian cents per share
a balance between supporting the Group’s
in 2021, and equates to a total payout
growth ambitions and providing flexibility
of A$578 million or 48% of adjusted
to effectively navigate through phases
cash profit.
of the global insurance cycle.
QBE enters the new year with
The final dividend for 2022 is 30 Australian
conservative balance sheet settings and
cents per share, compared with the 2021
a strong solvency position. The payout
final dividend of 19 Australian cents
for the current period reflects the strength
Dividend payout (A$M)
per share.
of the Group's capital position, as well
as what remains a positive outlook for
premium growth.
The final dividend will be 10% franked and
is payable on 14 April 2023. The Dividend
Reinvestment Plan and Bonus Share Plan
will be satisfied by the issue of shares
at a nil discount.
In an ultimately challenging year for the insurance industry,
the strength and resilience of QBE’s financial performance
are a testament to the ongoing work to de-risk, simplify
and modernise our business. We enter 2023 with a broader
and more diversified earnings base and strong growth
momentum across our key markets.
Outlook
focus
Maximise market
opportunity
Drive targeted growth
and enhance returns
Reduce volatility
Mitigate volatility through
evolving portfolio
optimisation framework
Build greater
consistency
In our operations
and financial results
Sustainability
Make a positive
contribution to the
economies and
communities in
which we operate
Although the macroeconomic backdrop remains uncertain, we remain
confident in our outlook for the year ahead, entering 2023 with strong business
momentum, a broader and more diversified earnings base, significant support
from earned rate, and a capital position at the top end of our target range.
Our portfolio optimisation strategy remains focused on reducing volatility and
improving risk-adjusted returns across our business. The progress in reducing
property catastrophe exposure proved critical in navigating a challenging
reinsurance renewal. Initiatives focused on reassessing reserve risk helped
inform the scope of the reserve transaction announced recently, which will
significantly reduce reserve volatility, enhance returns and provide greater
capital flexibility to support growth.
The benefit of expense discipline alongside positive operating leverage has
been meaningful in recent periods, and now affords increased capacity
to pursue further modernisation and growth of our business. In 2023, we will
be executing against a targeted set of growth opportunities, as well as initiatives
to develop deeper connectivity and improve the ease of doing business with our
customers, digitise our underwriting and claims processes, and provide better
tools for our people.
We are progressing with integrating environmental and social considerations
into our business planning and financial reporting processes. Material work
is underway to lift capability around underwriting emission measurement,
as we work towards setting an emission reduction target. We see great
opportunity as we work more closely with our customers to ensure a successful
transition, and will continue actively exploring transition opportunities that will
arise associated with new industries, products and technologies.
Insurance market conditions remain supportive and we expect rate increases
and premium growth to continue through 2023 and support further improvement
in the underwriting account. The reset in interest rates is translating into
substantially higher investment returns supporting a better balance in our
earnings profile, and we remain confident of achieving a stronger, more
consistent level of financial performance over the medium term.
Inder Singh
Group Chief Financial Officer
A
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26
Gross written
premium (US$M)
7,274
16% from 2021
Net earned
premium (US$M)
4,280
8% from 2021
Combined
operating ratio
98.9%
2021 102.9%
Underwriting
result 1 (US$M)
46
164 from 2021
North America
The favourable premium rate environment alongside
expanding benefits associated with portfolio optimisation
initiatives, exposure management, and the pursuit
of targeted organic growth have supported a return
to underwriting profit for North America.
Todd Jones Chief Executive Officer, North America
2022 overview
Challenges associated with higher inflation and elevated catastrophe activity resulted
in the need for further rate increases and disciplined risk selection. North America
delivered on its organic growth strategy while improving portfolio balance, exiting
a cohort of unprofitable programs and successfully executing the divestiture of the
Westwood Insurance Agency. Alongside further improvement in underwriting quality,
North America delivered a combined operating ratio of 98.9%, which compares
to 102.9% in 2021, and represents an encouraging return to underwriting profitability.
Gross written premium growth was strong at 16%, supported by ex-rate growth
of 12.5%. Pricing remained supportive despite moderating in certain pockets such
as management liability and workers' compensation, supporting an average renewal
rate increase of 9.2%, compared to 10.7% in the prior year.
North America executed on a number of portfolio optimisation initiatives calibrated
around a multi-year shift in portfolio risk profile and balance. Technical rate adequacy
improved from another year of compound rate increases while property catastrophe risk
was reduced, with coastal wind exposure down by over 30%. We deployed a number
of reinsurance solutions to manage earnings-at-risk in classes such as property and crop.
There is good momentum across our modernisation and efficiency initiatives.
Foundational investments in policy administration and data architecture are nearing
completion, including the migration of a number of key systems. Models were improved
by integrating additional third-party data for better pricing and improved risk selection
tools, while investments are underway to modernise and digitise underwriter workflows.
North America executed a loss portfolio transaction during the first half to facilitate
the transfer of $327 million of outstanding claims reserves related to the runoff legacy
E&S portfolio, resulting in an adverse pre-tax impact $65 million. All discussion
of performance within has been adjusted for the impact of this transaction.
Underwriting result
FOR THE YEAR ENDED 31 DECEMBER
2022
US$M
US$M
Gross written premium US$M
Gross earned premium US$M
Net earned premium
US$M
Net claims expense
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined
operating ratio
%
Insurance profit (loss) margin %
US$M
US$M
%
%
%
%
7,274
7,213
3,890
2,669
456
508
257
75.2
11.7
13.1
100.0
93.4
4.1
EX-E&S
2022
7,274
7,213
4,280
2,996
456
506
322
76.4
10.7
11.8
98.9
92.5
5.2
2021
2020
2019
6,289
5,838
3,965
3,046
512
460
(53)
78.4
12.9
11.6
102.9
101.3
(0.6)
4,775
4,551
3,351
2,917
486
469
(521)
84.2
14.5
14.0
112.7
115.5
(14.6)
4,361
4,375
3,692
2,929
536
488
(261)
77.9
14.5
13.2
105.6
107.0
(3.7)
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
26
27
Gross written
premium (US$M)
7,274
16% from 2021
Net earned
premium (US$M)
4,280
8% from 2021
Combined
operating ratio
98.9%
2021 102.9%
Underwriting
result 1 (US$M)
46
164 from 2021
North America
The favourable premium rate environment alongside
expanding benefits associated with portfolio optimisation
initiatives, exposure management, and the pursuit
of targeted organic growth have supported a return
to underwriting profit for North America.
Todd Jones Chief Executive Officer, North America
2022 overview
Challenges associated with higher inflation and elevated catastrophe activity resulted
in the need for further rate increases and disciplined risk selection. North America
delivered on its organic growth strategy while improving portfolio balance, exiting
a cohort of unprofitable programs and successfully executing the divestiture of the
Westwood Insurance Agency. Alongside further improvement in underwriting quality,
North America delivered a combined operating ratio of 98.9%, which compares
to 102.9% in 2021, and represents an encouraging return to underwriting profitability.
Gross written premium growth was strong at 16%, supported by ex-rate growth
of 12.5%. Pricing remained supportive despite moderating in certain pockets such
as management liability and workers' compensation, supporting an average renewal
rate increase of 9.2%, compared to 10.7% in the prior year.
North America executed on a number of portfolio optimisation initiatives calibrated
around a multi-year shift in portfolio risk profile and balance. Technical rate adequacy
improved from another year of compound rate increases while property catastrophe risk
was reduced, with coastal wind exposure down by over 30%. We deployed a number
of reinsurance solutions to manage earnings-at-risk in classes such as property and crop.
There is good momentum across our modernisation and efficiency initiatives.
Foundational investments in policy administration and data architecture are nearing
completion, including the migration of a number of key systems. Models were improved
by integrating additional third-party data for better pricing and improved risk selection
tools, while investments are underway to modernise and digitise underwriter workflows.
North America executed a loss portfolio transaction during the first half to facilitate
the transfer of $327 million of outstanding claims reserves related to the runoff legacy
E&S portfolio, resulting in an adverse pre-tax impact $65 million. All discussion
of performance within has been adjusted for the impact of this transaction.
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
2020
2019
Underwriting result
Gross written premium US$M
Gross earned premium US$M
Net earned premium
Net claims expense
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined
operating ratio
US$M
US$M
US$M
US$M
US$M
%
%
%
%
%
Insurance profit (loss) margin %
7,274
7,213
3,890
2,669
456
508
257
75.2
11.7
13.1
100.0
93.4
4.1
EX-E&S
2022
7,274
7,213
4,280
2,996
456
506
322
76.4
10.7
11.8
98.9
92.5
5.2
6,289
5,838
3,965
3,046
512
460
(53)
78.4
12.9
11.6
102.9
101.3
(0.6)
4,775
4,551
3,351
2,917
486
469
(521)
84.2
14.5
14.0
112.7
115.5
(14.6)
4,361
4,375
3,692
2,929
536
488
(261)
77.9
14.5
13.2
105.6
107.0
(3.7)
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
Underwriting performance
North America reported a combined
operating ratio of 98.9%, which improved
by 4.0% from 102.9% in the prior year.
The result reflected a lower level
of catastrophe claims, which fell to
$251 million and accounted for 5.8%
of net earned premium, slightly below
allowance and down from 7.7% in the
prior period.
The Crop combined operating ratio
deteriorated by 2.8% to 95.5%,
primarily relating to drier conditions
across a number of states.
Heightened inflation, which alongside
higher claims in Crop and elevated
severity from terminated programs,
saw a 3.3% deterioration in the ex-cat
claims ratio to 70.0%.
Premium income
Gross written premium increased
16% to $7,274 million. This reflected
particularly strong growth in Crop, and
broader property and casualty business
growth of 8.1% driven by continued strong
rate increases, new business growth,
and improved retention. Overall, growth
excluding rate was 12.5% compared
to the prior period, or negative 1.1%
excluding Crop.
Crop gross written premium rose 30.7%
primarily due to heightened commodity
prices and organic growth of 14%. QBE
continued to grow market share with its
leading technology-oriented customer
proposition, deeply ingrained agent
loyalty and investment in new talent.
Commercial gross written premium
growth of 17% was supported by strong
premium rate increases across most lines
and organic growth in targeted areas
including middle market and workers
compensation. We exited a number
of programs representing around $400
million of gross written premium which
reduced exposure to convective storm
and social inflation exposed classes.
Specialty gross written premium was
broadly steady as strong new business
growth and rate capture in both accident
and health, and professional liability was
offset by moderation in management and
transaction liability, in response to less
supportive market conditions.
Net earned premium increased 8%
to $4,280 million, a slower pace than
on a gross basis due to growth in heavily
reinsured portfolios such as Crop, which
had a new quota share in place for 2022.
Claims expense
The ex-cat claims ratio deteriorated
by 3.3% to 70.0%, or 1.5% excluding
Crop to 58.6%.
This reflected increased severity
observed in certain property segments,
and higher social inflation across
a discrete portion of the portfolio.
These trends ultimately underscore the
importance of our decision to terminate
a number of program relationships.
The ex-cat claims ratio for Crop
deteriorated by 7.6% compared to the
prior period, primarily as a result of drier
conditions across a number of states.
Catastrophe claims decreased 1.9%
to 5.8% of net earned premium from
7.7% in the prior year. Catastrophe
claims were driven by Hurricane Ian,
and the high frequency of smaller events.
Adverse prior accident year claims
development was $43 million, or 1.0%
of net earned premium, compared
to adverse development of $148 million,
or 3.7% in the prior period. This reflected
strengthening in older accident years
for certain discontinued books of
business. Further strengthening was
also made to incorporate higher inflation
assumptions across several lines.
Commission and expenses
The total acquisition cost ratio improved
by 2.0% to 22.5%, compared with 24.5%
in the prior period. This partly reflected
the benefit from efficiency initiatives
and ongoing improvement in operating
leverage, but also mix benefits associated
with strong growth in Crop, which
operates on a cost base below the
North American average.
Excluding Crop, North America's
combined commission and expense
ratio improved by 1.0% to 32.4%,
which has declined meaningfully
from historical levels.
Average renewal
premium rate increase
9.2%
1.5% from 2021
2022
2021
2020
2019
9.2%
10.7%
10.2%
5.7%
Gross written premium
by segment
(cid:31) Crop
(cid:31) Commercial
(cid:31) Specialty
2022
%
48.6
26.1
25.3
Gross earned premium
Gross written premium
by class of business
by class of business
(cid:31) Agriculture
(cid:31) Commercial &
domestic property
(cid:31) Professional indemnity
(cid:31) Accident & health
(cid:31) Workers' compensation
(cid:31) Public/product liability
(cid:31) Marine, energy & aviation
(cid:31) Motor & motor casualty
(cid:31) Financial & credit
2022
%
48.5
20.8
10.0
7.9
5.9
4.0
1.7
1.0
0.2
Combined commission
and expense ratio
22.5%
2.0% from 2021
2022
2021
2020
2019
22.5%
24.5%
28.5%
27.7%
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Separate shape sitting on top of
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28
International
Gross written
premium (US$M)
7,546
14% from 2021
Net earned
premium (US$M)
5,974
16% from 2021
Combined
operating ratio
92.5%
2021 90.6%
Underwriting
result 1 (US$M)
447
75 from 2021
In a year characterised by numerous external challenges,
the benefits from International’s ongoing focus on
resiliency, portfolio optimisation and targeted growth
were clear in a combined operating ratio of 92.5%.
Jason Harris Chief Executive Officer, International
2022 overview
International recorded further progress in its pursuit of targeted growth, with gross
written premium increasing 14% compared to the prior year. New business volumes
were particularly strong, with ex-rate growth of 8.8%, underpinned by successful growth
initiatives across both insurance and reinsurance segments. Mid-single digit premium rate
increases continue to compound on multi-year rating improvement across most classes.
Within the Insurance division, new business momentum was achieved in the
International Markets tracker portfolio, and liability and property lines for our UK
segment. In Continental Europe, new branches in both France and the Netherlands
helped to build our profile in marine and liability products respectively.
In the Reinsurance division (QBE Re), organic growth has been achieved across
all key markets and offices. Focus has centred around deepening relationships with
core clients, improving portfolio quality, and reshaping property catastrophe exposure
to better complement the Group’s overall global portfolio. Rate increases trended
higher through the year, with the Property market hardening meaningfully on the back
of concerns around loss experience, inflation, and climate change.
Benefits from the ongoing focus on underwriting quality and portfolio optimisation were
present in the resiliency of International’s underwriting result. International delivered
a combined operating ratio of 92.5% compared with 90.6% in the prior year. The result
was adversely impacted by heightened inflationary pressures, an adverse COVID-19
business interruption judgement, costs associated with the Russia/Ukraine conflict and
elevated catastrophe experience.
In an increasingly competitive marketplace for talent, we have been focused on
establishing QBE as an employer of choice. Pleasingly, QBE Europe was awarded
Employer of the Year from a major industry publication.
Underwriting result
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
2020
2019
Gross written premium
Gross earned premium
Net earned premium
Net claims expense
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined operating ratio
Insurance profit margin
US$M
US$M
US$M
US$M
US$M
US$M
US$M
%
%
%
%
%
%
7,546
6,908
5,974
3,017
1,045
678
1,234
63.7
17.4
11.4
92.5
79.3
13.7
6,958
6,476
5,545
3,134
980
726
704
59.8
17.7
13.1
90.6
87.3
12.9
5,856
5,542
4,812
3,106
877
655
174
59.4
18.3
13.6
91.3
96.4
5.5
5,200
5,010
4,339
2,918
752
652
17
64.5
17.3
15.0
96.8
99.6
7.9
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
28
29
Gross written
premium (US$M)
7,546
14% from 2021
Net earned
premium (US$M)
5,974
16% from 2021
Combined
operating ratio
92.5%
2021 90.6%
Underwriting
result 1 (US$M)
447
75 from 2021
International
In a year characterised by numerous external challenges,
the benefits from International’s ongoing focus on
resiliency, portfolio optimisation and targeted growth
were clear in a combined operating ratio of 92.5%.
Jason Harris Chief Executive Officer, International
2022 overview
International recorded further progress in its pursuit of targeted growth, with gross
written premium increasing 14% compared to the prior year. New business volumes
were particularly strong, with ex-rate growth of 8.8%, underpinned by successful growth
initiatives across both insurance and reinsurance segments. Mid-single digit premium rate
increases continue to compound on multi-year rating improvement across most classes.
Within the Insurance division, new business momentum was achieved in the
International Markets tracker portfolio, and liability and property lines for our UK
segment. In Continental Europe, new branches in both France and the Netherlands
helped to build our profile in marine and liability products respectively.
In the Reinsurance division (QBE Re), organic growth has been achieved across
all key markets and offices. Focus has centred around deepening relationships with
core clients, improving portfolio quality, and reshaping property catastrophe exposure
to better complement the Group’s overall global portfolio. Rate increases trended
higher through the year, with the Property market hardening meaningfully on the back
of concerns around loss experience, inflation, and climate change.
Benefits from the ongoing focus on underwriting quality and portfolio optimisation were
present in the resiliency of International’s underwriting result. International delivered
a combined operating ratio of 92.5% compared with 90.6% in the prior year. The result
was adversely impacted by heightened inflationary pressures, an adverse COVID-19
business interruption judgement, costs associated with the Russia/Ukraine conflict and
elevated catastrophe experience.
In an increasingly competitive marketplace for talent, we have been focused on
establishing QBE as an employer of choice. Pleasingly, QBE Europe was awarded
Employer of the Year from a major industry publication.
Underwriting result
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
2020
2019
Gross written premium
Gross earned premium
Net earned premium
Net claims expense
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined operating ratio
Insurance profit margin
US$M
US$M
US$M
US$M
US$M
US$M
US$M
%
%
%
%
%
%
7,546
6,908
5,974
3,017
1,045
678
1,234
63.7
17.4
11.4
92.5
79.3
13.7
6,958
6,476
5,545
3,134
980
726
704
59.8
17.7
13.1
90.6
87.3
12.9
5,856
5,542
4,812
3,106
877
655
174
59.4
18.3
13.6
91.3
96.4
5.5
5,200
5,010
4,339
2,918
752
652
17
64.5
17.3
15.0
96.8
99.6
7.9
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
Underwriting performance
International reported a combined
operating ratio of 92.5% compared
with 90.6% in the prior period.
The result reflected a challenging
operating environment underpinned
by heightened inflation, costs relating
to the Russia/Ukraine war and elevated
catastrophe costs including Hurricane
Ian and the June French storms.
These external headwinds were partly
offset by the benefit of increased
premium income driven by continued
rate increases, targeted new business,
and underlying exposure growth.
The result included adverse prior year
development of $142 million, which
represented strengthening for higher
inflation assumptions across multiple lines,
and the impact of an adverse COVID-19
business interruption legal judgement.
Premium income
Gross written premium increased by 14%
to $7,546 million. International achieved
an average renewal premium rate
increase of 6.5% compared to 10.2%
in the prior year.
The market became more bifurcated for
rating, where moderation was observed
in many casualty classes, while property
lines remained firm.
Within Insurance, gross written premium
increased by 12%, with most portfolios
achieving mid-single digit rate increases.
Ex-rate growth of 7% was robust, with
particularly strong contributions from our
portfolio tracker business, UK liability and
property, alongside natural resources
where we have established a new
Sustainable Energy unit.
Within QBE Re, gross written premium
growth of 25% reflected strong growth
across all segments and offices.
The recent January 2023 renewal has
seen further momentum, which should
support the outlook for both growth and
underwriting profitability.
Asia's gross written premium remained
stable at $455 million, where COVID-19
has continued to impact travel.
Growth in gross written premium
continues to translate into momentum
in net earned premium, which increased
16% during the year.
Claims expense
The net claims ratio increased to 63.7%
from 59.8% in the prior year.
French storms and flooding in Australia
and South Africa.
The ex-cat claims ratio improved
by 1.5% to 51.6%, where the benefit of
significant rate increases offset increased
allowances for inflation and an increase
in frequency observed in certain classes
as global economic activity returned
to more normal levels.
The net cost of catastrophe claims
was $438 million or 7.3% of net earned
premium, compared with 6.5% in the prior
period. Heightened catastrophe activity
continued, underscored by Hurricane
Ian, Storms Eunice and Elliott, the June
Higher catastrophe costs also include
an allowance for exposure to the ongoing
Russia/Ukraine conflict.
Adverse prior accident year development
of $142 million or 2.4%, reflected
additional allowances for inflation
across a number of classes, where
we have proactively looked to address
risks associated with the persistency
of inflation. The result also reflects
an adverse COVID-19 business
interruption legal judgement in the UK.
Commission and expenses
The combined commission and expense
ratio improved by 2.0% to 28.8%
compared to the prior year, supported
by an ongoing focus on efficiency,
positive operating leverage and
lower commissions.
The net commission ratio improved
by 0.3% to 17.4%, mainly representing
favourable changes in portfolio mix.
The expense ratio improved by 1.7%
to 11.4%, reflecting ongoing expense
discipline combined with the benefit
of positive operating leverage.
Average renewal
premium rate increase
6.5%
3.7% from 2021
2022
2021
2020
2019
6.5%
6.0%
10.2%
12.8%
Gross written premium
by segment
(cid:31) International markets
(cid:31) QBE Re
(cid:31) UK
(cid:31) Continental Europe
(cid:31) Asia
2022
%
32.8
25.0
22.4
13.9
5.9
Gross earned premium
Gross written premium
by class of business
by class of business
(cid:31) Commercial &
domestic property
(cid:31) Public/product liability
(cid:31) Marine, energy & aviation
(cid:31) Motor & motor casualty
(cid:31) Professional indemnity
(cid:31) Workers' compensation
(cid:31) Accident & health
(cid:31) Other
(cid:31) Financial & credit
2022
%
28.9
23.3
14.7
11.2
10.9
4.2
3.2
2.1
1.5
Combined commission
and expense ratio
28.8%
2.0% from 2021
2022
2021
2020
2019
28.8%
30.8%
31.9%
32.3%
A
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30
Gross written
premium (US$M)
5,241
9% from 2021
Net earned
premium (US$M)
4,519
15% from 2021
Combined
operating ratio
90.1%
2021 91.4%
Underwriting
result 1 (US$M)
446
76 from 2021
Australia Pacific
Australia Pacific recorded an improvement in
combined operating ratio to 90.1%, sustaining positive
rating momentum and targeted volume growth,
alongside foundational investment to support
medium-term modernisation initiatives.
Sue Houghton Chief Executive Officer, Australia Pacific
2022 overview
Australia Pacific continued to deliver targeted growth in 2022. Ex-rate growth was 2%,
or 5% excluding the impact of lower LMI volumes. Growth was broad based across
a wide range of classes, though it remains strongest in small and medium sized
business customer segments.
The operating environment proved challenging, with elevated natural peril activity and
heightened cost inflation. The La Nina climate pattern produced significant flood and storm
events across Eastern and Southern Australia in the first and fourth quarters. The frequency
and size of natural peril activity exacerbated economic inflationary trends, as the impact of
disrupted supply chains was amplified by increased demand for materials and tradespeople.
Against this backdrop, Australia Pacific’s result demonstrated encouraging resilience, with
a combined operating ratio of 90.1%, which improved by 1.3% compared to the prior period.
In response to claims pressures, premium rates continued to firm, with an average
renewal premium rate increase of 9.5% compared to 8.3% in 2021. Pricing momentum
built over the course of the year, with fourth quarter average renewal rate increases
of 10.4%. Rate increases were most pronounced in short-tail classes due to weather
and inflation effects, with several portfolios recording double digit increases alongside
favourable adjustment to terms and conditions.
During the year, modernisation initiatives focused on further uplifting capability across
customer and partner connectivity, claims, underwriting and pricing. Australia Pacific
commenced preparations for the introduction of the Northern Australia Reinsurance Pool,
while foundational investment was made to support commencement of a medium-term
digitisation project focused on commercial customer segments.
Australia Pacific conducted a review of pricing promises in conjunction with the broader
Australian Securities and Investments Commission (ASIC) industry review. As announced in
July 2022, this gave rise to a charge of $75 million in relation to instances where policy pricing
promises were not fully delivered. Work is progressing to remediate impacted customers.
Underwriting result
FOR THE YEAR ENDED 31 DECEMBER
2022
US$M
US$M
Gross written premium US$M
Gross earned premium US$M
Net earned premium
US$M
Net incurred claims
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined
operating ratio
Insurance profit margin
US$M
US$M
%
%
%
%
%
%
5,188
4,944
4,466
2,688
613
607
558
64.0
13.7
13.6
91.3
87.5
12.2
EX-
PRICING
2022
5,241
4,997
4,519
2,688
613
600
618
63.3
13.5
13.3
90.1
86.3
13.3
2021
2020
2019
5,215
4,731
4,265
2,640
600
601
424
63.2
14.1
14.1
91.4
90.1
10.4
4,079
3,985
3,626
2,316
534
555
221
62.8
14.7
15.3
92.8
93.9
6.9
3,920
3,885
3,568
2,223
526
519
300
60.7
14.8
14.5
90.0
91.6
13.6
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
30
31
Gross written
premium (US$M)
5,241
9% from 2021
Net earned
premium (US$M)
4,519
15% from 2021
Combined
operating ratio
90.1%
2021 91.4%
Underwriting
result 1 (US$M)
446
76 from 2021
Australia Pacific
Australia Pacific recorded an improvement in
combined operating ratio to 90.1%, sustaining positive
rating momentum and targeted volume growth,
alongside foundational investment to support
medium-term modernisation initiatives.
Sue Houghton Chief Executive Officer, Australia Pacific
2022 overview
Australia Pacific continued to deliver targeted growth in 2022. Ex-rate growth was 2%,
or 5% excluding the impact of lower LMI volumes. Growth was broad based across
a wide range of classes, though it remains strongest in small and medium sized
business customer segments.
The operating environment proved challenging, with elevated natural peril activity and
heightened cost inflation. The La Nina climate pattern produced significant flood and storm
events across Eastern and Southern Australia in the first and fourth quarters. The frequency
and size of natural peril activity exacerbated economic inflationary trends, as the impact of
disrupted supply chains was amplified by increased demand for materials and tradespeople.
Against this backdrop, Australia Pacific’s result demonstrated encouraging resilience, with
a combined operating ratio of 90.1%, which improved by 1.3% compared to the prior period.
In response to claims pressures, premium rates continued to firm, with an average
renewal premium rate increase of 9.5% compared to 8.3% in 2021. Pricing momentum
built over the course of the year, with fourth quarter average renewal rate increases
of 10.4%. Rate increases were most pronounced in short-tail classes due to weather
and inflation effects, with several portfolios recording double digit increases alongside
favourable adjustment to terms and conditions.
During the year, modernisation initiatives focused on further uplifting capability across
customer and partner connectivity, claims, underwriting and pricing. Australia Pacific
commenced preparations for the introduction of the Northern Australia Reinsurance Pool,
while foundational investment was made to support commencement of a medium-term
digitisation project focused on commercial customer segments.
Australia Pacific conducted a review of pricing promises in conjunction with the broader
Australian Securities and Investments Commission (ASIC) industry review. As announced in
July 2022, this gave rise to a charge of $75 million in relation to instances where policy pricing
promises were not fully delivered. Work is progressing to remediate impacted customers.
FOR THE YEAR ENDED 31 DECEMBER
2022
2021
2020
2019
Underwriting result
Gross written premium US$M
Gross earned premium US$M
Net earned premium
Net incurred claims
Net commission
Underwriting expenses
Underwriting result
Net claims ratio
Net commission ratio
Expense ratio
Combined operating ratio
Statutory combined
operating ratio
Insurance profit margin
US$M
US$M
US$M
US$M
US$M
%
%
%
%
%
%
EX-
PRICING
2022
5,241
4,997
4,519
2,688
613
600
618
63.3
13.5
13.3
90.1
86.3
13.3
5,188
4,944
4,466
2,688
613
607
558
64.0
13.7
13.6
91.3
87.5
12.2
5,215
4,731
4,265
2,640
600
601
424
63.2
14.1
14.1
91.4
90.1
10.4
4,079
3,985
3,626
2,316
534
555
221
62.8
14.7
15.3
92.8
93.9
6.9
3,920
3,885
3,568
2,223
526
519
300
60.7
14.8
14.5
90.0
91.6
13.6
1 Excludes impact of changes in risk-free rates used to discount net outstanding claims.
Underwriting performance
Australia Pacific reported a combined
operating ratio of 90.1% compared with
91.4% in the prior period.
Underwriting profit of $446 million
increased by 31% relative to the prior
year in constant currency terms.
Strong results were delivered across LMI,
New Zealand, Pacific, CTP and Australian
commercial portfolios. Partly offsetting this
were higher catastrophe and weather-
related claims in Householders and Strata.
The combined commission and expense
ratio improved to 26.8% from 28.2%
in the prior period.
In the fourth quarter, the High Court
declined leave to appeal test cases
relating to COVID-19 business interruption
claims. As a result, uncertainty relating
to the range of outcomes has reduced,
leading to a release of divisional claims
provisions and centrally held risk margin.
Claims are now being processed and
paid based on the Federal Court ruling.
Premium income
Gross written premium increased by 9%
to $5,241 million, reflecting premium rate
increases, sustained strong retention
levels and new business, partially offset
by lower volumes in LMI.
Premium rate increases improved
to 9.5% from 8.3% in the prior period.
Increases were broad based, though
more pronounced in short-tail portfolios
exposed to heightened natural peril
activity and increased inflation. Premium
retention remained strong at 87%,
broadly consistent with the prior period.
Commercial gross written premium grew
14% underpinned by farm, commercial motor,
commercial packages and engineering.
New Zealand & Pacific achieved gross
written premium growth of 6% despite
exiting the Smartpak facility in April.
Excluding LMI, Consumer achieved
gross written premium growth of 12%,
primarily reflecting higher rate increases.
LMI gross written premium declined
43% to $167 million, driven by reduced
housing market activity following strong
transaction volumes in the prior year.
Claims expense
Australia Pacific's net claims ratio was
stable over the year at 63.3%.
The ex-cat claims ratio of 55.8%
increased 1.6% relative to the prior period.
The benefit of higher earned premium rates
and lower claims handling costs was offset
by increased frequency of non-catastrophe
weather claims, and heightened inflation
in property and motor portfolios.
The net catastrophe claims ratio of 8.2%
increased by 2.5% compared to the prior
period. The result was underscored by the
significant East Coast flood and storm event
in the first quarter, and the multiple flood
and storm events impacting South-Eastern
Australia in the fourth quarter.
The size, breadth, frequency and mix
of natural peril activity (both catastrophe
and non-catastrophe) has compounded
inflationary impacts by increasing demand
for tradespeople and materials, and
supply chain disruption.
Short-tail inflation assumptions were
strengthened, to reflect observed trends
in average claims cost. In long-tail reserves,
assumptions have also been increased
for average wage growth and inflation.
Notwithstanding, the result included
favourable prior accident year claims
development of $44 million, compared with
strengthening of $111 million in the prior
period. Favourable experience in LMI and
CTP more than offset the aforementioned
inflation related strengthening, and strain
in workers' compensation excess of loss,
which was closed during the year.
In LMI, asset quality continued to
improve, with 90-day arrears at 0.52%,
down from 0.68% at 31 December 2021
and approximately 40 basis points below
pre-COVID-19 levels. As a result, claims
experience has been favourable and
prior accident year claims liabilities held
in relation to COVID-19 were released.
Commission and expenses
The combined commission and expense
ratio improved to 26.8% from 28.2%
in the prior period.
The net commission ratio reduced to
13.5% from 14.1% in the prior period
reflecting business mix, commission
income associated with the LMI quota
share reinsurance.
The expense ratio improved to 13.3%
from 14.1% in the prior period, despite
higher investment in modernisation and
technology initiatives, and investment
in staff to support business growth.
Average renewal
premium rate increase
9.5%
1.2% from 2021
2022
2021
2020
2019
9.5%
8.3%
5.4%
7.3%
Gross written premium
by segment
(cid:31) Commercial
(cid:31) Consumer
(cid:31) New Zealand & Pacific
2022
%
60.4
30.9
8.7
Gross earned premium
Gross written premium
by class of business
by class of business
(cid:31) Commercial &
domestic property
(cid:31) Motor & motor casualty
(cid:31) Agriculture
(cid:31) Public/product liability
(cid:31) Workers' compensation
(cid:31) Financial & credit
(cid:31) Marine, energy & aviation
(cid:31) Professional indemnity
(cid:31) Accident & health
2022
%
42.3
22.7
8.4
8.0
6.6
5.1
3.0
2.4
1.5
Combined commission
and expense ratio
26.8%
1.4% from 2021
2022
2021
2020
2019
26.8%
28.2%
30.0%
29.3%
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32
Group Chief Risk Officer’s report
Managing risk
– our business
Fiona Larnach Group Chief Risk Officer
As QBE emerges into a post-pandemic world, we continue to manage the residual
risks from supply chain disruptions, business interruptions and hybrid working.
However, given the volatility and rapid evolution of the geopolitical environment,
new international challenges arise. The invasion of Ukraine by Russia resulted
in a material deterioration in the global security environment and increased
macroeconomic uncertainty. QBE is focused on managing the risks and impact
to the Group while supporting our customers.
In addition, QBE continues to be exposed
to natural disasters, with the 2022 eastern
Australia floods recorded as some of the
costliest in the nation’s history. As the
frequency and severity of these weather
events continue to increase, QBE
is focused on continuously improving
understanding and management
of climate-related risks. Catastrophe
modelling continues to be updated
in order to inform underwriting and
reserving decisions.
Enterprise risk management
framework
The enterprise risk management
framework describes QBE’s approach
to managing risk and is embedded
in our Risk Management Strategy
which is annually reviewed to assess
its effectiveness. To achieve the
integration of risk in business planning
and supporting our strategic objectives,
material risks are identified and
assessed, with QBE focused on ensuring
there is a globally consistent process for
individual risk assessments. Group-wide
stress testing is performed to help
develop mitigation strategies and actions
to achieve our business plans.
Alongside strategic planning, our
Capital Management Plan and risk
appetite statements ensure a balance
between risk and return as we allocate
resources for sustainable growth.
QBE’s risk appetite statements define the
threshold for our risk appetite, and are
subject to periodic updates. Monitoring
this enables QBE management to be
aware of potential earnings volatility
risks within the business plan and take
action accordingly.
QBE’s Group Risk and Control
Self-Assessment Standard sets
minimum requirements for identifying,
documenting, and assessing key
risks that QBE faces in delivering our
strategic and business objectives, and
assessing the effectiveness of those
controls in place to manage those risks.
The Incident and Issue Management
Standard sets the minimum requirements
for managing incidents and issues
across QBE. This allows QBE to better
manage risk and drive continuous
improvement by understanding our risk
exposure, identifying the root causes
and proactively improving the overall
control environment.
Risk governance
QBE’s approach to managing risk
is set out in the Risk Management
Strategy, which is implemented through
a three lines of defence model with
oversight from the Board. The first line
is business, responsible for identifying
and controlling risks within our risk
appetite according to our enterprise
risk management framework. The
second line is the risk and compliance
function which establishes relevant risk
frameworks and has an independent
role to support and challenge the first
line. The third line is the internal audit
function which is the independent
review and assurance function. QBE’s
approach to assurance seeks to integrate
assurance-related activities across
all three lines of defence to provide
assurance that the key risks are being
appropriately managed.
During 2022, QBE has sought to improve
the effectiveness of risk management
through a number of initiatives including
strengthening the organisation’s risk
culture, developing an earnings volatility risk
approach and simplifying the risk framework
and internal governance documentation.
Management expects to continue
this program of risk management
enhancements in 2023.
Risk culture
QBE recognises the importance of risk
culture for supporting risk management
and is committed to developing an
appropriate level of skills to support
a strong risk mindset. The QBE Group
Risk Culture Standard outlines our
framework through which we assess
and manage risk culture.
Our risk culture is a key element of
the QBE organisational culture and is
strongly intertwined with the QBE DNA.
We use a variety of processes and tools
to understand and continually evolve
our risk culture and risk maturity.
32
33
Group Chief Risk Officer’s report
Managing risk
– our business
Fiona Larnach Group Chief Risk Officer
As QBE emerges into a post-pandemic world, we continue to manage the residual
risks from supply chain disruptions, business interruptions and hybrid working.
However, given the volatility and rapid evolution of the geopolitical environment,
new international challenges arise. The invasion of Ukraine by Russia resulted
in a material deterioration in the global security environment and increased
macroeconomic uncertainty. QBE is focused on managing the risks and impact
to the Group while supporting our customers.
In addition, QBE continues to be exposed
threshold for our risk appetite, and are
role to support and challenge the first
to natural disasters, with the 2022 eastern
subject to periodic updates. Monitoring
line. The third line is the internal audit
Australia floods recorded as some of the
this enables QBE management to be
function which is the independent
costliest in the nation’s history. As the
aware of potential earnings volatility
frequency and severity of these weather
risks within the business plan and take
review and assurance function. QBE’s
approach to assurance seeks to integrate
events continue to increase, QBE
action accordingly.
is focused on continuously improving
understanding and management
of climate-related risks. Catastrophe
modelling continues to be updated
in order to inform underwriting and
reserving decisions.
Enterprise risk management
framework
The enterprise risk management
framework describes QBE’s approach
to managing risk and is embedded
in our Risk Management Strategy
which is annually reviewed to assess
its effectiveness. To achieve the
integration of risk in business planning
and supporting our strategic objectives,
material risks are identified and
assessed, with QBE focused on ensuring
there is a globally consistent process for
individual risk assessments. Group-wide
stress testing is performed to help
develop mitigation strategies and actions
to achieve our business plans.
Alongside strategic planning, our
Capital Management Plan and risk
QBE’s Group Risk and Control
Self-Assessment Standard sets
minimum requirements for identifying,
documenting, and assessing key
risks that QBE faces in delivering our
strategic and business objectives, and
assessing the effectiveness of those
controls in place to manage those risks.
The Incident and Issue Management
Standard sets the minimum requirements
for managing incidents and issues
across QBE. This allows QBE to better
manage risk and drive continuous
improvement by understanding our risk
exposure, identifying the root causes
and proactively improving the overall
control environment.
Risk governance
QBE’s approach to managing risk
is set out in the Risk Management
Strategy, which is implemented through
a three lines of defence model with
oversight from the Board. The first line
is business, responsible for identifying
and controlling risks within our risk
appetite according to our enterprise
assurance-related activities across
all three lines of defence to provide
assurance that the key risks are being
appropriately managed.
During 2022, QBE has sought to improve
the effectiveness of risk management
through a number of initiatives including
strengthening the organisation’s risk
culture, developing an earnings volatility risk
approach and simplifying the risk framework
and internal governance documentation.
Management expects to continue
this program of risk management
enhancements in 2023.
Risk culture
QBE recognises the importance of risk
culture for supporting risk management
and is committed to developing an
appropriate level of skills to support
a strong risk mindset. The QBE Group
Risk Culture Standard outlines our
framework through which we assess
and manage risk culture.
Our risk culture is a key element of
the QBE organisational culture and is
strongly intertwined with the QBE DNA.
We use a variety of processes and tools
appetite statements ensure a balance
risk management framework. The
between risk and return as we allocate
second line is the risk and compliance
resources for sustainable growth.
function which establishes relevant risk
to understand and continually evolve
QBE’s risk appetite statements define the
frameworks and has an independent
our risk culture and risk maturity.
Our top risks
Geopolitical and economic uncertainty
Insurance accumulations
Political instability or conflict resulting in disruption
to international trade and economic downturn could result
in financial loss to QBE. Heightened risk of conflicts, such
as the ongoing geopolitical tensions between the US and
China, and Russia’s invasion of Ukraine has led to energy
concerns and additional disruption to supply chains which
were already strained from a global economy emerging
from COVID-19. This has contributed to inflation,
interest rate increases, heightened risk of recession
and volatile foreign exchange rates and stock markets
across major developed economies to which QBE’s
business is exposed, driving potential financial loss.
QBE is focused on understanding the potential impacts
of geopolitical and economic uncertainty through scenario
analysis and ensuring appropriate action is taken,
such as through pricing to manage the impact of future
claims costs, setting an appropriate business plan and
determining appropriate reserves and capital requirements.
Inflation
Heightened inflation is a key driver of the current global
macro-economic environment. Ongoing global political
crises impacting energy and commodities pricing also
threaten to exacerbate the fragility of the global supply
chain. Central bank interest rates are the primary policy
response to manage future inflation; however, the
economic risk associated is economic slowdown and
recession. There is the possibility that central banks
choose not to increase interest rates substantially,
leading to heightened inflation becoming embedded
within Western economies.
As such, the rising cost of insurance claims, wage inflation
and materials (both cost and availability), increasing
litigation and litigation funding as well as broader
definitions of covered liabilities, could impact profitability
targets. Inflation assumptions, impact on reserves and
pricing adequacy form a key part of the analysis within the
inflation and recession stress tests and Group business
planning process. Our inflation working group brings
together cross-functional leaders to consider predicted
inflationary trends and propose actions to be taken across
all dimensions of QBE’s business.
Climate change
As an international insurer, reinsurer and investor,
there are a range of risks and opportunities associated
with climate change that will present over the short,
medium and long term. The increased frequency and
severity of natural disasters due to climate change,
as well as the transition to a net-zero economy, drive
risks and opportunities. There is the potential for climate
change to have significant impacts on certain perils
and regions particularly floods in Europe and Australia,
and hurricanes in North America, over the longer term.
Regulatory pressures continue to grow, as policy action
and stakeholder expectations around disclosure become
more ambitious over the shorter term.
Further details on our approach to manage climate risks
and opportunities are on pages 34–43.
The influence of climate change, technological
advances, increased globalisation and interdependency
emphasise the importance of appropriate accumulations
management towards large insurance loss events.
To manage this risk, QBE monitors and manages its
insurance accumulations. Sophisticated modelling is used
to understand both our current and forecast exposures
and is viewed against the Board's risk appetite in relation
to extreme loss events. We use multiple methodologies
to evaluate the concentration risk from exposure to
natural and man-made catastrophes, controlling this
exposure with the appropriate purchase of reinsurance.
QBE maintains an inventory of catastrophe models
that cover global perils and regions to match our global
portfolio. Scenario analysis focused on underwriting risk
elements is employed to understand the potential impact
of unexpected events across multiple classes of business.
The breadth and depth of scenarios are reviewed and
challenged regularly to reinforce new learnings, reflect
best practice and to ensure the suite of catastrophes
covered are in line with current events and new risks.
Reinsurance and broader portfolio management
strategies are integral to ensuring that our insurance
accumulations remain at acceptable levels.
Reserving, large losses and prior year
claims development
Inflation continues to drive uncertainty around
the ability of QBE’s current reserves to meet future
claims with the risk of adverse prior year claims
development. Both price and social inflation contribute
to the rising claims costs and must be considered
in reserving assumptions.
Cyber
QBE continues to adapt and optimise its operations
and strategy in response to the ever-evolving threat
landscape. To support QBE’s innovative and fast-paced
business, QBE aims to effectively manage cyber risk
to ensure cyber resilience. QBE leverages the breadth
of knowledge and expertise globally to deliver consistent
and effective services that address our existing and
emerging risks.
QBE's Cyber Security Strategy is informed by
recommendations from internal and external reviews and
takes a risk-based approach to the current and emerging
threat environment. The strategic initiatives for 2022
to 2024 relate to ongoing improvements in our security
posture, resilience, enhancing governance of partners and
suppliers, investing in our people's security awareness
and obligations, and further enabling security solutions
in keeping pace with the threat landscape. In line with
implementing these strategic initiatives, QBE is also
focusing on assurance over our retention, management
and disposal of data and datasets.
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34
– our approach to risks
and opportunities
QBE’s approach to climate change is being embedded into our strategic
priorities and risk management framework and supports our purpose
of enabling a more resilient future. One of our three sustainability strategy
focus areas is to foster an orderly and inclusive transition to a net-zero
economy which directly supports our climate activities. We continue
to develop our metrics, taking data availability and reliability into account,
as well as set targets and make progress against our commitments.
Governance
The Board approves QBE’s strategic priorities, which includes
consideration of climate risks and opportunities. The Group
Executive Committee (GEC) is accountable for developing
and implementing the strategy.
The Board and the GEC receive regular reporting
on sustainability issues and our progress towards our
sustainability and climate-related goals and targets, as outlined
in our 2022 Sustainability Scorecard. The GEC is supported
by the Environmental and Social GEC Sub-Committee which
focuses on environmental and social strategic issues including
climate change. The Sub-Committee is chaired by our Group
Executive, Corporate Affairs and Sustainability and meets
at least every two months.
As part of the oversight of the Group’s Risk Management
Strategy, the Board Risk & Capital Committee (BRCC) and
the Executive Risk Committee (ERC) receive regular reports
on environmental, social and governance (ESG) risks,
including deep dives on climate change risk, QBE’s approach
to managing this risk, and our scenario analysis for 2022.
The ESG Risk Committee continues to play a key role in
supporting the ERC in its identification and management of
ESG risks, including climate change. The ESG Risk Committee
is chaired by the Group Chief Risk Officer and has oversight
of the Environmental and Social Risk Framework and its
implementation, as well as climate scenario analysis and
climate disclosures.
Our Board and Executives participate in regular training
to enhance climate change capability. In 2022, the BRCC and
ERC joined externally facilitated education sessions covering
the evolving and accelerating liability landscape, board and
management duties and exposures, reporting and disclosure,
and regulatory expectations.
34
35
Strategy
QBE has committed to be a net-zero emissions organisation across our operations
by 2030, and across our underwriting and investment portfolios by 2050.
Addressing the risks and opportunities associated with climate change
is a priority for QBE and our stakeholders.
In 2022, climate change was a key consideration in the
evolution of our sustainability strategy and is highly relevant
to our three areas of focus:
1. Foster an orderly and inclusive transition
to a net-zero economy
2. Enable a sustainable and
resilient workforce
3. Partner for growth through innovative,
sustainable and impactful solutions
We recognise the importance of addressing climate change
and incorporating climate-related risks and opportunities into
our strategic priorities, business planning and decision-making
to meet our environmental and social commitments and enable
a resilient future for our business and our customers.
To underpin our understanding of climate risks and opportunities,
we have continued to undertake physical and transition scenario
analysis. Understanding the changing nature of weather-related
risks is critical to considering how we can help our customers
manage their physical risks and how we price for and manage
the accumulation of this risk.
This year, we have undertaken a global, economy-wide
transition scenario analysis which has highlighted the risks
and opportunities associated with the pathways to achieving
net-zero emissions. While there is more work to be done to
deepen our understanding and response to the decarbonisation
journey, current data indicates QBE is broadly resilient. There
are environmental and social benefits to an orderly transition
to 1.5OC through greater economic stability and lower physical
risks of climate change. As a global insurer and reinsurer, we have
the ability to support the transition across many industries and
regions through the products and partners we work with across
our insurance portfolio, investment portfolio and own operations.
QBE’s sustainability commitments in relation to these focus
areas for 2023+ are detailed in our 2022 Sustainability Report.
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QBE Foundation
’
This year, QBE announced a three-year extension to its global
disaster relief and climate resilience partnership with two of the
world’s leading humanitarian agencies, Red Cross and Save
the Children.
This partnership enables rapid mobilisation of funds for relief
activities during disasters and supports preparedness and climate
adaptation initiatives for communities around the world. We work
together with communities to build resilience and save lives
by improving their capacity to prepare, anticipate, respond and
recover from disasters.
To date, the partnership has been activated in 19 of the
27 countries in which QBE operates and has reached over
490,000 people through the deployment of $2.7 million in funding
and a further $2 million in investments through the Save the
Children Impact Investment Fund. Our strategic framework
outlines four key pillars: Disaster Preparedness and Risk
Reduction, Anticipatory Action and Mitigation, Disaster Response
and Disaster Recovery, underpinned by the Sendai Framework
for Disaster Risk Reduction, UN Sustainable Development Goals
and our organisational policies and frameworks.
Our strategy seeks to address:
Building community resilience
Disaster financing
Local communities facing increased risk of natural
disasters and emergencies are supported to effectively
implement systems and practice
By developing forecast-based funding models,
we can minimise impact and reduce human
suffering and losses from disasters
Underinsurance
Responding to disasters
Supporting customers to prepare for disasters
and avoid significant impacts
Communities across 27 countries are
supported to respond to disasters effectively
5
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n
– our approach to risks
and opportunities
QBE’s approach to climate change is being embedded into our strategic
priorities and risk management framework and supports our purpose
of enabling a more resilient future. One of our three sustainability strategy
focus areas is to foster an orderly and inclusive transition to a net-zero
economy which directly supports our climate activities. We continue
to develop our metrics, taking data availability and reliability into account,
as well as set targets and make progress against our commitments.
Governance
The Board approves QBE’s strategic priorities, which includes
on environmental, social and governance (ESG) risks,
consideration of climate risks and opportunities. The Group
including deep dives on climate change risk, QBE’s approach
Executive Committee (GEC) is accountable for developing
to managing this risk, and our scenario analysis for 2022.
and implementing the strategy.
The Board and the GEC receive regular reporting
on sustainability issues and our progress towards our
sustainability and climate-related goals and targets, as outlined
in our 2022 Sustainability Scorecard. The GEC is supported
by the Environmental and Social GEC Sub-Committee which
focuses on environmental and social strategic issues including
The ESG Risk Committee continues to play a key role in
supporting the ERC in its identification and management of
ESG risks, including climate change. The ESG Risk Committee
is chaired by the Group Chief Risk Officer and has oversight
of the Environmental and Social Risk Framework and its
implementation, as well as climate scenario analysis and
climate disclosures.
climate change. The Sub-Committee is chaired by our Group
Our Board and Executives participate in regular training
Executive, Corporate Affairs and Sustainability and meets
to enhance climate change capability. In 2022, the BRCC and
at least every two months.
As part of the oversight of the Group’s Risk Management
Strategy, the Board Risk & Capital Committee (BRCC) and
the Executive Risk Committee (ERC) receive regular reports
ERC joined externally facilitated education sessions covering
the evolving and accelerating liability landscape, board and
management duties and exposures, reporting and disclosure,
and regulatory expectations.
36
Strategy continued
Scenario analysis
Physical
Transition
Scope of portfolios
Underwriting (property)
Investment (unlisted property funds)
Underwriting (casualty, financial lines)
Investment (fixed income)
Scenarios
less than 2°C, low emissions consistent with
Representative Concentration Pathway (RCP) 2.6
greater than 2°C (3.2°C to 5.4°C),
high emissions consistent with RCP 8.5
Network for Greening the Financial System
Orderly
Net zero 2050
Below 2°C
Disorderly
Divergent net zero
Delayed transition
Nationally Determined
Contributions
Hot house
world
1.5°C
1.7°C
1.5°C
1.8°C
2.4°C
Current policies
3.0°C+
Timeframe
2030, 2050 and 2090
2025, 2030, 2040 and 2050
Scope of assessment
Hurricane/
cyclone/
typhoon
Convective
storm/hail
Australia, North America, Japan
Australia, North America
Windstorm Europe
Flood
Australia, Europe
Bushfire
Australia
Wildfire
North America
The impact of climate change on
sectoral profit at a global level.
Climate scenario analysis
Catastrophe models
Business planning
Portfolio optimisation
NZIA target setting
Capital models
and planning
Reinsurance
programs
36
Strategy continued
Scenario analysis
Physical
Transition
Scope of portfolios
Underwriting (property)
Investment (unlisted property funds)
Underwriting (casualty, financial lines)
Investment (fixed income)
less than 2°C, low emissions consistent with
Representative Concentration Pathway (RCP) 2.6
greater than 2°C (3.2°C to 5.4°C),
high emissions consistent with RCP 8.5
Scenarios
Network for Greening the Financial System
Orderly
Net zero 2050
Below 2°C
Disorderly
Divergent net zero
Hot house
Nationally Determined
world
Delayed transition
Contributions
Current policies
1.5°C
1.7°C
1.5°C
1.8°C
2.4°C
3.0°C+
2030, 2050 and 2090
2025, 2030, 2040 and 2050
Timeframe
Scope of assessment
Hurricane/
cyclone/
typhoon
Convective
storm/hail
Australia, North America, Japan
Australia, North America
Windstorm Europe
Flood
Australia, Europe
Bushfire
Australia
Wildfire
North America
Climate scenario analysis
The impact of climate change on
sectoral profit at a global level.
Catastrophe models
Business planning
Portfolio optimisation
NZIA target setting
Capital models
and planning
Reinsurance
programs
Physical risks and opportunities
QBE’s property exposures most impacted by shorter-term
physical risks of climate change are typically driven by
exposure to North American hurricanes, and perils such
as floods, bushfires and convective storms. The evaluation
of the impact is supported by our accumulations management
process, including regularly updated natural perils models,
monitoring of property accumulations across the portfolio
to simulate weather-related loss potential, budgeting, price
setting, and the use of reinsurance to protect capital and
reduce earnings volatility.
Our analysis concludes that the impact of climate change
will differ significantly across both regions and the type
of catastrophes. From the perils and regions studied so far,
flood claims in Europe and Australia potentially could be the
most impacted, while cyclones and convective storms in North
America and Australia may take a little longer (mid-century)
before the impact of climate change becomes more significant.
As part of our portfolio optimisation, we have reduced our
exposure to North American hurricane given its significance
in terms of its exposure to physical climate risk and driving
potential losses for our business.
We expect climate change will increasingly impact the
frequency and severity of weather-related natural catastrophes
over the long term. In the short term, it is often difficult to
distinguish the impact of climate change versus the normal
short-term variability in weather and natural catastrophes.
QBE looks to manage for natural catastrophe volatility
by considering a wide range of event frequency and severity
scenarios in our capital planning. We also purchase
a comprehensive Group catastrophe reinsurance program.
Our catastrophe allowance in 2023 has been established
at well above the long-term average of our modelled
catastrophe costs. We effectively planned for the elevated
level of catastrophe activity experienced in recent years.
2023 catastrophe allowance 'as-if' analysis
Annual catastrophe claims restated using 2023 reinsurance program
2023 catastrophe allowance
$708M
$572M
$533M
$361M
$1,694M
$857M
$852M
$771M
$971M
$1,208M $1,253M
37
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Strategy continued
Transition risks and opportunities
In 2022, we refreshed our climate transition scenario analysis
to align with six of the latest Network for Greening the Financial
System scenarios 1.
We then overlayed QBE’s exposure, where data allowed, to better
understand which segments of our insurance and investment
portfolios may be exposed to high growth or contraction sectors
as a result of the transition to a net-zero economy.
For investment, this was the fixed income (core fixed income
(ex cash and cash equivalents), high yield, emerging market
debt and private credit) portfolio and for underwriting it was
the casualty and financial lines portfolios. The portfolios
initially covered represent the material proportion of the
underwriting portfolio that is likely to be affected by transition
risk. Our property portfolio is more exposed to physical risk
and we assess that separately, as outlined in this report.
In 2022, we have made a significant investment in data, people
and systems to allow us to better understand our underwriting
exposure at a sectoral level.
This work is ongoing as it supports our insurance-associated
emissions baseline and target setting. We expect that data
coverage and reliability will improve over time.
QBE has a diverse portfolio and operates in many industry
sectors and geographies. In relation to the in-scope portfolios,
QBE continues to be resilient with respect to climate transition
risks as both our investment and underwriting portfolios broadly
have limited exposure to highly impacted sectors.
There is an expectation that governments will follow through
on their own commitments under the Paris Agreement and the
transition will require insurance capacity to support activities
essential to the global economy and society. We need to work
with the most impacted industry sectors to transition in an
orderly and inclusive manner to achieve a net-zero economy.
1 Further details on the scenarios is available here: www.ngfs.net/ngfs-scenarios-portal/
38
Strategy continued
Transition risks and opportunities
Underwriting
In 2022, we refreshed our climate transition scenario analysis
QBE has a diverse portfolio and operates in many industry
to align with six of the latest Network for Greening the Financial
sectors and geographies. In relation to the in-scope portfolios,
System scenarios 1.
We then overlayed QBE’s exposure, where data allowed, to better
understand which segments of our insurance and investment
QBE continues to be resilient with respect to climate transition
risks as both our investment and underwriting portfolios broadly
have limited exposure to highly impacted sectors.
portfolios may be exposed to high growth or contraction sectors
There is an expectation that governments will follow through
on their own commitments under the Paris Agreement and the
transition will require insurance capacity to support activities
essential to the global economy and society. We need to work
with the most impacted industry sectors to transition in an
orderly and inclusive manner to achieve a net-zero economy.
as a result of the transition to a net-zero economy.
For investment, this was the fixed income (core fixed income
(ex cash and cash equivalents), high yield, emerging market
debt and private credit) portfolio and for underwriting it was
the casualty and financial lines portfolios. The portfolios
initially covered represent the material proportion of the
underwriting portfolio that is likely to be affected by transition
risk. Our property portfolio is more exposed to physical risk
and we assess that separately, as outlined in this report.
In 2022, we have made a significant investment in data, people
and systems to allow us to better understand our underwriting
exposure at a sectoral level.
This work is ongoing as it supports our insurance-associated
emissions baseline and target setting. We expect that data
coverage and reliability will improve over time.
In January 2022, we announced the commitment to transition
our insurance and reinsurance underwriting portfolios to net-
zero GHG emissions by 2050. We also became the first listed
Australian insurer to join the NZIA, a group of leading insurers and
reinsurers that have pledged to help accelerate the transition to
net zero within insurance and reinsurance underwriting portfolios.
This cemented our ongoing commitment to help support
the transition of our customers, encouraging businesses
to decarbonise and adopt more sustainable business models.
NZIA’s key objective is to set a common global standard to
assess, understand and disclose the emissions intensity for
underwriting, and a protocol based on science-based targets.
This establishes a foundation and enables the insurance industry
to set interim decarbonisation-related targets every five years,
with the first interim target being 2030, and begin the process
of annual reporting.
Our involvement in the NZIA has enabled participation within
the working groups centred around delivering the NZIA’s key
objectives. QBE has been part of the collaborative working
group between PCAF and NZIA to develop the first GHG gas
accounting and reporting standard to measure and disclose
insurance-associated emissions for specific commercial lines
classes of business and private motor, published in November
2022. QBE led the reporting and metrics sub-working group on
the methodology work, is a member of the NZIA target-setting
protocol working group that commenced in September 2022 and
was co-lead for the focus group on setting the overall emissions
target for the NZIA Target-Setting Protocol. In January 2023,
the NZIA published the Protocol and QBE is expecting to develop
and disclose interim targets in line with this Protocol.
This is uncharted territory for the insurance industry, and
we recognise that there is a material gap in emissions data
reported, especially by private corporations and small to
medium enterprises. Despite these challenges, we expect,
with appropriate engagement and changes in government policy,
this should improve over time.
We are also cognisant that the world needs a sustained shift
in energy supply away from fossil fuels and towards low carbon.
The situation in Ukraine and its impact on energy supply further
underlines the need to find alternative, sustainable sources
of energy. Our net-zero re/insurance strategies consider the social
consequences, aligned to our sustainability focus area of fostering
an orderly and inclusive transition to a net-zero economy.
We recognise that not all countries or communities can be
expected to transition at the same pace. Our internal target setting
strategies will seek to look to minimise these disparities and
achieve overall emissions reductions in line with our commitment.
Refer to the 2022 Sustainability Report for more information.
Insuring the transition
In 2022, QBE launched a Sustainable Energy unit
to support customers as they transition to lower
carbon energy. The unit aligns QBE underwriting
capabilities with the growing range of companies
and energy systems that form part of a rapidly
changing energy mix throughout the world.
Helping our customers adapt
As a business, we continually explore new ways to support
our customers on their mitigation and adaptation journeys.
To encourage green home ownership and increase
affordability of green home ownership, this year we
launched a new benefit for lenders' mortgage insurance
(LMI) customers. Customers who purchase or refinance
a home with a green mortgage (through our participating
partners) receive a premium reduction for their LMI. 100%
of the LMI premiums for green mortgages are contributed
to our Premiums4Good initiative.
39
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1 Further details on the scenarios is available here: www.ngfs.net/ngfs-scenarios-portal/
Operations
In 2022, we continued to deliver on our net-zero roadmap
and broaden our focus, extending our 2030 commitment to
net zero for our global operations to include material Scope 3
emissions (in addition to Scope 1 and 2 emissions). We have
also committed to commencing engagement on net-zero
progress with large suppliers in our global supply chain, with
the goal of setting targets for those large suppliers by 2025
and developing our approach for 2023 to 2025.
Further details on our approach to net zero within our
operations is available in the 2022 Sustainability Report.
ICA climate change roadmap
To support broader action across the Australian general
insurance sector, QBE has, through our role as co-chair
of the Insurance Council of Australia’s (ICA) Net-Zero Working
Group, worked with our peers and the ICA to develop a climate
change roadmap for the sector. The roadmap provides
guidance for ICA members on the role they can play in the
decarbonisation of the Australian economy and is aligned with
our broader global commitments, including our commitments
through the NZAOA and NZIA.
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Strategy continued
Investments
Net-Zero Asset Owner Alliance
Aligned with our broader climate strategy and our commitment to impact and responsible investments, QBE was the first Australian-
headquartered insurance company to become a member of the NZAOA in 2020, joining a growing group of institutional investors
committed to transitioning their investment portfolios to net-zero emissions by 2050. As asset owners, we have a unique role at the
top of the investment value chain, and we acknowledge both the responsibilities and opportunities that come with this role. In 2022,
we have continued to utilise guidance, tools and support of the NZAOA, as well as collaborated with other members, both one
on one, and in the relevant NZAOA working groups with which QBE is involved. In 2021, to deliver on our commitment to transition
our investment portfolio to net zero by 2050 and set our initial intermediate targets, we established cross functional working groups.
In 2022, these working groups continued this work with a key focus on implementation.
Engagement
All external managers
across our investment
portfolio
20 highest emitters
in our investment grade
corporate credit portfolio
Financing
the transition
5% by 2025
of assets under
management in climate
solutions investments
Carbon intensity
reduction
25% by 2025
of our Scope 1 and 2
emissions in our
equity portfolio
Engagement
We believe that having meaningful dialogue
on climate change is a critical component
of our responsibility as an asset owner and
in ensuring sustainable financial outcomes.
We have been engaging with our external
managers on climate-related issues since 2019
and each year we evolve the conversation
by improving, expanding and tailoring the
questions we ask. In 2021, as part of our target
setting work, we engaged all our external
managers across our investment portfolio
and our 20 highest emitters in investment
grade corporate credit, providing a baseline
for us to monitor progress. In 2022, we have
Financing the transition
further enhanced our engagement approach
by including asset class specific climate due
diligence questions. Each year, we will engage
with all of our external managers to continue
to track progress across key climate-related
issues, including net-zero commitments and
emissions target setting. For our top 20 highest
emitters in our investment grade corporate
credit portfolio, we enhanced our engagement
approach to be more tailored, identifying
material areas of focus per issuer and directing
targeted questions to each company allowing
for more meaningful and relevant dialogue.
We have set a target to increase our exposure
to climate solution investments that will finance
the transition. These investments will directly
contribute to climate change mitigation and/or
adaptation and follows guidance from the
NZAOA Target Setting Protocol. In 2022,
this has increased to 4.8% from 3% at the
end of 2021. Notably, in 2022 we added
$134 million in green bonds. Green bonds
fund projects that have positive environmental
benefits and support the transition to a net-zero
economy. We will continue to actively invest
in green bonds as well as search for additional
opportunities that support the transition
to a net-zero economy including negative
emissions investments.
Carbon intensity reduction
QBE has set the target of 25% reduction in the
carbon intensity of our developed market equity
portfolio by 2025, relative to a 2019 baseline.
Over the course of 2022, we worked towards
developing a more resilient portfolio by changing
the way we will primarily invest in developed
market equity by moving from passive strategies
via exchange traded funds to tailored mandates
with external equity managers. As part of our
due diligence, we considered prospective
managers’ commitments to net zero and
decarbonising the real economy as well as their
ability to incorporate our emissions reduction
targets into the investment management
agreements. We expect to make this transition
of our investment approach in 2023. Over the
course of 2023 we will continue to progress and
expect to set additional asset class emissions
reduction targets in line with the NZAOA Target
Setting Protocol.
Data, monitoring and reporting
As part of our learnings from the work we
undertook in 2021, we also introduced a new
working group, to deliver our data, monitoring
and reporting requirements. The working group
is focused on the sourcing and gathering
of relevant data as well as implementing
system solutions for monitoring and reporting
to support decision making and progress
tracking to achieve our goals. A key output
for the working group this year has been the
development of tools to provide attribution,
monitoring and overall tracking of emissions
across the developed market equity portfolio.
We are also in the process of implementing
a new investment system, which will provide
enhanced data capabilities, consistency
of reporting and ongoing accuracy to improve
the way we incorporate climate-related
considerations into our investment process
to achieve our commitment to decarbonisation.
40
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Investments
Net-Zero Asset Owner Alliance
Climate scenario analysis
200
Carbon footprinting
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Aligned with our broader climate strategy and our commitment to impact and responsible investments, QBE was the first Australian-
headquartered insurance company to become a member of the NZAOA in 2020, joining a growing group of institutional investors
committed to transitioning their investment portfolios to net-zero emissions by 2050. As asset owners, we have a unique role at the
top of the investment value chain, and we acknowledge both the responsibilities and opportunities that come with this role. In 2022,
we have continued to utilise guidance, tools and support of the NZAOA, as well as collaborated with other members, both one
on one, and in the relevant NZAOA working groups with which QBE is involved. In 2021, to deliver on our commitment to transition
our investment portfolio to net zero by 2050 and set our initial intermediate targets, we established cross functional working groups.
In 2022, these working groups continued this work with a key focus on implementation.
We have continued to undertake climate-related
analysis of our investments portfolio, such as
scenario analysis, temperature alignment and
carbon footprinting to assess our overall exposure
OLD 2021
to climate risks and opportunities.
for reference
Temperature alignment
We have commenced implementation
of a new investment system which has
allowed us to undertake a new temperature
alignment assessment of the investment
grade corporate credit portfolio. This
forward-looking analysis was undertaken
utilising the temperature alignment
metric 1 which shows how well aligned an
issuer’s, and also a portfolio’s, emission
projections are to the Paris Agreement.
This level of analysis will allow us to target
our engagement to those companies
that are not aligned and work with them
to decarbonise. Our investment grade
corporate credit temperature alignment
is 2.1°C, against a benchmark of 2.4°C.
We will continue to engage with our highest
emitters in pursuit of 1.5°C alignment.
NEW 2022
Benchmark
2.4°C
4°C
3°C
2°C
1°C
0°C
QBE 2022
2.1°C
Engagement
All external managers
across our investment
portfolio
20 highest emitters
in our investment grade
corporate credit portfolio
Financing
the transition
5% by 2025
of assets under
management in climate
solutions investments
Carbon intensity
reduction
25% by 2025
of our Scope 1 and 2
emissions in our
equity portfolio
Engagement
We believe that having meaningful dialogue
further enhanced our engagement approach
on climate change is a critical component
by including asset class specific climate due
of our responsibility as an asset owner and
diligence questions. Each year, we will engage
in ensuring sustainable financial outcomes.
with all of our external managers to continue
We have been engaging with our external
to track progress across key climate-related
managers on climate-related issues since 2019
issues, including net-zero commitments and
and each year we evolve the conversation
emissions target setting. For our top 20 highest
by improving, expanding and tailoring the
emitters in our investment grade corporate
questions we ask. In 2021, as part of our target
credit portfolio, we enhanced our engagement
setting work, we engaged all our external
approach to be more tailored, identifying
managers across our investment portfolio
material areas of focus per issuer and directing
and our 20 highest emitters in investment
targeted questions to each company allowing
grade corporate credit, providing a baseline
for more meaningful and relevant dialogue.
for us to monitor progress. In 2022, we have
Financing the transition
We have set a target to increase our exposure
$134 million in green bonds. Green bonds
to climate solution investments that will finance
fund projects that have positive environmental
the transition. These investments will directly
benefits and support the transition to a net-zero
contribute to climate change mitigation and/or
economy. We will continue to actively invest
adaptation and follows guidance from the
in green bonds as well as search for additional
NZAOA Target Setting Protocol. In 2022,
opportunities that support the transition
this has increased to 4.8% from 3% at the
to a net-zero economy including negative
end of 2021. Notably, in 2022 we added
emissions investments.
Carbon intensity reduction
QBE has set the target of 25% reduction in the
managers’ commitments to net zero and
carbon intensity of our developed market equity
decarbonising the real economy as well as their
portfolio by 2025, relative to a 2019 baseline.
ability to incorporate our emissions reduction
Over the course of 2022, we worked towards
targets into the investment management
developing a more resilient portfolio by changing
agreements. We expect to make this transition
the way we will primarily invest in developed
of our investment approach in 2023. Over the
market equity by moving from passive strategies
course of 2023 we will continue to progress and
via exchange traded funds to tailored mandates
expect to set additional asset class emissions
with external equity managers. As part of our
reduction targets in line with the NZAOA Target
due diligence, we considered prospective
Setting Protocol.
Data, monitoring and reporting
As part of our learnings from the work we
development of tools to provide attribution,
undertook in 2021, we also introduced a new
monitoring and overall tracking of emissions
working group, to deliver our data, monitoring
across the developed market equity portfolio.
and reporting requirements. The working group
We are also in the process of implementing
is focused on the sourcing and gathering
of relevant data as well as implementing
a new investment system, which will provide
enhanced data capabilities, consistency
system solutions for monitoring and reporting
of reporting and ongoing accuracy to improve
to support decision making and progress
the way we incorporate climate-related
tracking to achieve our goals. A key output
considerations into our investment process
for the working group this year has been the
to achieve our commitment to decarbonisation.
1
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We assessed the carbon footprint of our investment
s
e
grade corporate credit portfolio, which constitutes over
a
S
M
50% of assets under management, and remains in line
$
/
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with our commitment to maintaining a low carbon risk
2
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rating 2. We use weighted average carbon intensity 3
s
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o
(WACI) as a measure of our portfolio’s exposure
T
17.9
to carbon-related potential market and regulatory
risks. The WACI is significantly below the MSCI USD
Investment Grade Corporate Bond Index, given our low
Dec 2021
Dec 2020
exposure to high emitting sectors.
QBE investment grade corporate credit
Jun 2020
Jun 2021
20.3
14.5
17.4
0
MSCI USD IG Corporate Bond Index
Weighted average carbon intensity
l
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a
S
M
$
/
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s
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200
100
0
17.9
14.5
13.1
Dec 2020
Dec 2021
Dec 2022
QBE investment grade corporate credit
MSCI USD IG Corporate Bond Index
3
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High emitting sectors
To assess our transition risk, we have looked at the
exposure of our investment grade corporate credit,
high yield debt and emerging market debt portfolios
(approximately 53% of our total assets under
management) to high emitting sectors using the Paris
Agreement Capital Transition Assessment (PACTA)
tool. Collectively, these sectors account for about 75%
of global emissions and understanding our exposure
to these industries will enable us to continue to target
our engagement strategies. Our transition risk remains
low, with less than 5% of our portfolio exposed to these
high emitting sectors.
High emitting sector exposures (PACTA) 4
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
3.7%
0.1%
Power
Automotive
0.1%
Oil
& gas
0.1%
0.1%
0.0%
Steel
Aviation
All others
4
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1 Temperature alignment is calculated as the weighted average of each portfolio company’s individual contribution to rising temperatures.
2 Carbon risk rating measures exposure to carbon intensive companies. MSCI Carbon Risk is categorised as Very Low (0 to <15),
Low (15 to <70), Moderate (70 to <250), High (250 to <525) and Very High (>=525).
3 WACI is calculated as the sum product of the portfolio companies’ carbon intensities and weights (tCO2-e/$M sales).
4 Data sourced as of 30 September 2022.
42
Risk management
The risk of inaction on climate change continues to be a significant global risk.
QBE manages climate risk through integration into decision-making and our
processes and frameworks.
Managing climate risk is integrated into our assessment
of natural perils modelling, our management of exposure
accumulations, the design of our reinsurance program and
our portfolio optimisation and sustainable growth strategic
priorities. Further, managing the risks and opportunities
of climate is integrated into the three focus areas of our
sustainability strategy.
effective governance and fundamental principles for the
management of risk across all levels of the organisation.
Climate change is part of ESG risk, which is classified
as a strategic risk sub-class in our Strategic Risk Policy
and Risk Management Strategy. Climate-related risks
are also considered across our other risk classes such
as insurance, credit, market and operational risk.
The sustained increase in the frequency and severity
of natural catastrophes represents a challenge where
we provide cover for physical loss or damage to assets.
It also increases the potential for third party injury and/or
damage. Given this, we have spent considerable time over
the past two years analysing what the potential impacts
of climate change may be from a physical, liability and
transition risk perspective, and we have used this analysis
to assess the resilience of our strategic responses,
improve our underwriting, pricing and business planning,
and to set our risk appetite.
QBE has a Risk Management Strategy to ensure we
achieve our strategic priorities while also establishing
Our approach to identifying and managing ESG risks,
including climate-related risks, is outlined in our Group
ESG Risk Standard. Climate change continued to be
our top ESG risk in 2022, alongside modern slavery and
human rights, biodiversity, and sustainable procurement.
One of the ways we can identify and assess ESG risks
is through the Group Risk and Control Self-Assessment
(RCSA) process. QBE’s Group RCSA Standard sets
minimum requirements for identifying, documenting,
and assessing key risks that QBE faces in delivering our
strategic and business objectives. The Standard is also
used to assess the effectiveness of the controls in place
to manage those risks.
Training
This year, training modules were developed and rolled
out Group-wide on ESG risk and climate change.
These are voluntary and available to all employees with
the aim of improving the understanding of what are ESG
and climate risks, and QBE’s approach to identifying
and managing these risks.
Environmental and
Social Risk Framework
Our Environmental and Social Risk Framework came into
effect on 1 January 2022. Through our positions in the
Framework, we have committed to reduce our exposure
to higher transition risks in the energy sector. QBE has
no direct investments in coal, oil or gas and will no longer
directly invest in these sectors. We no longer underwrite
new coal and oil sands projects, and only support oil sands
and Arctic drilling where the company is on a pathway
consistent with achieving the Paris Agreement objectives.
42
43
Risk management
Metrics and targets
We continue to set relevant targets and assess our progress and performance against them.
More details on QBE’s Sustainability Framework and our performance and progress are available in QBE’s 2022 Sustainability Report.
Scope 1 and 2 emissions
(1.5°C trajectory aligned
science-based target) (tCO2e)
Scope 1 and 2 emissions
Operational Scope 3 emissions
Underwriting
Underwriting portfolio emissions
Investments
Engagement
Financing the transition
Carbon intensity reduction
TARGET
2022
2021
STATUS
MEASURE
Operations
Energy use (GJ)
Renewable electricity use (MWh)
100% by 2025 2
25% reduction by 2025 1
2019 baseline
192,429
20%
18,513
100%
7,732
75%
7,732
45%
180,004
On track
20,199
Achieved
6,880
Achieved
6,880
On track
r
e
v
i
e
w
15,896
2022 baseline
New target
30% reduction by 2025 3
2018 baseline
Net-zero emissions (Scope 1 and 2)
across operations by 2030 4
2019 baseline
Net-zero emissions on material
Scope 3 by 2030 5
Net-zero emissions (Scope 1 and 2)
in underwriting portfolio by 2050
N/A
N/A
Interim
targets to
be set
• All external managers across our
Achieved
N/A
Ongoing
investment portfolio
• 20 highest emitters in investment
grade corporate credit portfolio
Increase our climate solutions investments
to 5% of assets under management by 2025
25% reduction by 2025 of Scope 1 and 2
emissions in equity portfolio 6
4.8%
N/A
On track
In progress
N/A
Ongoing
Impact investing ambition
$2 billion by 2025
$1.6 billion
$1.4 billion
On track
1
In 2022, we broadened our energy use indicator to include company vehicle fuel consumption, in addition to electricity and gas usage. As a result, the 2019
baseline has been restated to include 86,228 GJ of company vehicle fuel consumption.
2 Based on RE100 Materiality Threshold guidance and excludes electricity use from countries with small electricity loads (<100 MWh/year) up to a total of
3
4
500 MWh/year and where it is not feasible to source renewable electricity.
In 2022, we reclassified previously reported Scope 3 – indirect gas to Scope 2 – heat for disclosure purposes. The 2018 baseline has been restated to
include 1,186 tCO2e of Scope 2 – heat.
In 2022, we reclassified previously reported Scope 3 – indirect gas to Scope 2 – heat for disclosure purposes. The 2019 baseline has been restated to
include 1,274 tCO2e of Scope 2 – heat.
5 Net-zero emissions on material Scope 3 includes emissions related to business travel, fuel-and energy-related activities and capital goods. Refer to the
2022 Sustainability Data Book – Metrics Criteria for details.
6 We have worked with preferred managers to ensure these are considered in mandate design and implementation, and will continue to track and monitor.
A
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The risk of inaction on climate change continues to be a significant global risk.
QBE manages climate risk through integration into decision-making and our
processes and frameworks.
Managing climate risk is integrated into our assessment
effective governance and fundamental principles for the
of natural perils modelling, our management of exposure
management of risk across all levels of the organisation.
accumulations, the design of our reinsurance program and
Climate change is part of ESG risk, which is classified
our portfolio optimisation and sustainable growth strategic
as a strategic risk sub-class in our Strategic Risk Policy
priorities. Further, managing the risks and opportunities
and Risk Management Strategy. Climate-related risks
of climate is integrated into the three focus areas of our
are also considered across our other risk classes such
sustainability strategy.
as insurance, credit, market and operational risk.
The sustained increase in the frequency and severity
Our approach to identifying and managing ESG risks,
of natural catastrophes represents a challenge where
including climate-related risks, is outlined in our Group
we provide cover for physical loss or damage to assets.
ESG Risk Standard. Climate change continued to be
It also increases the potential for third party injury and/or
our top ESG risk in 2022, alongside modern slavery and
damage. Given this, we have spent considerable time over
human rights, biodiversity, and sustainable procurement.
the past two years analysing what the potential impacts
of climate change may be from a physical, liability and
transition risk perspective, and we have used this analysis
to assess the resilience of our strategic responses,
improve our underwriting, pricing and business planning,
and to set our risk appetite.
One of the ways we can identify and assess ESG risks
is through the Group Risk and Control Self-Assessment
(RCSA) process. QBE’s Group RCSA Standard sets
minimum requirements for identifying, documenting,
and assessing key risks that QBE faces in delivering our
strategic and business objectives. The Standard is also
QBE has a Risk Management Strategy to ensure we
used to assess the effectiveness of the controls in place
achieve our strategic priorities while also establishing
to manage those risks.
Training
This year, training modules were developed and rolled
out Group-wide on ESG risk and climate change.
These are voluntary and available to all employees with
the aim of improving the understanding of what are ESG
and climate risks, and QBE’s approach to identifying
and managing these risks.
Environmental and
Social Risk Framework
Our Environmental and Social Risk Framework came into
effect on 1 January 2022. Through our positions in the
Framework, we have committed to reduce our exposure
to higher transition risks in the energy sector. QBE has
no direct investments in coal, oil or gas and will no longer
directly invest in these sectors. We no longer underwrite
new coal and oil sands projects, and only support oil sands
and Arctic drilling where the company is on a pathway
consistent with achieving the Paris Agreement objectives.
44
Board of Directors
Michael (Mike) Wilkins AO BCom, MBA, FCA, FAICD
Mike became a non-executive director of QBE in 2016 and was appointed Chair in March 2020.
He is Chair of the Governance & Nomination Committee and a member of the Audit, People
& Remuneration, Risk & Capital Committees. Mike has more than 30 years’ experience in financial
services. He was the Managing Director and CEO of Insurance Australia Group Limited until
November 2015 and previously served as Managing Director and CEO of Promina Group Limited and
Managing Director of Tyndall Australia Limited. He is currently Chair of Medibank Private Limited and
a non-executive director of Scentre Group Limited. He previously served as a non-executive director
of AMP Limited, Alinta Limited, Maple-Brown Abbott Limited, The Geneva Association and the
Australian Business and Community Network. Mike was the founding member of the Australian Business
Roundtable for Disaster Resilience & Safer Communities from 2013 until his retirement in 2015.
Independent Chair
Andrew Horton BA Natural Sciences, ACA
Group Chief Executive Officer
Andrew joined QBE as Group Chief Executive Officer in September 2021. He was previously the
CEO, and before that the Finance Director, of Beazley Group, a specialist insurer based in the
United Kingdom with operations in Europe, the United States and Asia. Prior to this, he held various
senior finance roles in ING, NatWest and Lloyds Bank. Andrew has more than 30 years’ experience
across insurance and banking, and has extensive experience across international markets.
Independent Director
Yasmin Allen BCom
Yasmin became a non-executive director of QBE in July 2022. She is a member of the Audit and
People & Remuneration Committees. Yasmin has more than 20 years’ experience as a company
director and Chair serving companies across a wide range of sectors, including natural resources
and financial services. She is currently a non-executive director of Cochlear Limited, Santos
Limited and ASX Limited. She chairs Tic Toc Online, a digital home loan platform company,
the Harrison Riedel Foundation, a charity supporting young mental health, and the Digital Skills
Organisation. Yasmin is a member of the Federal Government Takeovers Panel and has been
acting President since 2019 and is a member of Chief Executive Women. She has served as a non-
executive director for a number of companies including Insurance Australia Group Limited and was
the former Chair of Macquarie Group’s Global Infrastructure Funds. She was previously a senior
investment banking executive specialising in equity markets in Australia and the United Kingdom.
Tan Le BCom (Hons), LLB (Hons)
Tan became a non-executive director of QBE in September 2020. She is Chair of the People
& Remuneration Committee and a member of the Governance & Nomination Committee.
Tan is the founder and CEO of EMOTIV, a neuroinformatics company advancing understanding
of the human brain. She was previously co-founder and President of SASme, a wireless technology
company. Tan has been a contributor at the World Economic Forum (WEF) and previously served
on the WEF Global Future Council and on the WEF Board of Stewards on Shaping the Future
of Information & Entertainment.
Independent Director
Independent Director
Kathryn (Kathy) Lisson BSc (Hons)
Kathy became a non-executive director of QBE in 2016. She is Deputy Chair of the People
& Remuneration Committee and a member of the Risk & Capital Committee. Kathy has over
30 years’ experience across insurance and banking in technology, operations and management.
She was previously Chief Operating Officer for two insurance companies (QBE Europe (a QBE
regulated entity) and Brit Insurance) and Operational Transformation Director at Barclays Bank, which
included delivering global solutions in digital technology, cyber security and IT risk. Kathy also held
executive positions at Bank of Montreal, including as President of its Mortgage Corporation and EVP
Technology Strategy and Delivery. Kathy was a senior partner at Ernst & Young and Price Waterhouse
in Canada, leading their insurance and banking advisory practices. Kathy has also held several
other non-executive director roles in the United Kingdom and in Canada.
44
45
Sir Brian Pomeroy MA, FCA
Independent Director
Sir Brian became a non-executive director of QBE in 2014. He is Deputy Chair of the
Audit Committee and a member of the Risk & Capital Committee. He has extensive
insurance industry experience, including in his previous role as a Nominated Member
of the Council of Lloyd’s and as Chair of the Independent Commission on Equitable
Life Payments. He was formerly a non-executive member of the board of the Financial
Conduct Authority in the United Kingdom and a non-executive director on QBE’s
European regulated boards. Sir Brian also chaired the United Kingdom Treasury’s
Financial Inclusion Taskforce, the Payments Council and the Gambling Commission.
He was the Senior Partner of Deloitte Consulting in the United Kingdom until 1999.
Jann Skinner BCom, FCA, FAICD
Independent Director
Jann became a non-executive director of QBE in 2014. She is Chair of the Audit Committee,
Deputy Chair of the Risk & Capital Committee and a member of the Governance
& Nomination Committee. Jann has over 30 years’ professional experience in audit and
accounting with a focus on financial services, particularly the insurance industry. She
was an audit partner for 17 years with PricewaterhouseCoopers before retiring in 2004.
Jann is a non-executive director of Telix Pharmaceuticals Limited, HSBC Bank Australia
Limited and Create Foundation Limited. Previously, Jann was a non-executive director
of Enstar Australia Group and the Tasmanian Public Finance Corporation. Jann was also
a non-executive director on QBE’s Australian regulated boards.
Eric Smith MBA, BSc
Independent Director
Eric became a non-executive director of QBE in September 2020. He is a member of the
Audit and Risk & Capital Committees. Eric has more than 40 years’ experience in insurance
and financial services, and was most recently President and Chief Executive Officer
of Swiss Re Americas from 2011 to 2020. Eric has held a number of executive roles in his
career including President of USAA Life Insurance Co and President of Allstate Financial
Services, Allstate’s business unit that distributes life insurance, annuities and other financial
products. He has also held various roles in property and casualty insurance with Country
Financial over a 20-year period. Eric was a non-executive director of Deutsche Bank
Americas. Eric is currently a member of Jefferies Global Advisory Board and on the Board
of Pine Technology.
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Rolf Tolle Dipl. Pol
Independent Director
’
Rolf became a non-executive director of QBE in 2016. He is Chair of the Risk & Capital
Committee and a member of the People & Remuneration and Governance & Nomination
Committees. He has significant experience in specialist insurance and reinsurance
businesses, having held senior positions in a number of global companies. He was
the first ever Franchise Performance Director at Lloyd’s, for which he was awarded
the Silver Medal for Services at Lloyd’s, an honour bestowed on only a few individuals
since its creation in 1917. Rolf is a director of Marco Insurance PCC Limited and British
Reserve Insurance Company Limited and is also on the advisory board of Wrisk Ltd.
Rolf was previously a director of Beazley plc and Beazley Furlonge Ltd.
Stephen Fitzgerald AO BEc
Retired Independent Director
Stephen served as an independent non-executive director of QBE from 2014 until his retirement on 5 May 2022. Stephen
was Chair of the Investment Committee, Deputy Chair of the People & Remuneration Committee and a member of the
Risk & Capital and Governance & Nomination Committees. Stephen joined Goldman Sachs in 1992 and held a number
of leadership roles in London, Tokyo, Hong Kong and Australia. He was Chair of Goldman Sachs, Australia and New
Zealand when he retired in 2012.
John M Green BJuris/LLB, FAICD, SF FIN
Retired Independent Deputy Chair
John served as an independent non-executive director of QBE from 2010 until his retirement on 5 May 2022. He was Deputy
Chair of the Board, Chair of the People & Remuneration Committee and Deputy Chair of the Investment, Operations &
Technology and Governance & Nomination Committees. He was also a member of the Risk & Capital and Audit Committees.
5
R
e
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i
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6
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n
Board of Directors
Michael (Mike) Wilkins AO BCom, MBA, FCA, FAICD
Independent Chair
Mike became a non-executive director of QBE in 2016 and was appointed Chair in March 2020.
He is Chair of the Governance & Nomination Committee and a member of the Audit, People
& Remuneration, Risk & Capital Committees. Mike has more than 30 years’ experience in financial
services. He was the Managing Director and CEO of Insurance Australia Group Limited until
November 2015 and previously served as Managing Director and CEO of Promina Group Limited and
Managing Director of Tyndall Australia Limited. He is currently Chair of Medibank Private Limited and
a non-executive director of Scentre Group Limited. He previously served as a non-executive director
of AMP Limited, Alinta Limited, Maple-Brown Abbott Limited, The Geneva Association and the
Australian Business and Community Network. Mike was the founding member of the Australian Business
Roundtable for Disaster Resilience & Safer Communities from 2013 until his retirement in 2015.
Andrew Horton BA Natural Sciences, ACA
Group Chief Executive Officer
Andrew joined QBE as Group Chief Executive Officer in September 2021. He was previously the
CEO, and before that the Finance Director, of Beazley Group, a specialist insurer based in the
United Kingdom with operations in Europe, the United States and Asia. Prior to this, he held various
senior finance roles in ING, NatWest and Lloyds Bank. Andrew has more than 30 years’ experience
across insurance and banking, and has extensive experience across international markets.
Yasmin Allen BCom
Independent Director
Yasmin became a non-executive director of QBE in July 2022. She is a member of the Audit and
People & Remuneration Committees. Yasmin has more than 20 years’ experience as a company
director and Chair serving companies across a wide range of sectors, including natural resources
and financial services. She is currently a non-executive director of Cochlear Limited, Santos
Limited and ASX Limited. She chairs Tic Toc Online, a digital home loan platform company,
the Harrison Riedel Foundation, a charity supporting young mental health, and the Digital Skills
Organisation. Yasmin is a member of the Federal Government Takeovers Panel and has been
acting President since 2019 and is a member of Chief Executive Women. She has served as a non-
executive director for a number of companies including Insurance Australia Group Limited and was
the former Chair of Macquarie Group’s Global Infrastructure Funds. She was previously a senior
investment banking executive specialising in equity markets in Australia and the United Kingdom.
Tan Le BCom (Hons), LLB (Hons)
Independent Director
Tan became a non-executive director of QBE in September 2020. She is Chair of the People
& Remuneration Committee and a member of the Governance & Nomination Committee.
Tan is the founder and CEO of EMOTIV, a neuroinformatics company advancing understanding
of the human brain. She was previously co-founder and President of SASme, a wireless technology
company. Tan has been a contributor at the World Economic Forum (WEF) and previously served
on the WEF Global Future Council and on the WEF Board of Stewards on Shaping the Future
of Information & Entertainment.
Kathryn (Kathy) Lisson BSc (Hons)
Independent Director
Kathy became a non-executive director of QBE in 2016. She is Deputy Chair of the People
& Remuneration Committee and a member of the Risk & Capital Committee. Kathy has over
30 years’ experience across insurance and banking in technology, operations and management.
She was previously Chief Operating Officer for two insurance companies (QBE Europe (a QBE
regulated entity) and Brit Insurance) and Operational Transformation Director at Barclays Bank, which
included delivering global solutions in digital technology, cyber security and IT risk. Kathy also held
executive positions at Bank of Montreal, including as President of its Mortgage Corporation and EVP
Technology Strategy and Delivery. Kathy was a senior partner at Ernst & Young and Price Waterhouse
in Canada, leading their insurance and banking advisory practices. Kathy has also held several
other non-executive director roles in the United Kingdom and in Canada.
46
Group Executive Committee
Andrew Horton BA Natural Sciences, ACA
Group Chief Executive Officer
Andrew joined QBE as Group Chief Executive Officer in September 2021. He was previously
the CEO, and before that the Finance Director, of Beazley Group, a specialist insurer based
in the United Kingdom with operations in Europe, the United States and Asia. Prior to this,
he held various senior finance roles in ING, NatWest and Lloyds Bank. Andrew has more than
30 years’ experience across insurance and banking, and has extensive experience across
international markets.
Inder Singh BCom
Group Chief Financial Officer
Inder joined QBE in 2015 and was appointed Group Chief Financial Officer in 2018. His previous
roles at QBE include Chief Financial Officer for Australian & New Zealand Operations and Group
Head of Corporate Development and Financial Planning & Analysis. Inder has more than 20 years’
experience in financial services spanning property and casualty, life insurance and banking.
He started his career at Arthur Andersen before working in investment banking in Sydney and
London with Deutsche Bank and UBS. Prior to joining QBE, he was Group M&A Director at Aviva
plc in London where he led a number of transformational transactions.
Vivienne (Viv) Bower BA Organisational Communication
Group Executive, Corporate
Affairs and Sustainability
Viv joined QBE in 2017 and was appointed Group Executive, Corporate Affairs and Sustainability
in 2019. She previously held senior investor relations and corporate affairs roles, including
Group Head of Corporate Affairs and Investor Relations at Lendlease, Head of Group Internal
Communications at Westpac and Group General Manager of Communications at Multiplex Group.
Jason Harris BSc (Hons) Geology
Chief Executive Officer, International
Jason joined QBE as Chief Executive Officer, International in October 2020. Prior to joining QBE,
Jason held a number of global and international leadership roles at XL Group including most
recently as Chief Executive, Global Property and Casualty and previously as Chief Executive,
International Property and Casualty. He previously worked at AIG/Chartis in several senior roles
including Executive Director, Commercial Lines. He is an underwriter by background and started
his career in offshore energy. He has worked in insurance for over 25 years.
Sam Harrison BA (Hons) Economics
Group Chief Underwriting Officer
Sam was appointed Group Chief Underwriting Officer in April 2021. Having worked at QBE for
more than 24 years, Sam has held a number of senior roles including most recently as Managing
Director, Insurance, for QBE’s International division and prior to this as Managing Director
of International Markets. Sam joined QBE in 1998 as an offshore energy underwriter and has
over 30 years’ experience in underwriting across the global market.
Sue Houghton BA History, ACA
Chief Executive Officer, Australia Pacific
Sue joined QBE as Chief Executive Officer, Australia Pacific in August 2021. She was previously
Managing Director, Insurance for the Westpac Group. Sue has more than 20 years’ experience
in the financial services sector, having held senior leadership and management roles at
Wesfarmers Insurance, Insurance Australia Group and Arthur J Gallagher. She is a member
of the Champions of Change Coalition and is a director and immediate past President of the
Insurance Council of Australia.
46
47
Group Executive Committee
Andrew Horton BA Natural Sciences, ACA
Group Chief Executive Officer
Andrew joined QBE as Group Chief Executive Officer in September 2021. He was previously
the CEO, and before that the Finance Director, of Beazley Group, a specialist insurer based
in the United Kingdom with operations in Europe, the United States and Asia. Prior to this,
he held various senior finance roles in ING, NatWest and Lloyds Bank. Andrew has more than
30 years’ experience across insurance and banking, and has extensive experience across
international markets.
Inder Singh BCom
Group Chief Financial Officer
Inder joined QBE in 2015 and was appointed Group Chief Financial Officer in 2018. His previous
roles at QBE include Chief Financial Officer for Australian & New Zealand Operations and Group
Head of Corporate Development and Financial Planning & Analysis. Inder has more than 20 years’
experience in financial services spanning property and casualty, life insurance and banking.
He started his career at Arthur Andersen before working in investment banking in Sydney and
London with Deutsche Bank and UBS. Prior to joining QBE, he was Group M&A Director at Aviva
plc in London where he led a number of transformational transactions.
Vivienne (Viv) Bower BA Organisational Communication
Group Executive, Corporate
Affairs and Sustainability
Viv joined QBE in 2017 and was appointed Group Executive, Corporate Affairs and Sustainability
in 2019. She previously held senior investor relations and corporate affairs roles, including
Group Head of Corporate Affairs and Investor Relations at Lendlease, Head of Group Internal
Communications at Westpac and Group General Manager of Communications at Multiplex Group.
Jason Harris BSc (Hons) Geology
Chief Executive Officer, International
Jason joined QBE as Chief Executive Officer, International in October 2020. Prior to joining QBE,
Jason held a number of global and international leadership roles at XL Group including most
recently as Chief Executive, Global Property and Casualty and previously as Chief Executive,
International Property and Casualty. He previously worked at AIG/Chartis in several senior roles
including Executive Director, Commercial Lines. He is an underwriter by background and started
his career in offshore energy. He has worked in insurance for over 25 years.
Sam Harrison BA (Hons) Economics
Group Chief Underwriting Officer
Sam was appointed Group Chief Underwriting Officer in April 2021. Having worked at QBE for
more than 24 years, Sam has held a number of senior roles including most recently as Managing
Director, Insurance, for QBE’s International division and prior to this as Managing Director
of International Markets. Sam joined QBE in 1998 as an offshore energy underwriter and has
over 30 years’ experience in underwriting across the global market.
Sue Houghton BA History, ACA
Chief Executive Officer, Australia Pacific
Sue joined QBE as Chief Executive Officer, Australia Pacific in August 2021. She was previously
Managing Director, Insurance for the Westpac Group. Sue has more than 20 years’ experience
in the financial services sector, having held senior leadership and management roles at
Wesfarmers Insurance, Insurance Australia Group and Arthur J Gallagher. She is a member
of the Champions of Change Coalition and is a director and immediate past President of the
Insurance Council of Australia.
Amanda Hughes BCom, MBA, CA, GAICD
Group Chief People Officer
Amanda joined QBE in June 2020 as Group Head of Culture, Performance and Reward
and was appointed Group Executive, People and Culture in December 2021. Prior
to joining QBE, she was the Director of People and Culture at AMP and she previously
held senior HR roles at Lendlease and Macquarie Group. Amanda began her career
as a chartered accountant and has worked in Sydney, London and Auckland.
Todd Jones BSc, MBA
Chief Executive Officer, North America
Todd joined QBE in October 2019 as Chief Executive Officer, North America. Prior
to joining QBE, Todd held a number of senior roles at Willis Towers Watson, including
most recently as Head of Global Corporate Risk and Broking, and previously as CEO for
Willis North America. Todd began his career as a technical broker in management liability
insurance serving large, complex and middle market clients. Todd has over 25 years’
experience in the insurance and financial services industry.
Fiona Larnach FCPA, MAICD
Group Chief Risk Officer
Fiona joined QBE in March 2021 as Group Chief Risk Officer. She has previously held
senior executive roles at major financial services companies in Australia and the United
Kingdom and was, most recently, the Chief Risk Officer for Barclays UK. Prior to this,
she has held senior management roles including as Chief Risk Officer, Retail Banking
for Commonwealth Bank of Australia and as a risk advisory partner at Ernst & Young
consulting to insurance, banking and wealth management clients, and has worked
at Westpac, AMP Limited, GE Mortgage Insurance and Citibank.
Matt Mansour MBA
Group Executive Technology and Operations
Matt joined QBE in 2018 as Group Chief Information Officer and was appointed to the
Group Executive Committee in 2019. Prior to joining QBE, he held senior global roles
in Barclays Bank and GE Capital. Matt has over 25 years’ experience in technology,
operations and digital business leadership roles.
Carolyn Scobie BA, LLB, MA, AGIA, GAICD
Group General Counsel
and Company Secretary
Carolyn joined QBE in 2016 as Group General Counsel and Company Secretary.
Prior to joining QBE, she was Group General Counsel at Goodman Group for 17 years,
where she ran a multi-disciplinary legal team. Carolyn has extensive experience in
corporate law, compliance, regulatory matters, litigation and managing the complexity
of multiple jurisdictions.
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48
Corporate governance statement
QBE is committed to the highest standards of corporate governance. The QBE DNA
consists of seven interwoven elements that are fundamental to QBE and how QBE
needs to operate to succeed, recognising its customers, people, shareholders and
communities. QBE believes that a culture that rewards transparency, integrity
and performance will promote its long‑term sustainability and the ongoing
success of its business.
Board and management
Board functions
The Board charter sets out the role and responsibilities of the Board, including matters expressly reserved for the Board and
those delegated to its Committees and management. The role of the Board is to represent and serve the interests of shareholders
by providing guidance and oversight of QBE’s strategies, policies and performance. This includes demonstrating leadership,
setting the strategic direction for QBE. The Board also promotes QBE values that underpin the desired culture and monitors the
performance of management in the delivery of strategy. The Board’s principal objective is to maintain and increase shareholder
value while ensuring that the activities of QBE are properly managed.
The Board reviews strategy on an ongoing basis. To help the Board maintain its understanding of the business and to effectively
assess management, directors receive regular presentations from the divisional chief executive officers and other senior managers
of the various divisions on relevant topics, including budgets, three-year business plans and operating performance. The Board
receives updated forecasts during the year. The non-executive directors also have contact with senior executives in various forums
throughout the year.
Visits by non-executive directors to QBE’s offices in key locations are encouraged. The Board meets regularly in Australia and,
due to QBE’s substantial overseas operations spends time in the United Kingdom and the United States each year.
Each formal Board meeting normally considers reports from the Group Chief Executive Officer and the Group Chief Financial Officer,
together with other relevant reports. The non-executive directors regularly meet in the absence of management. The Chair and Group
Chief Executive Officer in particular, and directors in general, including those on the divisional boards, have substantial contact
outside Board and Committee meetings.
Details of the number of Board meetings held during the 2022 financial year and attendance by directors are set out in the Directors’
Report. Directors are expected to attend all Board meetings.
Senior management functions
Management’s responsibilities are to:
• develop a draft strategy, make recommendations to the Board and implement the Board-approved strategy, subject to market conditions;
• instil and reinforce QBE’s values and desired culture;
• prepare annual budgets and three-year business plans;
• carry on day-to-day operations within the Board-approved annual budget and three-year business plans, subject to market conditions;
• design and maintain internal controls;
• establish and monitor the effectiveness of the risk and compliance management systems, and monitor and manage all material risks
consistent with the strategic objectives, risk appetite statements and policies approved by the Board;
• provide the Board with accurate, timely and clear information on the Group’s operations, including on compliance with material
legal and regulatory requirements and any conduct materially inconsistent with the Group Code of Ethics and Conduct;
• inform the Board of material matters and keep the Board and market fully informed of any matters which a reasonable person would
expect to have a material effect on the price or value of QBE’s shares; and
• monitor that succession plans exist for all Group executive positions other than the Group Chief Executive Officer. The succession
plans for the Group Chief Executive Officer are managed by the Governance & Nomination Committee, and are discussed in more
detail below.
The Board delegates responsibility to the Group Chief Executive Officer for the day-to-day management of the business.
QBE has operated under an extensive written system of delegated authorities for many years. In particular, a written delegated
authority with specified limits is approved by the Board each year to enable the Group Chief Executive Officer to conduct QBE’s
business in accordance with detailed budgets and business plans. This delegated authority deals with topics such as underwriting,
reinsurance protection, claims, investments, acquisitions and expenses. The Group Chief Executive Officer delegates authority
to management throughout the Group on a selective basis, taking into account expertise and past performance. Compliance with
delegated authorities is monitored by management and adjusted as required based on performance, market conditions and other
factors. Management and the Group’s internal audit teams review compliance with delegated authorities and a breach can lead
to disciplinary procedures, including dismissal.
48
49
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Chair
The independent Chair of the Board is Mike Wilkins AO, who was appointed to that role in March 2020. The Chair is responsible
for ensuring that the Board functions as an effective and cohesive group. The Chair works closely with the Group Chief Executive
Officer to determine the strategic direction for QBE and to establish high standards of governance and leadership.
Committees
The Board is supported by several Committees which meet regularly to consider audit, risk management, remuneration, and
other matters. The main Committees of the Board are the Audit, Governance & Nomination, People & Remuneration and Risk
& Capital Committees. Further sub-committees of the Board may be convened to confer on particular issues from time to time.
Any non-executive director may attend a Committee meeting.
The Committees have free and unfettered access to QBE’s senior managers and may consult external advisers at QBE’s cost
with the consent of the Committee Chair. A report on each Committee’s last meeting is provided at the next Board meeting.
Each Committee comprises at least three independent directors and each Committee Chair is an independent director who is not
the Chair of the Board (excluding the Governance & Nomination Committee, the Chair of which is Mike Wilkins). Each Committee
operates under a written charter approved by the Board. These charters are available at www.qbe.com/investor-relations/
corporate-governance/qbe-charters-and-constitution. The membership of each Committee is provided at www.qbe.com/about-qbe/
group-board-of-directors and details of the number of Committee meetings held during the 2022 financial year and attendance
by Committee members at Committee meetings is set out in the Directors’ Report.
Further information regarding the Committees can be found throughout this corporate governance statement.
Company Secretary
The Company Secretary acts as secretary to the Board and all of the Committees and is accountable directly to the Board, through
the Chair, on all matters to do with the proper functioning of the Board. All directors have direct access to the Company Secretary.
The Company Secretary’s role is described in the Board charter and includes communication with regulatory bodies and the
Australian Securities Exchange (ASX). The Company Secretary overseas statutory and other filings and assisting with good
information flows within the Board and its Committees and between non-executive directors and senior management, as well
as facilitating induction and professional development of directors as required. The Company Secretary may also provide guidance
to directors in relation to governance matters.
Board skills and experience
Directors are selected to provide to QBE a broad range of skills, experience and expertise complementary to QBE’s insurance activities.
The Board comprised nine directors at 31 December 2022, being an independent Chair, seven other independent directors and the
Group Chief Executive Officer.
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The Board has a skills matrix covering the range of competencies and experience of each director. When the need for a new director
is identified, the required experience and competencies of the new director are considered in the context of this matrix and any gaps
that may exist.
’
Corporate governance statement
QBE is committed to the highest standards of corporate governance. The QBE DNA
consists of seven interwoven elements that are fundamental to QBE and how QBE
needs to operate to succeed, recognising its customers, people, shareholders and
communities. QBE believes that a culture that rewards transparency, integrity
and performance will promote its long‑term sustainability and the ongoing
success of its business.
Board and management
Board functions
The Board charter sets out the role and responsibilities of the Board, including matters expressly reserved for the Board and
those delegated to its Committees and management. The role of the Board is to represent and serve the interests of shareholders
by providing guidance and oversight of QBE’s strategies, policies and performance. This includes demonstrating leadership,
setting the strategic direction for QBE. The Board also promotes QBE values that underpin the desired culture and monitors the
performance of management in the delivery of strategy. The Board’s principal objective is to maintain and increase shareholder
value while ensuring that the activities of QBE are properly managed.
The Board reviews strategy on an ongoing basis. To help the Board maintain its understanding of the business and to effectively
assess management, directors receive regular presentations from the divisional chief executive officers and other senior managers
of the various divisions on relevant topics, including budgets, three-year business plans and operating performance. The Board
receives updated forecasts during the year. The non-executive directors also have contact with senior executives in various forums
throughout the year.
Visits by non-executive directors to QBE’s offices in key locations are encouraged. The Board meets regularly in Australia and,
due to QBE’s substantial overseas operations spends time in the United Kingdom and the United States each year.
Each formal Board meeting normally considers reports from the Group Chief Executive Officer and the Group Chief Financial Officer,
together with other relevant reports. The non-executive directors regularly meet in the absence of management. The Chair and Group
Chief Executive Officer in particular, and directors in general, including those on the divisional boards, have substantial contact
outside Board and Committee meetings.
Details of the number of Board meetings held during the 2022 financial year and attendance by directors are set out in the Directors’
Report. Directors are expected to attend all Board meetings.
• develop a draft strategy, make recommendations to the Board and implement the Board-approved strategy, subject to market conditions;
Senior management functions
Management’s responsibilities are to:
• instil and reinforce QBE’s values and desired culture;
• prepare annual budgets and three-year business plans;
• design and maintain internal controls;
• carry on day-to-day operations within the Board-approved annual budget and three-year business plans, subject to market conditions;
• establish and monitor the effectiveness of the risk and compliance management systems, and monitor and manage all material risks
consistent with the strategic objectives, risk appetite statements and policies approved by the Board;
• provide the Board with accurate, timely and clear information on the Group’s operations, including on compliance with material
legal and regulatory requirements and any conduct materially inconsistent with the Group Code of Ethics and Conduct;
• inform the Board of material matters and keep the Board and market fully informed of any matters which a reasonable person would
expect to have a material effect on the price or value of QBE’s shares; and
• monitor that succession plans exist for all Group executive positions other than the Group Chief Executive Officer. The succession
plans for the Group Chief Executive Officer are managed by the Governance & Nomination Committee, and are discussed in more
detail below.
The Board delegates responsibility to the Group Chief Executive Officer for the day-to-day management of the business.
QBE has operated under an extensive written system of delegated authorities for many years. In particular, a written delegated
authority with specified limits is approved by the Board each year to enable the Group Chief Executive Officer to conduct QBE’s
business in accordance with detailed budgets and business plans. This delegated authority deals with topics such as underwriting,
reinsurance protection, claims, investments, acquisitions and expenses. The Group Chief Executive Officer delegates authority
to management throughout the Group on a selective basis, taking into account expertise and past performance. Compliance with
delegated authorities is monitored by management and adjusted as required based on performance, market conditions and other
factors. Management and the Group’s internal audit teams review compliance with delegated authorities and a breach can lead
to disciplinary procedures, including dismissal.
The Board’s skills matrix is summarised below:
SKILLS
Financial literacy
Legal
Governance
Strategy
Government relations
Executive leadership
Digital technology
Cyber security
Commercial expertise
IT risks
Risk management
Data analytics
INDUSTRY
General insurance
Financial services
Reinsurance
Accounting
Investment banking
Details of individual directors, including their qualifications and experience, independence status and period of Board
tenure, are set out in the Board of Directors section of the Annual Report and can also be found on the QBE website
at www.qbe.com/about-qbe/group-board-of-directors.
Independence of the Board
During the 2022 year, the majority of the directors on the Board were independent directors, applying the ‘independence’ definition
of the ASX Corporate Governance Council. When applying this definition, the Board has determined that an independent director’s
relationship with QBE as a professional adviser, consultant, supplier, customer or otherwise is not material unless amounts paid
under that relationship exceed 0.1% of QBE’s annual revenue. The roles of the Chair and Group Chief Executive Officer are generally
also not exercised by the same individual.
Directors are required to advise the Board on an ongoing basis of any interest they have that they believe could conflict with QBE’s
interests. If a potential conflict does arise, either the director concerned may choose not to, or the Board may decide that he or she
should not, receive documents or take part in Board discussions while the matter is being considered. Conflicts of interest, including
related party transactions, are a standing agenda item and are considered by the Board at each Board meeting.
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Corporate governance statement continued
Tenure
The mere fact that a director has served on the Board for a lengthy period of time does not, of itself, suggest a lack of independence;
however, the Board has agreed that a non-executive director’s term should be approximately 10 years. Under the Company’s
Constitution, there is no maximum fixed term or retirement age for non-executive directors. The Board considers that a mandatory
limit on tenure would deprive the Group of valuable and relevant corporate experience in the complex world of international general
insurance and reinsurance. The tenure of each director is set out in the Board of Directors section of the Annual Report and can also
be found on the QBE website at www.qbe.com/about-qbe/group-board-of-directors.
The Constitution provides that no director, except the Group Chief Executive Officer, shall hold office for a continuous period
in excess of three years or past the third Annual General Meeting (AGM) following a director’s appointment, whichever is the longer,
without submission for individual re-election.
Board and senior executive selection process
The Board has a Governance & Nomination Committee which meets regularly during the year around the time of the Board
meetings. The Committee assists the Board in appointing directors so that the Board as a whole has the necessary range of skills,
knowledge and experience to be effective. The Committee also assists the Board in managing the succession plans for the Group
Chief Executive Officer and reviewing succession plans for members of the Group Executive Committee (GEC). The Governance
& Nomination Committee is comprised of four non-executive directors of the Board and is chaired by Mike Wilkins.
A formal process for the selection and appointment of directors or senior executives is undertaken by the Governance & Nomination
Committee and Board. Appropriate background checks are undertaken before the Board appoints a new director or senior executive
or puts forward a candidate for election. External consultants may be employed, where necessary, to search for prospective directors.
Candidates are assessed against the required skills and on their qualifications, background and personal qualities.
For Board appointments, candidates must also have the required time to commit to the position. The Board regularly reviews the
mix of skills that is required to operate effectively. Under the Constitution, the size of the Board is limited to 12 directors. The Board
considers that a maximum of 12 directors reflects the largest realistic size of the Board that is consistent with:
• maintaining the Board’s efficiency and cohesion in carrying out its governance duties on behalf of shareholders;
• reducing the risk of a director being insufficiently involved in, and informed about, the business of QBE; and
• providing individual directors with greater potential to contribute and participate.
QBE also provides shareholders with all material information in its possession that is relevant to a decision on whether or not to elect
or re-elect a director. This is done through a number of channels, such as the notice of meeting, director biographies and other
information contained in the Annual Report.
Upon appointment, each non-executive director and senior executive is provided with a written agreement which sets out the terms
of their appointment.
The Board believes that orderly succession and renewal contribute to strong corporate governance and are achieved by careful
planning and continual review. As an ongoing evaluation, the Board regularly discusses its composition in relation to the mix of skills,
diversity and geographic location of directors to meet the needs of QBE.
Director induction and training
Upon appointment, directors attend induction sessions where they are briefed on QBE’s history, DNA, strategy, financials, and risk
management and governance frameworks.
A non-executive director may seek such advice at QBE’s cost with the consent of the Chair. Directors are also provided with ongoing
professional development and training programs to enable them to develop and maintain their skills and knowledge at QBE’s cost,
with the consent of the Chair. Non-executive directors are required to complete continuing professional development each year,
including on insurance, customer and regulatory matters.
50
Corporate governance statement continued
Tenure
The mere fact that a director has served on the Board for a lengthy period of time does not, of itself, suggest a lack of independence;
however, the Board has agreed that a non-executive director’s term should be approximately 10 years. Under the Company’s
Constitution, there is no maximum fixed term or retirement age for non-executive directors. The Board considers that a mandatory
limit on tenure would deprive the Group of valuable and relevant corporate experience in the complex world of international general
insurance and reinsurance. The tenure of each director is set out in the Board of Directors section of the Annual Report and can also
be found on the QBE website at www.qbe.com/about-qbe/group-board-of-directors.
The Constitution provides that no director, except the Group Chief Executive Officer, shall hold office for a continuous period
in excess of three years or past the third Annual General Meeting (AGM) following a director’s appointment, whichever is the longer,
without submission for individual re-election.
Board and senior executive selection process
The Board has a Governance & Nomination Committee which meets regularly during the year around the time of the Board
meetings. The Committee assists the Board in appointing directors so that the Board as a whole has the necessary range of skills,
knowledge and experience to be effective. The Committee also assists the Board in managing the succession plans for the Group
Chief Executive Officer and reviewing succession plans for members of the Group Executive Committee (GEC). The Governance
& Nomination Committee is comprised of four non-executive directors of the Board and is chaired by Mike Wilkins.
A formal process for the selection and appointment of directors or senior executives is undertaken by the Governance & Nomination
Committee and Board. Appropriate background checks are undertaken before the Board appoints a new director or senior executive
or puts forward a candidate for election. External consultants may be employed, where necessary, to search for prospective directors.
Candidates are assessed against the required skills and on their qualifications, background and personal qualities.
For Board appointments, candidates must also have the required time to commit to the position. The Board regularly reviews the
mix of skills that is required to operate effectively. Under the Constitution, the size of the Board is limited to 12 directors. The Board
considers that a maximum of 12 directors reflects the largest realistic size of the Board that is consistent with:
• maintaining the Board’s efficiency and cohesion in carrying out its governance duties on behalf of shareholders;
• reducing the risk of a director being insufficiently involved in, and informed about, the business of QBE; and
• providing individual directors with greater potential to contribute and participate.
QBE also provides shareholders with all material information in its possession that is relevant to a decision on whether or not to elect
or re-elect a director. This is done through a number of channels, such as the notice of meeting, director biographies and other
information contained in the Annual Report.
of their appointment.
Upon appointment, each non-executive director and senior executive is provided with a written agreement which sets out the terms
The Board believes that orderly succession and renewal contribute to strong corporate governance and are achieved by careful
planning and continual review. As an ongoing evaluation, the Board regularly discusses its composition in relation to the mix of skills,
diversity and geographic location of directors to meet the needs of QBE.
Director induction and training
management and governance frameworks.
Upon appointment, directors attend induction sessions where they are briefed on QBE’s history, DNA, strategy, financials, and risk
A non-executive director may seek such advice at QBE’s cost with the consent of the Chair. Directors are also provided with ongoing
professional development and training programs to enable them to develop and maintain their skills and knowledge at QBE’s cost,
with the consent of the Chair. Non-executive directors are required to complete continuing professional development each year,
including on insurance, customer and regulatory matters.
Performance evaluation and remuneration
Performance evaluation – Board and directors
The Chair oversees the performance of the Board, its Committees and each director. The Board regularly reviews its
performance through internal and external assessments. Recommendations for either improvement or increased focus are
agreed and promptly implemented.
A Board performance evaluation was conducted in 2022 for the 2021 year. The review covered the performance of boards and
committees at both the Group and divisional levels.
People & Remuneration Committee
The Board has a People & Remuneration Committee which meets at least four times each year to assist it in, amongst other things,
overseeing major remuneration practices of QBE. The People & Remuneration Committee is comprised of independent directors
and is chaired by Tan Le.
Performance evaluation – senior executives
The People & Remuneration Committee oversees the performance of senior executives. In addition, the Board continually monitors
the performance of senior executives through regular review and reporting.
In 2022, QBE introduced a new Annual Performance Incentive plan, utilising a business scorecard containing Group adjusted cash
ROE and Group COR financial measures alongside risk, people and strategic non-financial measures. Individual performance
objectives focus on both what has been achieved and how it is achieved during the year. Senior executives’ risk performance is also
evaluated which may result in upwards or downwards adjustment to their remuneration outcomes.
A senior executives’ performance evaluation was conducted by the People & Remuneration Committee for the 2022 year, with
reference to their performance against agreed 2022 objectives.
The Remuneration Report sets out the executive key management personnel (KMP) business scorecard on page 67 which provides
a summary of performance against the key measures and a weighted outcome relative to target.
Remuneration policies and practices
Details of QBE’s policies and practices regarding the remuneration of executives and non-executive directors (being key management
personnel) are set out in the Remuneration Report.
Other than meeting statutory superannuation requirements, QBE does not have in place any retirement benefit schemes for
non-executive directors.
QBE’s Securities Trading Policy outlines QBE’s approach to derivatives or otherwise limiting the economic risk of participating
in an equity-based remuneration scheme, and is available at www.qbe.com/investor-relations/corporate-governance/global-policies.
Group governance
Governance frameworks
QBE has a Board-approved Group Governance Framework that sets out five overarching governance principles that support best
practice governance across QBE and is designed to encourage collective accountability across Group Head Office and the divisions.
The framework defines the roles, responsibilities and composition of the Group and divisional boards and committees to facilitate the
governance and oversight of the business. The framework also strengthens the relationship and information flows between the Group
and divisional boards and committees, so that they can work together to achieve the best possible outcomes for QBE.
51
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Corporate governance statement continued
QBE DNA
Everything we do at QBE is underpinned by our QBE DNA, which consists of seven interwoven elements. These elements describe
who we are and what we stand for, and outline the standards and behaviours we expect from our employees to achieve our goals and
fulfil our purpose.
At QBE, when we show up for our customers, shareholders, communities and each other:
• we are customer-focused;
• we are technical experts;
• we are inclusive;
• we are fast-paced;
• we are courageous;
• we are accountable; and
• we are a team.
The QBE DNA is set and approved by the Board, with the GEC responsible for bringing the elements to life throughout the
organisation through our day-to-day interactions as well through our recruitment, onboarding, performance, reward, leadership,
feedback, learning and communication practices.
Employees’ demonstration of the QBE DNA is integral to how strategic performance objectives are measured. At the end of the
performance year, employees are assessed in terms of both what they have achieved and how they have achieved it – whether
their behaviours were aligned to the QBE DNA. This in turn links to reward outcomes and is applicable for all employees, including
senior executives.
The Group Code of Ethics and Conduct addresses the responsibilities employees have to the Group, to each other and to customers,
suppliers, communities and governments. It provides clear guidance to help employees apply good judgement and make considered
decisions that exemplify the QBE DNA.
Group policies
QBE maintains a suite of Group policies commensurate with a mature and well-run organisation. QBE policies are governed
by a global policy framework designed to establish consistent policy design and management requirements. Group policies serve
as vital conduits to facilitate an understanding of the Group’s compliance and conduct expectations. QBE’s approach in key
compliance areas recognises that employees (including contractors, directors and agents) are key to maintaining a compliant and
ethical approach to QBE’s business practices. Most global policies are supported by Group standards and procedures that provide
additional information and guidance to support employees.
The Group Code of Ethics and Conduct applies to all employees as well as directors, agents and contractors. The Group Code
of Ethics and Conduct is complemented by the Group Conduct Reporting & Whistleblower Policy. The Board oversees, and
receives reports on compliance with amongst other things, the Group Code of Ethics and Conduct. The Group Conflicts of Interest
Policy operates in conjunction with the Group Gift and Entertainment Policy, to create a system to identify and report actual,
perceived or potential conflicts of interest. In recognition of the importance of protecting employee and customer data across QBE,
we have a global privacy framework that is periodically reviewed and updated to reflect developments in privacy laws across the
global footprint.
QBE’s policy framework also addresses sanctions, outsourcing, modern slavery, anti-bribery and corruption, health, safety and
wellbeing, continuous disclosure, diversity and inclusion, securities trading, flexible working, supplier sustainability, and environment
and energy. Policy summaries are available at www.qbe.com/investor-relations/corporate-governance/global-policies. Material
breaches and incidents relating to the policies within the policy framework, including the Group Code of Ethics and Conduct and the
Group Conduct Reporting & Whistleblower Policy, are required to be recorded and reported to the Board.
Global policies are also in place to address the prudential requirements of APRA, including risk management, cyber risk, business
continuity management, reinsurance management, fitness and propriety and material outsourcing.
In Australia, QBE complies with the General Insurance Code of Practice, an industry code relating to the provision of products and
services to customers of the general insurance industry in Australia. The Code Governance Committee is the independent body that
monitors and enforces insurers’ compliance with the Code. The General Insurance Code of Practice will also have sections that are
enforceable by the Australian Securities and Investments Commission (ASIC). Discussion as to identification of relevant sections
is ongoing with ASIC and the Insurance Council of Australia. QBE’s Australian business is also a member of the Australian Financial
Complaints Authority, the external dispute resolution scheme that deals with complaints from consumers related to financial services.
52
Corporate governance statement continued
Everything we do at QBE is underpinned by our QBE DNA, which consists of seven interwoven elements. These elements describe
who we are and what we stand for, and outline the standards and behaviours we expect from our employees to achieve our goals and
At QBE, when we show up for our customers, shareholders, communities and each other:
QBE DNA
fulfil our purpose.
• we are customer-focused;
• we are technical experts;
• we are inclusive;
• we are fast-paced;
• we are courageous;
• we are accountable; and
• we are a team.
The QBE DNA is set and approved by the Board, with the GEC responsible for bringing the elements to life throughout the
organisation through our day-to-day interactions as well through our recruitment, onboarding, performance, reward, leadership,
feedback, learning and communication practices.
Employees’ demonstration of the QBE DNA is integral to how strategic performance objectives are measured. At the end of the
performance year, employees are assessed in terms of both what they have achieved and how they have achieved it – whether
their behaviours were aligned to the QBE DNA. This in turn links to reward outcomes and is applicable for all employees, including
senior executives.
The Group Code of Ethics and Conduct addresses the responsibilities employees have to the Group, to each other and to customers,
suppliers, communities and governments. It provides clear guidance to help employees apply good judgement and make considered
decisions that exemplify the QBE DNA.
Group policies
QBE maintains a suite of Group policies commensurate with a mature and well-run organisation. QBE policies are governed
by a global policy framework designed to establish consistent policy design and management requirements. Group policies serve
as vital conduits to facilitate an understanding of the Group’s compliance and conduct expectations. QBE’s approach in key
compliance areas recognises that employees (including contractors, directors and agents) are key to maintaining a compliant and
ethical approach to QBE’s business practices. Most global policies are supported by Group standards and procedures that provide
additional information and guidance to support employees.
The Group Code of Ethics and Conduct applies to all employees as well as directors, agents and contractors. The Group Code
of Ethics and Conduct is complemented by the Group Conduct Reporting & Whistleblower Policy. The Board oversees, and
receives reports on compliance with amongst other things, the Group Code of Ethics and Conduct. The Group Conflicts of Interest
Policy operates in conjunction with the Group Gift and Entertainment Policy, to create a system to identify and report actual,
perceived or potential conflicts of interest. In recognition of the importance of protecting employee and customer data across QBE,
we have a global privacy framework that is periodically reviewed and updated to reflect developments in privacy laws across the
global footprint.
QBE’s policy framework also addresses sanctions, outsourcing, modern slavery, anti-bribery and corruption, health, safety and
wellbeing, continuous disclosure, diversity and inclusion, securities trading, flexible working, supplier sustainability, and environment
and energy. Policy summaries are available at www.qbe.com/investor-relations/corporate-governance/global-policies. Material
breaches and incidents relating to the policies within the policy framework, including the Group Code of Ethics and Conduct and the
Group Conduct Reporting & Whistleblower Policy, are required to be recorded and reported to the Board.
Global policies are also in place to address the prudential requirements of APRA, including risk management, cyber risk, business
continuity management, reinsurance management, fitness and propriety and material outsourcing.
In Australia, QBE complies with the General Insurance Code of Practice, an industry code relating to the provision of products and
services to customers of the general insurance industry in Australia. The Code Governance Committee is the independent body that
monitors and enforces insurers’ compliance with the Code. The General Insurance Code of Practice will also have sections that are
enforceable by the Australian Securities and Investments Commission (ASIC). Discussion as to identification of relevant sections
is ongoing with ASIC and the Insurance Council of Australia. QBE’s Australian business is also a member of the Australian Financial
Complaints Authority, the external dispute resolution scheme that deals with complaints from consumers related to financial services.
Inclusion of Diversity
People are at the heart of our business, and its essential to our success that we create a workplace culture and influence the external
environment so that our people, customers, suppliers and stakeholders feel included. At QBE, Inclusion of Diversity (IoD) is a fundamental
component of our QBE DNA – it is part of who we are and how we operate.
In early 2022, we launched our new approach IoD, with a broad view of diversity that includes the ways all people are visibly and
invisibly different. We know that to realise the benefits of all the ways we are different, we must create an environment where
everyone is, and feels they are, included. Our refreshed policy sets out our expectations for how we interact with each other, and our
aspiration to be a positive influence for IoD beyond the boundaries of the organisation.
To achieve this, the GEC has set the following key global focus areas, which are overseen and progressed by the GEC and monitored
by the People & Remuneration Committee of the Board:
AREA OF FOCUS
ACHIEVEMENTS IN 2022
Diverse workforce
including diverse leadership
representation, diverse
pipeline of talent and
fair remuneration
• This year, we achieved our 2025 goal of 40% women on the Board early, and continued to make
headway towards our target of 40% women in leadership across QBE. We were proud to be the
first insurer to sign up to HESTA’s 40:40 Vision (see below at Gender balance at Board and senior
management levels). We continue to identify opportunities for further progression, and to develop
targeted initiatives to address attraction, progression, and retention of women in leadership at QBE.
Women on the
Group Board goal
40% by 2025
achieved
Pledge to HESTA’s
40:40 Vision
• We continue to assess pay equity in our workforce based on key drivers such as role, location, and
performance, enabling us to identify areas for improvement. On average, our gender pay equity
gap is sufficiently negligible that we are confident our people are paid equally in like-for-like roles.
We recognise that some pay gaps remain at an individual level and will address any gaps through
ongoing review processes.
• In Europe, our pay equity review now includes both gender and ethnicity. In 2022 we partnered
with a diversity and behavioural science expert to carry out a deep dive into experiences by
ethnicity. This highlighted that some aspects of our processes were creating barriers to success
and negatively impacted ethnic minority colleagues. We have since created a comprehensive
ethnicity action plan and ethnicity targets for our UK workforce, which supports the achievement
and retention of our ethnic minority employees.
• We launched a School Partnership Programme in the UK that consists of a four-week paid work
placement and eight weeks mentoring, targeted at students from ethnically diverse backgrounds
between 16–19 years old who may not have previously considered insurance as a viable
career option.
• In Australia, education and employment pathways remain central to our commitment to reconciliation
and the CareerTrackers internship program plays a critical role. Through our long-standing
partnership with CareerTrackers, we continue to host Aboriginal and Torres Strait Islander interns
who bring a wealth of knowledge to our business in terms of skill, enthusiasm, and sharing their
unique perspectives. We have now hosted 37 interns through CareerTrackers to date.
• QBE North America developed the QBE Early Career Programs which consists of summer
internships and underwriting programs, providing opportunities for the next generation of leaders
to gain awareness and professional experience within the insurance industry. This includes a 10-week
summer internship program designed to build relationships with peers, senior leaders and business
leads. QBE North America also runs a one-year underwriting program designed to teach, develop,
and ultimately prepare early entrants to the insurance industry training as an underwriter in the middle
market business.
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54
Corporate governance statement continued
AREA OF FOCUS
ACHIEVEMENTS IN 2022
Inclusive workplace
including inclusive
leader capabilities,
QBE DNA, Voice of
Employee, Flex@QBE
and Workplace Wellbeing
Inclusion of Diversity
roundtable discussion
700 people
attended globally
Connected marketplace
including customer
satisfaction and retention,
vulnerable customers and
diversity in supply chain
Impact investment
– Premiums4Good
a portion of a customer’s
premium is directed
towards impact investments
• Our new approach to IoD recognises that to foster and realise the benefits of all the ways we are
different, it is essential to create an environment where everyone is, and feels that they are, included.
• To celebrate the launch of our refreshed policy and approach at QBE, we ran a series of IoD
roundtable discussions through February and March, with over 700 people attending these globally.
In these sessions, we heard from our GEC, senior leaders and world-renowned inclusion expert and
thought leader Professor Juliet Bourke PhD, to explore our refreshed approach to IoD, the business
case for inclusion, and practical advice on how to build inclusion through small actions. We used
the insights shared by our people to create a tip sheet on how you can build inclusion through your
everyday interactions.
• Our Group Chief Executive Officer joined our Chief Executive Officer, Australia Pacific by becoming
a member of the Champions of Change Coalition in 2022. This membership offers QBE an
opportunity to look to peers across the industry and beyond to help us achieve gender equality,
advance diverse and more women in leadership, and further our progress towards building
an inclusive workplace.
• Globally we launched ‘Meetings the QBE Way’ which aims to provide our people with a simple
framework to create and deliver meetings that are more productive, valuable, and inclusive.
• We challenged ourselves to develop bold new IoD targets for launch in 2023, going beyond
gender to consider equality of belonging, based on ethnicity, disability, and lesbian, gay, bisexual,
transgender, intersex and queer (LGBTIQ+) identification.
• Our European operations were named as the Employer of the Year by leading insurance publication
Insurance Insider. We were chosen for the breadth of initiatives covered which deliver a holistic view
of issues affecting all employees.
• In Australia, ‘Thriving at our Best’, a refreshed holistic wellbeing program that encapsulates three
focus areas – Healthy People, Healthy Teams and a Healthy Workplace was launched. Similarly,
Europe’s new wellbeing strategy “At Our Best” aims to create meaningful change by understanding
and tackling the systemic causes of stress and burnout.
• QBE Circle network launched in Hong Kong, which is dedicated to breaking down gender bias,
stereotypes and the promotion of gender equality and fairness as well as promote awareness,
learn from each other and drive change.
• QBE continues to offer Premiums4Good to customers as appropriate, which invites them to join
with us to make a real difference. By choosing QBE, a portion of a customer’s premium is directed
towards investments and select customers can ask us to direct a further 25% of their insurance
premium towards impact investments – investments in securities with an additional environmental
or social objective. This social objective includes social inclusion, diversity and gender.
• QBE maintains supplier sustainability principles to provide minimum expectations of suppliers
to foster an inclusive workforce and culture; provide a workplace that is free from direct and
indirect discrimination, harassment, and bullying; and develop, monitor and maintain workforce
management systems and/or policies which include and seek to improve diversity in recruitment,
equal opportunity, pay equity, anti-discrimination and anti-harassment standards.
Gender balance at Board and senior management levels
In 2020, we set ourselves the goal of achieving 40% women in leadership across QBE by 2025, and 40% women on our Board
by 2025. During 2022, we saw an increase from 35.9% to 38.6% women in leadership, and achieved our goal of 40% women on the
Group Board early, reaching 44.4% in July 2022. 39.8% of all leader hires and 51.5% of leader promotions were women, reflecting the
continued focus on gender diversity in leadership.
To further QBE’s commitment to gender diversity, in May 2022 QBE became the first insurer to sign up to HESTA’s 40:40 Vision,
pledging to have minimum of 40% women, 40% men and 20% any gender on the executive committee by 2030 – a principle
we currently meet, with 45.5% women.
Additionally, interim goals were set of having above 37% women in leadership by 2023, in line with our year-on-year progression
towards our 2025 target, and met early with 38.6%, and an improvement in pipeline for GEC (L1–L3) from a 2025 baseline in 2027*.
Further details are set out in the table on the next page.
54
Corporate governance statement continued
Inclusive workplace
including inclusive
leader capabilities,
QBE DNA, Voice of
Employee, Flex@QBE
and Workplace Wellbeing
Inclusion of Diversity
roundtable discussion
700 people
attended globally
• Our new approach to IoD recognises that to foster and realise the benefits of all the ways we are
different, it is essential to create an environment where everyone is, and feels that they are, included.
• To celebrate the launch of our refreshed policy and approach at QBE, we ran a series of IoD
roundtable discussions through February and March, with over 700 people attending these globally.
In these sessions, we heard from our GEC, senior leaders and world-renowned inclusion expert and
thought leader Professor Juliet Bourke PhD, to explore our refreshed approach to IoD, the business
case for inclusion, and practical advice on how to build inclusion through small actions. We used
the insights shared by our people to create a tip sheet on how you can build inclusion through your
everyday interactions.
• Our Group Chief Executive Officer joined our Chief Executive Officer, Australia Pacific by becoming
a member of the Champions of Change Coalition in 2022. This membership offers QBE an
opportunity to look to peers across the industry and beyond to help us achieve gender equality,
advance diverse and more women in leadership, and further our progress towards building
an inclusive workplace.
• Globally we launched ‘Meetings the QBE Way’ which aims to provide our people with a simple
framework to create and deliver meetings that are more productive, valuable, and inclusive.
• We challenged ourselves to develop bold new IoD targets for launch in 2023, going beyond
gender to consider equality of belonging, based on ethnicity, disability, and lesbian, gay, bisexual,
transgender, intersex and queer (LGBTIQ+) identification.
• Our European operations were named as the Employer of the Year by leading insurance publication
Insurance Insider. We were chosen for the breadth of initiatives covered which deliver a holistic view
of issues affecting all employees.
Connected marketplace
• In Australia, ‘Thriving at our Best’, a refreshed holistic wellbeing program that encapsulates three
including customer
focus areas – Healthy People, Healthy Teams and a Healthy Workplace was launched. Similarly,
satisfaction and retention,
Europe’s new wellbeing strategy “At Our Best” aims to create meaningful change by understanding
vulnerable customers and
and tackling the systemic causes of stress and burnout.
diversity in supply chain
• QBE Circle network launched in Hong Kong, which is dedicated to breaking down gender bias,
stereotypes and the promotion of gender equality and fairness as well as promote awareness,
learn from each other and drive change.
• QBE continues to offer Premiums4Good to customers as appropriate, which invites them to join
with us to make a real difference. By choosing QBE, a portion of a customer’s premium is directed
towards investments and select customers can ask us to direct a further 25% of their insurance
premium towards impact investments – investments in securities with an additional environmental
or social objective. This social objective includes social inclusion, diversity and gender.
• QBE maintains supplier sustainability principles to provide minimum expectations of suppliers
to foster an inclusive workforce and culture; provide a workplace that is free from direct and
indirect discrimination, harassment, and bullying; and develop, monitor and maintain workforce
management systems and/or policies which include and seek to improve diversity in recruitment,
equal opportunity, pay equity, anti-discrimination and anti-harassment standards.
Impact investment
– Premiums4Good
a portion of a customer’s
premium is directed
towards impact investments
Gender balance at Board and senior management levels
In 2020, we set ourselves the goal of achieving 40% women in leadership across QBE by 2025, and 40% women on our Board
by 2025. During 2022, we saw an increase from 35.9% to 38.6% women in leadership, and achieved our goal of 40% women on the
Group Board early, reaching 44.4% in July 2022. 39.8% of all leader hires and 51.5% of leader promotions were women, reflecting the
continued focus on gender diversity in leadership.
To further QBE’s commitment to gender diversity, in May 2022 QBE became the first insurer to sign up to HESTA’s 40:40 Vision,
pledging to have minimum of 40% women, 40% men and 20% any gender on the executive committee by 2030 – a principle
we currently meet, with 45.5% women.
Additionally, interim goals were set of having above 37% women in leadership by 2023, in line with our year-on-year progression
towards our 2025 target, and met early with 38.6%, and an improvement in pipeline for GEC (L1–L3) from a 2025 baseline in 2027*.
Further details are set out in the table on the next page.
AREA OF FOCUS
ACHIEVEMENTS IN 2022
Details of gender representation across our workforce and management levels together with targets are set out below:
FEMALE REPRESENTATION
GENDER TARGETS
31 DECEMBER 2022
31 DECEMBER 2021 31 DECEMBER 2020
31 DECEMBER 2019
Board
GEC
Level 1
Level 2
Level 3
Women in leadership
(GEC and levels 1–3)
Women in workforce
By 2025: 40%
By 2030: 40:40:20
By 2023: 37%
By 2025: 40%
44.4%
45.5%
27.7%
37.0%
39.3%
38.6%
52.5%
33.3%
45.5%
28.3%
32.0%
36.9%
35.9%
52.2%
33.3%
30.0%
25.5%
29.4%
36.3%
34.8%
52.0%
22.2%
27.3%
19.6%
28.8%
35.3%
33.7%
52.2%
* An additional target for 2027 of “an improvement in pipeline for GEC (L1-L3) from 2025 baseline” will be added to the table post 2025.
In addition to gender equality, QBE’s commitment extends to other areas of diversity including:
• actively promoting inclusion for LGBTIQ+ employees with a global QBE Pride employee network;
55
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• ongoing commitment to supporting indigenous communities in Australia and driving our third Reconciliation Action Plan (RAP),
which is now at the Innovate stage of the RAP framework;
• maintaining a learning channel that equips people to build inclusion and psychological safety, confront bias, support neurodiversity,
r
e
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w
and speak up against racism;
• looking to embed accessibility in the workplace and enhance our ability to employ people with a disability, with our recruitment team
embedding questions around workplace adjustments into every stage of the recruitment process; and
• increasing the quality and consistency of our diversity data globally and across the employee lifecycle, so we can understand the
diversity of our workforce, and how representative we are of the communities in which we operate.
For further details on our approach and progress, refer to QBE’s 2022 Sustainability Report. QBE also makes an annual filing to comply
with the Workplace Gender Equality Act 2012 (Cth) (WGEA) in Australia disclosing our performance against the ‘Gender Equality
Indicators’. The report can be found at www.qbe.com/investor-relations/corporate-governance/global-policies.
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Communications with shareholders
Shareholder engagement
QBE is committed to regularly communicating with its shareholders and other stakeholders in a timely and accessible
manner, and encouraging shareholder participation at its AGM. Detailed information about QBE can be found on the website
at www.qbe.com including:
• its history;
• the Board and management;
• its Constitution, Board charter and the charters of each of its Committees;
• corporate governance and policies;
• periodic disclosures, including annual reports, half yearly reports and sustainability reports;
• ASX announcements;
• shareholder calendar;
• notices of meeting and any accompanying documents;
• presentation materials provided at investor and analyst briefings; and
• webcasts of meetings of shareholders and investor and analyst briefings.
The QBE website includes a dedicated investor relations section where shareholders can access relevant information regarding
their shares. There is also a direct link where shareholders can access their shareholding online through QBE’s share registry,
Computershare. They can update their personal information and provide their email address and elect to receive communications
electronically. Shareholders can discuss their shareholding with either QBE’s shareholder services department by email
to shares@qbe.com or by contacting QBE’s share registry, Computershare, by email to qbe.queries@computershare.com.au
or by phone at +61 3 9415 4840. Shareholders may request to receive a hard copy of the Annual Report by updating their
communication preferences by logging into their shareholding at www.investorcentre.com/au.
QBE has a comprehensive investor relations program that facilitates effective communication with its investors. The Group Chief
Executive Officer, Group Chief Financial Officer, Group Chief Risk Officer, Group General Counsel and Company Secretary, Group
Head of Investor Relations, Group Executive, Corporate Affairs and Sustainability, Group Treasurer and divisional chief executive
officers generally deal with analysts, investors, media, rating agencies and others, taking account of regulatory guidelines including
those issued by the ASX on continuous disclosure. The presentations on the 30 June and 31 December results and other major
presentations are sent to the ASX before the presentations commence and are available promptly at www.qbe.com/investor-relations/
reports-presentations. The 30 June and 31 December results presentations are also webcast live and subsequently archived at
www.qbe.com/investor-relations/reports-presentations.
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Corporate governance statement continued
Annual General Meetings
QBE welcomes and encourages shareholder participation at its AGM, in person, online or by proxy. The AGM is held in Sydney
each year. In 2022, QBE held a hybrid AGM. Shareholders were able to:
• participate by attending the meeting in person, watching online or dialling in to the teleconference;
• ask questions in person, online or on the telephone once they were verified; and
• vote by appointing a proxy, direct voting prior to the AGM and direct voting online during the AGM.
Within the required statutory period before each AGM, QBE distributes to shareholders a notice of meeting and proxy form
in accordance with the requirements of the Corporations Act 2001, the ASX Listing Rules and the Company’s Constitution.
To encourage effective participation at AGMs, QBE:
• issues notices of meeting that are honest, accurate and not misleading;
• includes explanatory notes for all resolutions included in the notice;
• provides a proxy form which clearly indicates how a shareholder may appoint a proxy, direct their proxy how to vote on a particular
resolution if they so choose and, if they appoint the Chair of the meeting as their proxy, how the Chair intends to vote undirected proxies;
• only combines or ‘bundles’ resolutions in notices of meeting in limited circumstances; and
• provides shareholders with the opportunity to lodge proxies electronically.
Shareholders are encouraged to provide questions or comments ahead of the AGM so that these can be addressed at the meeting.
QBE will make directors, members of the management team and the external auditor available to shareholders at the AGM to respond
to questions regarding the items of business, including about the conduct of the audit and the preparation and content of the auditor’s report.
Votes at the AGM are by way of a poll i.e. one vote for each fully paid ordinary share held.
Continuous disclosure
QBE takes its continuous disclosure obligations seriously and issues market releases during the year to satisfy those obligations.
Significant developments affecting QBE may be the subject of an announcement to the ASX. All ASX announcements are placed
on QBE’s website at www.qbe.com/investor-relations/asx-announcements as soon as practicable after release. The Board and
relevant management also receive copies of all material market announcements promptly after they have been made. QBE’s
Continuous Disclosure Policy is available at www.qbe.com/investor-relations/corporate-governance/global-policies.
Verification of periodic corporate reports
QBE prepares periodic corporate reports for the benefit of investors such as annual reports, half year reports and sustainability
reports. QBE follows a robust process for satisfying itself that each report is materially accurate and balanced, and that it provides
investors with appropriate information to make investment decisions.
Periodic corporate reports are drafted by staff with direct responsibility for, or expertise in, the subject matter and are supported
by evidence, including by documenting the various sources of information and consultation undertaken within QBE or with external
parties. The information is then reviewed by senior management who have the knowledge and skills to verify the accuracy and
completeness of the information provided. QBE uses an independent assurance engagement to confirm that certain data in the
annual sustainability report has been prepared and presented appropriately in all material aspects.
The Board and its Committees review and approve statutory and other significant corporate reports prior to release to the market.
All other periodic corporate reports are submitted for approval to the Disclosure Committee, a committee comprised of senior
executives including the Group Chief Executive Officer and Group Chief Financial Officer.
Financial and other reporting
Audit Committee
The Board has an Audit Committee which meets at least quarterly to support the Board in overseeing the effectiveness of the Group’s
financial reporting and risk management framework. In particular, the Audit Committee oversees and monitors the integrity of the
Group’s financial reporting, including climate-related financial disclosures. The Audit Committee is also responsible for overseeing
the management of tax risks. The Audit Committee is comprised of independent directors, all of whom have financial expertise,
and is chaired by Jann Skinner.
Group Chief Executive Officer and Group Chief Financial Officer declaration
Prior to the Audit Committee’s review and the Board’s approval of the 2022 Annual Report, the Group Chief Executive Officer and
Group Chief Financial Officer provided a declaration to the Board that, in their opinion, the financial records were properly maintained,
that the financial statements complied with the appropriate accounting standards and that they gave a true and fair view of the
financial position and performance of QBE. The declaration also provides that the opinion of the Group Chief Executive Officer and
Group Chief Financial Officer was based on a sound system of risk management and internal control which is operating effectively.
External auditor independence
QBE firmly believes that the external auditor must be, and must be seen to be, independent. The external auditor confirms its
independence and the Audit Committee verifies this by separate enquiry. The Audit Committee regularly meets with the external
auditor in the absence of management. The external auditor attends the AGM and a representative is available to answer questions
from shareholders relevant to the audit.
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Corporate governance statement continued
Annual General Meetings
QBE welcomes and encourages shareholder participation at its AGM, in person, online or by proxy. The AGM is held in Sydney
each year. In 2022, QBE held a hybrid AGM. Shareholders were able to:
• participate by attending the meeting in person, watching online or dialling in to the teleconference;
• ask questions in person, online or on the telephone once they were verified; and
• vote by appointing a proxy, direct voting prior to the AGM and direct voting online during the AGM.
Within the required statutory period before each AGM, QBE distributes to shareholders a notice of meeting and proxy form
in accordance with the requirements of the Corporations Act 2001, the ASX Listing Rules and the Company’s Constitution.
To encourage effective participation at AGMs, QBE:
• issues notices of meeting that are honest, accurate and not misleading;
• includes explanatory notes for all resolutions included in the notice;
• provides a proxy form which clearly indicates how a shareholder may appoint a proxy, direct their proxy how to vote on a particular
resolution if they so choose and, if they appoint the Chair of the meeting as their proxy, how the Chair intends to vote undirected proxies;
• only combines or ‘bundles’ resolutions in notices of meeting in limited circumstances; and
• provides shareholders with the opportunity to lodge proxies electronically.
Shareholders are encouraged to provide questions or comments ahead of the AGM so that these can be addressed at the meeting.
QBE will make directors, members of the management team and the external auditor available to shareholders at the AGM to respond
to questions regarding the items of business, including about the conduct of the audit and the preparation and content of the auditor’s report.
Votes at the AGM are by way of a poll i.e. one vote for each fully paid ordinary share held.
QBE takes its continuous disclosure obligations seriously and issues market releases during the year to satisfy those obligations.
Significant developments affecting QBE may be the subject of an announcement to the ASX. All ASX announcements are placed
on QBE’s website at www.qbe.com/investor-relations/asx-announcements as soon as practicable after release. The Board and
relevant management also receive copies of all material market announcements promptly after they have been made. QBE’s
Continuous Disclosure Policy is available at www.qbe.com/investor-relations/corporate-governance/global-policies.
Verification of periodic corporate reports
QBE prepares periodic corporate reports for the benefit of investors such as annual reports, half year reports and sustainability
reports. QBE follows a robust process for satisfying itself that each report is materially accurate and balanced, and that it provides
investors with appropriate information to make investment decisions.
Periodic corporate reports are drafted by staff with direct responsibility for, or expertise in, the subject matter and are supported
by evidence, including by documenting the various sources of information and consultation undertaken within QBE or with external
parties. The information is then reviewed by senior management who have the knowledge and skills to verify the accuracy and
completeness of the information provided. QBE uses an independent assurance engagement to confirm that certain data in the
annual sustainability report has been prepared and presented appropriately in all material aspects.
The Board and its Committees review and approve statutory and other significant corporate reports prior to release to the market.
All other periodic corporate reports are submitted for approval to the Disclosure Committee, a committee comprised of senior
executives including the Group Chief Executive Officer and Group Chief Financial Officer.
Financial and other reporting
Audit Committee
The Board has an Audit Committee which meets at least quarterly to support the Board in overseeing the effectiveness of the Group’s
financial reporting and risk management framework. In particular, the Audit Committee oversees and monitors the integrity of the
Group’s financial reporting, including climate-related financial disclosures. The Audit Committee is also responsible for overseeing
the management of tax risks. The Audit Committee is comprised of independent directors, all of whom have financial expertise,
and is chaired by Jann Skinner.
Group Chief Executive Officer and Group Chief Financial Officer declaration
Prior to the Audit Committee’s review and the Board’s approval of the 2022 Annual Report, the Group Chief Executive Officer and
Group Chief Financial Officer provided a declaration to the Board that, in their opinion, the financial records were properly maintained,
that the financial statements complied with the appropriate accounting standards and that they gave a true and fair view of the
financial position and performance of QBE. The declaration also provides that the opinion of the Group Chief Executive Officer and
Group Chief Financial Officer was based on a sound system of risk management and internal control which is operating effectively.
External auditor independence
QBE firmly believes that the external auditor must be, and must be seen to be, independent. The external auditor confirms its
independence and the Audit Committee verifies this by separate enquiry. The Audit Committee regularly meets with the external
auditor in the absence of management. The external auditor attends the AGM and a representative is available to answer questions
from shareholders relevant to the audit.
The Audit Committee has free and unfettered access to the external auditor. The external auditor has free and unfettered access
to the Audit Committee.
QBE has issued an internal policy on external auditor independence. Under this policy, the external auditor is not allowed to provide
the excluded services of preparing accounting records, financial reports or asset or liability valuations. Furthermore, it cannot act
in a management capacity, as an advocate, as a custodian of assets or as a share registry.
The Board believes some non-audit services are appropriate given the external auditor’s knowledge of the Group. QBE may engage
the external auditor for some non-audit services, subject to the general principle that fees for non-audit services excluding audit-related
and assurance services should not exceed 50% of all fees paid to the external auditor in any one financial year. External tax services
are generally provided by an accounting firm other than the external auditor.
The Audit Committee approves the audit plan each year and receives information on the external auditor’s fees. QBE also considers
the terms of engagement of the external auditor every few years. The Corporations Act 2001 and Australian professional auditing
standards require rotation of the lead engagement partner after five years. The lead engagement partner of the external auditor was
last rotated in 2019.
The Audit Committee regularly reviews the need to rotate external auditors and if the Audit Committee thought it appropriate
to change the firm undertaking QBE’s external audit, it would conduct a competitive tender process.
Actuarial review
The central estimate of QBE’s insurance liabilities, comprising outstanding claims and premium liabilities, is determined
by experienced internal actuarial staff. Actuarial staff form an independent view of both the central estimate and the probability
of adequacy of outstanding claims and premium liabilities. At 31 December 2022, close to 100% of QBE’s outstanding claims central
estimate was also reviewed by external actuaries.
Continuous disclosure
Internal audit
A global internal audit function is a core part of QBE’s three lines of defence approach to effective risk management. QBE’s Group
Internal Audit team is an independent global function that operates on an integrated basis and is managed by the Group Head of
Internal Audit. Group Internal Audit is formally accountable to the Chair of the Audit Committee and has an administrative reporting
line to the Group Chief Financial Officer. Group Internal Audit operates under an Audit Committee-approved internal audit charter that
provides Group Internal Audit with free and unrestricted access to the Audit Committee, and all management, records and properties.
Group Internal Audit’s primary purpose is to assist the Audit Committee and senior management to discharge their responsibility
for sound and prudent management of risk at QBE. Group Internal Audit does this by performing audits, reviews and investigations
to provide independent assurance that the design and operation of controls across QBE’s international operations are effective.
Group Internal Audit develops and delivers an annual risk-based internal audit plan that is aligned to QBE’s risk management
framework and includes audits to address relevant regulatory requirements. The annual Group Internal Audit plan is designed so
that higher materiality risk processes are reviewed more frequently. Audit findings and related themes are reported to management,
local audit committees and the Audit Committee.
Risk management
QBE is in the business of managing risk. The Board and management are fully committed to adopting a disciplined approach
to managing risk, delivering leading practice and maintaining robust and independent risk management processes and systems.
QBE’s Enterprise Risk Management Framework supports its businesses across all divisions and provides a sound foundation for
reducing uncertainty and volatility in business performance.
Further details of how QBE manages risk are set out in the Group Chief Risk Officer’s report and the climate change sections of the
Annual Report on pages 32 to 43. An overview of QBE’s Enterprise Risk Management Framework, including QBE’s material risks and
how these are mitigated, is also set out in note 4 to the financial statements.
Risk & Capital Committee
The Board monitors QBE’s performance and, as such, plays a significant role in monitoring that an effective risk management
strategy is established and maintained. The Board has a Risk & Capital Committee which meets at least quarterly to support the
Board in overseeing the effectiveness of QBE’s risk and capital management frameworks. The proper oversight of these frameworks
supports strategic objectives, informs business plans and enables current and future risks to be identified, assessed and monitored
in line with risk appetite. Under its charter, the Risk & Capital Committee is required to review the Enterprise Risk Management
Framework periodically to confirm it continues to be sound. This review was undertaken during 2022 as part of the annual refresh
of the Risk Management Strategy. The Risk & Capital Committee is also responsible for overseeing QBE’s ESG responsibilities and
performance, and external reporting relating to this.
The Risk & Capital Committee is comprised of independent directors and is chaired by Rolf Tolle. The Risk & Capital Committee has
free and unfettered access to the Group Chief Risk Officer and other relevant senior management.
Environmental, social and governance risk
Information about how QBE approaches sustainability and the management of ESG issues can be found in the climate change
disclosures section on pages 34 to 43 of the Annual Report and in the 2022 Sustainability Report.
Refer to QBE’s 2022 Sustainability Report at www.qbe.com/sustainability.
57
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58
Directors' Report
FOR THE YEAR ENDED 31 DECEMBER 2022
Your directors present their report on QBE Insurance Group Limited and the entities
it controlled at, or during, the year ended 31 December 2022.
Directors
Michael Wilkins AO (Chair)
Andrew Horton
Yasmin Allen (from 1 July 2022)
Stephen Fitzgerald AO (until 5 May 2022)
John M Green (Deputy Chair) (until 5 May 2022)
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
Consolidated results
Gross written premium
Gross earned premium revenue
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Net investment (loss) income on policyholders’ funds
Insurance profit
Net investment (loss) income on shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit before income tax
Income tax expense
Profit after income tax
Net profit attributable to non-controlling interests
Net profit after income tax attributable to ordinary equity holders of the Company
STATUTORY RESULT
2022
US$M
20,001
19,067
14,327
(8,330)
(2,119)
(1,836)
2,042
(509)
1,533
(267)
(245)
38
(7)
(106)
(27)
919
(141)
778
(8)
770
2021
US$M
18,457
17,035
13,408
(8,371)
(2,070)
(1,829)
1,138
77
1,215
45
(247)
–
(7)
(72)
(21)
913
(156)
757
(7)
750
Result
The Group reported a net profit after tax attributable to ordinary equity holders of the Company of $770 million for the year ended
31 December 2022, compared with $750 million for the prior year. Risk-free rates increased across all currencies throughout the year
as central banks undertook aggressive actions to combat inflation. This resulted in a $1,214 million benefit to the underwriting result,
which was more than offset by a $1,343 million adverse mark-to-market impact on our fixed income portfolio.
Gross written premium increased by $1,544 million mainly as a result of continued premium rate increases, stable retention and
targeted new business growth, with particularly strong growth in Crop. Reinsurance expense increased by $1,113 million mainly
reflecting the growth in Crop, where net retention was managed through the placement of an external quota share, combined with
the cost of the transaction to reinsure prior accident year North American Excess and Surplus (E&S) liabilities.
The Group reported a statutory underwriting profit of $2,042 million compared with $1,138 million in the prior year, equating to a combined
operating ratio of 85.7% compared with 91.5%. Excluding the impacts of changes in risk-free rates, the combined operating ratio was
94.2% compared with 93.7% in the prior year, reflecting the impacts of the E&S transaction and the Australian pricing promise review.
The net claims ratio was 58.1% compared with 62.4% in the prior year. Excluding the impact of changes in risk-free rates, the net
claims ratio was 66.6% compared with 64.6% in the prior year. The beneficial impact of the E&S transaction and the release of the
remaining $160 million of COVID-19 risk margin was more than offset by an increase in ex-cat and catastrophe claims and prior
accident year claims development.
Your directors present their report on QBE Insurance Group Limited and the entities
it controlled at, or during, the year ended 31 December 2022.
58
Directors' Report
FOR THE YEAR ENDED 31 DECEMBER 2022
Directors
Michael Wilkins AO (Chair)
Andrew Horton
Yasmin Allen (from 1 July 2022)
Stephen Fitzgerald AO (until 5 May 2022)
John M Green (Deputy Chair) (until 5 May 2022)
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
Consolidated results
Gross written premium
Gross earned premium revenue
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Net investment (loss) income on policyholders’ funds
Insurance profit
Net investment (loss) income on shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit before income tax
Income tax expense
Profit after income tax
STATUTORY RESULT
2022
US$M
20,001
19,067
14,327
(8,330)
(2,119)
(1,836)
2,042
(509)
1,533
(267)
(245)
38
(7)
(106)
(27)
919
(141)
778
(8)
770
2021
US$M
18,457
17,035
13,408
(8,371)
(2,070)
(1,829)
1,138
1,215
77
45
(247)
–
(7)
(72)
(21)
913
(156)
757
(7)
750
Net profit attributable to non-controlling interests
Net profit after income tax attributable to ordinary equity holders of the Company
Result
The Group reported a net profit after tax attributable to ordinary equity holders of the Company of $770 million for the year ended
31 December 2022, compared with $750 million for the prior year. Risk-free rates increased across all currencies throughout the year
as central banks undertook aggressive actions to combat inflation. This resulted in a $1,214 million benefit to the underwriting result,
which was more than offset by a $1,343 million adverse mark-to-market impact on our fixed income portfolio.
Gross written premium increased by $1,544 million mainly as a result of continued premium rate increases, stable retention and
targeted new business growth, with particularly strong growth in Crop. Reinsurance expense increased by $1,113 million mainly
reflecting the growth in Crop, where net retention was managed through the placement of an external quota share, combined with
the cost of the transaction to reinsure prior accident year North American Excess and Surplus (E&S) liabilities.
The Group reported a statutory underwriting profit of $2,042 million compared with $1,138 million in the prior year, equating to a combined
operating ratio of 85.7% compared with 91.5%. Excluding the impacts of changes in risk-free rates, the combined operating ratio was
94.2% compared with 93.7% in the prior year, reflecting the impacts of the E&S transaction and the Australian pricing promise review.
The net claims ratio was 58.1% compared with 62.4% in the prior year. Excluding the impact of changes in risk-free rates, the net
claims ratio was 66.6% compared with 64.6% in the prior year. The beneficial impact of the E&S transaction and the release of the
remaining $160 million of COVID-19 risk margin was more than offset by an increase in ex-cat and catastrophe claims and prior
accident year claims development.
The combined commission and expense ratio decreased to 27.6% from 29.1% in the prior year. The net commission ratio reduced
to 14.8% from 15.5% in the prior year, primarily due to income from the increased quota share in Crop and favourable business mix,
partly offset by the impacts of the E&S reinsurance transaction. The Group’s expense ratio decreased to 12.8% from 13.6% in the
prior year, mainly reflecting disciplined cost management, favourable business mix and ongoing operating leverage driven by strong
premium growth.
Total investment loss was $776 million compared with an investment income of $122 million in the prior year. Excluding the impacts
of changes in risk-free rates, total investment income was $567 million compared with $382 million in the prior year. Wider credit
spreads and unrealised losses on developed and emerging market equity and enhanced fixed income investments were more than
offset by favourable returns from unlisted property and infrastructure assets.
The Group’s effective tax rate was 15.3% compared with 17.1% in the prior year reflecting the mix of corporate tax rates in the
jurisdictions in which QBE operates and the recognition of previously unrecognised tax losses in the North American tax group.
Dividends
The directors are announcing a final dividend of 30 Australian cents per share (2021 19 Australian cents per share). The final dividend
will be 10% franked (2021 10%). The 2022 full year dividend payout is A$578 million compared with A$443 million for 2021. Further
details of dividends paid during the year are set out in note 5.4 to the financial statements.
Activities
The principal activities of QBE during the year were underwriting general insurance and reinsurance risks, management of Lloyd’s
syndicates and investment management.
Presentation currency
The Group has presented the Financial Report in US dollars because a significant proportion of its underwriting activity is denominated
in US dollars. The US dollar is also the currency that is widely understood by the global insurance industry, international investors
and analysts.
Operating and financial review
Information on the Group’s results, operations, business strategy, prospects and financial position is set out in the operating and
financial review on pages 16 to 25 of this Annual Report.
Outstanding claims liability
The net central estimate of outstanding claims is determined by the Group Chief Actuary. The assessment takes into account the
statistical analysis of past claims, allowance for claims incurred but not reported, reinsurance and other recoveries and future interest
rates and inflation factors.
As in previous years, the directors consider that substantial risk margins are required to mitigate the inherent uncertainty in the net
central estimate. The probability of adequacy of the outstanding claims liability at 31 December 2022 was 90.0% compared with
91.7% last year. The Australian Prudential Regulation Authority (APRA) prudential standards provide a capital credit for risk margins
in excess of a probability of adequacy of 75%.
Group indemnities
Rule 78 of the Company’s Constitution provides that the Company indemnifies past and present directors, secretaries or other officers
against any liability incurred by that person as a director, secretary or other officer of the Company or its subsidiaries. The indemnity
does not apply to any liability (excluding legal costs):
• owed to the Company or a related body corporate (e.g. breach of directors’ duties);
• for a pecuniary penalty under section 1317G or a compensation order under sections 1317H or 1317HA of the Corporations Act
2001 (Cth) (or a similar provision of the corresponding legislation in another jurisdiction); or
• that is owed to someone other than the Company or a related body corporate and which did not arise out of conduct in good faith.
The indemnity extends to legal costs other than where:
• in civil proceedings, one or more of the above exclusions apply;
• in criminal proceedings, the person is found guilty;
• the person is liable in proceedings brought by the Australian Securities and Investments Commission (ASIC), a corresponding
regulator in another jurisdiction or a liquidator (unless as part of the investigation before proceedings are commenced); or
• the court does not grant relief after an application under the Corporations Act 2001 or corresponding legislation in another jurisdiction.
In addition, a deed exists between the Company and each director which includes an indemnity in similar terms to rule 78 of the
Company’s Constitution.
59
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60
Directors' Report continued
FOR THE YEAR ENDED 31 DECEMBER 2022
Directors’ and officers’ insurance
QBE pays a premium each year in respect of a contract insuring directors, secretaries, senior managers and employees of the Group
together with any natural person who is either a trustee or a member of a policy committee for a superannuation plan established for
the benefit of the Group’s employees against liabilities past, present or future. The officers of the Group covered by the insurance
contract include the directors listed on pages 44 and 45 of this Annual Report, the Group Company Secretary, Carolyn Scobie,
and Deputy Company Secretary, Peter Smiles.
In accordance with normal commercial practice, disclosure of the amount of premium payable under, and the nature of liabilities
covered by, the insurance contract is prohibited by a confidentiality clause in the contract.
No such insurance cover has been provided for the benefit of any external auditor of the Group.
Significant changes
There were no significant changes in the Group’s state of affairs during the financial year other than as disclosed in this Annual Report.
Likely developments and expected results of operations
Likely developments in the Group’s operations in future financial years and the expected results of those operations have been included
in the operating and financial review on pages 16 to 25 of this Annual Report.
Events after balance date
On 17 February 2023, the Group entered into a transaction to reinsure certain prior accident year claims liabilities in North America
and International. The transaction remains subject to regulatory approval and is expected to result in an upfront net cost of around
$100 million before tax.
Other than the above and the declaration of the final dividend, no matter or circumstance has arisen since 31 December 2022
that, in the opinion of the directors, has significantly affected or may significantly affect the Group’s operations, the results of those
operations or the Group’s state of affairs in future financial periods.
Material business risks
As a global insurance and reinsurance business, QBE is subject to a substantial variety of business risks. The directors believe
that effective management of these risks is critical to delivering value for QBE’s stakeholders. It is QBE’s policy to adopt a rigorous
approach to managing risk throughout the Group. Risk management is a continuous process and an integral part of QBE’s governance
structure, QBE’s broader business processes and, most importantly, QBE’s culture.
Some of the material business risks that QBE faces include strategic, insurance, credit, market, liquidity, operational, compliance and Group
risks. Explanations of these risks and their mitigations are set out in detail in note 4 to the financial statements which we recommend you
read. Further details of how QBE manages risk are set out in the Group Chief Risk Officer’s Report on pages 32 to 33, the climate change
section on pages 34 to 43 and the risk management section of the corporate governance statement on page 57 of this Annual Report.
The Group makes judgements and estimates in respect of the reported amounts of certain assets and liabilities, the most significant
of which are in relation to the determination of the net outstanding claims liability, the application of the liability adequacy test and the
valuation of deferred tax assets. Details of these, and information on how QBE has responded to uncertainties created by COVID-19,
are included in the notes to the financial statements.
Meetings of directors
FULL
MEETINGS OF
DIRECTORS1
MEETINGS
OF
INDEPENDENT
DIRECTORS
GOVERNANCE
&
AUDIT
NOMINATION INVESTMENT
OPERATIONS &
TECHNOLOGY
PEOPLE & RE-
MUNERATION
RISK &
CAPITAL
SUB-
COMMITTEES2
MEETINGS OF COMMITTEES
H
4
5
Yasmin Allen3
Stephen
Fitzgerald3
John M Green3
4
Andrew Horton
10
Tan Le
10
Kathryn Lisson
10
Sir Brian Pomeroy 10
Jann Skinner
10
Eric Smith
10
Rolf Tolle
10
Michael Wilkins
10
A
5
4
3
10
10
10
9
10
9
10
10
H
3
2
2
–
6
6
6
6
6
6
6
A
3
2
2
–
6
6
6
6
6
6
6
H
3
–
1
–
1
1
5
5
4
1
5
A
3
–
1
–
1
1
5
5
4
1
5
H
–
2
2
–
6
2
2
6
2
6
6
A
–
2
2
–
6
2
2
6
2
6
6
H
–
1
1
–
–
–
1
–
–
–
1
A
–
1
1
–
–
–
1
–
–
–
1
H
–
–
–
–
1
1
–
–
1
–
1
A
–
–
–
–
1
1
–
–
1
–
1
H
3
1
1
–
3
3
–
1
–
4
4
A
3
1
1
–
3
3
–
1
–
4
4
H
–
2
2
–
–
4
6
6
6
6
6
A
–
2
1
–
–
4
6
6
6
6
6
H
3
–
3
6
–
1
–
8
–
–
9
A
3
–
3
6
–
1
–
8
–
–
9
H Number of meetings held while a Board or Committee member.
A Number of meetings attended while a Board or Committee member.
1 All directors attended all scheduled Board meetings. Some of the 2022 Board meetings were unscheduled and called at short notice,
resulting in some directors being unable to attend.
2 Ad hoc committees of the Board were convened during the year in relation to the financial results and other reporting matters.
3 Stephen Fitzgerald and John M Green retired from the Board effective 5 May 2022. Yasmin Allen was appointed to the board effective
1 July 2022. The composition of the Board Committees was changed effective 6 May 2022.
Further meetings occurred during the year, including meetings of the Chair, Group Chief Executive Officer, and meetings of the
directors with management. Often directors attend meetings of committees of which they are not currently members.
60
Directors' Report continued
FOR THE YEAR ENDED 31 DECEMBER 2022
Directors’ and officers’ insurance
QBE pays a premium each year in respect of a contract insuring directors, secretaries, senior managers and employees of the Group
together with any natural person who is either a trustee or a member of a policy committee for a superannuation plan established for
the benefit of the Group’s employees against liabilities past, present or future. The officers of the Group covered by the insurance
contract include the directors listed on pages 44 and 45 of this Annual Report, the Group Company Secretary, Carolyn Scobie,
and Deputy Company Secretary, Peter Smiles.
In accordance with normal commercial practice, disclosure of the amount of premium payable under, and the nature of liabilities
covered by, the insurance contract is prohibited by a confidentiality clause in the contract.
No such insurance cover has been provided for the benefit of any external auditor of the Group.
Significant changes
There were no significant changes in the Group’s state of affairs during the financial year other than as disclosed in this Annual Report.
Likely developments and expected results of operations
Likely developments in the Group’s operations in future financial years and the expected results of those operations have been included
in the operating and financial review on pages 16 to 25 of this Annual Report.
Events after balance date
$100 million before tax.
On 17 February 2023, the Group entered into a transaction to reinsure certain prior accident year claims liabilities in North America
and International. The transaction remains subject to regulatory approval and is expected to result in an upfront net cost of around
Other than the above and the declaration of the final dividend, no matter or circumstance has arisen since 31 December 2022
that, in the opinion of the directors, has significantly affected or may significantly affect the Group’s operations, the results of those
operations or the Group’s state of affairs in future financial periods.
Material business risks
As a global insurance and reinsurance business, QBE is subject to a substantial variety of business risks. The directors believe
that effective management of these risks is critical to delivering value for QBE’s stakeholders. It is QBE’s policy to adopt a rigorous
approach to managing risk throughout the Group. Risk management is a continuous process and an integral part of QBE’s governance
structure, QBE’s broader business processes and, most importantly, QBE’s culture.
Some of the material business risks that QBE faces include strategic, insurance, credit, market, liquidity, operational, compliance and Group
risks. Explanations of these risks and their mitigations are set out in detail in note 4 to the financial statements which we recommend you
read. Further details of how QBE manages risk are set out in the Group Chief Risk Officer’s Report on pages 32 to 33, the climate change
section on pages 34 to 43 and the risk management section of the corporate governance statement on page 57 of this Annual Report.
The Group makes judgements and estimates in respect of the reported amounts of certain assets and liabilities, the most significant
of which are in relation to the determination of the net outstanding claims liability, the application of the liability adequacy test and the
valuation of deferred tax assets. Details of these, and information on how QBE has responded to uncertainties created by COVID-19,
are included in the notes to the financial statements.
Meetings of directors
FULL
MEETINGS
OF
MEETINGS OF
INDEPENDENT
DIRECTORS1
DIRECTORS
GOVERNANCE
&
AUDIT
NOMINATION INVESTMENT
TECHNOLOGY
MUNERATION
OPERATIONS &
PEOPLE & RE-
RISK &
CAPITAL
SUB-
COMMITTEES2
MEETINGS OF COMMITTEES
Yasmin Allen3
Stephen
Fitzgerald3
John M Green3
Andrew Horton
Tan Le
Kathryn Lisson
Jann Skinner
Eric Smith
Rolf Tolle
Michael Wilkins
Sir Brian Pomeroy 10
H
5
4
4
10
10
10
10
10
10
10
A
5
4
3
10
10
10
9
10
9
10
10
H
3
2
2
–
6
6
6
6
6
6
6
A
3
2
2
–
6
6
6
6
6
6
6
H
3
–
1
–
1
1
5
5
4
1
5
A
3
–
1
–
1
1
5
5
4
1
5
H
–
2
2
–
6
2
2
6
2
6
6
A
–
2
2
–
6
2
2
6
2
6
6
H Number of meetings held while a Board or Committee member.
A Number of meetings attended while a Board or Committee member.
H
–
1
1
–
–
–
1
–
–
–
1
A
–
1
1
–
–
–
1
–
–
–
1
H
–
–
–
–
1
1
–
–
1
–
1
A
–
–
–
–
1
1
–
–
1
–
1
H
3
1
1
–
3
3
–
1
–
4
4
A
3
1
1
–
3
3
–
1
–
4
4
H
–
2
2
–
–
4
6
6
6
6
6
A
–
2
1
–
–
4
6
6
6
6
6
H
3
–
3
6
1
–
8
–
–
–
9
A
3
–
3
6
–
1
–
8
–
–
9
1 All directors attended all scheduled Board meetings. Some of the 2022 Board meetings were unscheduled and called at short notice,
resulting in some directors being unable to attend.
2 Ad hoc committees of the Board were convened during the year in relation to the financial results and other reporting matters.
3 Stephen Fitzgerald and John M Green retired from the Board effective 5 May 2022. Yasmin Allen was appointed to the board effective
1 July 2022. The composition of the Board Committees was changed effective 6 May 2022.
Further meetings occurred during the year, including meetings of the Chair, Group Chief Executive Officer, and meetings of the
directors with management. Often directors attend meetings of committees of which they are not currently members.
61
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Directorships of listed companies held by the members of the Board
From 1 January 2020 to 17 February 2023, the directors also served as directors of the following listed entities:
DIRECTOR
POSITION
DATE APPOINTED
DATE CEASED
John M Green
Challenger Limited
Michael Wilkins
AMP Limited
Medibank Private Limited
Scentre Group Limited
Jann Skinner
Telix Pharmaceuticals Limited
Yasmin Allen
Cochlear Limited
Santos Limited
ASX Limited
Director
Director
Director
Director
Director
Director
Director
Director
i
e
w
14 February 2020
–
–
6 December 2017
–
12 September 2016
25 May 2017
8 April 2020
19 June 2018
2 August 2010
22 October 2014
9 February 2015
–
–
–
–
Qualifications and experience of directors
The qualifications and experience of each director are set out on pages 44 and 45 of this Annual Report.
Qualifications and experience of company secretaries
Carolyn Scobie, BA, LLB, MA, AGIA, GAICD
Carolyn joined QBE in 2016 as Group General Counsel and Company Secretary. Prior to joining QBE, Carolyn was Group General
Counsel at Goodman Group for 17 years, where she ran a multi-disciplinary legal team. Carolyn has extensive experience in corporate
law, compliance, regulatory matters, litigation and managing the complexity of multiple jurisdictions.
Peter Smiles, LLB, MBA, FGIA, FCIS, GAICD
Peter is Deputy Company Secretary of QBE Insurance Group Limited and a company secretary of various QBE subsidiaries in Australia.
He has over 30 years of insurance experience, which includes 25 years as a corporate lawyer. In addition to his current company
secretarial duties, he acts as a corporate lawyer advising Group head office departments.
Directors’ interests and benefits
Ordinary share capital
Directors’ relevant interests, including those of their personal related parties, in the ordinary share capital of the Company at the date
of this report are as follows:
DIRECTOR
Yasmin Allen
Andrew Horton
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
Michael Wilkins
Options and conditional rights
NUMBER OF
SHARES HELD
18,333
235,959
8,753
49,010
42,425
70,000
8,767
73,806
83,783
At the date of this report, Andrew Horton has 611,437 conditional rights to ordinary shares of the Company. No executives hold
options at the date of this report. Details of the schemes under which options and conditional rights are granted are provided in the
Remuneration Report and in note 8.5 to the financial statements.
The names of all persons who currently hold options granted under the Employee Share and Option Plan and conditional rights to
ordinary shares of the Company are entered in the registers kept by the Company pursuant to section 168 of the Corporations Act 2001.
n
f
o
r
m
a
t
i
o
n
Environmental regulation
While the Group is not currently required to report under any significant environmental regulations under Commonwealth, State
or Territory legislation, climate change disclosures are provided on pages 34 to 43 of this Annual Report and operational GHG
emissions and other environmental data are disclosed in the 2022 Sustainability Report.
62
Remuneration Report
To our shareholders
On behalf of the Board, I am pleased to present QBE’s
Remuneration Report for 2022.
I am incredibly proud to be leading the People & Remuneration
Committee as we continue our journey to enabling a more
resilient future. Insurance plays a positive role in our society,
adding certainty and supporting communities to protect what
matters to them. Since joining the Board, I have had the
opportunity to meet many of our employees who are supporting
our customers every day. Our people are energised and excited
about the new purpose and vision as well as the varied and
purposeful careers that QBE offers.
We operate in a competitive global market for talent and are
committed to continually improving our employee experience
and workplace culture to attract and retain people. Throughout
2022 we delivered on a range of people-focused initiatives and
continued to evolve our robust remuneration practices to enable
our strategic priorities.
An example of this evolution, as highlighted in last year’s
Remuneration Report, is the launch of our new 2022 short-term
incentive plan (the Annual Performance Incentive or API).
Through the API, there is increased emphasis on the impact
of both what our people deliver and how they demonstrate the
QBE DNA whilst achieving their goals. Overall performance
is measured through both financial and non-financial measures,
aligned to our key results and priorities, including combined
operating ratio (COR), Group cash return on equity (ROE), Risk,
People and the various initiatives which form part of our six
strategic priorities. Pleasingly, the introduction of the API has
strengthened our ability to deliver our strategy and drive towards
our target culture.
In addition to the new API, we introduced a DNA Champions
award and reinforced our focus on creating a flexible workplace.
Investment in our people included the establishment of three
new enterprise leadership groups to help strengthen our
internal succession pipeline and build collaboration across
the enterprise. Progress also continued to be made on the
implementation of our Culture Blueprint. We strive for a culture
that embraces diversity, seeks feedback, and encourages
people to speak up.
Listed on the opposite page are a sample of the people-related
recognition and awards received during 2022. We are proud
to be publicly acknowledged in so many of our locations across
the globe for our people programs.
Performance during 2022
For 2022, QBE recorded an adjusted cash ROE for incentive
purposes of 10.5%, an encouraging result given numerous
external challenges and investment market volatility over the
year. While our financial performance has been impacted
by the increased costs associated with the devastating
catastrophes during 2022, our business has demonstrated
continued resilience.
The Group COR for incentive purposes was 94.2%.
This performance was despite significant catastrophe activity
in all regions, the adverse impact from the Russia/Ukraine
conflict, and increasing inflationary pressure.
Both of these financial measures were between the threshold
and maximum ranges set for incentive payouts.
For more information on 2022 financial highlights,
refer to page 5.
Remuneration Report
contents
Our remuneration at a glance
Remuneration framework
Remuneration key features
Remuneration pay mix
Five-year performance
How we performed – executive
KMP business scorecard
Executive KMP performance snapshots
1.
Remuneration
governance
2. Executive KMP
remuneration in detail
3. Executive KMP
remuneration tables
4. Non-executive
director remuneration
64
64
65
65
66
67
68
70
73
78
82
62
Remuneration Report
To our shareholders
On behalf of the Board, I am pleased to present QBE’s
Remuneration Report for 2022.
I am incredibly proud to be leading the People & Remuneration
Committee as we continue our journey to enabling a more
resilient future. Insurance plays a positive role in our society,
adding certainty and supporting communities to protect what
matters to them. Since joining the Board, I have had the
opportunity to meet many of our employees who are supporting
our customers every day. Our people are energised and excited
about the new purpose and vision as well as the varied and
purposeful careers that QBE offers.
We operate in a competitive global market for talent and are
committed to continually improving our employee experience
and workplace culture to attract and retain people. Throughout
2022 we delivered on a range of people-focused initiatives and
continued to evolve our robust remuneration practices to enable
our strategic priorities.
An example of this evolution, as highlighted in last year’s
Remuneration Report, is the launch of our new 2022 short-term
incentive plan (the Annual Performance Incentive or API).
Through the API, there is increased emphasis on the impact
of both what our people deliver and how they demonstrate the
QBE DNA whilst achieving their goals. Overall performance
is measured through both financial and non-financial measures,
aligned to our key results and priorities, including combined
operating ratio (COR), Group cash return on equity (ROE), Risk,
People and the various initiatives which form part of our six
strategic priorities. Pleasingly, the introduction of the API has
strengthened our ability to deliver our strategy and drive towards
our target culture.
In addition to the new API, we introduced a DNA Champions
award and reinforced our focus on creating a flexible workplace.
Investment in our people included the establishment of three
new enterprise leadership groups to help strengthen our
internal succession pipeline and build collaboration across
the enterprise. Progress also continued to be made on the
implementation of our Culture Blueprint. We strive for a culture
that embraces diversity, seeks feedback, and encourages
people to speak up.
Listed on the opposite page are a sample of the people-related
recognition and awards received during 2022. We are proud
to be publicly acknowledged in so many of our locations across
the globe for our people programs.
Performance during 2022
For 2022, QBE recorded an adjusted cash ROE for incentive
purposes of 10.5%, an encouraging result given numerous
external challenges and investment market volatility over the
year. While our financial performance has been impacted
by the increased costs associated with the devastating
catastrophes during 2022, our business has demonstrated
continued resilience.
The Group COR for incentive purposes was 94.2%.
This performance was despite significant catastrophe activity
in all regions, the adverse impact from the Russia/Ukraine
conflict, and increasing inflationary pressure.
Both of these financial measures were between the threshold
and maximum ranges set for incentive payouts.
For more information on 2022 financial highlights,
refer to page 5.
Remuneration Report
contents
Our remuneration at a glance
Remuneration framework
Remuneration key features
Remuneration pay mix
Five-year performance
How we performed – executive
KMP business scorecard
Executive KMP performance snapshots
1.
Remuneration
governance
2. Executive KMP
remuneration in detail
3. Executive KMP
remuneration tables
4. Non-executive
director remuneration
64
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65
65
66
67
68
70
73
78
82
The API business scorecard considers financial measures alongside non-financial
measures for incentive purposes. The inclusion of non-financial measures in 2022
supported our growing maturity as it relates to managing risk and measures our
progress against diversity and inclusion metrics and our 2022 strategic priorities.
Maintaining this focus will be essential to support the successful embedment
of our refreshed sustainability strategy across the business.
Our broader view of performance through the API also considers the individual
performance of the executive key management personnel (KMP) when determining
incentive outcomes. The assessments against agreed individual performance
objectives completed by the Board for the executive KMP results in overall API
outcomes which range from 54.2% to 69.4% of their maximum opportunity.
For the Group Chief Executive Officer (CEO), the 2022 API outcome results in
him receiving 98.1% of his target opportunity (65.4% of his maximum opportunity).
Of this outcome, 50% is deferred as conditional rights and vests in equal tranches
over the first, second, third and fourth anniversaries of the award.
For more information on the 2022 API business scorecard and outcomes, refer to
pages 67 to 69.
The 2019 long-term incentive (LTI) which was due to vest in 2022 to executive KMP
did not vest and all awards related to that grant lapsed.
Looking ahead
Our people are essential to our business’ long-term success and in 2023 we
continue to have Our people and Our culture as two of our six strategic priorities,
as highlighted on pages 8 to 9. Our overarching aim is to enable a sustainable
and resilient workforce to ensure we can continue to deliver to our customers
and shareholders in 2023 and beyond.
The global market for attracting and retaining talent remains competitive, and we
continue to invest to ensure QBE stands out as an employer of choice. As such,
we are closely monitoring the ongoing impacts of inflation, cost of living pressures
and international market competitiveness. We have made limited changes to
executive KMP fixed pay and no changes to non-executive director fees in recent
years, but we will review these in light of the above factors in 2023.
The Board is committed to retaining a strong focus on the longer term and alongside
fixed pay, will consider the potential for adjustments to levels of LTI opportunity.
We will also look at non-executive director fees during 2023 to address any potential
market pressures. Any changes that are enacted will be shared in further detail
in next year’s Remuneration Report.
We remain focused on building a deeper connection amongst our people to our
new purpose and vision, enhancing culture through performance and reward,
improving leadership capability and internal succession, and supporting flexibility
and wellbeing to ensure we continue to attract and retain the best talent.
With 2022 being the first year of the new API plan, no major changes are proposed
for 2023. We will continue to review how we can incorporate non-financial metrics
into our LTI plans in response to regulatory requirements and in support of our
sustainability strategy and commitments.
In closing, I would like to acknowledge my appointment to the Chair of the People
& Remuneration Committee and Yasmin Allen as a new non-executive director and
member of the Committee following the retirement of John M Green and Stephen
Fitzgerald. We thank both John and Stephen for their contribution to the People
& Remuneration Committee during their time with QBE. Thank you for your
support in 2022. As always, we look forward to shareholder feedback.
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Recognition
and awards
Included in the Bloomberg
Gender-Equality Index
Winner of the Australian
HR Institute (AHRI)
Awards 2022 Organisation
Development category
for Culture Transformation
3
G
o
v
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c
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Winner of the Employer of the
Year Award at The Insurance
Insider Awards 2022 in the UK
Insurance Business Asia Top
Insurance Employer of 2022
4
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Insurance Business America
2022: 5-star carrier for Diversity,
Equity and Inclusion
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Tan Le | Chair, People & Remuneration Committee
This Remuneration Report sets out QBE’s remuneration framework and provides detail
of remuneration outcomes for KMP for 2022 and how this aligns with QBE’s performance.
Accounting standards define KMP as those executives and non-executive directors with
the authority and responsibility for planning, directing and controlling the activities of the
Group, either directly or indirectly. The 2022 Remuneration Report has been prepared
and audited in accordance with the disclosure requirements of the Corporations Act 2001.
Awarded Platinum status
for excellence in LGBTIQ+
by Australian Workplace
Equality Index for inclusion
initiatives in the workplace
64
Our remuneration at a glance
Remuneration framework
Our remuneration strategy is designed to attract, motivate and retain QBE’s executives
by providing market competitive remuneration aligned with the creation of sustained
shareholder value.
Our purpose
QBE – enabling a more resilient future
Our remuneration principles
The guiding principles which promote robust risk management practices are applied
effectively to manage remuneration and reward across the Group.
Simple
and clear
Linked to
strategy
Motivating
Aligned to
shareholders
Globally consistent and
locally competitive
The remuneration framework supports the strategy
Simple
and clear
A simple and clear
view of how delivery
of our strategy impacts
incentive outcomes for
our executives.
Adaptable to changes
in our strategy and
external environment
Measures that
are correlated
with performance
Performance targets
aimed at delivering our
long-term objectives will
evolve with our strategy,
changes to business
cycles and the external
operating environment.
Measures that focus on
profitability, management
of the balance sheet
and our longer-term
strategic priorities enable
remuneration outcomes
to reflect a holistic view
of performance.
Encourages our
executives to think and
act like business owners
A significant portion
of incentives is paid
in equity which focuses
executives on creating
shareholder value,
managing risk and being
accountable for the
long-term success of QBE.
Aligning remuneration to culture and managing risk
The remuneration structure is designed to align remuneration with prudent risk-taking, underpinned by
clear messaging of our QBE DNA which describes who we are, what we stand for and how we need to operate
to be successful. The way that each executive manages risk and conduct is a key consideration of the Board
in determining incentive outcomes.
In 2022, we focused on measuring not only what was achieved but how it was achieved to further strengthen our
culture. Executive KMP performance assessments include a formal assessment of risk and behaviours using input
from the Group Chief Risk Officer (CRO), the Chair of the People & Remuneration Committee, the Chair of the Board
Risk & Capital Committee and chairs of divisional boards where relevant.
64
Our remuneration at a glance
Remuneration framework
Remuneration key features
Our remuneration strategy is designed to attract, motivate and retain QBE’s executives
by providing market competitive remuneration aligned with the creation of sustained
A high level summary of the terms of the Group CEO’s remuneration arrangements
in 2022 are presented below:
shareholder value.
Annual Performance Incentive (API)
Long-term Incentive (LTI)
Delivered through
A mix of API cash (50%) and API deferred equity (50%)
Delivered through
Equity (100%)
Incentive opportunity
150% (target), 225% (maximum)
Performance period
One year
Incentive opportunity
200% (maximum face-value)
Performance period
Three years
Equity deferral period
One to four years from end of performance period
Equity deferral period
Three to five years from start of performance period
Performance measures
Performance measured through a business scorecard
containing Group cash ROE and Group COR financial
measures alongside non-financial measures. These
incorporate sustainability-aligned metrics based on risk,
people and culture and strategic priorities. In addition,
individual performance objectives focus both on what has
been achieved and how they were achieved during the year.
Performance measures
Two measures: Average Group cash ROE (70%) and
relative Total Shareholder Return (TSR) (30%) with
a global insurance peer group
Malus and clawback provisions and executive minimum shareholding requirements (MSR) continue to apply.
Remuneration pay mix
The pay mix of the Group CEO provides a blend of fixed and variable pay, cash and
equity, and is measured against short- and long-term performance. The graph below
sets out the typical remuneration structure and delivery for on-target performance
and how the remuneration vests over time.
Our purpose
QBE – enabling a more resilient future
Our remuneration principles
The guiding principles which promote robust risk management practices are applied
effectively to manage remuneration and reward across the Group.
Simple
and clear
Linked to
strategy
Motivating
Aligned to
shareholders
Globally consistent and
locally competitive
The remuneration framework supports the strategy
Simple
and clear
A simple and clear
view of how delivery
of our strategy impacts
incentive outcomes for
our executives.
Adaptable to changes
in our strategy and
external environment
Measures that
are correlated
with performance
Encourages our
executives to think and
act like business owners
Performance targets
Measures that focus on
A significant portion
aimed at delivering our
profitability, management
of incentives is paid
long-term objectives will
evolve with our strategy,
changes to business
cycles and the external
operating environment.
of the balance sheet
and our longer-term
in equity which focuses
executives on creating
strategic priorities enable
shareholder value,
remuneration outcomes
managing risk and being
to reflect a holistic view
accountable for the
of performance.
long-term success of QBE.
Aligning remuneration to culture and managing risk
The remuneration structure is designed to align remuneration with prudent risk-taking, underpinned by
clear messaging of our QBE DNA which describes who we are, what we stand for and how we need to operate
to be successful. The way that each executive manages risk and conduct is a key consideration of the Board
in determining incentive outcomes.
In 2022, we focused on measuring not only what was achieved but how it was achieved to further strengthen our
culture. Executive KMP performance assessments include a formal assessment of risk and behaviours using input
from the Group Chief Risk Officer (CRO), the Chair of the People & Remuneration Committee, the Chair of the Board
Risk & Capital Committee and chairs of divisional boards where relevant.
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LTI maximum face-value
API deferred equity
API cash
Fixed remuneration
44%
17%
17%
22%
At risk remuneration
Pay mix
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
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CEO
Pay mix
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
66
Five-year performance
The Group’s financial performance demonstrated improved resilience in a tough operating
environment that included macro challenges such as geopolitical tensions, elevated
catastrophe experience and a surge in inflation.
Financial performance
Return to shareholders
COR
Return to shareholders
.
9
5
9
.
7
5
9
.
0
0
0
1
.
5
7
9
.
4
7
0
1
.
8
3
0
1
5
.
1
9
.
2
4
9
.
7
5
8
2018
2019
2020
Statutory COR (%)
Group COR for incentive purposes (%) 1
A
/
N
1
2021
2022
Profit measures
0
8
.
.
5
4
.
9
8
.
7
6
567
571
.
3
0
1
.
6
8
.
5
0
1
.
6
8
750
770
(1,517)
.
)
2
6
1
(
.
)
2
8
1
(
0
1
.
0
1
)
9
0
.
(
2018
8
8
2
1
.
.
2
9
2
3
5
8
.
)
.
0
4
2
(
5
3
.
1
1
.
5
3
2
3
4
3
1
.
.
0
6
1
2019
2020
2021
2022
Share price at 31 December (A$/share)
TSR (%)
Dividend per share
0
5
2
5
9
3
0
3
4
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Net profit (loss) after tax (US$M)
Group cash ROE for incentive purposes (%) 2
Return on average shareholders’ equity (%)
Dividend per share (Australian cents)
Group CEO outcomes 3
Short term incentive achievements as % of target 4
LTI vested (% of grant) 5
2018
98.6
0
2019
68.5
0
2020
90.4
–
2021
115.2
–
2022
98.1
–
The impact of the financial performance on the incentive payouts for executive KMP is provided on pages 68 to 69.
Tracking of unvested LTI awards
2019 LTI award – vesting Q1 2022/23/24 – Average Group cash ROE and relative TSR performance – Did not vest
2020 LTI award – vesting Q1 2023/24/25 – Average Group cash ROE and relative TSR performance – Partial vesting
2021 LTI award – vesting Q1 2024/25/26 – Average Group cash ROE and relative TSR performance – On track
2022 LTI award – vesting Q1 2025/26/27 – Average Group cash ROE and relative TSR performance – On track
1 For incentive purposes, the 2021 Group COR was replaced by a blended Group COR. For details please see the 2021 Remuneration Report.
2 For incentive purposes, adjusted Group cash ROE of 10.5% is as provided on page 24. Details of prior years’ adjusted Group cash ROE
is provided in the Remuneration Report for each relevant year.
3 Full details for 2022 are provided on page 68. Previous Group CEO outcomes are detailed in the Remuneration Report for each relevant year.
4 Legacy plans are detailed on pages 76 to 77 and comprise Executive Incentive Plan (EIP) in 2018, Short Term Incentive (STI) in 2019,
2020 and 2021. The API was introduced in 2022.
5 The ‘–’ indicates no LTI award was eligible for vesting in the relevant year, where ‘0’ indicates zero LTI vested. The 2019 LTI did not vest in 2022.
The current Group CEO was not eligible to receive the 2019 LTI.
66
67
Five-year performance
How we performed – executive KMP business scorecard
The Group’s financial performance demonstrated improved resilience in a tough operating
environment that included macro challenges such as geopolitical tensions, elevated
Our focus on a blend of financial and non-financial measures in 2022 resulted
in QBE making good progress against our six strategic priorities.
catastrophe experience and a surge in inflation.
Financial performance
Return to shareholders
FINANCIAL
WEIGHTING: 70%
OUTCOME
THRESHOLD
30%
TARGET
100%
SUPERIOR
150%
COR
Return to shareholders
Group COR
Group COR for incentive purposes in 2022 was 94.2% which resulted in an outcome between threshold and target. This was
despite elevated catastrophe activity throughout the year, our allowance for the Russia/Ukraine conflict and the adverse impact
from higher inflation across all regions. From a divisional performance perspective, North America’s catastrophe costs were
slightly below allowance despite the impact from Hurricane Ian, while adverse prior accident year claims development (PYD)
declined significantly, details on pages 26 to 27. International was impacted by the aforementioned conflict, adverse PYD
associated with inflation and an unfavourable COVID business interruption court judgement, details on pages 28 to 29. Australia
Pacific delivered a strong result, although catastrophe costs were elevated, marked by significant flooding and wet weather
associated with the La Nina weather pattern. This was broadly offset by favourable PYD associated with strong credit quality
in LMI, and releases across a number of commercial lines classes, details on pages 30 to 31.
Group cash ROE
The Group delivered an adjusted cash ROE of 10.5% for incentive purposes in 2022 which resulted in an outcome between target
and superior. Our business has demonstrated continued resilience throughout the year. However, our financial performance has
been impacted by the increased costs associated with the devastating catastrophes, the Russia/Ukraine conflict and ongoing
inflationary pressures. Pleasingly, the result is the second consecutive double-digit ROE for QBE, the strongest in over a decade,
and highlights our building resilience in a year impacted by various external factors.
NON-FINANCIAL
WEIGHTING: 30%
OUTCOME
THRESHOLD
30%
ACHIEVED
100%
SUPERIOR
150%
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Dividend per share (Australian cents)
Risk
The annual risk maturity assessment completed for 2022 received an outcome of ‘embedded’ across key elements of the Risk
Management Framework. This year, higher levels of maturity were identified across risk governance, three lines of defence roles
and responsibilities and risk skills and culture. The outcomes reflect improvements made from the risk transformation initiatives
completed to date.
People and culture
There was strong performance across the people agenda in 2022. We remained focused on becoming an employer of choice
in our chosen markets and building and empowering a sustainable and diverse pipeline of leaders. Significant progress towards
our 2025 diversity targets was delivered through the achievement of our women in leadership targets. An enterprise-wide new
incentive plan was introduced with a focus on both what was achieved and how it was achieved. In addition, advancements
in a more collaborative and aligned culture, centred around our new purpose, were reflected in improvements in employee
engagement levels.
Strategic priorities
Good progress was made across the enterprise against the strategic priorities in 2022. Work commenced on our portfolio
optimisation targets and these were incorporated into 2023 business planning. A detailed reassessment of our geographical
footprint and lines of business supporting our medium to long term growth aspirations was completed as part of the sustainable
growth priority. Bring the enterprise together delivered greater consistency through more structured collaboration and
alignment. We continued to modernise our business through digitisation efforts across QBE, along with the simplification
of core IT platforms and progress on leveraging our data and global scale.
For more information on strategic priorities, refer to pages 8 to 9.
API BUSINESS SCORECARD WEIGHTED OUTCOME: Slightly below target
The Board considered both quantitative and qualitative factors
in determining the executive KMP API business scorecard outcome.
9
.
5
9
7
.
5
9
0
.
0
0
1
5
.
7
9
4
.
7
0
1
8
.
3
0
1
5
.
1
9
2
.
4
9
7
.
5
8
2018
2019
2020
2022
2019
2020
2021
2022
Statutory COR (%)
Group COR for incentive purposes (%) 1
Share price at 31 December (A$/share)
A
/
N
1
2021
Profit measures
0
.
8
5
.
4
9
.
8
7
.
6
3
.
0
1
6
.
8
5
.
0
1
6
.
8
Dividend per share
0
5
2
5
8
8
.
2
1
2
.
9
2
0
1
.
0
1
)
9
.
0
(
2018
TSR (%)
5
3
.
1
1
5
.
3
2
3
4
.
3
1
0
.
6
1
9
3
0
3
3
5
.
8
)
0
.
4
2
(
4
567
571
750
770
(1,517)
)
2
.
6
1
(
)
2
.
8
1
(
Net profit (loss) after tax (US$M)
Group cash ROE for incentive purposes (%) 2
Return on average shareholders’ equity (%)
Group CEO outcomes 3
Short term incentive achievements as % of target 4
LTI vested (% of grant) 5
Tracking of unvested LTI awards
The impact of the financial performance on the incentive payouts for executive KMP is provided on pages 68 to 69.
2018
98.6
0
2019
68.5
0
2020
90.4
–
2021
115.2
–
2022
98.1
–
2019 LTI award – vesting Q1 2022/23/24 – Average Group cash ROE and relative TSR performance – Did not vest
2020 LTI award – vesting Q1 2023/24/25 – Average Group cash ROE and relative TSR performance – Partial vesting
2021 LTI award – vesting Q1 2024/25/26 – Average Group cash ROE and relative TSR performance – On track
2022 LTI award – vesting Q1 2025/26/27 – Average Group cash ROE and relative TSR performance – On track
1 For incentive purposes, the 2021 Group COR was replaced by a blended Group COR. For details please see the 2021 Remuneration Report.
2 For incentive purposes, adjusted Group cash ROE of 10.5% is as provided on page 24. Details of prior years’ adjusted Group cash ROE
is provided in the Remuneration Report for each relevant year.
3 Full details for 2022 are provided on page 68. Previous Group CEO outcomes are detailed in the Remuneration Report for each relevant year.
4 Legacy plans are detailed on pages 76 to 77 and comprise Executive Incentive Plan (EIP) in 2018, Short Term Incentive (STI) in 2019,
2020 and 2021. The API was introduced in 2022.
5 The ‘–’ indicates no LTI award was eligible for vesting in the relevant year, where ‘0’ indicates zero LTI vested. The 2019 LTI did not vest in 2022.
The current Group CEO was not eligible to receive the 2019 LTI.
A
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f
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68
Executive KMP performance snapshots
The realised remuneration outlined below provides an overview of actual
remuneration outcomes for executive KMP.
QBE discloses actual remuneration outcomes in the financial period under review. The realised 2022 remuneration figures below
include the accrued API cash award for the 2022 financial year, the value of any conditional rights granted in prior years that vested
during 2022 and executive shareholdings against the MSR.
Andrew Horton
Group CEO
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
3.24.0
Andrew Horton
2022 API outcome (US$000)
$919
Cash
$919
Deferred
98.1% of target
65.4% of maximum
2022 realised remuneration 1 (US$000)
$3,021 Total
$1,249
$919
$667
$186
Jason Harris
Chief Executive Officer,
International
Term as KMP in 2022
Full year
Country of residence United Kingdom
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.3
Sam Harrison
Group Chief
Underwriting Officer
Term as KMP in 2022
Full year
Country of residence United Kingdom
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.5
Sue Houghton
Chief Executive Officer,
Australia Pacific
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.9
2022 API outcome (US$000)
$562
Cash
$375
Deferred
97.4% of target
65.0% of maximum
2022 realised remuneration 1 (US$000)
$1,996 Total
$801
$562
$626
$7
2022 API outcome (US$000)
$554
Cash
$370
Deferred
99.2% of target
66.1% of maximum
2022 realised remuneration 1 (US$000)
$1,760Total
$776
$554
$417
$13
2022 API outcome (US$000)
$520
Cash
$347
Deferred
104.2% of target
69.4% of maximum
2022 realised remuneration 1 (US$000)
$1,456 Total
$693
$520
$227
$16
1 The value of vested conditional rights awards has been calculated using the share price on the vesting date. These figures are different
from those shown in the statutory table on page 78. For example, the statutory table includes an apportioned accounting value for all
unvested conditional rights held during the year, which remain subject to performance and service conditions and consequently may
or may not ultimately vest.
Key:
Fixed remuneration
API cash
API deferred equity
Value of vested rights
Other
68
69
Executive KMP performance snapshots
The realised remuneration outlined below provides an overview of actual
remuneration outcomes for executive KMP.
QBE discloses actual remuneration outcomes in the financial period under review. The realised 2022 remuneration figures below
include the accrued API cash award for the 2022 financial year, the value of any conditional rights granted in prior years that vested
during 2022 and executive shareholdings against the MSR.
Andrew Horton
Group CEO
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
3.24.0
Andrew Horton
2022 API outcome (US$000)
$919
Cash
$919
Deferred
98.1% of target
65.4% of maximum
2022 realised remuneration 1 (US$000)
$3,021 Total
$1,249
$919
$667
$186
Jason Harris
Chief Executive Officer,
International
Term as KMP in 2022
Full year
Country of residence United Kingdom
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.3
Sam Harrison
Group Chief
Underwriting Officer
Term as KMP in 2022
Full year
Country of residence United Kingdom
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.5
Sue Houghton
Chief Executive Officer,
Australia Pacific
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
1.9
2022 API outcome (US$000)
$562
Cash
$375
Deferred
97.4% of target
65.0% of maximum
2022 realised remuneration 1 (US$000)
$1,996 Total
2022 API outcome (US$000)
$554
Cash
$370
Deferred
99.2% of target
66.1% of maximum
2022 realised remuneration 1 (US$000)
$1,760Total
2022 API outcome (US$000)
$520
Cash
$347
Deferred
104.2% of target
69.4% of maximum
2022 realised remuneration 1 (US$000)
$1,456 Total
Amanda Hughes
Group Chief People Officer 2
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
0.9
Todd Jones
Chief Executive Officer,
North America
Term as KMP in 2022
Full year
Country of residence
United States
Total value of shareholdings
against the MSR
(times fixed remuneration)
2.6
2022 API outcome (US$000)
$324
Cash
$216
Deferred
97.5% of target
65.0% of maximum
2022 realised remuneration 1 (US$000)
$896 Total
$553
$324
$14
$5
2022 API outcome (US$000)
$600
Cash
$400
Deferred
81.3% of target
54.2% of maximum
2022 realised remuneration 1 (US$000)
$1,931 Total
$801
$562
$626
$7
$1,024
$600
$274 $33
Fiona Larnach
Group Chief Risk Officer
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
0.3
2022 API outcome (US$000)
$270
Cash
$180
Deferred
96.3% of target
64.2% of maximum
2022 realised remuneration 1 (US$000)
$912 Total
$776
$554
$417
$13
$624
$270
$18
$693
$520
$227
$16
$901
$628
$604
$11
Inder Singh
Group Chief Financial Officer
Term as KMP in 2022
Country of residence
Full year
Australia
Total value of shareholdings
against the MSR
(times fixed remuneration)
3.1
2022 API outcome (US$000)
$628
Cash
$419
Deferred
96.8% of target
64.5% of maximum
2022 realised remuneration 1 (US$000)
$2,144 Total
1 The value of vested conditional rights awards has been calculated using the share price on the vesting date. These figures are different
2 A title change for Amanda Hughes from Group Executive, People and Culture to Group Chief People Officer occurred on 3 March 2022.
from those shown in the statutory table on page 78. For example, the statutory table includes an apportioned accounting value for all
unvested conditional rights held during the year, which remain subject to performance and service conditions and consequently may
or may not ultimately vest.
Key:
Fixed remuneration
API cash
API deferred equity
Value of vested rights
Other
Key:
Fixed remuneration
API cash
API deferred equity
Value of vested rights
Other
A
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2
2
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70
Remuneration Report continued
1.
REMUNERATION GOVERNANCE
QBE has a robust remuneration governance framework overseen by the Board. This ensures that the remuneration arrangements
are appropriately designed and managed and that the agreed frameworks and policies are applied and monitored across QBE.
Has overall responsibility for the remuneration strategy and outcomes for executives and non-executive directors.
Board
People & Remuneration Committee
Is the main governing body for key people and remuneration items across the Group.
Further details on the role and scope of the People & Remuneration Committee are set out in the QBE People & Remuneration
Committee charter, available from www.qbe.com/investor-relations/corporate-governance/qbe-charters-and-constitution.
Group CEO
Divisional People &
Remuneration
Committees
External
advisers
Managing risk
The continued focus on and investment in managing our risk provides for a stronger and resilient QBE.
The People & Remuneration Committee works closely with the Board Risk & Capital Committee, Group CRO and Group Chief
People Officer to ensure that any risk associated with remuneration arrangements is managed within the Group’s risk management
framework. The attendance of other members of the Board at the People & Remuneration Committee meetings strengthens
remuneration governance across QBE.
Executive KMP are required to adhere to a range of Group-wide policies to ensure risks are well managed, strong governance
structures are in place and high ethical standards are maintained. The Board approves a comprehensive delegated authority for the
Group CEO, which is an integral part of QBE’s risk management process. The remuneration governance framework incorporates risk
oversight principles so that executives cannot unduly influence a decision that could materially impact their own incentive outcome.
The performance-based components of remuneration established in QBE’s incentive plans are designed to encourage behaviour
that supports the Group’s long-term financial soundness.
Specifically, the QBE incentive plans:
• deliver a target remuneration mix balanced between fixed/variable remuneration, short- and long-term and cash and equity;
• incorporate individual performance objectives through the API that measure demonstrable proactive sound risk management,
including an assessment of risk maturity and the setting of a clear and consistent tone about the importance of managing risk;
• incorporate robust corporate standards for all employees supporting the QBE risk culture;
• balance performance outcomes based on delivery against a range of financial and non-financial strategic measures which are
set in the context of business plans that have been appropriately stress-tested by the Group CRO;
• enable the build-up of meaningful shareholding with API deferred equity and LTI underpinned by the MSR (refer to page 72);
• provide the Board with discretion to take other factors into account when determining the appropriate outcome; and
• allow for multiple risk adjustments: in year, malus for unvested awards and clawback of cash and vested equity (refer to page 71).
As part of the 2022 year-end process, an assessment of each senior executive’s approach to risk management has been completed
using input from the Group CRO. This process recognises positive and negative risk culture and risk management through upward
or downward adjustment of performance ratings, incentive payouts and consequences (that can include executives leaving
the organisation).
Across the Group in 2022, over 100 assessments were carried out including for executive KMP and divisional executive
teams. Based on the assessments in 2022, there were performance rating and/or incentive adjustments applied both upwards
and downwards.
1.
REMUNERATION GOVERNANCE
Malus provision
Clawback provision
The malus provision gives the People & Remuneration
Committee and the Board discretion to reduce the amount of
an unvested award (including to zero) in certain circumstances
during the retention period, including in the case of:
• misconduct leading to significant adverse outcomes;
• a significant failure of financial or non-financial risk management;
• a significant failure or breach of accountability, fitness and
propriety, or compliance obligations;
• a significant error or a significant misstatement of criteria
on which the variable remuneration determination was based;
and/or
• significant adverse outcomes for customers, beneficiaries
or counterparties.
This provision reflects QBE’s obligations under APRA’s
Prudential Standard CPS 510 Governance to incorporate
terms allowing for the adjustment of incentive awards to protect
QBE’s financial soundness and ability to respond to unforeseen
significant issues.
A review against the malus provision was completed as part
of the year end process. There was no requirement to apply
the provision in 2022.
The clawback provision allows, to the extent permissible
by applicable law, all variable remuneration (cash and deferred
remuneration) to remain subject to clawback for a period of two
years from the date of payment or vesting (as the case may be)
of the relevant component of variable remuneration.
The Board can determine whether to apply clawback to paid
or vested variable remuneration and, if so, the appropriate value
over which clawback will be applied.
The circumstances in which the Board may apply clawback
include those where it concludes in good faith that there
is or has been:
• misconduct leading to material adverse outcomes;
• a material failure of financial or non-financial risk management;
• a material failure or breach of accountability, fitness and
propriety, or compliance obligations;
• a material error or a material misstatement of criteria on which
the variable remuneration determination was based; and/or
• material adverse outcomes for customers, beneficiaries
or counterparties.
Clawback may be applied to any variable remuneration
regardless of whether or not the employment or engagement
of the relevant person is ongoing.
A review against the clawback provision was completed as part
of the year end process. There was no requirement to apply the
provision in 2022.
Consequence Management Policy
71
A
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2
2
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The QBE Consequence Management Policy was adopted in 2022 for implementation in 2023. The policy introduces principles and
guidance to ensure consequences for misconduct or poor risk outcomes are fair, consistent and aligned with regulatory requirements.
’
70
Remuneration Report continued
QBE has a robust remuneration governance framework overseen by the Board. This ensures that the remuneration arrangements
are appropriately designed and managed and that the agreed frameworks and policies are applied and monitored across QBE.
Has overall responsibility for the remuneration strategy and outcomes for executives and non-executive directors.
Board
People & Remuneration Committee
Is the main governing body for key people and remuneration items across the Group.
Further details on the role and scope of the People & Remuneration Committee are set out in the QBE People & Remuneration
Committee charter, available from www.qbe.com/investor-relations/corporate-governance/qbe-charters-and-constitution.
Group CEO
Divisional People &
Remuneration
Committees
External
advisers
Managing risk
The continued focus on and investment in managing our risk provides for a stronger and resilient QBE.
The People & Remuneration Committee works closely with the Board Risk & Capital Committee, Group CRO and Group Chief
People Officer to ensure that any risk associated with remuneration arrangements is managed within the Group’s risk management
framework. The attendance of other members of the Board at the People & Remuneration Committee meetings strengthens
remuneration governance across QBE.
Executive KMP are required to adhere to a range of Group-wide policies to ensure risks are well managed, strong governance
structures are in place and high ethical standards are maintained. The Board approves a comprehensive delegated authority for the
Group CEO, which is an integral part of QBE’s risk management process. The remuneration governance framework incorporates risk
oversight principles so that executives cannot unduly influence a decision that could materially impact their own incentive outcome.
The performance-based components of remuneration established in QBE’s incentive plans are designed to encourage behaviour
that supports the Group’s long-term financial soundness.
Specifically, the QBE incentive plans:
• deliver a target remuneration mix balanced between fixed/variable remuneration, short- and long-term and cash and equity;
• incorporate individual performance objectives through the API that measure demonstrable proactive sound risk management,
including an assessment of risk maturity and the setting of a clear and consistent tone about the importance of managing risk;
• incorporate robust corporate standards for all employees supporting the QBE risk culture;
• balance performance outcomes based on delivery against a range of financial and non-financial strategic measures which are
set in the context of business plans that have been appropriately stress-tested by the Group CRO;
• enable the build-up of meaningful shareholding with API deferred equity and LTI underpinned by the MSR (refer to page 72);
• provide the Board with discretion to take other factors into account when determining the appropriate outcome; and
• allow for multiple risk adjustments: in year, malus for unvested awards and clawback of cash and vested equity (refer to page 71).
As part of the 2022 year-end process, an assessment of each senior executive’s approach to risk management has been completed
using input from the Group CRO. This process recognises positive and negative risk culture and risk management through upward
or downward adjustment of performance ratings, incentive payouts and consequences (that can include executives leaving
the organisation).
and downwards.
Across the Group in 2022, over 100 assessments were carried out including for executive KMP and divisional executive
teams. Based on the assessments in 2022, there were performance rating and/or incentive adjustments applied both upwards
Securities Trading Policy
Trading in QBE ordinary shares is generally permitted outside of designated closed periods. QBE’s Securities Trading Policy states
that non-executive directors and other designated employees must notify any intended share transaction to nominated people within
the Group. The policy prohibits the hedging of QBE securities at all times. The purpose of this prohibition is to ensure that there
is an alignment between the interests of non-executive directors, executives and shareholders.
A copy of QBE’s Securities Trading Policy for dealing in securities is available from www.qbe.com/investor-relations/corporate-
governance/global-policies.
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Remuneration Report continued
1.
REMUNERATION GOVERNANCE
Minimum shareholding requirement
The MSR ensures executives build their shareholding to have significant exposure to QBE’s share price. Under the MSR, a minimum
of three times fixed remuneration for the Group CEO (one and a half times for other executive KMP) is to be maintained as long as the
executive KMP remains at QBE. New executive KMP are required to build their shareholdings over a five-year period after becoming
executive KMP.
The value of shareholdings as a multiple of fixed remuneration at 31 December 2022 for each executive KMP is shown on pages 68 to 69.
All executive KMP have either met or are on track to meet the MSR requirements at 31 December 2022.
Treatment of conditional rights on a change in control of QBE
In accordance with the rules of each of QBE’s incentive plans, a change in control is defined as either a scheme of arrangement that
has been approved by QBE’s shareholders or the acquisition by a bidder of at least 50% of the issued and to be issued QBE shares
under an unconditional takeover offer made in accordance with the Corporations Act 2001.
Should a change in organisational control occur, the People & Remuneration Committee has discretion to determine how unvested
conditional rights should be treated, having regard to factors such as the length of time elapsed in the performance period, the level
of performance to date and the circumstances of the change of control.
Use of external advisers
Remuneration advisers provide guidance on remuneration for executives, facilitate discussion, review remuneration and at-risk
reward benchmarking within industry peer groups. They also provide guidance on current trends in executive remuneration
practices. Any advice provided by remuneration advisers is used as a guide and is not a substitute for consideration of all the issues
by each non-executive director on the People & Remuneration Committee.
Ernst & Young (EY) currently acts as the independent remuneration adviser to the People & Remuneration Committee. The People
& Remuneration Committee and the Board are satisfied that the advice provided by EY during 2022 was free from undue influence.
During 2022, management requested and utilised reports on market practice from various reputable sources. No recommendations
in relation to the remuneration of KMP were provided as part of these engagements.
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Remuneration Report continued
1.
REMUNERATION GOVERNANCE
Minimum shareholding requirement
The MSR ensures executives build their shareholding to have significant exposure to QBE’s share price. Under the MSR, a minimum
of three times fixed remuneration for the Group CEO (one and a half times for other executive KMP) is to be maintained as long as the
executive KMP remains at QBE. New executive KMP are required to build their shareholdings over a five-year period after becoming
executive KMP.
The value of shareholdings as a multiple of fixed remuneration at 31 December 2022 for each executive KMP is shown on pages 68 to 69.
All executive KMP have either met or are on track to meet the MSR requirements at 31 December 2022.
Treatment of conditional rights on a change in control of QBE
In accordance with the rules of each of QBE’s incentive plans, a change in control is defined as either a scheme of arrangement that
has been approved by QBE’s shareholders or the acquisition by a bidder of at least 50% of the issued and to be issued QBE shares
under an unconditional takeover offer made in accordance with the Corporations Act 2001.
Should a change in organisational control occur, the People & Remuneration Committee has discretion to determine how unvested
conditional rights should be treated, having regard to factors such as the length of time elapsed in the performance period, the level
of performance to date and the circumstances of the change of control.
Use of external advisers
Remuneration advisers provide guidance on remuneration for executives, facilitate discussion, review remuneration and at-risk
reward benchmarking within industry peer groups. They also provide guidance on current trends in executive remuneration
practices. Any advice provided by remuneration advisers is used as a guide and is not a substitute for consideration of all the issues
by each non-executive director on the People & Remuneration Committee.
Ernst & Young (EY) currently acts as the independent remuneration adviser to the People & Remuneration Committee. The People
& Remuneration Committee and the Board are satisfied that the advice provided by EY during 2022 was free from undue influence.
During 2022, management requested and utilised reports on market practice from various reputable sources. No recommendations
in relation to the remuneration of KMP were provided as part of these engagements.
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EXECUTIVE KMP REMUNERATION IN DETAIL
At QBE, having the right talent across the Group enables us to create shareholder value, while prudently managing risk and
maintaining strong corporate governance. To deliver our strategic ambitions, we must ensure that our executive remuneration
framework reflects QBE’s desire to attract and retain the best people.
This section sets out our approach for 2022. The graphs below set out the typical remuneration structure and delivery for the
Group CEO and other executive KMP for on-target performance.
Group CEO pay mix
Other executive KMP pay mix
22%
17%
17%
44%
31%
21%
14%
34%
Fixed remuneration
API cash
API deferred equity
LTI maximum face-value
At risk remuneration
Executive remuneration structure
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QBE’s executive remuneration structure for 2022 comprised a mix of fixed and at-risk remuneration through API and LTI plan arrangements.
Each of these components is discussed in further detail on the following pages.
FIXED REMUNERATION – KEY DETAILS
Description
Fixed remuneration comprises cash salary, superannuation/pension and packaged benefits, additional annual benefits
and associated taxes. Additional annual benefits may include health insurance, life assurance, personal accident insurance,
expatriate benefits, occasional spouse travel to accompany the executive on business and applicable taxes.
Fixed remuneration is delivered in accordance with terms and conditions of employment.
Determining fixed remuneration levels
Fixed remuneration considers the diversity, complexity and expertise required of individual roles. Remuneration quantum is set
in the context of QBE’s broader reward strategy and internal relativities.
To assess the competitiveness of fixed remuneration, the People & Remuneration Committee considers market data and
recognised published surveys.
Australian-based executive roles are generally benchmarked to the ASX 30 and ASX 10-50 peer group of companies,
with a specific focus on global companies and companies in the financial services industry. Overseas-based executives or roles
that have a global reach are compared with a peer group consisting of global insurers. The peer group of companies used for
remuneration benchmarking purposes is set out in the table below:
PEER GROUP
DESCRIPTION
ASX peer group
The financial services sub-peer group is determined based on the industry classification
on the ASX and includes commercial banks and insurers.
Global insurance peer group Consists of large, global insurance companies aligned with the peer group used for the
LTI plan.
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Remuneration Report continued
2.
EXECUTIVE KMP REMUNERATION IN DETAIL
ANNUAL PERFORMANCE INCENTIVE PLAN – KEY DETAILS
Description
The API is an annual, performance-based incentive, delivered as a mix of an annual cash payment and deferred award in the
form of conditional rights to QBE shares. Performance is measured over a 12-month period. The conditional rights vest in equal
tranches over a further four years.
Performance measures and rationale
The API plan provides an incentive outcome with a clear link between business performance, risk management and individual
behaviours, and allows further discretion by the Board to be applied where warranted. API outcomes are based on a combination
of the Group’s financial performance, non-financial metrics incorporating sustainability-aligned metrics based on risk, people and
culture and strategic priorities, and individual performance assessed both on what has been achieved and how it was achieved
during the year. A summary of achievements and positioning against targets is set out in the business scorecard on page 67 and
an explanation of the measures and their rationale for use is provided below:
Financial measures (70% weighting)
Non-financial measures (30% weighting)
COR
RISK
COR is the most relevant measure of the underwriting
performance of our insurance operations.
COR comprises net claims incurred, net commission
expense and underwriting and administration expenses
as a percentage of net earned premium. The measure
excludes the impact of risk-free rates because it is
consistent with the way we report and the basis on which
the market assesses the underwriting performance
of QBE.
GROUP CASH ROE
Cash ROE is a measure of how effectively we are
managing shareholders’ investment in QBE.
For the API, this measure will generally be measured
on the same basis as that used to determine shareholder
dividends. As a principle, losses due to unbudgeted
amortisation/impairment of intangibles will, other than
in exceptional circumstances, be included in cash ROE
so that executives remain accountable for the management
of intangible assets.
Risk outcomes are assessed using the Risk Maturity
Assessment, a framework QBE uses to understand how
our risk management practices are maturing, how we
determine areas of strength and identify areas that may
require further investment. This multi-dimensional measure
supports how we assess our effectiveness in managing
risk, both from a qualitative and quantitative perspective.
PEOPLE AND CULTURE
Investment in our people and the strengthening of
alignment and collaboration across the enterprise are
priorities that enable culture in order to drive performance.
Assessing a blend of quantitative measures and qualitative
outputs provides a strong lens on people and culture
across the enterprise as we look to enable a more
sustainable and resilient workforce.
STRATEGIC PRIORITIES
How we are actively managing the business to deliver
achievements in each of our strategic priority areas is key
to delivering our vision. Our focus in 2022 was: portfolio
optimisation, sustainable growth, bring the enterprise
together and modernise our business. The Board considers
how the business performed against each element.
Individual performance objectives
The objectives align with strategic priorities. At the end of the year, individual performance of the executive KMP is assessed
both on what was achieved and how it was achieved. This embeds QBE DNA behaviours in remuneration outcomes.
ADJUSTMENTS
API outcomes may be adjusted by other items (such as material acquisitions or divestments) not included in the business
plan and as deemed appropriate by the People & Remuneration Committee.
Vesting schedule
The API vesting schedule is outlined below:
% of API opportunity achieved
BELOW THRESHOLD
THRESHOLD
0%
30%
TARGET
100%
SUPERIOR
150%
The API rules provide suitable discretion for the People & Remuneration Committee to adjust any formulaic outcomes to ensure
API awards appropriately reflect performance.
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Remuneration Report continued
2.
EXECUTIVE KMP REMUNERATION IN DETAIL
ANNUAL PERFORMANCE INCENTIVE PLAN – KEY DETAILS
API PLAN – key details (continued)
Instrument and deferral mechanics
The API award is delivered as 60% in cash (50% in the case
of the Group CEO) and 40% is deferred as conditional rights
to QBE shares (50% in the case of the Group CEO).
Deferred API vests in four equal tranches on the first, second,
third and fourth anniversaries of the award. Vesting is subject
to service conditions during the deferral period. Malus and
clawback also apply.
To calculate the number of conditional rights to be granted, the
award value is divided by the volume weighted average price
of QBE shares over the five trading days prior to the grant date.
Notional dividends accrue during the deferral period.
Executive KMP API awards for the 2022 performance year are
detailed on pages 68 to 69.
Leaver provisions
On voluntary termination, dismissal or termination due
to poor performance, all awards are forfeited.
‘Good leaver’ provisions (e.g. retirement, redundancy, ill
health, injury, or mutually agreed separation (in some cases))
will apply such that:
• API opportunity is reduced to a pro-rata amount to reflect
the proportion of the performance year in service.
• Deferred awards remain in the plan subject to the original
vesting conditions.
Malus and clawback provisions
API is subject to malus and clawback, as applicable,
enabling awards to be forfeited, reduced or have clawback
applied at the discretion of the People & Remuneration
Committee and Board.
Malus and clawback provisions are detailed on page 71.
LONG TERM INCENTIVE PLAN – KEY DETAILS
Description
The LTI plan consists of an award of conditional rights to QBE shares. Conditional rights are awarded at no cost to the executive KMP.
Performance measures
Vesting is subject to two performance conditions measured over a three-year performance period:
Average Group cash ROE (70% weighting)
Relative total shareholder return (30% weighting)
DEFINITION
The three-year arithmetic average of the annual cash ROE
over the performance period assessed against targets set
in the context of the three-year business plan. The Group
cash ROE target is set with reference to the prevailing
risk-free rate plus a set margin.
DEFINITION
TSR is the change in percentage value of an entity’s share
price plus the value of reinvested dividends and any capital
returns measured over the three-year performance period.
TSR of QBE is measured against a global insurance
peer group as shown below.
RATIONALE
Cash ROE is the primary financial measure of success for
QBE and is most tangible for long-term decision making.
RATIONALE
The use of a relative TSR measure enables stronger pay
for performance, aligning with shareholders.
The API is an annual, performance-based incentive, delivered as a mix of an annual cash payment and deferred award in the
form of conditional rights to QBE shares. Performance is measured over a 12-month period. The conditional rights vest in equal
Description
tranches over a further four years.
Performance measures and rationale
The API plan provides an incentive outcome with a clear link between business performance, risk management and individual
behaviours, and allows further discretion by the Board to be applied where warranted. API outcomes are based on a combination
of the Group’s financial performance, non-financial metrics incorporating sustainability-aligned metrics based on risk, people and
culture and strategic priorities, and individual performance assessed both on what has been achieved and how it was achieved
during the year. A summary of achievements and positioning against targets is set out in the business scorecard on page 67 and
an explanation of the measures and their rationale for use is provided below:
Financial measures (70% weighting)
Non-financial measures (30% weighting)
COR
RISK
COR is the most relevant measure of the underwriting
Risk outcomes are assessed using the Risk Maturity
performance of our insurance operations.
COR comprises net claims incurred, net commission
expense and underwriting and administration expenses
as a percentage of net earned premium. The measure
excludes the impact of risk-free rates because it is
consistent with the way we report and the basis on which
the market assesses the underwriting performance
of QBE.
GROUP CASH ROE
Cash ROE is a measure of how effectively we are
managing shareholders’ investment in QBE.
For the API, this measure will generally be measured
on the same basis as that used to determine shareholder
dividends. As a principle, losses due to unbudgeted
amortisation/impairment of intangibles will, other than
in exceptional circumstances, be included in cash ROE
so that executives remain accountable for the management
of intangible assets.
Assessment, a framework QBE uses to understand how
our risk management practices are maturing, how we
determine areas of strength and identify areas that may
require further investment. This multi-dimensional measure
supports how we assess our effectiveness in managing
risk, both from a qualitative and quantitative perspective.
PEOPLE AND CULTURE
Investment in our people and the strengthening of
alignment and collaboration across the enterprise are
priorities that enable culture in order to drive performance.
Assessing a blend of quantitative measures and qualitative
outputs provides a strong lens on people and culture
across the enterprise as we look to enable a more
sustainable and resilient workforce.
STRATEGIC PRIORITIES
How we are actively managing the business to deliver
achievements in each of our strategic priority areas is key
to delivering our vision. Our focus in 2022 was: portfolio
optimisation, sustainable growth, bring the enterprise
together and modernise our business. The Board considers
how the business performed against each element.
Individual performance objectives
The objectives align with strategic priorities. At the end of the year, individual performance of the executive KMP is assessed
both on what was achieved and how it was achieved. This embeds QBE DNA behaviours in remuneration outcomes.
ADJUSTMENTS
API outcomes may be adjusted by other items (such as material acquisitions or divestments) not included in the business
plan and as deemed appropriate by the People & Remuneration Committee.
Vesting schedule
The API vesting schedule is outlined below:
% of API opportunity achieved
BELOW THRESHOLD
THRESHOLD
0%
30%
TARGET
100%
SUPERIOR
150%
The API rules provide suitable discretion for the People & Remuneration Committee to adjust any formulaic outcomes to ensure
API awards appropriately reflect performance.
TSR peer group – global insurance peer group
Allianz SE
American International Group, Inc.
AXA SA
Beazley plc
Chubb Limited
CNA Financial Corporation
Hiscox Limited
Insurance Australia Group Limited
QBE Insurance Group Limited
Suncorp Group Limited
The Hartford Financial Services Group, Inc.
The Travelers Companies, Inc.
Zurich Insurance Group AG
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ADJUSTMENTS
LTI outcomes may be adjusted by other items (such as material acquisitions or divestments) not included in the business plan
and as deemed appropriate by the People & Remuneration Committee.
LTI allocation
To calculate the number of conditional rights granted, the award value is divided by the volume weighted average price of QBE
shares over the five trading days prior to the grant date.
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Remuneration Report continued
2.
EXECUTIVE KMP REMUNERATION IN DETAIL
LTI PLAN – key details (continued)
Vesting schedules
For the 2022 LTI, the Group cash ROE and TSR vesting schedules are outlined below:
QBE'S GROUP CASH ROE PERFORMANCE
% OF LTI CONDITIONAL RIGHTS SUBJECT TO THE GROUP CASH ROE
COMPONENT WHICH MAY VEST
Below risk-free rate + 5.75%
At risk-free rate + 5.75%
Between risk-free rate + 5.75% and risk-free rate + 10.75%
At or above risk-free rate + 10.75%
0%
30%
Straight line vesting between 30% and 100%
100%
QBE'S TSR PERFORMANCE RELATIVE TO THE PEER GROUP
Less than 50th percentile
At the 50th percentile
Between 50th and 75th percentile
75th percentile or greater
% OF LTI CONDITIONAL RIGHTS SUBJECT TO THE TSR COMPONENT
WHICH MAY VEST
0%
50%
50% plus 2% for each percentile above the 50th percentile
100%
The LTI rules provide suitable discretion to the People & Remuneration Committee to adjust any formulaic outcome to ensure
LTI awards appropriately reflect performance.
Vesting periods
Following assessment of performance measures at the end of the three-year performance period, conditional rights will vest
in three tranches (on or about the vesting date) set out in the table below, subject to service conditions and malus provisions:
TRANCHE VESTING DATE
PERFORMANCE PERIOD
PROPORTION OF ELIGIBLE 2022 LTI
CONDITIONAL RIGHTS TO VEST
1
2
3
26 February 2025
26 February 2026
26 February 2027
End of the three-year performance period
First anniversary of the end of the performance period
Second anniversary of the end of the performance period
33%
33%
34%
Notional dividends accrue during the vesting period.
Leaver provisions
In cases of ‘good leaver’ (e.g. retirement, redundancy, ill health, injury, or mutually agreed separation (in some cases))
the unvested LTI conditional rights may be reduced to a pro-rata amount to reflect the proportion of the performance
period in service and may continue to be held subject to the same vesting conditions. On voluntary termination, dismissal
or termination due to poor performance, all awards are forfeited.
Malus and clawback provisions
LTI is subject to malus and clawback provisions, as applicable, enabling awards to be either forfeited or reduced or have
clawback applied at the discretion of the People & Remuneration Committee and Board.
Malus and clawback provisions are detailed on page 71.
Legacy equity schemes
The information below summarises QBE’s legacy incentive plans mentioned in the Remuneration Report.
Executive Incentive Plan (EIP) – until 31 December 2018
The EIP was an at-risk reward structure comprised of cash and deferred equity that vested progressively over a five-year period.
40% to 50% of the award was delivered in cash and 50% to 60% of the award was deferred as conditional rights to fully paid ordinary
QBE shares.
The conditional rights were deferred over four equal tranches: 25% over each of the four anniversaries of the award. EIP outcomes
were subject to the achievement of multiple performance measures over the one-year performance period including the Group’s
cash ROE and COR targets, individual performance ratings and, for divisional staff, divisional COR targets.
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2.
EXECUTIVE KMP REMUNERATION IN DETAIL
LTI PLAN – key details (continued)
Vesting schedules
Below risk-free rate + 5.75%
At risk-free rate + 5.75%
At or above risk-free rate + 10.75%
Less than 50th percentile
At the 50th percentile
Between 50th and 75th percentile
75th percentile or greater
LTI awards appropriately reflect performance.
Vesting periods
For the 2022 LTI, the Group cash ROE and TSR vesting schedules are outlined below:
QBE'S GROUP CASH ROE PERFORMANCE
COMPONENT WHICH MAY VEST
% OF LTI CONDITIONAL RIGHTS SUBJECT TO THE GROUP CASH ROE
Between risk-free rate + 5.75% and risk-free rate + 10.75%
Straight line vesting between 30% and 100%
QBE'S TSR PERFORMANCE RELATIVE TO THE PEER GROUP
WHICH MAY VEST
% OF LTI CONDITIONAL RIGHTS SUBJECT TO THE TSR COMPONENT
The LTI rules provide suitable discretion to the People & Remuneration Committee to adjust any formulaic outcome to ensure
50% plus 2% for each percentile above the 50th percentile
0%
30%
100%
0%
50%
100%
Following assessment of performance measures at the end of the three-year performance period, conditional rights will vest
in three tranches (on or about the vesting date) set out in the table below, subject to service conditions and malus provisions:
TRANCHE VESTING DATE
PERFORMANCE PERIOD
1
2
3
26 February 2025
End of the three-year performance period
26 February 2026
First anniversary of the end of the performance period
26 February 2027
Second anniversary of the end of the performance period
33%
33%
34%
PROPORTION OF ELIGIBLE 2022 LTI
CONDITIONAL RIGHTS TO VEST
Notional dividends accrue during the vesting period.
Leaver provisions
In cases of ‘good leaver’ (e.g. retirement, redundancy, ill health, injury, or mutually agreed separation (in some cases))
the unvested LTI conditional rights may be reduced to a pro-rata amount to reflect the proportion of the performance
period in service and may continue to be held subject to the same vesting conditions. On voluntary termination, dismissal
or termination due to poor performance, all awards are forfeited.
Malus and clawback provisions
LTI is subject to malus and clawback provisions, as applicable, enabling awards to be either forfeited or reduced or have
clawback applied at the discretion of the People & Remuneration Committee and Board.
Malus and clawback provisions are detailed on page 71.
Legacy equity schemes
The information below summarises QBE’s legacy incentive plans mentioned in the Remuneration Report.
Executive Incentive Plan (EIP) – until 31 December 2018
The EIP was an at-risk reward structure comprised of cash and deferred equity that vested progressively over a five-year period.
40% to 50% of the award was delivered in cash and 50% to 60% of the award was deferred as conditional rights to fully paid ordinary
QBE shares.
The conditional rights were deferred over four equal tranches: 25% over each of the four anniversaries of the award. EIP outcomes
were subject to the achievement of multiple performance measures over the one-year performance period including the Group’s
cash ROE and COR targets, individual performance ratings and, for divisional staff, divisional COR targets.
The EIP was replaced by the STI and LTI plans for executive KMP from 2019. The EIP awards made to Sam Harrison prior to his
appointment as executive KMP include cash-settled share-based payment awards which are subject to the same vesting conditions
as the equivalent conditional rights described above. The benefit received at vesting is indexed to the movement in the A$ value
of QBE’s shares including dividends declared in the period between grant and vest dates.
Short Term Incentive (STI) – until 31 December 2021
The STI was a performance-based incentive delivered in the form of an annual cash payment and deferred award in the form
of conditional rights to QBE shares. Performance was measured over a 12-month period. The conditional rights were deferred
in two equal tranches such that 50% vested on the first anniversary of the award and 50% on the second anniversary of the award.
STI outcomes were subject to the achievement of a blend of divisional CORs for 2021, Group COR for 2017–2020, Group cash ROE
targets, divisional COR targets in the case of divisional employees, and individual performance objectives reflecting QBE’s strategic
priorities. The STI was replaced by the API from 2022.
LTI levelling mechanism – until 31 December 2021
The LTI levelling mechanism, introduced in 2019, and removed after 2021, effectively puts a ceiling and a floor on aggregate
catastrophe claims when determining LTI outcomes, because extreme or benign catastrophe periods can have a material effect
across multiple LTI awards as the LTI performance period is measured over three years. The cap and collar uses a range of +/- 1.5%
of net earned premium either side of the budgeted catastrophe allowance for which LTI participants are exposed to catastrophe risk.
There was no need to adjust the cash ROE for catastrophe claims in 2022. Historically, the cost of catastrophe claims in 2021 was
$924 million (2020: $898 million), and being in excess of the range resulted in adjusted cash ROE of 11% in 2021 (2020: (14.2)%).
For the 2021 LTI, target ranges for each of the three performance years are set at the start of each relevant year and are disclosed in
the following year. The target range for 2022 was between 7.9% and 11.9% (2021: between 6.3% and 10.3%) with straight line vesting
commencing at 30% from the lower range up to 100% at the upper range. The individual annual ranges will be used to create the target
range for the three-year performance period.
Employment agreements
The table below summarises the material terms for the current executive KMP which are subject to applicable laws. The terms and
conditions of employment of each executive KMP reflect market conditions at the time of their contract negotiation on appointment
and thereafter. In addition, the typical treatment of incentives is also provided below.
CONTRACTUAL TERM
GROUP CEO
OTHER EXECUTIVE KMP
Duration
Permanent full-time employment contract until notice given by either party
Notice period
(by executive KMP or QBE)
12 months: QBE may elect to make
a payment in lieu of notice
Six months: QBE may elect to make
a payment in lieu of notice
Post-employment restraints 12 months non-compete and non-solicitation
Six to 12 months non-compete and non-solicitation
Treatment of incentives
Voluntary termination
All unvested incentives are forfeited.
Involuntary termination
On termination with cause or for poor performance: All unvested incentives are forfeited.
On termination without cause: For API in the year of termination, the executive remains eligible to be considered for an award
on a pro-rata basis, with any award to be determined following the end of the performance year and subject to the standard deferral
arrangements. Unvested deferred EIP, STI and API conditional rights remain in the plan subject to the original vesting dates and
malus, with clawback provisions included from 2021. Unvested LTI conditional rights may be reduced to a pro-rata amount to reflect
the proportion of the performance period in service and may continue to be held subject to the same performance and vesting
conditions. Legacy equity awards generally remain in the plan subject to the original performance and vesting conditions; however,
the People & Remuneration Committee has discretion to vest these awards in accordance with the original terms and plan rules.
77
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6
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78
Remuneration Report continued
3.
EXECUTIVE KMP REMUNERATION TABLES
3.1
Statutory remuneration disclosures
The following table provides details of the remuneration of QBE’s executive KMP as determined by reference to applicable Australian
Accounting Standards for the year ended 31 December 2022. Remuneration has been converted to US dollars using the average rate
of exchange for the relevant year.
SHORT-TERM EMPLOYMENT
BENEFITS
POST-EMPLOYMENT
BENEFITS
BASE
SALARY
US$000
OTHER 1
US$000
API
CASH 2
US$000
SUPERANNUATION
US$000
OTHER
LONG-TERM
EMPLOYEE
BENEFITS
LEAVE
ACCRUALS 3
US$000
SHARE-BASED
PAYMENTS 4
US$000
TERMINATION
BENEFITS
US$000
1,246
431
801
894
776
650
676
295
536
42
1,000
1,000
607
540
884
962
6,526
4,814
186
465
7
7
13
14
16
151
5
–
33
27
18
1
11
10
289
675
919
390
562
922
554
578
520
289
324
38
600
659
270
306
628
905
4,377
4,087
3
–
–
–
–
–
17
5
17
–
24
23
17
16
17
18
95
62
32
33
–
–
–
–
(3)
6
45
(10)
–
–
9
32
18
21
101
82
2,125
913
716
810
883
620
810
396
250
2
1,081
818
356
168
867
733
7,088
4,460
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
US$000
4,511
2,232
2,086
2,633
2,226
1,862
2,036
1,142
1,177
72
2,738
2,527
1,277
1,063
2,425
2,649
18,476
14,180
Andrew Horton 5
Jason Harris
Sam Harrison 5
Sue Houghton 5
Amanda Hughes 5
Todd Jones
Fiona Larnach 5
Inder Singh
Total
YEAR
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
20216
1 Other includes, where relevant, provision of health insurance, spouse travel, accommodation costs, staff insurance discount benefits received
during the year, life assurance and personal accident insurance and applicable taxes. It also includes tax accruals in respect of employment
benefits and other one-off expenses.
2 API cash is payable in March 2023 for the 2022 performance year.
3
4
Includes the movement in annual leave and long service leave provisions during the relevant year measured as the present value
of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the
projected unit credit method. See note 8.6 to the financial statements on page 158 for more detail.
Includes conditional rights and legacy cash-settled awards. The fair value at grant date of conditional rights is determined using
appropriate models including Monte Carlo simulations, depending on the vesting conditions. The fair value of each conditional right
is recognised evenly over the service period ending at vesting date. Where an award will no longer vest, the related accounting charge for
any non-market component is reversed in full and the reversal is included in the table above. This may include conditional rights granted
as compensation for incentives forfeited on ceasing previous employment to join QBE. Details of conditional rights are provided on page
80. For Sam Harrison, this includes legacy cash-settled share-based awards ($197,000) relating to grants made prior to his appointment
as executive KMP on 1 April 2021 under the 2019, 2020 and 2021 EIP. A description of the EIP is provided on pages 76 to 77.
5 The 2021 disclosures reflect pro-rated remuneration for certain executive KMP who were in role for part of 2021.
6 The total disclosed in the 2021 Remuneration Report ($24,662,000) includes remuneration of former executive KMP, which are excluded
from the above, comprising: Jason Brown ($1,061,000), Margaret Murphy ($1,708,000) and Richard Pryce ($7,713,000).
78
Remuneration Report continued
3.
EXECUTIVE KMP REMUNERATION TABLES
3.1
Statutory remuneration disclosures
The following table provides details of the remuneration of QBE’s executive KMP as determined by reference to applicable Australian
Accounting Standards for the year ended 31 December 2022. Remuneration has been converted to US dollars using the average rate
of exchange for the relevant year.
SHORT-TERM EMPLOYMENT
POST-EMPLOYMENT
BENEFITS
BENEFITS
OTHER
LONG-TERM
EMPLOYEE
BENEFITS
OTHER 1
US$000
API
CASH 2
US$000
SUPERANNUATION
ACCRUALS 3
US$000
US$000
LEAVE
SHARE-BASED
PAYMENTS 4
TERMINATION
BENEFITS
US$000
TOTAL
US$000
Andrew Horton 5
Jason Harris
Sam Harrison 5
Sue Houghton 5
Amanda Hughes 5
Todd Jones
Fiona Larnach 5
Inder Singh
Total
BASE
SALARY
US$000
1,246
431
801
894
776
650
676
295
536
42
1,000
1,000
607
540
884
962
6,526
4,814
YEAR
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
20216
186
465
7
7
13
14
16
151
5
–
33
27
18
1
11
10
919
390
562
922
554
578
520
289
324
38
600
659
270
306
628
905
289
675
4,377
4,087
3
–
–
–
–
–
17
5
17
–
24
23
17
16
17
18
95
62
32
33
–
–
–
–
(3)
6
45
(10)
–
–
9
32
18
21
101
82
US$000
2,125
913
716
810
883
620
810
396
250
2
818
356
168
867
733
1,081
7,088
4,460
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,511
2,232
2,086
2,633
2,226
1,862
2,036
1,142
1,177
72
2,738
2,527
1,277
1,063
2,425
2,649
18,476
14,180
1 Other includes, where relevant, provision of health insurance, spouse travel, accommodation costs, staff insurance discount benefits received
during the year, life assurance and personal accident insurance and applicable taxes. It also includes tax accruals in respect of employment
benefits and other one-off expenses.
2 API cash is payable in March 2023 for the 2022 performance year.
3
Includes the movement in annual leave and long service leave provisions during the relevant year measured as the present value
of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the
projected unit credit method. See note 8.6 to the financial statements on page 158 for more detail.
4
Includes conditional rights and legacy cash-settled awards. The fair value at grant date of conditional rights is determined using
appropriate models including Monte Carlo simulations, depending on the vesting conditions. The fair value of each conditional right
is recognised evenly over the service period ending at vesting date. Where an award will no longer vest, the related accounting charge for
any non-market component is reversed in full and the reversal is included in the table above. This may include conditional rights granted
as compensation for incentives forfeited on ceasing previous employment to join QBE. Details of conditional rights are provided on page
80. For Sam Harrison, this includes legacy cash-settled share-based awards ($197,000) relating to grants made prior to his appointment
as executive KMP on 1 April 2021 under the 2019, 2020 and 2021 EIP. A description of the EIP is provided on pages 76 to 77.
5 The 2021 disclosures reflect pro-rated remuneration for certain executive KMP who were in role for part of 2021.
6 The total disclosed in the 2021 Remuneration Report ($24,662,000) includes remuneration of former executive KMP, which are excluded
from the above, comprising: Jason Brown ($1,061,000), Margaret Murphy ($1,708,000) and Richard Pryce ($7,713,000).
3.2
Conditional rights movements
Equity awards at QBE are granted in the form of conditional rights. A conditional right is a promise by QBE to acquire or issue
one fully paid ordinary QBE Insurance Group Limited share where certain conditions are met.
The table below details conditional rights provided under the terms of both current and legacy plans, details of which can be found
on pages 74 to 77, and contractual arrangements. LTI conditional rights are subject to future performance hurdles as detailed
on pages 75 to 76. Conditional rights under the API for the 2022 performance year will typically be granted in the first quarter of 2023.
2022
Andrew Horton
Jason Harris
Sam Harrison
Sue Houghton
Amanda Hughes
Todd Jones
Fiona Larnach
Inder Singh
BALANCE AT
1 JANUARY
2022
NUMBER
335,570
320,683
248,761
195,370
6,916
591,236
97,626
445,936
GRANTED
NUMBER
345,059
152,220
141,712
99,632
94,478
215,735
92,172
158,627
VALUE AT
GRANT DATE
US$0001
VESTED AND
EXERCISED
NUMBER
VALUE AT
VESTING DATE
US$000
FORFEITED/
LAPSED
NUMBER 2
NOTIONAL
DIVIDENDS
ATTACHING IN
THE YEAR
NUMBER
BALANCE AT
31 DECEMBER
2022
NUMBER
2,646
1,160
1,076
741
715
1,608
688
1,205
(83,892)
(78,240)
(53,168)
(28,546)
(1,729)
(33,385)
–
(76,079)
667
626
417
227
14
274
–
604
–
–
–
–
–
(157,013)
–
(98,522)
14,700
9,722
8,314
6,571
2,458
15,189
4,678
10,600
611,437
404,385
345,619
273,027
102,123
631,762
194,476
440,562
1 The value at grant date is calculated in accordance with AASB 2 Share-based Payment.
2 The 2019 LTI award and related notional dividends lapsed in full as the performance conditions were not met.
79
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6
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80
Remuneration Report continued
3.
EXECUTIVE KMP REMUNERATION TABLES
3.3
Valuation of conditional rights outstanding at 31 December 2022
The table below details the conditional rights issued affecting remuneration of executives in the previous, current or future
reporting periods:
GRANT
2022
Andrew Horton
Jason Harris
Sam Harrison
Sue Houghton
Special
2021 STI
2022 LTI
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
2018 EIP
2019 EIP
2020 EIP
2021 LTI
2021 EIP
2021 STI
2022 LTI
2021 LTI
Special
2021 STI
2022 LTI
Amanda Hughes 2020 EIP
2021 EIP
2021 STI
2022 LTI
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
2021 LTI
2021 STI
2022 LTI
2018 EIP
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
Fiona Larnach
Todd Jones
Inder Singh
PERFORMANCE
PERIOD START
DATE
VESTING/
EXERCISE DATE
CONDITIONAL
RIGHTS AT
31 DECEMBER
2022
NUMBER 1, 2
MAXIMUM
VALUE OF
AWARD TO
VEST
A$000 3
1 Sep 2021
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2018
1 Jan 2019
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2021
3 Aug 2021
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2018
1 Jan 2020
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
2023-2025
2023-2024
2025-2027
2023-2025
25 Feb 2023
2024-2026
2023-2024
2025-2027
3 Mar 2023
2023-2024
2023-2025
2024-2026
2023-2026
2023-2024
2025-2027
2024-2026
2023-2024
2023-2024
2025-2027
2023-2025
2023-2026
2023-2024
2025-2027
2023-2025
25 Feb 2023
2024-2026
2023-2024
2025-2027
2024-2026
2023-2024
2025-2027
3 Mar 2023
2023-2025
25 Feb 2023
2024-2026
2023-2024
2025-2027
257,879
44,623
308,935
104,050
16,136
128,229
52,522
103,448
18,255
18,596
39,279
124,285
12,011
32,925
100,268
94,966
75,970
16,272
85,819
5,316
26,037
2,119
68,651
166,152
30,030
214,530
38,565
182,485
100,035
17,207
77,234
23,711
79,009
30,811
144,495
50,975
111,561
3,074
533
3,378
647
150
930
627
1,087
222
277
365
902
143
393
1,053
831
827
194
901
49
311
25
721
2,124
279
1,556
460
1,917
726
205
811
289
1,010
287
1,048
609
1,172
FAIR VALUE PER
CONDITIONAL RIGHT
A$4
GROUP
ROE
–
–
12.13
8.70
–
9.30
–
11.94
–
–
–
9.30
–
–
11.94
10.89
–
–
11.94
–
–
–
11.94
14.91
–
9.30
–
11.94
9.30
–
11.94
–
14.91
–
9.30
–
11.94
TSR
TIME
–
–
8.14
3.75
–
5.21
–
7.15
–
–
–
5.21
–
–
7.15
6.61
–
–
7.15
–
–
–
7.15
10.66
–
5.21
–
7.15
5.21
–
7.15
–
10.66
–
5.21
–
7.15
11.92
11.94
–
–
9.30
–
11.94
–
12.17
14.91
9.30
–
11.94
11.94
–
–
10.89
11.94
–
9.30
11.94
11.94
–
–
9.30
–
11.94
–
–
11.94
–
12.17
–
9.30
–
11.94
–
GRANT DATE
1 Sep 2021
28 Feb 2022
5 May 2022
1 Oct 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
4 Mar 2019
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
28 Feb 2022
3 Aug 2021
3 Aug 2021
28 Feb 2022
28 Feb 2022
26 Feb 2021
28 Feb 2022
28 Feb 2022
28 Feb 2022
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
26 Feb 2021
28 Feb 2022
28 Feb 2022
4 Mar 2019
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
1
Includes original grant of conditional rights and notional dividends. Shareholders approved the grant of 2022 LTI for Andrew Horton at the
Annual General Meeting on 5 May 2022.
2 For the 2020 and 2021 LTI allocations, the number of conditional rights reflects an equal proportion of Group cash ROE and TSR performance
conditions. The number of 2022 LTI conditional rights reflects a proportion of 70% Group cash ROE and 30% TSR performance conditions.
3 The maximum value to vest represents the fair value at grant date for all unvested conditional rights. The minimum amount executive KMP
may receive will be zero if awards do not vest for any reason.
4 The fair value of conditional rights at grant date is determined using appropriate models including Monte Carlo simulations, depending
on the vesting conditions. The fair value of each conditional right is recognised evenly over the service period ending at vesting date.
For the 2020 and 2021 LTI allocations, the TSR fair value shown above was averaged over the two peer groups.
3.4
Executive KMP shareholdings
The table below provides details of movements during the year in the number of ordinary shares in QBE held by executive KMP,
including their personally-related parties. In prior years, where non-recourse loans were provided by the Group to executive KMP
for the purchase of shares in QBE, details are shown in the Remuneration Report of each relevant year. There were no loans provided
to executive KMP during the year ended 31 December 2022.
2022
Andrew Horton
Jason Harris
Sam Harrison
Sue Houghton
Amanda Hughes
Todd Jones
Fiona Larnach
Inder Singh
INTEREST IN
SHARES AT
1 JANUARY 2022
NUMBER
DIVIDENDS
REINVESTED
NUMBER
CONDITIONAL
RIGHTS VESTED
NUMBER
SHARES
PURCHASED
(SOLD)
NUMBER 1
INTEREST IN
SHARES AT
31 DECEMBER 2022
NUMBER
150,000
–
201
17,000
16,460
205,156
–
113,041
2,067
1,019
5
704
43
372
–
1,310
83,892
78,240
53,168
28,546
1,729
33,385
–
76,079
–
(36,888)
(53,168)
–
–
(11,805)
–
–
235,959
42,371
206
46,250
18,232
227,108
–
190,430
1 The shares listed as sold may either partially or fully relate to sales to meet withholding tax obligations upon the vesting of conditional rights.
80
Remuneration Report continued
3.
EXECUTIVE KMP REMUNERATION TABLES
3.3
Valuation of conditional rights outstanding at 31 December 2022
The table below details the conditional rights issued affecting remuneration of executives in the previous, current or future
reporting periods:
2022
GRANT
GRANT DATE
DATE
EXERCISE DATE
Andrew Horton
Special
1 Sep 2021
1 Sep 2021
PERFORMANCE
PERIOD START
CONDITIONAL
RIGHTS AT
31 DECEMBER
2022
NUMBER 1, 2
MAXIMUM
VALUE OF
AWARD TO
VEST
GROUP
A$000 3
ROE
FAIR VALUE PER
CONDITIONAL RIGHT
A$4
Jason Harris
Sam Harrison
Sue Houghton
Todd Jones
Fiona Larnach
Inder Singh
2021 STI
2022 LTI
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
2018 EIP
2019 EIP
2020 EIP
2021 LTI
2021 EIP
2021 STI
2022 LTI
2021 LTI
Special
2021 STI
2022 LTI
2021 EIP
2021 STI
2022 LTI
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
2021 LTI
2021 STI
2022 LTI
2018 EIP
2020 LTI
2020 STI
2021 LTI
2021 STI
2022 LTI
Amanda Hughes 2020 EIP
1 Jan 2020
25 Feb 2023
VESTING/
2023-2025
2023-2024
2025-2027
2023-2025
2024-2026
2023-2024
2025-2027
3 Mar 2023
2023-2024
2023-2025
2024-2026
2023-2026
2023-2024
2025-2027
2024-2026
2023-2024
2023-2024
2025-2027
2023-2025
2023-2026
2023-2024
2025-2027
2023-2025
2024-2026
2023-2024
2025-2027
2024-2026
2023-2024
2025-2027
3 Mar 2023
2023-2025
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2018
1 Jan 2019
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2021
3 Aug 2021
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2020
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2021
1 Jan 2021
1 Jan 2022
1 Jan 2018
1 Jan 2020
1 Jan 2020
25 Feb 2023
1 Jan 2020
25 Feb 2023
1 Jan 2021
1 Jan 2021
1 Jan 2022
2024-2026
2023-2024
2025-2027
28 Feb 2022
5 May 2022
1 Oct 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
4 Mar 2019
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
28 Feb 2022
3 Aug 2021
3 Aug 2021
28 Feb 2022
28 Feb 2022
26 Feb 2021
28 Feb 2022
28 Feb 2022
28 Feb 2022
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
26 Feb 2021
28 Feb 2022
28 Feb 2022
4 Mar 2019
24 Feb 2020
26 Feb 2021
26 Feb 2021
28 Feb 2022
28 Feb 2022
257,879
44,623
308,935
104,050
16,136
128,229
52,522
103,448
18,255
18,596
39,279
124,285
12,011
32,925
100,268
94,966
75,970
16,272
85,819
5,316
26,037
2,119
68,651
166,152
30,030
214,530
38,565
182,485
100,035
17,207
77,234
23,711
79,009
30,811
144,495
50,975
111,561
TSR
TIME
–
–
11.92
11.94
3,074
533
3,378
12.13
8.70
8.14
3.75
9.30
5.21
–
9.30
–
11.94
1,087
11.94
7.15
647
150
930
627
222
277
365
902
143
393
831
827
194
901
49
311
25
279
460
726
205
811
289
287
609
9.30
5.21
1,053
11.94
10.89
7.15
6.61
11.94
7.15
721
11.94
7.15
2,124
14.91
10.66
1,556
9.30
5.21
1,917
11.94
9.30
7.15
5.21
11.94
7.15
1,010
14.91
10.66
1,048
9.30
5.21
1,172
11.94
7.15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.17
14.91
9.30
11.94
11.94
10.89
11.94
9.30
11.94
11.94
–
9.30
–
11.94
–
11.94
–
12.17
–
9.30
–
11.94
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
Includes original grant of conditional rights and notional dividends. Shareholders approved the grant of 2022 LTI for Andrew Horton at the
Annual General Meeting on 5 May 2022.
2 For the 2020 and 2021 LTI allocations, the number of conditional rights reflects an equal proportion of Group cash ROE and TSR performance
conditions. The number of 2022 LTI conditional rights reflects a proportion of 70% Group cash ROE and 30% TSR performance conditions.
3 The maximum value to vest represents the fair value at grant date for all unvested conditional rights. The minimum amount executive KMP
may receive will be zero if awards do not vest for any reason.
4 The fair value of conditional rights at grant date is determined using appropriate models including Monte Carlo simulations, depending
on the vesting conditions. The fair value of each conditional right is recognised evenly over the service period ending at vesting date.
For the 2020 and 2021 LTI allocations, the TSR fair value shown above was averaged over the two peer groups.
81
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82
Remuneration Report continued
4.
NON-EXECUTIVE DIRECTOR REMUNERATION
The following section contains information on the approach to non-executive director remuneration, their fees, other benefits
and shareholdings.
Remuneration philosophy
Non-executive director remuneration reflects QBE’s desire to attract, motivate and retain experienced independent directors and
to ensure their active participation in the Group’s affairs for the purpose of corporate governance, regulatory compliance and
other matters.
QBE aims to provide a level of remuneration for non-executive directors comparable with that of its peers, which include multi-national
financial institutions. The Board reviews surveys published by independent remuneration consultants and other public information
to ensure that fee levels are appropriate. The remuneration arrangements of non-executive directors are distinct and separate from
those of the executive KMP.
Fee structure and components
The aggregate amount approved by shareholders at the Annual General Meeting on 5 May 2022 was A$4,750,000 per annum.
The total amount paid to non-executive directors in 2022 was A$3,387,953 (2021 A$3,398,414).
Under the current fee framework, non-executive directors receive a base fee expressed in Australian dollars. In addition,
a non-executive director (other than the Chair) may receive further fees for chairing or membership of a Board Committee.
No changes were made to non-executive director remuneration during 2022. Fees for independent non-executive directors will
be reviewed later in 2023.
The non-executive director fee structure in place since 2017 is shown in the table below:
ROLE
Board
Committee
Other benefits
CHAIR FEE
A$663,000
A$50,000
DEPUTY CHAIR FEE
A$229,000
–
MEMBER FEE
A$208,000
A$27,000
Non-executive directors do not receive any performance-based remuneration such as cash incentives or equity awards. Under QBE’s
Constitution, non-executive directors are entitled to be reimbursed for all travel and related expenses properly incurred in connection
with the business of QBE. All non-executive directors are eligible to receive an annual cash travel allowance of A$42,750 (A$64,000
for the Chair), in addition to fees for the time involved in travelling to Board meetings and other Board commitments.
Superannuation
QBE pays superannuation to Australian-based non-executive directors in accordance with Australian superannuation guarantee (SG)
legislation. Overseas-based non-executive directors receive the cash equivalent amount in addition to their fees. From 1 July 2022,
the SG contribution increased by 0.5% to 10.5%. This change is reflected in table 4.1.
Since 1 January 2020, Australian-based directors may elect to opt out of superannuation contributions as long as they are still
receiving contributions from at least one employer. In such cases, a superannuation allowance is paid in lieu of actual contributions.
82
Remuneration Report continued
4.
NON-EXECUTIVE DIRECTOR REMUNERATION
The following section contains information on the approach to non-executive director remuneration, their fees, other benefits
and shareholdings.
Remuneration philosophy
Non-executive director remuneration reflects QBE’s desire to attract, motivate and retain experienced independent directors and
to ensure their active participation in the Group’s affairs for the purpose of corporate governance, regulatory compliance and
other matters.
QBE aims to provide a level of remuneration for non-executive directors comparable with that of its peers, which include multi-national
financial institutions. The Board reviews surveys published by independent remuneration consultants and other public information
to ensure that fee levels are appropriate. The remuneration arrangements of non-executive directors are distinct and separate from
those of the executive KMP.
Fee structure and components
The aggregate amount approved by shareholders at the Annual General Meeting on 5 May 2022 was A$4,750,000 per annum.
The total amount paid to non-executive directors in 2022 was A$3,387,953 (2021 A$3,398,414).
Under the current fee framework, non-executive directors receive a base fee expressed in Australian dollars. In addition,
a non-executive director (other than the Chair) may receive further fees for chairing or membership of a Board Committee.
No changes were made to non-executive director remuneration during 2022. Fees for independent non-executive directors will
The non-executive director fee structure in place since 2017 is shown in the table below:
CHAIR FEE
A$663,000
A$50,000
DEPUTY CHAIR FEE
A$229,000
–
MEMBER FEE
A$208,000
A$27,000
be reviewed later in 2023.
ROLE
Board
Committee
Other benefits
Non-executive directors do not receive any performance-based remuneration such as cash incentives or equity awards. Under QBE’s
Constitution, non-executive directors are entitled to be reimbursed for all travel and related expenses properly incurred in connection
with the business of QBE. All non-executive directors are eligible to receive an annual cash travel allowance of A$42,750 (A$64,000
for the Chair), in addition to fees for the time involved in travelling to Board meetings and other Board commitments.
Superannuation
QBE pays superannuation to Australian-based non-executive directors in accordance with Australian superannuation guarantee (SG)
legislation. Overseas-based non-executive directors receive the cash equivalent amount in addition to their fees. From 1 July 2022,
the SG contribution increased by 0.5% to 10.5%. This change is reflected in table 4.1.
Since 1 January 2020, Australian-based directors may elect to opt out of superannuation contributions as long as they are still
receiving contributions from at least one employer. In such cases, a superannuation allowance is paid in lieu of actual contributions.
4.1
Remuneration details for non-executive directors
The table below details the nature and amount of each component of the remuneration of QBE’s current non-executive directors.
Remuneration has been converted to US dollars using the average rate of exchange for the relevant year.
SHORT-TERM EMPLOYMENT BENEFITS
POST-EMPLOYMENT BENEFITS
NON-EXECUTIVE
DIRECTOR
Michael Wilkins
Yasmin Allen 3
Stephen Fitzgerald 4
John M Green 4
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
Total
YEAR
2022
2021
2022
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
FEES 1
US$000
504
498
106
95
257
104
290
231
216
239
235
240
238
234
234
233
216
258
257
2,244
2,441
OTHER
US$000
SUPERANNUATION
– SG 2
US$000
SUPERANNUATION
– OTHER 2
US$000
–
–
–
–
–
–
–
2
1
2
3
2
3
–
–
–
1
4
3
10
11
17
17
4
–
–
–
–
–
–
–
–
–
–
4
4
–
–
–
–
25
21
35
32
7
–
–
10
28
–
–
–
–
–
–
20
18
–
–
–
–
72
78
TOTAL
US$000
556
547
117
95
257
114
318
233
217
241
238
242
241
258
256
233
217
262
260
2,351
2,551
1 Fees include amounts sacrificed in relation to the Director Share Acquisition Plan (DSAP). During 2022, Michael Wilkins, Stephen
Fitzgerald, Tan Le, Kathryn Lisson, Sir Brian Pomeroy, Eric Smith and Rolf Tolle elected to sacrifice a portion of their director pre-tax base
fees to acquire QBE shares to meet their minimum shareholding requirement over the required period. The amounts are included in the
fees approved by shareholders and form part of the A$3,387,953 on page 82. The increase in their shareholdings in 2022 reflected in table
4.2 was mainly as a result of their participation in the DSAP. Travel allowances and additional fees in lieu of superannuation in Australia are
also included in fees. Stephen Fitzgerald, Tan Le, Kathryn Lisson, Sir Brian Pomeroy, Eric Smith and Rolf Tolle received additional fees
of 10.0% in lieu of superannuation in Australia from 1 January 2022 to 30 June 2022, and 10.5% from 1 July 2022 to 31 December 2022.
2 Michael Wilkins, Yasmin Allen, John M Green and Jann Skinner are Australian residents. Superannuation is calculated as 10.0% of fees,
up to 30 June 2022 and increased by 0.5% to 10.5% through to 31 December 2022. Superannuation in excess of the statutory minimum
may be taken as additional cash fees or in the form of superannuation contributions at the option of the director. For part of 2022, Yasmin
Allen, John M Green and Jann Skinner elected to opt out of superannuation contributions and a superannuation allowance was paid in lieu
of superannuation contributions.
3 Yasmin Allen commenced in role on 1 July 2022.
4 Stephen Fitzgerald and John M Green retired on 5 May 2022.
Minimum shareholding requirement
With effect from 1 April 2014, a non-executive director MSR was introduced for the Board. Under this requirement, non-executive
directors have five years to build a minimum shareholding equal to 100% of annual base fees.
To assist current and new non-executive directors in meeting the requirement, the DSAP was established with effect from 1 June 2014.
The DSAP allows non-executive directors to sacrifice a portion of their director pre-tax base fees to acquire QBE shares. Shares
acquired in this way are not subject to performance targets, as they are acquired in place of cash payments. Non-executive directors’
shareholdings are shown overleaf.
All non-executive directors have met the MSR as at 31 December 2022, or are within the five-year period to achieve the MSR.
83
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84
Remuneration Report continued
4.
NON-EXECUTIVE DIRECTOR REMUNERATION
4.2
Non-executive director shareholdings
The table below details movements during the year in the number of ordinary shares in QBE held by the non-executive directors,
including their personally-related parties:
2022
Michael Wilkins
Yasmin Allen
Stephen Fitzgerald 2
John M Green 3
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
POSITION
TERM AS KMP
Chair
Director
Director
Director
Director
Director
Director
Director
Director
Director
Full year
Part year from 1 July 2022
Part year to 5 May 2022
Part year to 5 May 2022
Full year
Full year
Full year
Full year
Full year
Full year
INTEREST IN
SHARES AT
1 JANUARY 2022
NUMBER 1
CHANGES DURING
THE YEAR
NUMBER
INTEREST IN
SHARES AT
31 DECEMBER 2022
NUMBER
72,258
–
69,268
41,253
4,127
44,079
37,445
70,000
4,127
67,618
11,525
18,333
3,077
–
4,626
4,931
4,980
–
4,640
6,188
83,783
18,333
72,345
41,253
8,753
49,010
42,425
70,000
8,767
73,806
1 The interest in shares for Yasmin Allen represents the balance at the commencement date of 1 July 2022.
2 The interest in shares for Stephen Fitzgerald represents the balance at the date he retired as non-executive director on 5 May 2022 at the
conclusion of the Annual General Meeting, which updates the Appendix 3Z lodged on 6 May 2022.
3 The interest in shares for John M Green represents the balance at the date he retired as non-executive director on 5 May 2022 at the
conclusion of the Annual General Meeting.
84
Remuneration Report continued
4.
NON-EXECUTIVE DIRECTOR REMUNERATION
4.2
Non-executive director shareholdings
The table below details movements during the year in the number of ordinary shares in QBE held by the non-executive directors,
including their personally-related parties:
2022
Michael Wilkins
Yasmin Allen
Stephen Fitzgerald 2
John M Green 3
Tan Le
Kathryn Lisson
Sir Brian Pomeroy
Jann Skinner
Eric Smith
Rolf Tolle
Chair
Director
Director
Director
Director
Director
Director
Director
Director
Director
Full year
Part year from 1 July 2022
Part year to 5 May 2022
Part year to 5 May 2022
Full year
Full year
Full year
Full year
Full year
Full year
INTEREST IN
SHARES AT
1 JANUARY 2022
NUMBER 1
CHANGES DURING
INTEREST IN
SHARES AT
THE YEAR
NUMBER
31 DECEMBER 2022
NUMBER
72,258
–
69,268
41,253
4,127
44,079
37,445
70,000
4,127
67,618
11,525
18,333
3,077
–
4,626
4,931
4,980
–
4,640
6,188
83,783
18,333
72,345
41,253
8,753
49,010
42,425
70,000
8,767
73,806
1 The interest in shares for Yasmin Allen represents the balance at the commencement date of 1 July 2022.
2 The interest in shares for Stephen Fitzgerald represents the balance at the date he retired as non-executive director on 5 May 2022 at the
conclusion of the Annual General Meeting, which updates the Appendix 3Z lodged on 6 May 2022.
3 The interest in shares for John M Green represents the balance at the date he retired as non-executive director on 5 May 2022 at the
conclusion of the Annual General Meeting.
Directors' Report
FOR THE YEAR ENDED 31 DECEMBER 2022
Auditor
PricewaterhouseCoopers, Chartered Accountants, continues in office in accordance with section 327B of the Corporations Act 2001.
Non-audit services
During the year, PricewaterhouseCoopers performed certain other services in addition to statutory duties.
The Board, on the advice of the Audit Committee, has considered the position and is satisfied that the provision of non-audit services
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are also
satisfied that the provision of non-audit services by the auditor, as set out in note 8.8 to the financial statements, did not compromise
the auditor independence requirements of the Corporations Act 2001.
POSITION
TERM AS KMP
A copy of the auditor’s independence declaration required under section 307C of the Corporations Act 2001 is set out on page 86.
Details of amounts paid or payable to PricewaterhouseCoopers for audit and non-audit services are provided in note 8.8 to the
financial statements.
Rounding of amounts
The Company is of a kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
Amounts have been rounded off in the Directors’ Report to the nearest million dollars or, in certain cases, to the nearest thousand
dollars in accordance with that instrument.
Signed in SYDNEY this 17th day of February 2023 in accordance with a resolution of the directors.
Michael Wilkins AO
Director
Andrew Horton
Director
85
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86
Directors' Report continued
FOR THE YEAR ENDED 31 DECEMBER 2022
Auditor’s independence declaration
As lead auditor for the audit of QBE Insurance Group Limited for the year ended 31 December 2022, I declare that to the best
of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of QBE Insurance Group Limited and the entities it controlled during the period.
Voula Papageorgiou
Partner, PricewaterhouseCoopers
Sydney
17 February 2023
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999
Liability limited by a scheme approved under Professional Standards Legislation.
86
Directors' Report continued
FOR THE YEAR ENDED 31 DECEMBER 2022
Auditor’s independence declaration
of my knowledge and belief, there have been:
As lead auditor for the audit of QBE Insurance Group Limited for the year ended 31 December 2022, I declare that to the best
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of QBE Insurance Group Limited and the entities it controlled during the period.
Voula Papageorgiou
Partner, PricewaterhouseCoopers
Sydney
17 February 2023
Financial Report contents
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
NOTES TO THE FINANCIAL STATEMENTS
OVERVIEW
1.
1.1 About QBE
1.2 About this report
1.3 Segment information
UNDERWRITING ACTIVITIES
2.
2.1 Revenue
2.2 Net claims expense
2.3 Net outstanding claims liability
2.4 Claims development – net undiscounted central estimate
2.5 Unearned premium and deferred insurance costs
2.6 Trade and other receivables
2.7 Trade and other payables
INVESTMENT ACTIVITIES
Investment income
3.
3.1
3.2 Investment assets
RISK MANAGEMENT
4.
4.1 Strategic risk
4.2 Insurance risk
4.3 Credit risk
4.4 Market risk
4.5 Liquidity risk
4.6 Operational risk
4.7 Compliance risk
4.8 Group risk
5. CAPITAL STRUCTURE
5.1 Borrowings
5.2 Cash and cash equivalents
5.3 Contributed equity and reserves
5.4 Dividends
5.5 Earnings per share
5.6 Derivatives
TAX
6.
6.1 Reconciliation of prima facie tax to income tax expense or credit
6.2 Deferred income tax
GROUP STRUCTURE
7.
7.1 Disposals
7.2
7.3 Controlled entities
Intangible assets
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
T: +61 2 9659 2476, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
Liability limited by a scheme approved under Professional Standards Legislation.
DIRECTORS' DECLARATION
INDEPENDENT AUDITOR’S REPORT
OTHER
8.
8.1 Other accounting policies
8.2 Contingent liabilities
8.3 Offsetting financial assets and liabilities
8.4 Reconciliation of profit after income tax to net cash flows from
operating activities
8.5 Share‑based payments
8.6 Key management personnel
8.7 Defined benefit plans
8.8 Remuneration of auditors
8.9 Ultimate parent entity information
This Annual Report includes
the consolidated financial
statements for QBE
Insurance Group Limited (the
ultimate parent entity or the
Company) and its controlled
entities (QBE or the Group).
All amounts in this Financial
Report are presented in US
dollars unless otherwise
stated. QBE Insurance
Group Limited is a company
limited by its shares and
incorporated and domiciled
in Australia. Its registered
office is located at:
Level 18, 388 George Street
Sydney NSW 2000
Australia.
A description of the nature
of the Group’s operations
and its principal activities
is included on pages 4 to
31, none of which is part
of this Financial Report.
The Financial Report was
authorised for issue by the
directors on 17 February
2023. The directors have the
power to amend and reissue
the financial statements.
Through the use of the
internet, we have ensured
that our corporate reporting
is timely, complete and
available globally at
minimum cost to the
Company. All material press
releases, this Financial
Report and other information
are available at our QBE
investor centre at our
website: www.qbe.com.
88
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90
91
92
92
93
96
98
98
99
99
106
108
111
112
113
113
114
117
118
119
121
123
127
128
129
129
130
130
132
133
135
136
137
140
140
141
143
143
144
147
150
150
153
153
154
155
158
159
160
161
162
163
87
A
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2
2
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s
u
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w
P
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2
O
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t
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6
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O
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f
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t
i
o
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88
Consolidated statement
of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER 2022
Gross written premium
Unearned premium movement
Gross earned premium revenue
Outward reinsurance premium
Deferred reinsurance premium movement
Outward reinsurance premium expense
Net earned premium (a)
Gross claims expense
Reinsurance and other recoveries revenue
Net claims expense (b)
Gross commission expense
Reinsurance commission revenue
Net commission (c)
Underwriting and other expenses (d)
Underwriting result (a)+(b)+(c)+(d)
Investment (loss) income – policyholders’ funds
Investment expenses – policyholders’ funds
Insurance profit
Investment (loss) income – shareholders’ funds
Investment expenses – shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive (loss) income
Items that may be reclassified to profit or loss
Net movement in foreign currency translation reserve
Net movement in cash flow hedge and cost of hedging reserves
Income tax relating to these components of other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans
Income tax relating to this component of other comprehensive income
Other comprehensive loss after income tax
Total comprehensive income after income tax
Profit after income tax attributable to:
Ordinary equity holders of the Company
Non-controlling interests
Total comprehensive income after income tax attributable to:
Ordinary equity holders of the Company
Non-controlling interests
NOTE
2.1
2.2
2.2
2.2
2.1
3.1
3.1
3.1
3.1
5.1.2
7.1
7.2
6.1
5.3.2
5.3.2
5.3.2
2022
US$M
20,001
(934)
19,067
(4,920)
180
(4,740)
14,327
(12,220)
3,890
(8,330)
(2,950)
831
(2,119)
(1,836)
2,042
(490)
(19)
1,533
(257)
(10)
(245)
38
(7)
(106)
(27)
919
(141)
778
(379)
33
(10)
(36)
10
(382)
396
770
8
778
388
8
396
2021
US$M
18,457
(1,422)
17,035
(3,983)
356
(3,627)
13,408
(11,464)
3,093
(8,371)
(2,704)
634
(2,070)
(1,829)
1,138
94
(17)
1,215
53
(8)
(247)
–
(7)
(72)
(21)
913
(156)
757
(272)
41
(13)
21
(7)
(230)
527
750
7
757
520
7
527
EARNINGS PER SHARE FOR PROFIT AFTER INCOME TAX ATTRIBUTABLE TO ORDINARY EQUITY
HOLDERS OF THE COMPANY
For profit after income tax
Basic earnings per share
Diluted earnings per share
NOTE
5.5
5.5
2022
US CENTS
2021
US CENTS
48.6
48.2
47.5
47.2
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
88
Consolidated statement
of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER 2022
Gross written premium
Unearned premium movement
Gross earned premium revenue
Outward reinsurance premium
Deferred reinsurance premium movement
Outward reinsurance premium expense
Net earned premium (a)
Gross claims expense
Reinsurance and other recoveries revenue
Net claims expense (b)
Gross commission expense
Reinsurance commission revenue
Net commission (c)
Underwriting and other expenses (d)
Underwriting result (a)+(b)+(c)+(d)
Investment (loss) income – policyholders’ funds
Investment expenses – policyholders’ funds
Insurance profit
Investment (loss) income – shareholders’ funds
Investment expenses – shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive (loss) income
Items that may be reclassified to profit or loss
Net movement in foreign currency translation reserve
Net movement in cash flow hedge and cost of hedging reserves
Income tax relating to these components of other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans
Income tax relating to this component of other comprehensive income
Other comprehensive loss after income tax
Total comprehensive income after income tax
Profit after income tax attributable to:
Ordinary equity holders of the Company
Non-controlling interests
Total comprehensive income after income tax attributable to:
Ordinary equity holders of the Company
Non-controlling interests
NOTE
2.1
2.2
2.2
2.2
2.1
3.1
3.1
3.1
3.1
5.1.2
7.1
7.2
6.1
5.3.2
5.3.2
5.3.2
NOTE
5.5
5.5
2022
US$M
20,001
(934)
19,067
(4,920)
180
(4,740)
14,327
(12,220)
3,890
(8,330)
(2,950)
831
(2,119)
(1,836)
2,042
(490)
(19)
1,533
(257)
(10)
(245)
38
(7)
(106)
(27)
919
(141)
778
(379)
33
(10)
(36)
10
(382)
396
770
8
778
388
8
396
48.6
48.2
2021
US$M
18,457
(1,422)
17,035
(3,983)
356
(3,627)
13,408
(11,464)
3,093
(8,371)
(2,704)
634
(2,070)
(1,829)
1,138
94
(17)
1,215
53
(8)
(247)
–
(7)
(72)
(21)
913
(156)
757
(272)
41
(13)
21
(7)
(230)
527
750
7
757
520
7
527
47.5
47.2
Consolidated balance sheet
AS AT 31 DECEMBER 2022
Assets
Cash and cash equivalents
Investments
Derivative financial instruments
Trade and other receivables
Current tax assets
Deferred insurance costs
Reinsurance and other recoveries on outstanding claims
Other assets
Assets held for sale
Defined benefit plan surpluses
Right-of-use lease assets
Property, plant and equipment
Deferred tax assets
Investment properties
Investments in associates
Intangible assets
Total assets
Liabilities
Derivative financial instruments
Trade and other payables
Current tax liabilities
Unearned premium
Gross outstanding claims
Lease liabilities
Provisions
Defined benefit plan deficits
Deferred tax liabilities
Borrowings
Total liabilities
Net assets
Equity
Contributed equity
Treasury shares held in trust
Reserves
Retained profits
Shareholders’ equity
Non-controlling interests
Total equity
NOTE
5.2
3.2
5.6
2.6
2.5
2.3
3.2.1
8.7
6.2
7.2
5.6
2.7
2.5
2.3
8.7
6.2
5.1
5.3.1
5.3.2
2022
US$M
833
27,299
284
8,341
45
2,936
6,617
2
–
46
276
151
587
35
32
2,018
49,502
387
3,543
39
9,075
24,045
301
203
26
147
2,744
40,510
8,992
9,242
(1)
(1,365)
1,114
8,990
2
8,992
2021
US$M
819
28,111
142
7,109
6
2,697
6,757
2
50
92
328
155
521
37
28
2,449
49,303
452
3,215
24
8,637
24,282
354
129
29
31
3,268
40,421
8,882
9,777
(2)
(1,608)
714
8,881
1
8,882
EARNINGS PER SHARE FOR PROFIT AFTER INCOME TAX ATTRIBUTABLE TO ORDINARY EQUITY
2022
US CENTS
2021
US CENTS
HOLDERS OF THE COMPANY
For profit after income tax
Basic earnings per share
Diluted earnings per share
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
The consolidated balance sheet should be read in conjunction with the accompanying notes.
89
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
i
e
w
P
e
r
f
o
r
m
a
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c
e
2
O
p
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r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
r
e
v
i
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w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
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r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
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i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
90
Consolidated statement
of changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2022
SHAREHOLDERS’ EQUITY
CONTRIBUTED
EQUITY
US$M
TREASURY
SHARES HELD
IN TRUST
US$M
RESERVES
US$M
RETAINED
PROFITS
US$M
At 1 January 2022
Profit after income tax
Other comprehensive loss
Total comprehensive (loss)
income
Transactions with owners in
their capacity as owners
Shares issued under Employee
Share and Option Plan and held
in trust
Share-based payment expense
Shares vested and/or released
Dividends paid on ordinary
shares
Dividend Reinvestment Plan and
Bonus Share Plan
Distributions on capital notes
Foreign exchange
At 31 December 2022
9,777
–
–
–
29
–
–
–
36
–
(600)
9,242
(2)
–
–
–
(30)
–
31
–
–
–
–
(1)
(1,608)
–
(356)
(356)
–
39
(31)
–
–
–
591
(1,365)
714
770
(26)
744
–
–
–
(297)
3
(50)
–
1,114
SHAREHOLDERS’ EQUITY
CONTRIBUTED
EQUITY
US$M
TREASURY
SHARES HELD
IN TRUST
US$M
At 1 January 2021
Profit after income tax
Other comprehensive (loss)
income
Total comprehensive (loss)
income
Transactions with owners in
their capacity as owners
Shares issued under Employee
Share and Option Plan and held
in trust
Share-based payment expense
Shares vested and/or released
Dividends paid on ordinary
shares
Dividend Reinvestment Plan and
Bonus Share Plan
Distributions on capital notes
Foreign exchange
At 31 December 2021
10,273
–
–
–
31
–
–
–
11
–
(538)
9,777
(1)
–
–
–
(31)
–
30
–
–
–
–
(2)
RESERVES
US$M
(1,898)
–
(244)
(244)
–
32
(30)
–
–
–
532
(1,608)
RETAINED
PROFITS
US$M
117
750
14
764
–
–
–
(118)
1
(50)
–
714
NON-
CONTROLLING
INTERESTS
US$M
1
8
–
8
–
–
–
(7)
–
–
–
2
NON-
CONTROLLING
INTERESTS
US$M
1
7
–
7
–
–
–
(7)
–
–
–
1
TOTAL
US$M
8,881
770
(382)
388
(1)
39
–
(297)
39
(50)
(9)
8,990
TOTAL
US$M
8,491
750
(230)
520
–
32
–
(118)
12
(50)
(6)
8,881
TOTAL
EQUITY
US$M
8,882
778
(382)
396
(1)
39
–
(304)
39
(50)
(9)
8,992
TOTAL
EQUITY
US$M
8,492
757
(230)
527
–
32
–
(125)
12
(50)
(6)
8,882
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
90
Consolidated statement
of changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2022
SHAREHOLDERS’ EQUITY
CONTRIBUTED
SHARES HELD
TREASURY
IN TRUST
US$M
RESERVES
US$M
RETAINED
PROFITS
US$M
NON-
CONTROLLING
INTERESTS
US$M
EQUITY
US$M
9,777
At 1 January 2022
Profit after income tax
Other comprehensive loss
Total comprehensive (loss)
income
Transactions with owners in
their capacity as owners
Shares issued under Employee
Share and Option Plan and held
in trust
Share-based payment expense
Shares vested and/or released
Dividends paid on ordinary
shares
Dividend Reinvestment Plan and
Bonus Share Plan
Distributions on capital notes
Foreign exchange
At 31 December 2022
At 1 January 2021
Profit after income tax
Other comprehensive (loss)
income
income
Total comprehensive (loss)
Transactions with owners in
their capacity as owners
Shares issued under Employee
Share and Option Plan and held
in trust
Share-based payment expense
Shares vested and/or released
Dividends paid on ordinary
shares
Dividend Reinvestment Plan and
Bonus Share Plan
Distributions on capital notes
Foreign exchange
At 31 December 2021
(600)
9,242
EQUITY
US$M
10,273
–
–
–
29
–
–
–
36
–
–
–
–
31
–
–
–
11
–
(538)
9,777
(2)
–
–
–
(30)
–
31
–
–
–
–
(1)
(1)
–
–
–
(31)
–
30
–
–
–
–
(2)
(1,608)
–
(356)
(356)
–
39
(31)
–
–
–
591
(1,365)
(1,898)
–
(244)
(244)
–
32
(30)
–
–
–
532
(1,608)
(297)
(297)
1,114
8,990
TOTAL
US$M
8,881
770
(382)
388
(1)
39
–
39
(50)
(9)
TOTAL
US$M
8,491
750
(230)
520
–
32
–
(118)
12
(50)
(6)
8,881
714
770
(26)
744
–
–
–
(50)
3
–
117
750
14
764
–
–
–
(118)
(50)
1
–
714
SHAREHOLDERS’ EQUITY
CONTRIBUTED
SHARES HELD
TREASURY
IN TRUST
US$M
RESERVES
US$M
RETAINED
PROFITS
US$M
NON-
CONTROLLING
INTERESTS
US$M
TOTAL
EQUITY
US$M
8,882
778
(382)
396
(1)
39
–
(304)
39
(50)
(9)
8,992
TOTAL
EQUITY
US$M
8,492
757
(230)
527
–
32
–
(125)
12
(50)
(6)
8,882
1
8
–
8
(7)
–
–
–
–
–
–
2
1
7
–
7
(7)
–
–
–
–
–
–
1
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated statement
of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2022
Operating activities
Premium received
Reinsurance and other recoveries received
Outward reinsurance premium paid
Claims paid
Acquisition and other underwriting costs paid
Interest received
Dividends and distributions received
Other operating payments
Interest paid
Income taxes paid
Net cash flows from operating activities
Investing activities
Net (payments for purchase) proceeds on sale of growth assets
Net payments for purchase of interest-bearing financial assets
Net payments for foreign exchange transactions
Payments for purchase of intangible assets
Payments for purchase of property, plant and equipment
Payments for investment in associates
Proceeds on disposal of entities and businesses (net of cash disposed)
Proceeds on sale of investment property
Net cash flows from investing activities
Financing activities
Purchase of treasury shares
Payments relating to principal element of lease liabilities
Proceeds from borrowings
Repayments of borrowings
Dividends and distributions paid
Net cash flows from financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes
Cash and cash equivalents at the end of the year
NOTE
8.4
5.2
2022
US$M
18,405
3,176
(4,167)
(10,384)
(4,268)
421
126
(197)
(246)
(74)
2,792
(512)
(1,494)
(186)
(132)
(33)
(11)
361
–
(2,007)
(1)
(62)
–
(412)
(315)
(790)
(5)
819
19
833
2021
US$M
17,020
2,538
(2,616)
(10,056)
(4,116)
406
124
(220)
(238)
(88)
2,754
156
(2,782)
(20)
(91)
(29)
(9)
–
4
(2,771)
–
(85)
550
(202)
(162)
101
84
766
(31)
819
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
91
A
n
n
u
a
l
R
e
p
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t
2
0
2
2
Q
B
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I
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s
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a
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e
G
r
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1
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w
P
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f
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m
a
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2
O
p
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r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
r
e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
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r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
92
Notes to the financial statements
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.1
About QBE
About QBE Insurance Group
QBE is one of the world’s largest insurance and reinsurance companies, with operations in all the major insurance markets.
Formed in Australia in 1886, QBE employs more than 12,000 people and carries on insurance activities in 27 countries, with
operations in Australia, Europe, North America, Asia and the Pacific. QBE’s captive reinsurer, Equator Re, provides reinsurance
protection to our divisions in conjunction with the Group’s external reinsurance programs.
The Company is listed on the Australian Securities Exchange and is a for‑profit entity.
About insurance
In simple terms, insurance and reinsurance companies help their customers (consumers, businesses and other insurance companies)
to manage risk. More broadly put, an insurance company creates value by pooling and redistributing risk. This is done by collecting
premium from those that it insures (i.e. policyholders), and then paying the claims of the few that call upon their insurance protection.
A company may also choose to reduce some of its own accumulated risk through the use of outward reinsurance, which is insurance
for insurance companies. As not all policyholders will actually experience a claim event, the effective pooling and redistribution of risk
lowers the total cost of risk management, thereby making insurance protection more cost effective for all.
The operating model of insurance companies relies on profits being generated by:
• appropriately pricing risk and charging adequate premium to cover the expected payouts that will be incurred over the life of the
insurance policy (both claims and operating expenses); and
• earning a return on the collected premium and funds withheld to pay future claims through the adoption of an appropriate
investment strategy.
Insurance therefore serves a critical function of providing customers with the confidence to achieve their business and personal goals
through cost‑effective risk management. This is achieved within a highly regulated environment, designed to ensure that insurance
companies maintain adequate capital to protect the interests of policyholders.
The diagram below presents a simplified overview of the key components of this Financial Report:
ss kk MM aa nn aa gg eemmeenntt FFrraammeewwoorrkk NNoottee 44
R i s k m anagement Note 4
RR ii
Debt and
equity investors
Note 2
Underwriting
activities
D
e
b
t
a
n
d
e
q
u
i
t
y
i
i
D
v
d
e
n
d
s
a
n
d
i
n
t
e
r
e
s
t
Note 5
Capital
structure
Policyholders
Premium
Claims
Reinsurers
Reinsurance premium
Reinsurance recoveries
Notes 6 to 8
Other costs of
doing business
Note 1
T
a
x
e
s
O
t
h
e
r
c
o
s
t
s
Investments
Dividends and interest
Fixed income
assets
and growth
assets
Note 3
Investment
activities
Tax authorities,
service providers,
employees, etc.
RRiisskk MMaannaaggeemmeenntt FFrraa mm ee ww oo rr kk NN oo tt
Risk manageme n t
N o t e 4
ee 44
92
93
Notes to the financial statements
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.1
About QBE
About QBE Insurance Group
QBE is one of the world’s largest insurance and reinsurance companies, with operations in all the major insurance markets.
Formed in Australia in 1886, QBE employs more than 12,000 people and carries on insurance activities in 27 countries, with
operations in Australia, Europe, North America, Asia and the Pacific. QBE’s captive reinsurer, Equator Re, provides reinsurance
protection to our divisions in conjunction with the Group’s external reinsurance programs.
The Company is listed on the Australian Securities Exchange and is a for‑profit entity.
About insurance
In simple terms, insurance and reinsurance companies help their customers (consumers, businesses and other insurance companies)
to manage risk. More broadly put, an insurance company creates value by pooling and redistributing risk. This is done by collecting
premium from those that it insures (i.e. policyholders), and then paying the claims of the few that call upon their insurance protection.
A company may also choose to reduce some of its own accumulated risk through the use of outward reinsurance, which is insurance
for insurance companies. As not all policyholders will actually experience a claim event, the effective pooling and redistribution of risk
lowers the total cost of risk management, thereby making insurance protection more cost effective for all.
The operating model of insurance companies relies on profits being generated by:
• appropriately pricing risk and charging adequate premium to cover the expected payouts that will be incurred over the life of the
insurance policy (both claims and operating expenses); and
• earning a return on the collected premium and funds withheld to pay future claims through the adoption of an appropriate
investment strategy.
Insurance therefore serves a critical function of providing customers with the confidence to achieve their business and personal goals
through cost‑effective risk management. This is achieved within a highly regulated environment, designed to ensure that insurance
companies maintain adequate capital to protect the interests of policyholders.
The diagram below presents a simplified overview of the key components of this Financial Report:
R i s k m anagement Note 4
ss kk MM aa nn aa gg eemmeenntt FFrraammeewwoorrkk NNoottee 44
RR ii
Debt and
equity investors
Note 2
Underwriting
activities
Note 5
Capital
structure
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Policyholders
Premium
Claims
Reinsurers
Reinsurance premium
Reinsurance recoveries
Investments
Dividends and interest
Fixed income
assets
and growth
assets
Notes 6 to 8
Other costs of
doing business
Note 3
Investment
activities
Tax authorities,
service providers,
employees, etc.
RRiisskk MMaannaaggeemmeenntt FFrraa mm ee ww oo rr kk NN oo tt
Risk manageme n t
N o t e 4
ee 44
1.2
About this report
This Financial Report includes the consolidated financial statements of QBE Insurance Group Limited (the ultimate parent entity
or the Company) and its controlled entities (QBE or the Group).
The Financial Report includes the four primary statements, namely the statement of comprehensive income (which comprises profit
or loss and other comprehensive income or loss), balance sheet, statement of changes in equity and statement of cash flows as well
as associated notes as required by Australian Accounting Standards. Disclosures have been grouped into the following categories
in order to assist users in their understanding of the financial statements:
1. Overview contains information that impacts the Financial Report as a whole as well as segment reporting disclosures.
2. Underwriting activities brings together results and balance sheet disclosures relevant to the Group’s insurance activities.
3.
Investment activities includes results and balance sheet disclosures relevant to the Group’s investments.
4. Risk management provides commentary on the Group’s exposure to various financial and capital risks, explaining the potential
impact on the results and balance sheet and how the Group manages these risks.
5. Capital structure provides information about the debt and equity components of the Group’s capital.
6. Tax includes disclosures relating to the Group’s tax expense and balances.
7. Group structure provides a summary of the Group’s controlled entities and includes disclosures in relation to transactions
impacting the Group structure.
8. Other includes additional disclosures required to comply with Australian Accounting Standards.
Where applicable within each note, disclosures are further analysed as follows:
• Overview provides some context to assist users in understanding the disclosures.
• Disclosures (both numbers and commentary) provide analysis of balances as required by Australian Accounting Standards.
• How we account for the numbers summarises the accounting policies relevant to an understanding of the numbers.
• Critical accounting judgements and estimates explains the key estimates and judgements applied by QBE in determining
the numbers.
The notes include information which the directors believe is required to understand the financial statements and is material and
relevant to the operations, balance sheet and results of the Group. Information is considered material and relevant if:
• the amount in question is significant because of its size or nature;
• it is important to assist in understanding the results of the Group;
• it helps to explain the impact of significant changes in the Group’s business – for example, significant acquisitions or disposals; or
• it relates to an aspect of the Group’s operations that is important to its future performance.
Basis of preparation
1.2.1
This Financial Report is a general purpose financial report which:
• has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001;
• complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)
and Interpretations as issued by the IFRS Interpretations Committee (IFRIC);
• has been prepared on a historical cost basis as modified by certain exceptions, the most significant of which are the measurement
of investments and derivatives at fair value and the measurement of the net outstanding claims liability at present value;
• is presented in US dollars; and
• is presented with values rounded to the nearest million dollars or, in certain cases, to the nearest thousand dollars in accordance
with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
New and amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are
now effective are detailed in note 8.1.1.
The Group has not adopted any Accounting Standards and Interpretations that have been issued or amended but are not yet effective
as listed in note 8.1.2.
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Company as at 31 December
2022 and the results for the financial year then ended. In preparing the consolidated financial statements, all transactions between
controlled entities are eliminated in full. Where control of an entity commences or ceases during a financial year, the results are
included for that part of the year during which control existed. A list of entities controlled by the Company at the balance date
is contained in note 7.3.
Lloyd’s syndicates are accounted for on a proportional basis. The nature of Lloyd’s syndicates is such that, even when one party
provides the majority of capital, the syndicate as a whole is not controlled for accounting purposes.
Where necessary, comparative information has been restated to conform to the current year’s disclosures.
A
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94
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.2.2 Critical accounting judgements and estimates
The preparation of the Group’s consolidated financial statements requires management to make judgements and estimates that affect
reported amounts.
In view of the geographic and product diversity of its international operations, the Group has developed a centralised risk management
and policy framework designed to ensure consistency of approach across a number of operational activities, subject to the specific
requirements of local markets, legislation and regulation. Such operational activities include underwriting, claims management,
actuarial assessment of the outstanding claims liability and investment management.
Given the centralised approach, sensitivity analyses in respect of critical accounting estimates and judgements are presented at the
consolidated Group level in order to provide information and analysis which is meaningful, relevant, reliable and comparable year-
on-year. Sensitivity disclosure at business segment or product level would not provide a meaningful overview given the complex
interrelationships between the variables underpinning the Group’s operations.
The key areas in which critical estimates and judgements are applied are as follows:
• net outstanding claims liability (note 2.3);
• liability adequacy test (note 2.5.1);
• recoverability of deferred tax assets (note 6.2.1); and
• impairment testing of intangible assets (note 7.2.1).
The Group continues to monitor the potential impacts of COVID-19 on key areas of judgement. While the areas of critical accounting
judgements and estimates did not change, the impact of COVID-19 resulted in the application of judgement in the determination
of the net discounted central estimate and risk margin, and is discussed in the relevant notes where appropriate. Given the continued
uncertainty in relation to potential legislative outcomes, the impact of any changes will be accounted for in future reporting periods
as they arise.
The Group has also considered the impact of climate change on the amounts reported and disclosed in the financial statements,
particularly in the context of the risks and opportunities identified in our climate change disclosures on pages 34 to 43 of this Annual
Report. Details of how these considerations have been reflected in the critical accounting judgements and estimates are discussed
in the relevant notes where appropriate.
1.2.3 Australian pricing promise review
Following a review of Australian pricing practices dating back several years across a number of policy administration systems and
products, the Group has identified instances where policy pricing promises were not fully delivered. As a result, the Group has
recognised a provision on the balance sheet and a $75 million net cost (before tax) in the consolidated statement of comprehensive
income during the year based on current estimates, of which $53 million relates to customer remediation for premium earned,
$15 million relates to interest payable, and $7 million relates to other costs associated with administering the program.
In estimating the amounts recognised, assumptions have been made based on the findings of the review, including in relation to the
number of affected customers, and the premiums and interest refundable.
94
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.2.2 Critical accounting judgements and estimates
The preparation of the Group’s consolidated financial statements requires management to make judgements and estimates that affect
reported amounts.
In view of the geographic and product diversity of its international operations, the Group has developed a centralised risk management
and policy framework designed to ensure consistency of approach across a number of operational activities, subject to the specific
requirements of local markets, legislation and regulation. Such operational activities include underwriting, claims management,
actuarial assessment of the outstanding claims liability and investment management.
Given the centralised approach, sensitivity analyses in respect of critical accounting estimates and judgements are presented at the
consolidated Group level in order to provide information and analysis which is meaningful, relevant, reliable and comparable year-
on-year. Sensitivity disclosure at business segment or product level would not provide a meaningful overview given the complex
interrelationships between the variables underpinning the Group’s operations.
The key areas in which critical estimates and judgements are applied are as follows:
• net outstanding claims liability (note 2.3);
• liability adequacy test (note 2.5.1);
• recoverability of deferred tax assets (note 6.2.1); and
• impairment testing of intangible assets (note 7.2.1).
The Group continues to monitor the potential impacts of COVID-19 on key areas of judgement. While the areas of critical accounting
judgements and estimates did not change, the impact of COVID-19 resulted in the application of judgement in the determination
of the net discounted central estimate and risk margin, and is discussed in the relevant notes where appropriate. Given the continued
uncertainty in relation to potential legislative outcomes, the impact of any changes will be accounted for in future reporting periods
as they arise.
in the relevant notes where appropriate.
1.2.3 Australian pricing promise review
Following a review of Australian pricing practices dating back several years across a number of policy administration systems and
products, the Group has identified instances where policy pricing promises were not fully delivered. As a result, the Group has
recognised a provision on the balance sheet and a $75 million net cost (before tax) in the consolidated statement of comprehensive
income during the year based on current estimates, of which $53 million relates to customer remediation for premium earned,
$15 million relates to interest payable, and $7 million relates to other costs associated with administering the program.
In estimating the amounts recognised, assumptions have been made based on the findings of the review, including in relation to the
number of affected customers, and the premiums and interest refundable.
1.2.4
Foreign currency
Translation of foreign currency transactions and balances
Transactions included in the financial statements of controlled entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). Foreign currency transactions are translated into functional
currencies at the spot rates of exchange applicable at the dates of the transactions. At the balance date, monetary assets and
liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing at that date. Resulting exchange
gains and losses are included in profit or loss.
Translation of foreign operations
The results and balance sheets of all foreign operations that have a functional currency different from the Group’s presentation
currency of US dollars are translated into US dollars as follows:
• income, expenses and other current period movements in comprehensive income are translated at average rates of exchange; and
• balance sheet items are translated at the closing balance date rates of exchange.
On consolidation, exchange differences arising from the translation of net investments in foreign operations are taken to shareholders’
equity and recognised in other comprehensive income. When a foreign operation is sold in whole or part and capital is repatriated,
exchange differences on translation from the entity’s functional currency to the ultimate parent entity’s functional currency of Australian
dollars are reclassified out of other comprehensive income and recognised in profit or loss as part of the gain or loss on sale.
95
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The Group has also considered the impact of climate change on the amounts reported and disclosed in the financial statements,
particularly in the context of the risks and opportunities identified in our climate change disclosures on pages 34 to 43 of this Annual
Report. Details of how these considerations have been reflected in the critical accounting judgements and estimates are discussed
The Group designates hedge relationships which meet the specified criteria in AASB 9 Financial Instruments as either cash flow
hedges or hedges of net investments in foreign operations. Further information on the accounting for derivatives and for designated
hedge relationships is provided in note 5.6.
Exchange rates
The principal exchange rates used in the preparation of the financial statements were:
2022
2021
4
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s
PROFIT OR LOSS
BALANCE SHEET
PROFIT OR LOSS
BALANCE SHEET
’
Hedging of foreign exchange risk
The Group manages its foreign exchange exposures as part of its foreign currency risk management processes, further information
on which is provided in note 4.4.
QBE uses borrowings to mitigate currency risk on translation of net investments in foreign operations to the ultimate parent entity’s
functional currency of Australian dollars. QBE may elect to use derivatives to manage currency translation risk in order to preserve capital.
QBE also uses derivatives to mitigate risk associated with foreign currency transactions and balances.
3
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A$/US$
£/US$
€/US$
0.693
1.232
1.051
0.678
1.203
1.067
0.751
1.375
1.182
0.727
1.353
1.138
5
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96
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.3
Segment information
Overview
Information is provided by operating segment to assist an understanding of the Group’s performance. The operating
segments are consistent with the basis on which information is provided to the Group Executive Committee for
measuring performance and determining the allocation of capital, being the basis upon which the Group’s underwriting
products and services are managed within the various markets in which QBE operates.
Operating segments
The Group’s operating segments are as follows:
• North America writes general insurance, reinsurance and Crop business in the United States.
• International writes general insurance business in the United Kingdom, Europe and Canada. It also writes general
insurance and reinsurance business through Lloyd’s; worldwide reinsurance business through offices in the United
Kingdom, the United States, Ireland, Bermuda, Dubai and mainland Europe; and provides personal and commercial
insurance covers in Hong Kong, Singapore, Malaysia and Vietnam.
• Australia Pacific primarily underwrites general insurance risks throughout Australia, New Zealand and the Pacific
region, providing all major lines of insurance for personal and commercial risks.
Corporate & Other includes non-operating holding companies that do not form part of the Group’s insurance operations;
gains or losses on disposals; and financing costs and amortisation of any intangibles which are not allocated
to a specific operating segment. It also includes consolidation adjustments and internal reinsurance eliminations.
Intersegment transactions are priced on an arm’s length basis and are eliminated on consolidation.
2022
Gross written premium
Gross earned premium revenue – external
Gross earned premium revenue – internal
Outward reinsurance premium expense
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Investment (loss) income – policyholders’
funds
Insurance profit
Investment loss – shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit (loss) before income tax
Income tax (expense) credit
Profit (loss) after income tax
Net profit attributable to non-controlling
interests
Net profit (loss) after income tax attributable
to ordinary equity holders of the Company
NORTH AMERICA
US$M
INTERNATIONAL
US$M
AUSTRALIA
PACIFIC
US$M
TOTAL
REPORTABLE
SEGMENTS
US$M
CORPORATE
& OTHER
US$M
7,274
7,213
–
(3,323)
3,890
(2,669)
(456)
(508)
257
(97)
160
(68)
(1)
–
–
(51)
–
40
(8)
32
–
32
7,546
6,901
7
(934)
5,974
(3,017)
(1,045)
(678)
1,234
(417)
817
(176)
(2)
–
–
(21)
–
618
(123)
495
–
495
5,188
4,944
–
(478)
4,466
(2,688)
(613)
(607)
558
(15)
543
(3)
(19)
–
–
(14)
(13)
494
(170)
324
–
324
20,008
19,058
7
(4,735)
14,330
(8,374)
(2,114)
(1,793)
2,049
(529)
1,520
(247)
(22)
–
–
(86)
(13)
1,152
(301)
851
–
851
(7)
9
(7)
(5)
(3)
44
(5)
(43)
(7)
20
13
(20)
(223)
38
(7)
(20)
(14)
(233)
160
(73)
(8)
(81)
TOTAL
US$M
20,001
19,067
–
(4,740)
14,327
(8,330)
(2,119)
(1,836)
2,042
(509)
1,533
(267)
(245)
38
(7)
(106)
(27)
919
(141)
778
(8)
770
96
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
1.
OVERVIEW
1.3
Segment information
Overview
Information is provided by operating segment to assist an understanding of the Group’s performance. The operating
segments are consistent with the basis on which information is provided to the Group Executive Committee for
measuring performance and determining the allocation of capital, being the basis upon which the Group’s underwriting
products and services are managed within the various markets in which QBE operates.
Operating segments
The Group’s operating segments are as follows:
• North America writes general insurance, reinsurance and Crop business in the United States.
• International writes general insurance business in the United Kingdom, Europe and Canada. It also writes general
insurance and reinsurance business through Lloyd’s; worldwide reinsurance business through offices in the United
Kingdom, the United States, Ireland, Bermuda, Dubai and mainland Europe; and provides personal and commercial
insurance covers in Hong Kong, Singapore, Malaysia and Vietnam.
• Australia Pacific primarily underwrites general insurance risks throughout Australia, New Zealand and the Pacific
region, providing all major lines of insurance for personal and commercial risks.
Corporate & Other includes non-operating holding companies that do not form part of the Group’s insurance operations;
gains or losses on disposals; and financing costs and amortisation of any intangibles which are not allocated
to a specific operating segment. It also includes consolidation adjustments and internal reinsurance eliminations.
Intersegment transactions are priced on an arm’s length basis and are eliminated on consolidation.
NORTH AMERICA
INTERNATIONAL
AUSTRALIA
REPORTABLE
CORPORATE
SEGMENTS
US$M
& OTHER
US$M
2022
Gross written premium
Gross earned premium revenue – external
Gross earned premium revenue – internal
Outward reinsurance premium expense
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Investment (loss) income – policyholders’
funds
Insurance profit
Investment loss – shareholders’ funds
Financing and other costs
Gain on sale of entities and businesses
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
Profit (loss) before income tax
Income tax (expense) credit
Profit (loss) after income tax
Net profit attributable to non-controlling
interests
Net profit (loss) after income tax attributable
to ordinary equity holders of the Company
US$M
7,274
7,213
–
(3,323)
3,890
(2,669)
(456)
(508)
257
(97)
160
(68)
(1)
–
–
(51)
–
40
(8)
32
–
32
US$M
7,546
6,901
7
(934)
5,974
(3,017)
(1,045)
(678)
1,234
(417)
817
(176)
(2)
–
–
(21)
–
618
(123)
495
–
495
PACIFIC
US$M
5,188
4,944
–
(478)
4,466
(2,688)
(613)
(607)
558
(15)
543
(3)
(19)
–
–
(14)
(13)
494
(170)
324
–
324
TOTAL
20,008
19,058
7
(4,735)
14,330
(8,374)
(2,114)
(1,793)
2,049
(529)
1,520
(247)
(22)
–
–
(86)
(13)
1,152
(301)
851
–
851
TOTAL
US$M
20,001
19,067
–
(4,740)
14,327
(8,330)
(2,119)
(1,836)
2,042
(509)
1,533
(267)
(245)
38
(7)
(106)
(27)
919
(141)
778
(8)
770
(7)
9
(7)
(5)
(3)
44
(5)
(43)
(7)
20
13
(20)
(223)
38
(7)
(20)
(14)
(233)
160
(73)
(8)
(81)
2021
Gross written premium
Gross earned premium revenue – external
Gross earned premium revenue – internal
Outward reinsurance premium expense
Net earned premium
Net claims expense
Net commission
Underwriting and other expenses
Underwriting result
Investment income – policyholders’ funds
Insurance (loss) profit
Investment income – shareholders’ funds
Financing and other costs
Share of net loss of associates
Restructuring and related expenses
Amortisation and impairment of intangibles
(Loss) profit before income tax
Income tax credit (expense)
(Loss) profit after income tax
Net profit attributable to non-controlling
interests
Net (loss) profit after income tax attributable
to ordinary equity holders of the Company
Geographical analysis
NORTH AMERICA
US$M
INTERNATIONAL
US$M
AUSTRALIA
PACIFIC
US$M
TOTAL
REPORTABLE
SEGMENTS
US$M
CORPORATE
& OTHER
US$M
6,289
5,838
–
(1,873)
3,965
(3,136)
(512)
(460)
(143)
30
(113)
30
(1)
–
(18)
–
(102)
21
(81)
–
(81)
6,962
6,480
6
(947)
5,539
(3,118)
(978)
(724)
719
12
731
5
(2)
–
(8)
–
726
(139)
587
5,215
4,730
1
(831)
3,900
(2,217)
(581)
(601)
501
22
523
10
(6)
–
(13)
(5)
509
(149)
360
18,466
17,048
7
(3,651)
13,404
(8,471)
(2,071)
(1,785)
1,077
64
1,141
45
(9)
–
(39)
(5)
1,133
(267)
866
–
–
–
(9)
(13)
(7)
24
4
100
1
(44)
61
13
74
–
(238)
(7)
(33)
(16)
(220)
111
(109)
(7)
TOTAL
US$M
18,457
17,035
–
(3,627)
13,408
(8,371)
(2,070)
(1,829)
1,138
77
1,215
45
(247)
(7)
(72)
(21)
913
(156)
757
(7)
587
360
866
(116)
750
North America is defined by reference to its geographical location and, as such, satisfies the requirements of a geographical
analysis as well as an operating segment analysis.
Gross earned premium revenue – external was $4,518 million (2021 $4,254 million) for Australia, the ultimate parent entity’s country
of domicile, and was $2,860 million (2021 $2,439 million) for risks located in the United Kingdom. No other country within International
or Australia Pacific is individually material in this respect.
Product analysis
QBE does not collect Group-wide revenue information by product and the cost to develop this information would be excessive.
Gross earned premium revenue by class of business is disclosed in note 4.2.
97
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3
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6
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98
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
Overview
This section provides analysis and commentary on the Group’s underwriting activities. Underwriting, in simple terms,
is the agreement by the insurer to assume insurance risk in return for a premium paid by the insured. The underwriter
assesses the quality of the risk and prices it accordingly.
2.1
Revenue
Overview
Revenue mainly comprises premiums charged for providing insurance coverage. Premiums are classified as:
• direct, being those paid by the policyholder to the insurer;
• facultative, being reinsurance of an individual (usually significant) risk by a ceding insurer or reinsurer; or
• inward reinsurance, being coverage provided to an insurer or reinsurer in relation to a specified grouping of policies
or risks.
Other sources of revenue include amounts recovered from reinsurers under the terms of reinsurance contracts,
commission income from reinsurers and salvage or third-party recoveries.
Gross earned premium revenue
Direct and facultative
Inward reinsurance
Other revenue
Reinsurance and other recoveries revenue
Reinsurance commission revenue
NOTE
2.2
2022
US$M
17,429
1,638
19,067
3,890
831
23,788
2021
US$M
15,493
1,542
17,035
3,093
634
20,762
How we account for the numbers
Premium revenue
Premium written comprises amounts charged to policyholders, excluding taxes collected on behalf of third parties.
Premium is recognised as revenue in profit or loss based on the incidence of the pattern of risk associated with the
insurance policy. The earned portion of premium on unclosed business, being business that is written at the balance
date but for which detailed policy information is not yet booked, is also included in premium revenue.
Reinsurance and other recoveries
Reinsurance and other recoveries on paid claims, reported claims not yet paid, claims incurred but not reported (IBNR)
and claims incurred but not enough reported (IBNER) are recognised as revenue. Recoveries are measured as the
present value of the expected future receipts.
98
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.1
Revenue
Overview
Overview
or risks.
Revenue mainly comprises premiums charged for providing insurance coverage. Premiums are classified as:
• direct, being those paid by the policyholder to the insurer;
• facultative, being reinsurance of an individual (usually significant) risk by a ceding insurer or reinsurer; or
• inward reinsurance, being coverage provided to an insurer or reinsurer in relation to a specified grouping of policies
Other sources of revenue include amounts recovered from reinsurers under the terms of reinsurance contracts,
commission income from reinsurers and salvage or third-party recoveries.
Gross earned premium revenue
Direct and facultative
Inward reinsurance
Other revenue
Reinsurance and other recoveries revenue
Reinsurance commission revenue
NOTE
2.2
2022
US$M
17,429
1,638
19,067
3,890
831
23,788
2021
US$M
15,493
1,542
17,035
3,093
634
20,762
How we account for the numbers
Premium revenue
Premium written comprises amounts charged to policyholders, excluding taxes collected on behalf of third parties.
Premium is recognised as revenue in profit or loss based on the incidence of the pattern of risk associated with the
insurance policy. The earned portion of premium on unclosed business, being business that is written at the balance
date but for which detailed policy information is not yet booked, is also included in premium revenue.
Reinsurance and other recoveries
Reinsurance and other recoveries on paid claims, reported claims not yet paid, claims incurred but not reported (IBNR)
and claims incurred but not enough reported (IBNER) are recognised as revenue. Recoveries are measured as the
present value of the expected future receipts.
This section provides analysis and commentary on the Group’s underwriting activities. Underwriting, in simple terms,
is the agreement by the insurer to assume insurance risk in return for a premium paid by the insured. The underwriter
assesses the quality of the risk and prices it accordingly.
The largest expense for an insurance company is net claims expense, which is the difference between the net
outstanding claims liability (as described in note 2.3) at the beginning and the end of the financial year plus
any claims payments made net of reinsurance and other recoveries received during the financial year.
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2.2
Net claims expense
Overview
Gross claims expense
Direct and facultative
Inward reinsurance
Reinsurance and other recoveries revenue
Direct and facultative
Inward reinsurance
Net claims expense
Analysed as follows:
Movement in net discounted central estimate
Movement in risk margin
Net claims expense
2.3
Net outstanding claims liability
Overview
NOTE
2.1
2.4.2
2.3.3
2022
US$M
11,335
885
12,220
3,769
121
3,890
8,330
8,391
(61)
8,330
2021
US$M
10,321
1,143
11,464
2,851
242
3,093
8,371
8,453
(82)
8,371
2
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The net outstanding claims liability comprises the elements described below:
’
• the gross central estimate (note 2.3.1): This is the provision for expected future payments for claims incurred and
includes claims reported but not yet paid, IBNR, IBNER and estimated claims handling costs; less
• reinsurance and other recoveries on outstanding claims (note 2.3.2): Insurance companies may elect to purchase
reinsurance cover to manage their exposure to any one claim or series of claims. When an insurance company incurs
a claim as a result of an insured loss, it may be able to recover some of that claim from reinsurance. An insurer may
also be entitled to non-reinsurance recoveries under the insurance contract such as salvage, subrogation and sharing
arrangements with other insurers; less
• an amount to reflect the discount to present value using risk‑free rates of return: The net central estimate
is discounted to present value recognising that the claim and/or recovery may not be settled for some time.
The weighted average risk-free rate for each operating segment and for the consolidated Group are summarised
in note 2.3.4; plus
• a risk margin (note 2.3.3): A risk margin is added to reflect the inherent uncertainty in the net discounted central
estimate of outstanding claims.
Gross discounted central estimate
Risk margin
Gross outstanding claims
Reinsurance and other recoveries on outstanding claims
Net outstanding claims
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NOTE
2.3.1
2.3.3
2.3.2
2022
US$M
22,758
1,287
24,045
(6,617)
17,428
2021
US$M
22,864
1,418
24,282
(6,757)
17,525
100
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
The table below analyses the movement in the net outstanding claims liability, showing separately the movement in the gross liability
and the impact of reinsurance:
At 1 January
Claims expense – current accident year
Claims expense – prior accident years
Movement in risk margin
Incurred claims recognised in profit or loss
Claims payments
Foreign exchange
At 31 December
NOTE
2.4.2
2.4.2
2.3.3
2.2
2022
GROSS REINSURANCE
US$M
US$M
24,282
14,092
(1,811)
(61)
12,220
(11,292)
(1,165)
24,045
(6,757)
(4,572)
682
–
(3,890)
3,861
169
(6,617)
NET
US$M
17,525
9,520
(1,129)
(61)
8,330
(7,431)
(996)
17,428
2021
GROSS REINSURANCE
US$M
US$M
23,861
12,172
(626)
(82)
11,464
(10,361)
(682)
24,282
(6,527)
(3,359)
266
–
(3,093)
2,742
121
(6,757)
2.3.1 Gross discounted central estimate
Gross undiscounted central estimate excluding claims settlement costs
Claims settlement costs
Gross undiscounted central estimate
Discount to present value
Gross discounted central estimate
Payable within 12 months
Payable in greater than 12 months
Gross discounted central estimate
NOTE
2.3
2.3
2022
US$M
25,184
488
25,672
(2,914)
22,758
10,006
12,752
22,758
NET
US$M
17,334
8,813
(360)
(82)
8,371
(7,619)
(561)
17,525
2021
US$M
23,129
500
23,629
(765)
22,864
8,339
14,525
22,864
How we account for the numbers
The gross discounted central estimate is the present value of the expected future payments for claims incurred and
includes claims reported but not yet paid, IBNR, IBNER and estimated claims handling costs. The central estimate is
determined by the Group Chief Actuary, supported by a team of actuaries in each of the Group’s divisions. The valuation
process is performed quarterly and, on at least a semi-annual basis, includes extensive consultation with claims and
underwriting staff as well as senior management. The central estimate of outstanding claims is also subject to annual
comprehensive independent actuarial review. The risk management procedures related to the actuarial function are
explained in note 4.2.
100
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
The table below analyses the movement in the net outstanding claims liability, showing separately the movement in the gross liability
and the impact of reinsurance:
At 1 January
Claims expense – current accident year
Claims expense – prior accident years
Movement in risk margin
Incurred claims recognised in profit or loss
Claims payments
Foreign exchange
At 31 December
2022
2021
GROSS REINSURANCE
GROSS REINSURANCE
NOTE
2.4.2
2.4.2
2.3.3
2.2
US$M
24,282
14,092
(1,811)
(61)
12,220
(11,292)
(1,165)
24,045
US$M
(6,757)
(4,572)
682
–
(3,890)
3,861
169
(6,617)
NET
US$M
17,525
9,520
(1,129)
(61)
8,330
(7,431)
(996)
17,428
US$M
23,861
12,172
(626)
(82)
11,464
(10,361)
(682)
24,282
US$M
(6,527)
(3,359)
266
–
(3,093)
2,742
121
(6,757)
2.3.1 Gross discounted central estimate
Gross undiscounted central estimate excluding claims settlement costs
Claims settlement costs
Gross undiscounted central estimate
Discount to present value
Gross discounted central estimate
Payable within 12 months
Payable in greater than 12 months
Gross discounted central estimate
NOTE
2.3
2.3
2022
US$M
25,184
488
25,672
(2,914)
22,758
10,006
12,752
22,758
NET
US$M
17,334
8,813
(360)
(82)
8,371
(7,619)
(561)
17,525
2021
US$M
23,129
500
23,629
(765)
22,864
8,339
14,525
22,864
How we account for the numbers
The gross discounted central estimate is the present value of the expected future payments for claims incurred and
includes claims reported but not yet paid, IBNR, IBNER and estimated claims handling costs. The central estimate is
determined by the Group Chief Actuary, supported by a team of actuaries in each of the Group’s divisions. The valuation
process is performed quarterly and, on at least a semi-annual basis, includes extensive consultation with claims and
underwriting staff as well as senior management. The central estimate of outstanding claims is also subject to annual
comprehensive independent actuarial review. The risk management procedures related to the actuarial function are
explained in note 4.2.
Critical accounting judgements and estimates
The determination of the amounts that the Group will ultimately pay for claims arising under insurance and inward
reinsurance contracts involves a number of critical assumptions. Some of the uncertainties impacting these assumptions
are as follows:
• changes in patterns of claims incidence, reporting and payment;
• volatility in the estimation of future costs for long-tail insurance classes due to the longer period of time that can elapse
before a claim is paid in full;
• existence of complex underlying exposures;
• incidence of catastrophic events close to the balance date;
• changes in the legal environment, including the interpretation of liability laws and the quantum of damages;
• changing social, environmental, political and economic trends, for example price and wage inflation; and
• impacts of COVID-19.
The estimation of IBNR and IBNER is generally subject to a greater degree of uncertainty than the estimation of the cost
of settling claims that have been reported to the Group but are not yet paid, for which more information about the claims
is generally available. The notification and settlement of claims relating to liability and other long-tail classes of business
may not happen for many years after the event giving rise to the claim. As a consequence, liability and other long-tail
classes typically display greater variability between initial estimates and final settlement due to delays in reporting
claims and uncertainty in respect of court awards and future claims inflation. Claims in respect of property and other
short-tail classes are typically reported and settled soon after the claim event, giving rise to more certainty.
Central estimates for each class of business are determined using a variety of estimation techniques, generally based
on an analysis of historical experience and with reference to external benchmarks where relevant. The gross central
estimate is discounted to present value using appropriate risk-free rates.
Central estimates are calculated gross of any reinsurance and other recoveries. A separate estimate is made of the
amounts recoverable based on the gross central estimate (refer to note 2.3.2).
COVID-19
The projected net ultimate cost of COVID-19 related claims is based on detailed reviews of the Group’s emerging
claims experience and exposure, and allows for the Group’s reinsurance protections. Litigation outcomes relating to the
Group’s property business interruption exposure, as well as the potential for the appeal of these outcomes, continue
to be considered in the determination of the net discounted central estimate and risk margin (refer to note 2.3.3). Key
recent legislative outcomes include the Australian High Court decision to decline applications for special leave to appeal
aspects of the second industry test case judgement, and the UK High Court judgements in respect of the Corbin & King,
Stonegate, Greggs and Various Eateries cases.
There has been no material change to the projected net ultimate cost of COVID-19 related claims during the period,
with a modest increase during the period in respect of UK business interruption exposure being partly offset by a release
in respect of Australian business interruption exposure, and offsetting movements in other classes.
The Group has released all of the remaining $160 million of COVID-19 related risk margin (refer to note 2.3.3) during
the current period, reflecting the materially reduced uncertainty related to COVID-19 following the outcomes of the court
decisions in the UK and Australia.
101
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102
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.3.2 Reinsurance and other recoveries on outstanding claims
Reinsurance and other recoveries on outstanding claims – undiscounted1
Discount to present value
Reinsurance and other recoveries on outstanding claims
Receivable within 12 months
Receivable in greater than 12 months
Reinsurance and other recoveries on outstanding claims
1 Net of a provision for impairment of $25 million (2021 $32 million).
NOTE
2.3
2.3
2022
US$M
7,547
(930)
6,617
3,927
2,690
6,617
2021
US$M
7,014
(257)
6,757
2,758
3,999
6,757
How we account for the numbers
The recoverability of amounts due from reinsurers is assessed at each balance date to ensure that the balances
properly reflect the amounts ultimately expected to be received, taking into account counterparty credit risk and the
contractual terms of the reinsurance contract. Counterparty credit risk in relation to reinsurance assets is considered
in note 4.3. Recoveries are discounted to present value using appropriate risk-free rates.
2.3.3 Risk margin
Overview
A risk margin is determined by the Board to reflect the inherent uncertainty in the net discounted central estimate.
The risk margin and the net discounted central estimate are key inputs in the determination of the probability of adequacy,
which is a statistical measure of the relative adequacy of the outstanding claims liability to ultimately be able to pay claims.
For example, a 90% probability of adequacy indicates that the outstanding claims liability is expected to be adequate nine
years in 10.
Risk margin
Risk margin as a percentage of the net discounted central estimate
Probability of adequacy
US$M
%
%
2022
1,287
8.0
90.0
2021
1,418
8.8
91.7
Excluding the impact of foreign exchange which reduced the risk margin by $70 million (2021 $37 million), the net movement in profit
or loss was a release of $61 million (2021 $82 million). This mainly reflects a $160 million release of COVID-19 related risk margin due
to materially reduced uncertainty (refer to note 2.3.1) partly offset by an increase relating to underlying growth in the net discounted
central estimate.
The probability of adequacy was 90.0% (2021 91.7%). Net profit after tax would have reduced by $79 million, at the Group’s prima
facie income tax rate of 30%, if the probability of adequacy was maintained at 91.7%.
How we account for the numbers
AASB 1023 General Insurance Contracts requires an entity to adopt an appropriate risk margin. The resulting probability
of adequacy is not of itself an accounting policy as defined by AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors.
QBE reviews a number of factors when determining the appropriate risk margin, including any changes in the level of
uncertainty in the net discounted central estimate, the resulting probability of adequacy and the risk margin as a percentage
of the net discounted central estimate. The Group aims to maintain a probability of adequacy in the range of 87.5% to 92.5%.
102
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.3.2 Reinsurance and other recoveries on outstanding claims
Reinsurance and other recoveries on outstanding claims – undiscounted1
Discount to present value
Reinsurance and other recoveries on outstanding claims
Receivable within 12 months
Receivable in greater than 12 months
Reinsurance and other recoveries on outstanding claims
1 Net of a provision for impairment of $25 million (2021 $32 million).
NOTE
2.3
2.3
2022
US$M
7,547
(930)
6,617
3,927
2,690
6,617
2021
US$M
7,014
(257)
6,757
2,758
3,999
6,757
How we account for the numbers
The recoverability of amounts due from reinsurers is assessed at each balance date to ensure that the balances
properly reflect the amounts ultimately expected to be received, taking into account counterparty credit risk and the
contractual terms of the reinsurance contract. Counterparty credit risk in relation to reinsurance assets is considered
in note 4.3. Recoveries are discounted to present value using appropriate risk-free rates.
2.3.3 Risk margin
Overview
Critical accounting judgements and estimates
The risk margin is determined by the Board and is held to mitigate the potential for uncertainty in the net discounted
central estimate. The determination of the appropriate level of risk margin takes into account similar factors to those
used to determine the central estimate, such as:
• mix of business, in particular the mix of short-tail and long-tail business and the overall weighted average term
to settlement; and
• the level of uncertainty in the central estimate due to estimation error, data quality, variability of key inflation
assumptions, impacts of COVID-19 and possible economic and legislative changes.
The variability by class of business is measured using techniques that determine a range of possible outcomes
of ultimate payments and assign a likelihood to outcomes at different levels. These techniques generally use
standard statistical distributions, and the measure of variability is referred to as the coefficient of variation.
The appropriate risk margin for two or more classes of business or for two or more geographic locations combined
is likely to be less than the sum of the risk margins for the individual classes, reflecting the benefit of diversification
in general insurance, but is not determined by reference to a fixed probability of adequacy. The statistical measure
used to determine diversification is called the correlation; the higher the correlation between two classes of business,
the more likely it is that a negative outcome in one class will correspond to a negative outcome in the other class.
For example, higher correlation exists between classes of business affected by court cases involving bodily injury
claims such as motor third-party liability, workers’ compensation and public liability, particularly in the same jurisdiction.
The probability of adequacy for the Group is determined by analysing the variability of each class of business and
the correlation between classes of business and divisions. Correlations are determined for aggregations of classes
of business, where appropriate, at the divisional level. The correlations adopted by the Group are generally derived
from industry analysis, the Group’s historical experience and the judgement of experienced and qualified actuaries.
2.3.4 Discount rate used to determine the outstanding claims liability
A risk margin is determined by the Board to reflect the inherent uncertainty in the net discounted central estimate.
The risk margin and the net discounted central estimate are key inputs in the determination of the probability of adequacy,
which is a statistical measure of the relative adequacy of the outstanding claims liability to ultimately be able to pay claims.
For example, a 90% probability of adequacy indicates that the outstanding claims liability is expected to be adequate nine
years in 10.
Overview
Claims in relation to long-tail classes of business (e.g. professional indemnity and workers’ compensation) typically
may not settle for many years. As such, the liability is discounted to reflect the time value of money. The table below
summarises the weighted average discount rate for each operating segment and for the Group.
Risk margin as a percentage of the net discounted central estimate
Risk margin
Probability of adequacy
US$M
%
%
2022
1,287
8.0
90.0
2021
1,418
8.8
91.7
Excluding the impact of foreign exchange which reduced the risk margin by $70 million (2021 $37 million), the net movement in profit
or loss was a release of $61 million (2021 $82 million). This mainly reflects a $160 million release of COVID-19 related risk margin due
to materially reduced uncertainty (refer to note 2.3.1) partly offset by an increase relating to underlying growth in the net discounted
central estimate.
The probability of adequacy was 90.0% (2021 91.7%). Net profit after tax would have reduced by $79 million, at the Group’s prima
facie income tax rate of 30%, if the probability of adequacy was maintained at 91.7%.
How we account for the numbers
AASB 1023 General Insurance Contracts requires an entity to adopt an appropriate risk margin. The resulting probability
of adequacy is not of itself an accounting policy as defined by AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors.
QBE reviews a number of factors when determining the appropriate risk margin, including any changes in the level of
uncertainty in the net discounted central estimate, the resulting probability of adequacy and the risk margin as a percentage
of the net discounted central estimate. The Group aims to maintain a probability of adequacy in the range of 87.5% to 92.5%.
North America
International
Australia Pacific
Group
2022
%
4.21
3.29
3.73
3.60
2021
%
1.44
0.55
1.12
0.87
How we account for the numbers
AASB 1023 General Insurance Contracts requires that the net central estimate is discounted to reflect the time value
of money using risk-free rates that are based on current observable, objective rates that reflect the nature, structure
and terms of the future obligations.
103
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104
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.3.5 Weighted average term to settlement
Overview
The weighted average term to settlement refers to the period from the balance date to the expected date of claims
settlement. All other factors being equal, a longer weighted average term to settlement generally results in a larger
impact on the central estimate from discounting. The material increase in risk-free rates used to discount the outstanding
claims liability has driven the reductions in weighted average term to settlement in the current period. The table below
summarises the weighted average term to settlement for each operating segment and for the consolidated Group.
North America
International
Australia Pacific
Group
US$
2.7
3.0
–
2.8
£
–
3.7
–
3.7
2022
YEARS
A$
–
3.2
2.2
2.3
€
OTHER
TOTAL
–
3.5
–
3.5
–
2.1
2.1
2.1
2.7
3.3
2.2
2.9
US$
3.2
4.0
–
3.4
£
–
5.0
–
5.0
2021
YEARS
A$
–
3.5
2.2
2.4
€
OTHER
TOTAL
–
4.0
–
4.0
–
2.5
1.7
2.4
3.2
4.1
2.2
3.5
2.3.6 Net discounted central estimate maturity profile
Overview
The maturity profile is the Group’s expectation of the period over which the net central estimate will be settled.
The Group uses this information to ensure that it has adequate liquidity to pay claims as they are due to be settled and
to inform the Group’s investment strategy. The table below summarises the expected maturity profile of the Group’s net
discounted central estimate for each operating segment.
2022
North America
International
Australia Pacific
2021
North America
International
Australia Pacific
LESS THAN
1 YEAR
US$M
13 TO 24
MONTHS
US$M
25 TO 36
MONTHS
US$M
37 TO 48
MONTHS
US$M
49 TO 60
MONTHS
US$M
1,540
2,832
1,707
6,079
558
1,679
750
2,987
393
1,137
491
2,021
265
835
331
1,431
177
624
174
975
LESS THAN
1 YEAR
US$M
13 TO 24
MONTHS
US$M
25 TO 36
MONTHS
US$M
37 TO 48
MONTHS
US$M
49 TO 60
MONTHS
US$M
1,578
2,404
1,599
5,581
608
1,631
713
2,952
413
1,143
465
2,021
274
842
300
1,416
193
632
190
1,015
OVER 5
YEARS
US$M
469
1,745
434
2,648
OVER 5
YEARS
US$M
647
2,120
355
3,122
TOTAL
US$M
3,402
8,852
3,887
16,141
TOTAL
US$M
3,713
8,772
3,622
16,107
104
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.3.5 Weighted average term to settlement
Overview
The weighted average term to settlement refers to the period from the balance date to the expected date of claims
settlement. All other factors being equal, a longer weighted average term to settlement generally results in a larger
impact on the central estimate from discounting. The material increase in risk-free rates used to discount the outstanding
claims liability has driven the reductions in weighted average term to settlement in the current period. The table below
summarises the weighted average term to settlement for each operating segment and for the consolidated Group.
US$
2.7
3.0
–
2.8
£
–
–
3.7
3.7
2022
YEARS
A$
–
3.2
2.2
2.3
€
–
–
3.5
3.5
OTHER
TOTAL
–
2.1
2.1
2.1
2.7
3.3
2.2
2.9
US$
3.2
4.0
–
3.4
£
–
–
5.0
5.0
2021
YEARS
A$
–
3.5
2.2
2.4
€
–
–
4.0
4.0
OTHER
TOTAL
–
2.5
1.7
2.4
3.2
4.1
2.2
3.5
2.3.6 Net discounted central estimate maturity profile
The maturity profile is the Group’s expectation of the period over which the net central estimate will be settled.
The Group uses this information to ensure that it has adequate liquidity to pay claims as they are due to be settled and
to inform the Group’s investment strategy. The table below summarises the expected maturity profile of the Group’s net
discounted central estimate for each operating segment.
LESS THAN
13 TO 24
MONTHS
US$M
25 TO 36
MONTHS
US$M
37 TO 48
MONTHS
US$M
49 TO 60
MONTHS
US$M
1 YEAR
US$M
1,540
2,832
1,707
6,079
1 YEAR
US$M
1,578
2,404
1,599
5,581
LESS THAN
13 TO 24
MONTHS
US$M
25 TO 36
MONTHS
US$M
37 TO 48
MONTHS
US$M
49 TO 60
MONTHS
US$M
558
1,679
750
2,987
608
1,631
713
2,952
393
1,137
491
2,021
413
1,143
465
2,021
265
835
331
1,431
274
842
300
1,416
177
624
174
975
193
632
190
1,015
OVER 5
YEARS
US$M
469
1,745
434
2,648
OVER 5
YEARS
US$M
647
2,120
355
3,122
TOTAL
US$M
3,402
8,852
3,887
16,141
TOTAL
US$M
3,713
8,772
3,622
16,107
North America
International
Australia Pacific
Group
Overview
2022
North America
International
Australia Pacific
2021
North America
International
Australia Pacific
105
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
i
e
w
P
e
r
f
o
r
m
a
n
c
e
2
fi
n
a
n
c
i
a
l
O
p
e
r
a
t
i
n
g
a
n
d
2.3.7
Impact of changes in key variables on the net outstanding claims liability
Overview
The impact of changes in key variables used in the calculation of the outstanding claims liability is summarised in the
table below. Each change has been calculated in isolation from the other changes and shows the after-tax impact
on profit or loss assuming that there is no change to any of the other variables. In practice, this is considered unlikely
to occur as, for example, an increase in interest rates is normally associated with an increase in the rate of inflation.
Over the medium to longer term, the impact of a change in discount rates is expected to be largely offset by the impact
of a change in the rate of inflation.
The sensitivities below assume that all changes directly impact profit after tax. In practice, if the central estimate was
to increase, it is possible that part of the increase may result in an offsetting change in the level of risk margin required
rather than in a change to profit or loss after tax, depending on the nature of the change in the central estimate and risk
outlook. Likewise, if the coefficient of variation were to increase, it is possible that the probability of adequacy would
reduce from its current level rather than result in a change to profit or loss after income tax.
PROFIT (LOSS)1
r
e
v
i
e
w
Net discounted central estimate
Risk margin
Inflation rate
Discount rate
Coefficient of variation
Probability of adequacy
Weighted average term to settlement
1 Net of tax at the Group’s prima facie income tax rate of 30%.
SENSITIVITY
%
+5
-5
+5
-5
+1
-1
+1
-1
+1
-1
+1
-1
+10
-10
2022
US$M
(565)
565
(45)
45
(333)
304
304
(333)
(148)
148
(44)
41
149
(151)
2021
US$M
(564)
564
(50)
50
(427)
375
375
(427)
(163)
162
(53)
48
38
(38)
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
106
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.4
Claims development – net undiscounted central estimate
Overview
The claims development table demonstrates the extent to which the original estimate of net ultimate claims payments
in any one accident year (item (a) in the table below) has subsequently developed favourably (i.e. claims cost estimates
have reduced) or unfavourably (i.e. further claims expense has been recognised in subsequent years). This table
therefore illustrates the variability and inherent uncertainty in estimating the central estimate each year. The ultimate
claims cost for any particular accident year is not known until all claims payments have been made which, for some
long-tail classes of business, could be many years into the future. The estimate of net ultimate claims payments at the
end of each subsequent accident year demonstrates how the original estimate has been revised over time (b).
Cumulative net claims payments (d) are deducted from the estimate of net ultimate claims payments in each accident
year (c) at the current balance date, resulting in the undiscounted central estimate at a fixed rate of exchange (e). This
is revalued to the balance date rate of exchange (f) to report the net undiscounted central estimate (g), which is reconciled
to the discounted net outstanding claims liability (h). The treatment of foreign exchange in the claims development table
is explained on the following page.
The net increase (decrease) in estimated net ultimate claims payments (i) reflects the estimated ultimate net claims
payments at the end of the current financial year (c) less the equivalent at the end of the previous financial year (b).
This is further summarised in note 2.4.1.
The claims development table is presented net of reinsurance. With insurance operations in 27 countries, hundreds
of products, various reinsurance arrangements and with the Group’s risk tolerance managed on a consolidated basis,
it is considered neither meaningful nor practicable to provide this information other than on a consolidated Group basis.
2012 &
PRIOR
2022
2017
US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M
2020
2019
2016
2018
2014
2015
2021
2013
TOTAL
US$M
Net ultimate claims payments1
(a) Original estimate of net
ultimate claims payments
(b) One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
(c) Current estimate of net
ultimate claims payments
(d) Cumulative net payments to
date
(e) Net undiscounted central
estimate at fixed rate of
exchange
Foreign exchange impact
Provision for impairment
(f)
(g) Net undiscounted central
estimate at 31 December 2022
Discount to present value
Claims settlement costs
Risk margin
(h) Net outstanding claims liability
at 31 December 2022 (note
2.3)
(i) Movement in estimated net
ultimate claims payments (note
2.4.1)
1 Excludes claims settlement costs.
7,417 7,344 7,945 9,536
7,124 7,685 7,080 8,040
7,137 7,860
7,791
7,140
7,045 6,874 6,153 6,559 7,866 6,969
6,171 6,351
6,964 6,880
7,913
6,741 5,953 6,219 7,861
6,916
6,897 6,650 5,925 6,230 8,059 7,222
6,816 6,626 5,835 6,286 8,074
7,119
6,914 6,633 5,801 6,239 8,077
6,866 6,587 5,747 6,259
6,846 6,571 5,734
6,839 6,521
6,817
6,817 6,521 5,734 6,259 8,077
7,119
7,791
7,140 8,040 9,536
73,034
(6,610) (6,319) (5,609) (5,755) (7,240) (6,203) (6,175) (4,875) (4,755) (2,996) (56,537)
1,307
207
202
125
504
837
916 1,616 2,265 3,285 6,540
17,804
(192)
25
17,637
(1,984)
488
1,287
17,428
9
(22)
(50)
(13)
20
3
(103)
(69)
60
95 9,536
9,466
106
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.4
Claims development – net undiscounted central estimate
Overview
The claims development table demonstrates the extent to which the original estimate of net ultimate claims payments
in any one accident year (item (a) in the table below) has subsequently developed favourably (i.e. claims cost estimates
have reduced) or unfavourably (i.e. further claims expense has been recognised in subsequent years). This table
therefore illustrates the variability and inherent uncertainty in estimating the central estimate each year. The ultimate
claims cost for any particular accident year is not known until all claims payments have been made which, for some
long-tail classes of business, could be many years into the future. The estimate of net ultimate claims payments at the
end of each subsequent accident year demonstrates how the original estimate has been revised over time (b).
Cumulative net claims payments (d) are deducted from the estimate of net ultimate claims payments in each accident
year (c) at the current balance date, resulting in the undiscounted central estimate at a fixed rate of exchange (e). This
is revalued to the balance date rate of exchange (f) to report the net undiscounted central estimate (g), which is reconciled
to the discounted net outstanding claims liability (h). The treatment of foreign exchange in the claims development table
is explained on the following page.
The net increase (decrease) in estimated net ultimate claims payments (i) reflects the estimated ultimate net claims
payments at the end of the current financial year (c) less the equivalent at the end of the previous financial year (b).
This is further summarised in note 2.4.1.
The claims development table is presented net of reinsurance. With insurance operations in 27 countries, hundreds
of products, various reinsurance arrangements and with the Group’s risk tolerance managed on a consolidated basis,
it is considered neither meaningful nor practicable to provide this information other than on a consolidated Group basis.
Net ultimate claims payments1
(a) Original estimate of net
ultimate claims payments
(b) One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
(c) Current estimate of net
ultimate claims payments
(d) Cumulative net payments to
date
(e) Net undiscounted central
estimate at fixed rate of
exchange
(f)
Foreign exchange impact
Provision for impairment
(g) Net undiscounted central
estimate at 31 December 2022
Discount to present value
Claims settlement costs
Risk margin
(h) Net outstanding claims liability
at 31 December 2022 (note
(i) Movement in estimated net
ultimate claims payments (note
2.3)
2.4.1)
1 Excludes claims settlement costs.
2012 &
PRIOR
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M
TOTAL
US$M
7,045 6,874 6,153 6,559 7,866 6,969
7,417 7,344 7,945 9,536
6,964 6,880
6,171 6,351
7,913
7,124 7,685 7,080 8,040
6,916
6,741 5,953 6,219 7,861
7,137 7,860
7,140
6,897 6,650 5,925 6,230 8,059 7,222
7,791
6,816 6,626 5,835 6,286 8,074
7,119
6,914 6,633 5,801 6,239 8,077
6,866 6,587 5,747 6,259
6,846 6,571 5,734
6,839 6,521
6,817
6,817 6,521 5,734 6,259 8,077
7,119
7,791
7,140 8,040 9,536
73,034
(6,610) (6,319) (5,609) (5,755) (7,240) (6,203) (6,175) (4,875) (4,755) (2,996) (56,537)
1,307
207
202
125
504
837
916 1,616 2,265 3,285 6,540
17,804
(192)
25
17,637
(1,984)
488
1,287
17,428
9
(22)
(50)
(13)
20
3
(103)
(69)
60
95 9,536
9,466
How we account for the numbers
The estimate of net ultimate claims payments attributable to business acquired is generally included in the claims
development table in the accident year in which the acquisition was made. The exception is increased participation
in Lloyd’s syndicates where the estimate of net ultimate claims payments is allocated to the original accident year(s)
in which the underlying claim was incurred.
The Group writes business in many currencies. The translation of estimated net ultimate claims payments denominated
in foreign currencies gives rise to foreign exchange movements which have no direct bearing on the development of the
underlying claims. To eliminate this distortion, estimated net ultimate claims payments have been translated to the
functional currencies of our controlled entities at constant rates of exchange. All estimates of ultimate claims payments
for the 10 most recent accident years reported in functional currencies other than US dollars have been translated
to US dollars using 2022 average rates of exchange.
2.4.1 Reconciliation of claims development table to profit or loss
Overview
The table below reconciles the net increase or decrease in estimated net ultimate claims payments in the current
financial year from the claims development table (item (i) in note 2.4) to the analysis of current and prior accident
year net central estimate development recognised in profit or loss (refer to note 2.4.2).
Movement in estimated net ultimate claims payments
(note 2.4)1, 2,3
Movement in claims settlement costs
Movement in discount
Other movements
Movement in net discounted central estimate (note 2.4.2)
CURRENT
ACCIDENT
YEAR
US$M
2022
PRIOR
ACCIDENT
YEARS
US$M
9,536
441
(460)
3
9,520
(70)
1
(1,053)
(7)
(1,129)
CURRENT
ACCIDENT
YEAR
US$M
2021
PRIOR
ACCIDENT
YEARS
US$M
8,463
433
(85)
2
8,813
(142)
1
(232)
13
(360)
TOTAL
US$M
9,466
442
(1,513)
(4)
8,391
TOTAL
US$M
8,321
434
(317)
15
8,453
1 Excludes claims settlement costs.
2 2022 prior accident year claims includes a benefit of $334 million as a result of the reinsurance of legacy North American Excess and
Surplus (E&S) liabilities. Excluding this recovery, the movement in prior accident year claims in 2022 reflects adverse development
in North America and International, partly offset by positive development in Australia Pacific.
3 2021 prior accident year claims includes a benefit of $324 million from the reinsurance of Australian CTP liabilities. Excluding this recovery,
the movement in prior accident year claims in 2021 reflects adverse development in North America and Australia Pacific, partly offset
by positive development in International.
107
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
i
e
w
P
e
r
f
o
r
m
a
n
c
e
2
O
p
e
r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
r
e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
108
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.4.2 Net central estimate development
Overview
The table below further analyses the current and prior accident year movement in the net discounted central estimate,
separately identifying the gross and reinsurance components. Prior accident year claims are those claims that occurred
in a previous year but for which a reassessment of the claims cost has impacted the result in the current period.
Gross central estimate development
Undiscounted
Discount
Reinsurance and other recoveries
Undiscounted
Discount
Net central estimate development
Undiscounted
Discount
Net discounted central estimate
development (note 2.4.1)
CURRENT
ACCIDENT YEAR
US$M
14,692
(600)
14,092
(4,712)
140
(4,572)
9,980
(460)
9,520
2022
PRIOR
ACCIDENT
YEARS
US$M
(227)
(1,584)
(1,811)
151
531
682
(76)
(1,053)
(1,129)
TOTAL
US$M
CURRENT
ACCIDENT YEAR
US$M
2021
PRIOR
ACCIDENT
YEARS
US$M
14,465
(2,184)
12,281
(4,561)
671
(3,890)
9,904
(1,513)
8,391
12,280
(108)
12,172
(3,382)
23
(3,359)
8,898
(85)
8,813
(253)
(373)
(626)
125
141
266
(128)
(232)
(360)
TOTAL
US$M
12,027
(481)
11,546
(3,257)
164
(3,093)
8,770
(317)
8,453
2.4.3 Reinsurance of prior accident year claims liabilities after the balance date
On 17 February 2023, the Group entered into a transaction to reinsure certain prior accident year claims liabilities in North America
and International. The transaction remains subject to regulatory approval and is expected to result in an upfront net cost of around
$100 million before tax.
2.5
Unearned premium and deferred insurance costs
Overview
Unearned premium
Gross written premium is earned in profit or loss in accordance with the pattern of risk of the business written.
The unearned premium liability is that portion of gross written premium that QBE has not yet earned in profit or loss
as it represents insurance coverage to be provided by QBE after the balance date.
Deferred insurance costs
Premium ceded to reinsurers by QBE in exchange for reinsurance protection is expensed in profit or loss in accordance
with the reinsurance contract’s expected pattern of incidence of risk. The deferred reinsurance premium asset is that
portion of the reinsurance premium that QBE has not yet expensed in profit or loss as it represents reinsurance coverage
to be received by QBE after the balance date.
Acquisition costs are the costs associated with obtaining and recording insurance business. Acquisition costs are
similarly capitalised and amortised, consistent with the earning of the related premium for that business. Commissions
are a type of acquisition cost and are disclosed separately.
108
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.4.2 Net central estimate development
Overview
The table below further analyses the current and prior accident year movement in the net discounted central estimate,
separately identifying the gross and reinsurance components. Prior accident year claims are those claims that occurred
in a previous year but for which a reassessment of the claims cost has impacted the result in the current period.
Gross central estimate development
Undiscounted
Discount
Undiscounted
Discount
Undiscounted
Discount
Reinsurance and other recoveries
Net central estimate development
Net discounted central estimate
development (note 2.4.1)
14,692
(600)
14,092
(4,712)
140
(4,572)
9,980
(460)
9,520
CURRENT
ACCIDENT YEAR
US$M
CURRENT
TOTAL
ACCIDENT YEAR
US$M
US$M
2022
PRIOR
ACCIDENT
YEARS
US$M
(227)
(1,584)
(1,811)
151
531
682
(76)
(1,053)
(1,129)
2021
PRIOR
ACCIDENT
YEARS
US$M
(253)
(373)
(626)
125
141
266
(128)
(232)
(360)
TOTAL
US$M
12,027
(481)
11,546
(3,257)
164
(3,093)
8,770
(317)
8,453
14,465
(2,184)
12,281
(4,561)
671
(3,890)
9,904
(1,513)
8,391
12,280
(108)
12,172
(3,382)
23
(3,359)
8,898
(85)
8,813
2.4.3 Reinsurance of prior accident year claims liabilities after the balance date
On 17 February 2023, the Group entered into a transaction to reinsure certain prior accident year claims liabilities in North America
and International. The transaction remains subject to regulatory approval and is expected to result in an upfront net cost of around
$100 million before tax.
2.5
Unearned premium and deferred insurance costs
Overview
Unearned premium
Deferred insurance costs
Gross written premium is earned in profit or loss in accordance with the pattern of risk of the business written.
The unearned premium liability is that portion of gross written premium that QBE has not yet earned in profit or loss
as it represents insurance coverage to be provided by QBE after the balance date.
Premium ceded to reinsurers by QBE in exchange for reinsurance protection is expensed in profit or loss in accordance
with the reinsurance contract’s expected pattern of incidence of risk. The deferred reinsurance premium asset is that
portion of the reinsurance premium that QBE has not yet expensed in profit or loss as it represents reinsurance coverage
to be received by QBE after the balance date.
Acquisition costs are the costs associated with obtaining and recording insurance business. Acquisition costs are
similarly capitalised and amortised, consistent with the earning of the related premium for that business. Commissions
are a type of acquisition cost and are disclosed separately.
Summary of unearned premium and deferred insurance costs
Unearned premium (a)
To be earned within 12 months
To be earned in greater than 12 months
Unearned premium
Deferred reinsurance premium1
Deferred net commission
Deferred acquisition costs
Deferred insurance costs (b)
To be expensed within 12 months
To be expensed in greater than 12 months
Deferred insurance costs
Net unearned premium (a)–(b)
1 Deferred reinsurance premium relating to future business not yet written was $89 million (2021 $114 million).
Unearned premium movements
At 1 January
Deferral of unearned premium on contracts written in the financial year
Earning of premium written in previous financial years
Net profit or loss movement
Foreign exchange
At 31 December
Deferred insurance costs movements
2022
US$M
9,075
7,933
1,142
9,075
1,183
1,328
425
2,936
2,464
472
2,936
6,139
2022
US$M
8,637
9,645
(8,711)
934
(496)
9,075
2021
US$M
8,637
7,847
790
8,637
1,052
1,230
415
2,697
2,260
437
2,697
5,940
2021
US$M
7,466
7,516
(6,094)
1,422
(251)
8,637
At 1 January
Costs deferred in financial year
Amortisation of costs deferred in
previous financial years
Net profit or loss movement
Foreign exchange
At 31 December
DEFERRED
REINSURANCE PREMIUM
DEFERRED
NET COMMISSION
DEFERRED
ACQUISITION COSTS
2022
US$M
1,052
1,021
(841)
180
(49)
1,183
2021
US$M
724
951
(595)
356
(28)
1,052
2022
US$M
1,230
1,163
(994)
169
(71)
1,328
2021
US$M
1,141
1,038
(922)
116
(27)
1,230
2022
US$M
415
321
(281)
40
(30)
425
2021
US$M
417
354
(342)
12
(14)
415
How we account for the numbers
Unearned premium
Unearned premium is calculated based on the coverage period of the insurance or reinsurance contract and in accordance
with the expected pattern of the incidence of risk, using either the daily pro-rata method or the 24ths method, adjusted
where appropriate to reflect different risk patterns.
Deferred insurance costs
Deferred reinsurance premium is calculated based on the period of indemnity provided to QBE by the reinsurance
contract and in accordance with the related pattern of the incidence of risk.
Acquisition costs are capitalised when they relate to new business or the renewal of existing business and are amortised
on the same basis as the earning pattern for that business. At the balance date, deferred acquisition costs represent the
capitalised acquisition costs that relate to unearned premium and are carried forward to a subsequent accounting period
in recognition of their future benefit. The carrying value of deferred acquisition costs is subject to impairment testing
in the form of the liability adequacy test (refer to note 2.5.1). Deferred net commission is a type of deferred acquisition
cost and is disclosed separately.
109
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1
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i
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P
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f
o
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a
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c
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2
O
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a
t
i
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g
a
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d
fi
n
a
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c
i
a
l
r
e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
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t
D
i
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e
c
t
o
r
s
’
5
R
e
p
o
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t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
110
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.5.1
Liability adequacy test
Overview
At each balance date, the Group is required to assess net unearned premium to determine whether the amount provided
is sufficient to pay future claims net of reinsurance recoveries attributable to the net unearned premium.
If the present value of expected future net claims including a risk margin exceeds the net unearned premium, adjusted
for deferred reinsurance premium relating to future business not yet written, the net unearned premium is deemed
deficient. This deficiency is immediately recognised in profit or loss. In recognising the deficiency, an insurer must first
write down related intangible assets and then deferred acquisition costs before recognising an unexpired risk liability.
Expected present value of future cash flows for future claims including risk margin
Undiscounted net central estimate
Discount to present value
Risk margin at the 75th percentile of insurance liabilities
Expected present value of future cash flows for future claims including risk margin
2022
US$M
5,543
(402)
5,141
189
5,330
2021
US$M
5,282
(98)
5,184
197
5,381
The risk margin at the 75th percentile of insurance liabilities as a percentage of the net discounted central estimate is 3.7% (2021 3.8%).
The application of the liability adequacy test at 31 December 2022 did not identify a deficiency (2021 nil).
How we account for the numbers
At each balance date, the adequacy of net unearned premium is assessed on a net of reinsurance basis against the
present value of the expected future claims cash flows in respect of the relevant insurance contracts, plus an additional
risk margin to reflect the inherent uncertainty of the central estimate. The assessment is carried out at the operating
segment level other than for Europe, Asia and the Group’s captive reinsurer, Equator Re, which are assessed separately,
each being a portfolio of contracts subject to broadly similar risks and which are managed together as a single portfolio.
Critical accounting judgements and estimates
In assessing the adequacy of net unearned premium, AASB 1023 General Insurance Contracts requires the inclusion
of a risk margin but does not prescribe a minimum level of margin. While there is established practice in the calculation
of the probability of adequacy of the outstanding claims liability, no such guidance exists in respect of the level of risk
margin to be used in determining the adequacy of net unearned premium.
The liability adequacy test assumes a 75% probability of adequacy. The risk margin applied in the liability adequacy
test is determined on a consistent basis with the methodology described in note 2.3.3 and also reflects the benefit
of diversification. The 75% basis is a recognised industry benchmark in Australia, being the minimum probability
of adequacy required for Australian licensed insurers by APRA.
111
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2.6
Trade and other receivables
Overview
Trade and other receivables are principally amounts owed to QBE by policyholders or reinsurance counterparties.
Unclosed premium receivables are estimated amounts due to QBE in relation to business for which the Group
is on risk but which have not yet been processed into financial systems.
i
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110
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.5.1
Liability adequacy test
Overview
At each balance date, the Group is required to assess net unearned premium to determine whether the amount provided
is sufficient to pay future claims net of reinsurance recoveries attributable to the net unearned premium.
If the present value of expected future net claims including a risk margin exceeds the net unearned premium, adjusted
for deferred reinsurance premium relating to future business not yet written, the net unearned premium is deemed
deficient. This deficiency is immediately recognised in profit or loss. In recognising the deficiency, an insurer must first
write down related intangible assets and then deferred acquisition costs before recognising an unexpired risk liability.
Expected present value of future cash flows for future claims including risk margin
Undiscounted net central estimate
Discount to present value
Risk margin at the 75th percentile of insurance liabilities
Expected present value of future cash flows for future claims including risk margin
2022
US$M
5,543
(402)
5,141
189
5,330
2021
US$M
5,282
(98)
5,184
197
5,381
How we account for the numbers
At each balance date, the adequacy of net unearned premium is assessed on a net of reinsurance basis against the
present value of the expected future claims cash flows in respect of the relevant insurance contracts, plus an additional
risk margin to reflect the inherent uncertainty of the central estimate. The assessment is carried out at the operating
segment level other than for Europe, Asia and the Group’s captive reinsurer, Equator Re, which are assessed separately,
each being a portfolio of contracts subject to broadly similar risks and which are managed together as a single portfolio.
Critical accounting judgements and estimates
In assessing the adequacy of net unearned premium, AASB 1023 General Insurance Contracts requires the inclusion
of a risk margin but does not prescribe a minimum level of margin. While there is established practice in the calculation
of the probability of adequacy of the outstanding claims liability, no such guidance exists in respect of the level of risk
margin to be used in determining the adequacy of net unearned premium.
The liability adequacy test assumes a 75% probability of adequacy. The risk margin applied in the liability adequacy
test is determined on a consistent basis with the methodology described in note 2.3.3 and also reflects the benefit
of diversification. The 75% basis is a recognised industry benchmark in Australia, being the minimum probability
of adequacy required for Australian licensed insurers by APRA.
Trade debtors
Premium receivable1
Reinsurance and other recoveries 2
Unclosed premium
Other trade debtors
Other receivables
Trade and other receivables
Receivable within 12 months
Receivable in greater than 12 months
Trade and other receivables
2022
US$M
3,985
2,869
837
232
7,923
418
8,341
7,868
473
8,341
2021
US$M
3,462
2,118
774
195
6,549
560
7,109
6,628
481
7,109
The risk margin at the 75th percentile of insurance liabilities as a percentage of the net discounted central estimate is 3.7% (2021 3.8%).
1 Net of a provision for impairment of $86 million (2021 $81 million).
2 Net of a provision for impairment of $19 million (2021 $17 million).
The application of the liability adequacy test at 31 December 2022 did not identify a deficiency (2021 nil).
Due to the predominantly short-term nature of these receivables, the carrying value is assumed to approximate the fair value.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables. No receivables are
pledged by the Group as collateral for liabilities or contingent liabilities. Information on the ageing and credit rating of these balances
is included in note 4.3.
2
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fi
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3
G
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4
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s
How we account for the numbers
’
Receivables are recognised initially at fair value and are subsequently measured at amortised cost less any impairment.
The vast majority of the Group's receivables arise from general insurance contracts. These include premium receivable,
reinsurance and other recoveries, and unclosed premium. For these receivables, a provision for impairment is established
when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms
of the receivable. The remainder of the Group's receivables are assessed for impairment based on expected credit
losses, the impacts of which are not material. Any increase or decrease in the provision for impairment is recognised
in profit or loss within underwriting expenses.
5
R
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F
i
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a
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i
a
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6
i
O
t
h
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r
n
f
o
r
m
a
t
i
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n
P
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f
o
r
m
a
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e
1
o
v
e
r
v
112
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.7
Trade and other payables
Overview
Trade payables primarily comprise amounts owed to reinsurance counterparties and cedants. Treasury and investment
payables are amounts due to counterparties in settlement of treasury and investment transactions.
Trade payables
Other payables and accrued expenses
Treasury payables
Investment payables
Trade and other payables
Payable within 12 months
Payable in greater than 12 months
Trade and other payables
2022
US$M
2,818
705
17
3
3,543
3,335
208
3,543
2021
US$M
2,322
823
19
51
3,215
3,029
186
3,215
Due to the predominantly short-term nature of these payables, the carrying value is assumed to approximate the fair value.
How we account for the numbers
Trade payables are recognised initially at their fair value and are subsequently measured at amortised cost using the
effective interest method.
112
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
2.
UNDERWRITING ACTIVITIES
2.7
Trade and other payables
Overview
Trade payables primarily comprise amounts owed to reinsurance counterparties and cedants. Treasury and investment
payables are amounts due to counterparties in settlement of treasury and investment transactions.
Trade payables
Other payables and accrued expenses
Treasury payables
Investment payables
Trade and other payables
Payable within 12 months
Payable in greater than 12 months
Trade and other payables
2022
US$M
2,818
705
17
3
3,543
3,335
208
3,543
2021
US$M
2,322
823
19
51
3,215
3,029
186
3,215
Due to the predominantly short-term nature of these payables, the carrying value is assumed to approximate the fair value.
How we account for the numbers
Trade payables are recognised initially at their fair value and are subsequently measured at amortised cost using the
effective interest method.
113
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a
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G
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o
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1
o
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P
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m
a
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c
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2
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a
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g
a
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d
3.
INVESTMENT ACTIVITIES
Overview
Premiums collected from policyholders are invested to meet the Group’s cash flow needs to pay claims and other
expenses, as well as generating a return that contributes to the Group’s profitability. A sound investment strategy
is therefore integral to the success of the Group’s operations.
i
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The Group invests across a diversified range of instruments to achieve an appropriate balance between risk and return.
Decisions on where to invest are dependent on expected returns, cash flow requirements of the Group, liquidity of the
instrument, credit quality of the instrument and the overall risk appetite of the Group. Further details on the management
of risk associated with investment assets can be found in note 4.
3.1
Investment income
r
e
v
i
e
w
Loss on fixed interest securities, short-term money and cash
Income on growth assets
Gross investment (loss) income1
Investment expenses
Net investment (loss) income
Foreign exchange
Other expenses
Total investment (loss) income
Investment (loss) income – policyholders’ funds
Investment expenses – policyholders’ funds
Investment (loss) income – shareholders’ funds
Investment expenses – shareholders’ funds
Total investment (loss) income
2022
US$M
(812)
60
(752)
(29)
(781)
10
(5)
(776)
(490)
(19)
(257)
(10)
(776)
2021
US$M
(96)
258
162
(25)
137
(4)
(11)
122
94
(17)
53
(8)
122
1 Includes net fair value losses of $1,295 million (2021 $409 million), interest income of $466 million (2021 $396 million) and dividend and
distribution income of $77 million (2021 $175 million).
How we account for the numbers
Interest income is recognised in the period in which it is earned. Dividends and distribution income are recognised
when the right to receive payment is established. Investment income includes realised and unrealised gains or losses
on financial assets which are reported on a combined basis as fair value gains or losses on financial assets.
3
G
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n
a
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c
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4
R
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D
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c
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s
’
5
R
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p
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t
F
i
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a
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c
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6
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m
a
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i
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n
114
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
3.
INVESTMENT ACTIVITIES
3.2
Investment assets
Fixed income assets
Short-term money
Government bonds
Corporate bonds
Infrastructure debt
Emerging market debt
High yield debt
Private credit
Growth assets
Developed market equity
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
Total investments
Amounts maturing within 12 months
Amounts maturing in greater than 12 months
Total investments
2022
US$M
5,396
5,094
13,649
47
429
416
113
25,144
332
62
747
834
180
2,155
27,299
11,032
16,267
27,299
2021
US$M
4,537
6,953
14,777
99
–
–
–
26,366
85
–
758
788
114
1,745
28,111
10,051
18,060
28,111
At 31 December 2022, QBE had undrawn commitments to externally managed investment vehicles of $237 million (2021 $209 million).
How we account for the numbers
The Group's investments are required to be measured at fair value through profit or loss, with all investments managed
and assessed on a fair value basis to optimise returns within risk appetites and investment strategy parameters and
limits. They are therefore initially recognised at fair value, determined as the cost of acquisition excluding transaction
costs, and are remeasured to fair value through profit or loss at each reporting date. The fair value hierarchy and the
Group’s approach to measuring the fair value of each category of investment instrument are disclosed in note 3.2.1.
All purchases and sales of investments that require delivery of the asset within the time frame established by regulation
or market convention are recognised at trade date, being the date on which the Group commits to buy or sell the asset.
Investments are de-recognised when the right to receive future cash flows from the asset has expired or has been
transferred along with substantially all the risks and rewards of ownership.
114
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
3.
INVESTMENT ACTIVITIES
3.2
Investment assets
Fixed income assets
Short-term money
Government bonds
Corporate bonds
Infrastructure debt
Emerging market debt
High yield debt
Private credit
Growth assets
Developed market equity
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
Total investments
Amounts maturing within 12 months
Amounts maturing in greater than 12 months
Total investments
25,144
26,366
2022
US$M
5,396
5,094
13,649
47
429
416
113
332
62
747
834
180
2,155
27,299
11,032
16,267
27,299
2021
US$M
4,537
6,953
14,777
99
–
–
–
85
–
758
788
114
1,745
28,111
10,051
18,060
28,111
At 31 December 2022, QBE had undrawn commitments to externally managed investment vehicles of $237 million (2021 $209 million).
How we account for the numbers
The Group's investments are required to be measured at fair value through profit or loss, with all investments managed
and assessed on a fair value basis to optimise returns within risk appetites and investment strategy parameters and
limits. They are therefore initially recognised at fair value, determined as the cost of acquisition excluding transaction
costs, and are remeasured to fair value through profit or loss at each reporting date. The fair value hierarchy and the
Group’s approach to measuring the fair value of each category of investment instrument are disclosed in note 3.2.1.
All purchases and sales of investments that require delivery of the asset within the time frame established by regulation
or market convention are recognised at trade date, being the date on which the Group commits to buy or sell the asset.
Investments are de-recognised when the right to receive future cash flows from the asset has expired or has been
transferred along with substantially all the risks and rewards of ownership.
3.2.1
Fair value hierarchy
Overview
The Group Revaluation Committee is responsible for the governance and oversight of the valuation process. The fair
value of investments is determined in accordance with the Group’s investment valuation policy.
The investments of the Group are disclosed in the table below using a fair value hierarchy which reflects the significance
of inputs into the determination of fair value as follows:
Level 1: Valuation is based on quoted prices in active markets for identical instruments.
Level 2: Valuation is based on quoted prices for identical instruments in markets which are not active, quoted prices
for similar instruments, or valuation techniques for which all significant inputs are based on observable market data,
for example, consensus pricing using broker quotes or valuation models with observable inputs.
Level 3: Valuation techniques are applied in which one or more significant inputs are not based on observable market data.
Fixed income assets
Short-term money
Government bonds
Corporate bonds
Infrastructure debt
Emerging market debt
High yield debt
Private credit
Growth assets
Developed market equity
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
Total investments
2022
2021
LEVEL 1
US$M
LEVEL 2
US$M
LEVEL 3
US$M
TOTAL
US$M
LEVEL 1
US$M
LEVEL 2
US$M
LEVEL 3
US$M
TOTAL
US$M
326
3,547
–
–
–
–
–
3,873
332
62
–
–
112
506
4,379
5,070
1,547
13,649
–
429
416
–
21,111
–
–
–
–
–
–
21,111
–
–
–
47
–
–
113
160
–
–
747
834
68
1,649
1,809
5,396
5,094
13,649
47
429
416
113
25,144
332
62
747
834
180
2,155
27,299
141
5,236
–
–
–
–
–
5,377
83
–
–
–
64
147
5,524
4,396
1,717
14,777
–
–
–
–
20,890
–
–
–
–
–
–
20,890
–
–
–
99
–
–
–
99
2
–
758
788
50
1,598
1,697
4,537
6,953
14,777
99
–
–
–
26,366
85
–
758
788
114
1,745
28,111
The Group’s approach to measuring the fair value of investments is described below:
Short-term money
Cash managed as part of the investment portfolio is categorised as level 1 in the fair value hierarchy. Term deposits are valued at par.
Other short-term money (bank bills, certificates of deposit, treasury bills and other short-term instruments) is priced using interest
rates and yield curves observable at commonly quoted intervals.
Government bonds, corporate bonds, emerging market debt and high yield debt
These assets are valued based on quoted prices sourced from external data providers. The fair value categorisation of these assets
is based on the observability of the inputs.
115
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P
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a
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2
O
p
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r
a
t
i
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g
a
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d
fi
n
a
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c
i
a
l
r
e
v
i
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w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
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t
D
i
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c
t
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s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
Infrastructure debt
Infrastructure debt is priced by external data providers where quoted prices are available or by the external fund manager who may
use a combination of observable market prices or comparable prices where available and other valuation techniques. When valuation
techniques require the use of significant unobservable inputs, these assets have been categorised as level 3.
n
f
o
r
m
a
t
i
o
n
Private credit
These assets comprise investments in fund vehicles that are valued using current unit prices as advised by the investment fund
manager. As the valuation techniques require the use of significant unobservable inputs, these assets have been categorised as level 3.
116
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
3.
INVESTMENT ACTIVITIES
Developed market equity and emerging market equity
These assets mainly comprise listed equities traded in active markets valued by reference to quoted prices.
Unlisted property trusts and infrastructure assets
These assets are valued using current unit prices as advised by the responsible entity, trustee or equivalent of the investment management
scheme. As the valuation techniques require the use of significant unobservable inputs, these assets have been categorised as level 3.
Alternatives
These assets mainly comprise investments in exchange-traded commodity products that are listed, traded in active markets and
valued by reference to quoted prices. Alternatives also includes strategic unlisted investments which are valued based on other
valuation techniques utilising significant unobservable inputs.
Movements in level 3 investments
The following table provides an analysis of investments valued with reference to level 3 inputs:
LEVEL 3
At 1 January
Purchases
Disposals/transfers to assets held for sale1
Fair value movement recognised in profit or loss
Foreign exchange
At 31 December
2022
US$M
1,697
200
(98)
70
(60)
1,809
2021
US$M
2,285
61
(675)
86
(60)
1,697
1 At 31 December 2021, $50 million of private equity assets were reclassified to assets held for sale. These assets were disposed of during 2022.
3.2.2 Charges over investments and restrictions on use
A controlled entity has given fixed and floating charges over certain of its investments and other assets in order to secure the obligations
of the Group’s corporate members at Lloyd’s as described in note 8.2.
Included in investments are amounts totalling $3,538 million (2021 $3,417 million) which are held in Lloyd’s syndicate trust funds.
In order to conduct underwriting business within some territories, Lloyd’s syndicates are required to lodge assets in locally regulated
trust funds. Under Lloyd’s byelaws, these amounts can only be used to pay claims and allowable expenses of the syndicate and
cannot be withdrawn from the trust funds until they become distributable as profit once annual solvency requirements are met.
Included in this amount is $790 million (2021 $287 million) of short-term money.
3.2.3 Derivatives over investment assets
In accordance with our investment management policies and procedures, derivatives may be used in the investment portfolio as both
a hedging tool and to alter the risk profile of the portfolio. Risk management policies over the use of derivatives are set out in note 4.
The Group’s notional exposure to investment derivatives at the balance date is set out in the table below:
NOTIONAL EXPOSURE
Bond futures and options
Short government bond futures
Long government bond futures
Short government bond options
Interest rate futures
Short interest rates futures
Equity index futures
Short equity index futures
2022
US$M
(1,347)
12
–
–
(80)
2021
US$M
(1,751)
36
(23)
(1,214)
–
QBE may also have exposure to derivatives through investments in underlying pooled funds in accordance with the fund mandate.
Those derivative exposures are not included in the table above.
How we account for the numbers
Derivatives over investment assets are required to be measured at fair value through profit or loss. They are therefore
initially recognised at fair value, determined as the cost of acquisition excluding transaction costs, and are remeasured to
fair value through profit or loss at each reporting date. For futures and options traded in an active market, the fair value is
determined by reference to quoted market prices. The mark-to-market value of futures positions is cash settled on a daily
basis resulting in a fair value of nil at the balance date. The fair value of options was not material at the balance date.
117
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116
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
3.
INVESTMENT ACTIVITIES
Developed market equity and emerging market equity
4.
RISK MANAGEMENT
These assets mainly comprise listed equities traded in active markets valued by reference to quoted prices.
Overview
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QBE is in the business of managing risk. The Group’s ability to satisfy customers’ risk management needs is central
to what we do. QBE aims to generate wealth and maximise returns for its shareholders by pursuing opportunities that
involve risk. Our people are responsible for ensuring that QBE’s risks are managed and controlled on a day-to-day
basis. QBE aims to use its ability to properly manage risk to provide more certainty and improved outcomes for
all stakeholders.
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1 At 31 December 2021, $50 million of private equity assets were reclassified to assets held for sale. These assets were disposed of during 2022.
The Group’s strategy for managing risk is to:
QBE applies a consistent and integrated approach to enterprise risk management (ERM). QBE’s framework for managing risk sets
out the approach to managing risk effectively to meet strategic objectives while taking into account the creation of value for our
shareholders. QBE’s ERM framework is articulated in the Group Risk Management Strategy (RMS) and Reinsurance Management
Strategy (REMS), both of which are approved annually by the Board and lodged with APRA.
The ERM framework consists of complementary elements that are embedded throughout the business management cycle and culture
of the organisation. Key aspects include risk appetite, governance, reporting, risk identification and measurement, modelling and
stress testing, risk systems, and risk culture.
Risk management is a continuous process and an integral part of robust business management. QBE’s approach is to integrate risk
management into the broader management processes of the organisation. It is QBE’s philosophy to ensure that risk management
remains embedded in the business and that the risk makers or risk takers are themselves the risk managers. Specifically, the
management of risk must occur at each point in the business management cycle.
• achieve competitive advantage by better understanding the risk environments in which we operate;
• give confidence to the business to make objective, risk-based decisions to optimise returns; and
• avoid unwelcome surprises to the achievement of business objectives by reducing uncertainty and volatility through the
identification and management of risks.
The framework is supported by a suite of policies that detail QBE’s approach to the key risk categories used by QBE to classify
risk as follows:
• strategic risk (note 4.1);
• insurance risk (note 4.2);
• credit risk (note 4.3);
• market risk (note 4.4);
• liquidity risk (note 4.5);
• operational risk (note 4.6);
• compliance risk (note 4.7); and
• Group risk (note 4.8).
Risk culture
A sound risk culture underpins QBE’s risk management strategy and is a key component of the ERM framework. QBE is committed
to, and supports, a strong risk culture.
It recognises the importance of risk awareness and culture as being instrumental in the effectiveness of the ERM framework.
Further information on risk culture is provided on page 32 of this Annual Report.
Unlisted property trusts and infrastructure assets
These assets are valued using current unit prices as advised by the responsible entity, trustee or equivalent of the investment management
scheme. As the valuation techniques require the use of significant unobservable inputs, these assets have been categorised as level 3.
Alternatives
These assets mainly comprise investments in exchange-traded commodity products that are listed, traded in active markets and
valued by reference to quoted prices. Alternatives also includes strategic unlisted investments which are valued based on other
valuation techniques utilising significant unobservable inputs.
Movements in level 3 investments
The following table provides an analysis of investments valued with reference to level 3 inputs:
LEVEL 3
At 1 January
Purchases
Foreign exchange
At 31 December
Disposals/transfers to assets held for sale1
Fair value movement recognised in profit or loss
3.2.2 Charges over investments and restrictions on use
A controlled entity has given fixed and floating charges over certain of its investments and other assets in order to secure the obligations
of the Group’s corporate members at Lloyd’s as described in note 8.2.
Included in investments are amounts totalling $3,538 million (2021 $3,417 million) which are held in Lloyd’s syndicate trust funds.
In order to conduct underwriting business within some territories, Lloyd’s syndicates are required to lodge assets in locally regulated
trust funds. Under Lloyd’s byelaws, these amounts can only be used to pay claims and allowable expenses of the syndicate and
cannot be withdrawn from the trust funds until they become distributable as profit once annual solvency requirements are met.
Included in this amount is $790 million (2021 $287 million) of short-term money.
3.2.3 Derivatives over investment assets
In accordance with our investment management policies and procedures, derivatives may be used in the investment portfolio as both
a hedging tool and to alter the risk profile of the portfolio. Risk management policies over the use of derivatives are set out in note 4.
The Group’s notional exposure to investment derivatives at the balance date is set out in the table below:
2022
US$M
1,697
200
(98)
70
(60)
1,809
2021
US$M
2,285
61
(675)
86
(60)
1,697
2022
US$M
(1,347)
12
–
–
(80)
2021
US$M
(1,751)
36
(23)
(1,214)
–
NOTIONAL EXPOSURE
Bond futures and options
Short government bond futures
Long government bond futures
Short government bond options
Interest rate futures
Short interest rates futures
Equity index futures
Short equity index futures
QBE may also have exposure to derivatives through investments in underlying pooled funds in accordance with the fund mandate.
Those derivative exposures are not included in the table above.
How we account for the numbers
Derivatives over investment assets are required to be measured at fair value through profit or loss. They are therefore
initially recognised at fair value, determined as the cost of acquisition excluding transaction costs, and are remeasured to
fair value through profit or loss at each reporting date. For futures and options traded in an active market, the fair value is
determined by reference to quoted market prices. The mark-to-market value of futures positions is cash settled on a daily
basis resulting in a fair value of nil at the balance date. The fair value of options was not material at the balance date.
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118
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
4.1
Strategic risk
Overview
Strategic risk is the current and prospective impact on earnings and/or capital arising from strategic business decisions
and responsiveness to external change. QBE classifies strategic risk into five subcategories, as follows:
• Performance risk: QBE is not able to achieve its performance objectives.
• Capital risk: QBE’s structure and availability of capital do not meet regulatory requirements and/or support
strategic initiatives.
• Reputational risk: QBE’s stakeholders have a negative perception of QBE’s brand which may damage QBE’s
reputation and threaten overall performance.
• Environmental, social and governance (ESG) risk: this is the negative impact on QBE’s strategic priorities or objectives
from ESG issues.
• Emerging risk: these are new or future risks which are difficult to assess but may have a significant impact to QBE
or the markets in which it operates.
QBE’s approach to managing strategic risk is underpinned by the Group strategic risk appetite statement as set by the
Board and is summarised below.
Performance risk
Failure to deliver acceptable performance can result in shareholders losing confidence, impacting our reputation in the market and
ultimately impacting our ability to deliver our strategic objectives.
QBE evaluates performance risk by assessing potential earnings volatility against its risk appetite and considering the changing
levels of risk in its business plan. The plan is supported by an established regime of attestations by chief underwriting officers,
chief actuaries, chief financial officers and chief risk officers, enabling action prior to signing off the business plan and making
market commitments. Performance risk is monitored throughout the year against committed business plans (supported
by performance monitoring, cell reviews, and mid-year risk reviews).
Capital risk
The Internal Capital Adequacy Assessment Process (ICAAP) outlines QBE’s approach to:
• assessing the risks arising from its activities and ensuring that capital held is commensurate with the level of risk; and
• maintaining adequate capital over time, including the setting of capital targets consistent with risk profile, risk appetite and
regulatory capital requirements.
QBE maintains a level of eligible regulatory capital that exceeds requirements, with the capital target set at a multiple of 1.6–1.8 times
the Prescribed Capital Amount (PCA).
All regulated controlled entities are required to maintain a minimum level of capital to meet obligations to policyholders. It is the
Group’s policy that each regulated entity maintains a capital base appropriate to its size, business mix, complexity and risk profile
which fully complies with and meets or exceeds local regulatory requirements.
QBE aims to maintain the ratio of borrowings to total capital at 15%–30%. At the balance date, this ratio was 23.4% (2021 26.9%,
or 24.1% when excluding the subordinated debt redeemed in May 2022).
The ICAAP also sets out QBE’s approach to:
• accessing potential sources of additional capital if required;
• setting and monitoring risk indicators and triggers for capital levels, to alert management to periods of potential heightened risk;
• outlining the management actions that can be used to mitigate the potential implications of heightened risk;
• undertaking stress testing and scenario analysis to anticipate, and be better prepared for, certain adverse events;
• assessing the quality and composition of capital to meet regulatory requirements and rating agency guidelines and rules; and
• determining and monitoring capital allocation and ensuring that QBE earns an effective rate of return on its capital deployed.
The governance over the ICAAP includes the Board and Board Committees, the Executive Investment & Capital Committee,
the Executive Risk Committee, senior management, and supporting functions.
118
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
4.1
Strategic risk
Overview
Strategic risk is the current and prospective impact on earnings and/or capital arising from strategic business decisions
and responsiveness to external change. QBE classifies strategic risk into five subcategories, as follows:
• Performance risk: QBE is not able to achieve its performance objectives.
• Capital risk: QBE’s structure and availability of capital do not meet regulatory requirements and/or support
strategic initiatives.
• Reputational risk: QBE’s stakeholders have a negative perception of QBE’s brand which may damage QBE’s
reputation and threaten overall performance.
• Environmental, social and governance (ESG) risk: this is the negative impact on QBE’s strategic priorities or objectives
from ESG issues.
or the markets in which it operates.
Board and is summarised below.
• Emerging risk: these are new or future risks which are difficult to assess but may have a significant impact to QBE
QBE’s approach to managing strategic risk is underpinned by the Group strategic risk appetite statement as set by the
Performance risk
Failure to deliver acceptable performance can result in shareholders losing confidence, impacting our reputation in the market and
ultimately impacting our ability to deliver our strategic objectives.
QBE evaluates performance risk by assessing potential earnings volatility against its risk appetite and considering the changing
levels of risk in its business plan. The plan is supported by an established regime of attestations by chief underwriting officers,
chief actuaries, chief financial officers and chief risk officers, enabling action prior to signing off the business plan and making
market commitments. Performance risk is monitored throughout the year against committed business plans (supported
by performance monitoring, cell reviews, and mid-year risk reviews).
Capital risk
The Internal Capital Adequacy Assessment Process (ICAAP) outlines QBE’s approach to:
• assessing the risks arising from its activities and ensuring that capital held is commensurate with the level of risk; and
• maintaining adequate capital over time, including the setting of capital targets consistent with risk profile, risk appetite and
regulatory capital requirements.
the Prescribed Capital Amount (PCA).
QBE maintains a level of eligible regulatory capital that exceeds requirements, with the capital target set at a multiple of 1.6–1.8 times
All regulated controlled entities are required to maintain a minimum level of capital to meet obligations to policyholders. It is the
Group’s policy that each regulated entity maintains a capital base appropriate to its size, business mix, complexity and risk profile
which fully complies with and meets or exceeds local regulatory requirements.
QBE aims to maintain the ratio of borrowings to total capital at 15%–30%. At the balance date, this ratio was 23.4% (2021 26.9%,
or 24.1% when excluding the subordinated debt redeemed in May 2022).
The ICAAP also sets out QBE’s approach to:
• accessing potential sources of additional capital if required;
• setting and monitoring risk indicators and triggers for capital levels, to alert management to periods of potential heightened risk;
• outlining the management actions that can be used to mitigate the potential implications of heightened risk;
• undertaking stress testing and scenario analysis to anticipate, and be better prepared for, certain adverse events;
• assessing the quality and composition of capital to meet regulatory requirements and rating agency guidelines and rules; and
• determining and monitoring capital allocation and ensuring that QBE earns an effective rate of return on its capital deployed.
The governance over the ICAAP includes the Board and Board Committees, the Executive Investment & Capital Committee,
the Executive Risk Committee, senior management, and supporting functions.
Reputational risk
QBE assesses reputational risk through the quality of the relationships with key stakeholders, including shareholders, regulators,
customers, governments, communities, employees, and third-party partners including distributors and suppliers. Each of these
relationships is managed through divisional and Group teams, including corporate affairs, human resources, regulatory, compliance
and distribution teams.
ESG and emerging risks
QBE’s ESG risk and emerging risk standards operationalise QBE’s approach to managing ESG and emerging risks respectively,
including climate change. Horizon scans are performed to identify and assess the key ESG and emerging risks. Our approach to
managing these risks includes development of underwriting and investment policies, monitoring frameworks and stress and scenario
analysis. ESG and emerging risks are regularly reported to the Executive Risk Committee and the Board Risk & Capital Committee.
Climate change is a material business risk for QBE, potentially impacting our business and customers in the medium to long term.
We have considered short-term scenarios that could affect our insurance business written to date and current investments. Climate
change is expected to increasingly impact the frequency and severity of weather-related natural catastrophes over the long term.
In the short term, it is often difficult to distinguish the impact of climate change from the normal variability in weather and natural
catastrophes. Claims in respect of classes most impacted by these events (e.g. property classes) are typically reported and settled
soon after the claim event, and climate change is therefore not expected to materially impact the level of uncertainty in estimating the
ultimate cost of those claims. QBE looks to manage for natural catastrophe volatility by considering a wide range of event frequency
and severity scenarios in our capital planning, and by purchasing a comprehensive Group catastrophe reinsurance program.
QBE’s investments continue to be resilient with respect to climate transition risks as they have limited exposure to highly impacted
sectors. Given the medium to long-term nature of the estimated impacts of climate transition, this factor is not expected to be
significant to the fair value measurement of the Group’s investment assets at the balance date.
Further detail on QBE’s approach to climate change is included in our climate change disclosures on pages 34 to 43 of this
Annual Report.
4.2
Insurance risk
Overview
Insurance risk is the risk of fluctuations in the timing, frequency and severity of insured events and claims settlements,
relative to expectations.
QBE classifies insurance risk into three subcategories, as follows:
• underwriting/pricing risk;
• insurance concentration risk; and
• reserving risk.
QBE’s approach to managing insurance risk is underpinned by the Group’s insurance risk appetite statement which
is set by the Board and is summarised below.
Underwriting/pricing risk
QBE manages underwriting/pricing risk by appropriately setting and adjusting underwriting strategy, risk selection and pricing
practices throughout the underwriting cycle. Underwriting/pricing risk is monitored throughout the year against committed business
plans underpinned by cell reviews.
QBE’s underwriting strategy aims to diversify and limit the type of insurance risks accepted and reduce the variability of the expected
outcome. The underwriting strategy is implemented through QBE’s annual business planning process, supported by minimum
underwriting standards and delegated authorities. These authorities reflect the level of risk that the Group is prepared to take with
respect to each permitted insurance class.
Pricing of risks is controlled by the use of in-house pricing models relevant to specific portfolios and the markets in which QBE
operates. Underwriters and actuaries maintain pricing and claims analysis for each portfolio, combined with a knowledge of current
developments in the respective markets and classes of business.
119
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6
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120
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Insurance concentration risk
QBE’s exposure to concentrations of insurance risk is mitigated by maintaining a business portfolio that is diversified across countries
and classes of business. Product diversification is pursued through a strategy of developing strong underwriting skills in a wide variety
of classes of business.
The table below demonstrates the diversity of QBE’s operations:
GROSS EARNED PREMIUM REVENUE
Commercial and domestic property
Agriculture
Public/product liability
Motor & motor casualty
Professional indemnity
Marine, energy and aviation
Workers’ compensation
Accident and health
Financial and credit
Other
2022
US$M
5,520
3,921
2,248
1,922
1,624
1,303
1,172
876
453
28
19,067
2021
US$M
5,031
2,825
1,983
1,937
1,644
1,271
1,040
772
511
21
17,035
Insurance concentration risk includes the risks from natural or man-made events that have the potential to produce claims from
many of the Group’s policyholders at the same time (e.g. catastrophes). QBE currently uses a variety of methodologies to monitor
aggregate exposures and manage catastrophe risk. These include the use of catastrophe models from third-party vendors, realistic
disaster scenarios and group aggregate methodology. QBE sets the risk appetite relating to catastrophe risk with reference to the
insurance concentration risk charge (ICRC), a capital measure under APRA prudential standards. QBE’s maximum risk tolerance
for an individual natural catastrophe is determined annually and is linked to a maximum net aggregate allowance of catastrophe claims.
Reserving risk
Reserving risk is managed through the actuarial valuation of insurance liabilities, which is conducted at least half-yearly. The valuation
of the net discounted central estimate of outstanding claims is performed by qualified and experienced actuaries, with reference
to historical data and reasoned expectations of future experience and events. The net discounted central estimate of outstanding claims
is subject to a comprehensive independent review at least annually.
QBE’s exposure to concentrations of insurance risk is mitigated by maintaining a business portfolio that is diversified across countries
and classes of business. Product diversification is pursued through a strategy of developing strong underwriting skills in a wide variety
Overview
4.3
Credit risk
120
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Insurance concentration risk
of classes of business.
The table below demonstrates the diversity of QBE’s operations:
GROSS EARNED PREMIUM REVENUE
Commercial and domestic property
Agriculture
Public/product liability
Motor & motor casualty
Professional indemnity
Marine, energy and aviation
Workers’ compensation
Accident and health
Financial and credit
Other
2022
US$M
5,520
3,921
2,248
1,922
1,624
1,303
1,172
876
453
28
2021
US$M
5,031
2,825
1,983
1,937
1,644
1,271
1,040
772
511
21
19,067
17,035
Insurance concentration risk includes the risks from natural or man-made events that have the potential to produce claims from
many of the Group’s policyholders at the same time (e.g. catastrophes). QBE currently uses a variety of methodologies to monitor
aggregate exposures and manage catastrophe risk. These include the use of catastrophe models from third-party vendors, realistic
disaster scenarios and group aggregate methodology. QBE sets the risk appetite relating to catastrophe risk with reference to the
insurance concentration risk charge (ICRC), a capital measure under APRA prudential standards. QBE’s maximum risk tolerance
for an individual natural catastrophe is determined annually and is linked to a maximum net aggregate allowance of catastrophe claims.
Reserving risk
Reserving risk is managed through the actuarial valuation of insurance liabilities, which is conducted at least half-yearly. The valuation
of the net discounted central estimate of outstanding claims is performed by qualified and experienced actuaries, with reference
to historical data and reasoned expectations of future experience and events. The net discounted central estimate of outstanding claims
is subject to a comprehensive independent review at least annually.
121
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Credit risk is the risk of financial loss from a counterparty’s failure to meet their financial obligations, including both
inability or unwillingness to pay, as well as loss due to credit quality deterioration from rating downgrades. QBE’s
exposure to credit risk results from financial transactions with securities issuers, debtors, brokers, policyholders,
reinsurers and guarantors.
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QBE’s approach to managing credit risk is underpinned by the Group’s credit risk appetite as set by the Board and
is summarised below.
Reinsurance credit risk
The Group’s objective is to maximise placement of reinsurance with highly rated counterparties. Concentration of risk with
reinsurance counterparties is monitored strictly and regularly by the Group’s Security Committee and is controlled by reference
to the following protocols:
• treaty or facultative reinsurance is placed in accordance with the requirements of the Group REMS and Group Security
Committee guidelines;
• reinsurance arrangements are regularly reassessed to determine their effectiveness based on current exposures, historical
claims and potential future claims based on the Group’s insurance concentrations; and
• exposure to reinsurance counterparties and the credit quality of those counterparties are actively monitored.
Credit risk exposures are calculated regularly and compared with authorised credit limits. The Group is exposed to material
concentrations of credit risk in relation to reinsurance recoveries at the balance date, in particular to large global reinsurers.
In certain cases, the Group requires letters of credit or other collateral arrangements to be provided to guarantee the recoverability
of the amount involved. Collateral held for the Group in respect of reinsurance arrangements is $1,809 million (2021 $1,960 million).
The carrying amount of relevant asset classes on the balance sheet represents the maximum amount of credit exposure. Collateral
held may reduce the level of credit risk associated with this exposure but does not change the total amount recoverable. The credit
rating analysis below includes the impact of such security arrangements. In some cases, further security has been obtained in the
form of trust arrangements, reinsurer default protection and other potential offsets. This additional security has not been included
in the credit rating analysis below.
The following table provides information about the quality of the Group’s credit risk exposure in respect of reinsurance recoveries
at the balance date. The analysis classifies the assets according to Standard & Poor’s (S&P) counterparty credit ratings.
AAA is the highest possible rating. Rated assets falling outside the range of AAA to BBB are classified as speculative grade.
At 31 December 2022
Reinsurance recoveries on outstanding claims1, 2
Reinsurance recoveries on paid claims1
At 31 December 2021
Reinsurance recoveries on outstanding claims1, 2
Reinsurance recoveries on paid claims1
1 Net of a provision for impairment.
2 Excludes other recoveries of $309 million (2021 $261 million).
CREDIT RATING
AAA
US$M
AA
US$M
A
US$M
BBB
US$M
NOT RATED
US$M
67
2
2
–
4,298
2,106
4,713
1,701
1,838
744
1,662
388
30
4
55
4
75
13
64
25
TOTAL
US$M
6,308
2,869
6,496
2,118
2
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t
h
e
r
n
f
o
r
m
a
t
i
o
n
122
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
The following table provides further information regarding the ageing of reinsurance recoveries on paid claims at the balance date:
PAST DUE BUT NOT IMPAIRED
NEITHER
PAST
DUE NOR
IMPAIRED
US$M
1,528
1,333
YEAR
2022
2021
0 TO 3
MONTHS
US$M
1,043
642
4 TO 6
MONTHS
US$M
7 MONTHS
TO 1 YEAR
US$M
54
58
147
36
GREATER
THAN
1 YEAR
US$M
97
49
TOTAL
US$M
2,869
2,118
Reinsurance recoveries on paid claims1
1 Net of a provision for impairment.
Investment and treasury credit risk
The Group only transacts with investment counterparties within the limits outlined in the delegated authorities. Investment
counterparty exposure limits are applied to individual counterparty exposures and to multiple exposures within a group of related
companies in relation to investments, cash deposits and forward foreign exchange exposures. Counterparty exposure limit
compliance is monitored daily.
The following table provides information regarding the Group’s aggregate credit risk exposure at the balance date in respect of the
major classes of financial assets. Trade and other receivables are excluded from this analysis on the basis that they comprise smaller
credit risk items which generally cannot be rated and are not individually material. The analysis classifies the assets according to S&P
counterparty credit ratings. AAA is the highest possible rating. Rated assets falling outside the range of AAA to BBB are classified
as speculative grade.
At 31 December 2022
Cash and cash equivalents
Interest-bearing investments
Derivative financial instruments
At 31 December 2021
Cash and cash equivalents
Interest-bearing investments
Derivative financial instruments
CREDIT RATING
AAA
US$M
AA
US$M
–
3,796
–
–
4,435
–
231
10,217
121
232
9,706
53
A
US$M
437
7,629
154
499
9,474
81
BBB
US$M
SPECULATIVE
GRADE
US$M
NOT RATED
US$M
TOTAL
US$M
17
2,869
8
35
2,715
6
1
482
–
–
–
–
147
153
1
53
38
2
833
25,146
284
819
26,368
142
The carrying amount of the relevant asset classes on the balance sheet represents the maximum amount of credit exposure at the
balance date. The fair value of derivatives shown on the balance sheet represents the risk exposure at the balance date but not the
maximum risk exposure that could arise in the future as a result of changing values.
Insurance and other credit risk
The Group transacts with brokers that are reputable, suitable and approved in accordance with local broker policies. The continuous
due diligence over brokers involves an assessment of the broker’s reputation, regulatory standing and financial strength.
QBE regularly reviews the collectability of receivables and the adequacy of associated provisions for impairment. Concentration risk
for large brokers is also monitored. Balances are monitored on the basis of uncollected debt and debt outstanding in excess of six
months. Brokers are also subject to regular due diligence to ensure adherence to local broker policies and associated requirements.
The following table provides information regarding the ageing of the Group’s financial assets that are past due but not impaired and
which are largely unrated at the balance date:
PAST DUE BUT NOT IMPAIRED
NEITHER PAST
DUE NOR
IMPAIRED
US$M
0 TO 3
MONTHS
US$M
4 TO 6
MONTHS
US$M
7 MONTHS
TO 1 YEAR
US$M
GREATER THAN
1 YEAR
US$M
3,567
223
412
2,789
126
508
256
1
3
421
60
41
102
1
1
152
2
1
44
2
1
65
1
1
16
5
1
35
6
9
TOTAL
US$M
3,985
232
418
3,462
195
560
At 31 December 2022
Premium receivable1
Other trade debtors
Other receivables
At 31 December 2021
Premium receivable1
Other trade debtors
Other receivables
1 Net of a provision for impairment.
122
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
The following table provides further information regarding the ageing of reinsurance recoveries on paid claims at the balance date:
PAST DUE BUT NOT IMPAIRED
NEITHER
PAST
DUE NOR
IMPAIRED
US$M
1,528
1,333
YEAR
2022
2021
0 TO 3
MONTHS
US$M
1,043
642
4 TO 6
MONTHS
US$M
7 MONTHS
TO 1 YEAR
US$M
54
58
147
36
GREATER
THAN
1 YEAR
US$M
97
49
TOTAL
US$M
2,869
2,118
Reinsurance recoveries on paid claims1
1 Net of a provision for impairment.
Investment and treasury credit risk
The Group only transacts with investment counterparties within the limits outlined in the delegated authorities. Investment
counterparty exposure limits are applied to individual counterparty exposures and to multiple exposures within a group of related
companies in relation to investments, cash deposits and forward foreign exchange exposures. Counterparty exposure limit
compliance is monitored daily.
The following table provides information regarding the Group’s aggregate credit risk exposure at the balance date in respect of the
major classes of financial assets. Trade and other receivables are excluded from this analysis on the basis that they comprise smaller
credit risk items which generally cannot be rated and are not individually material. The analysis classifies the assets according to S&P
counterparty credit ratings. AAA is the highest possible rating. Rated assets falling outside the range of AAA to BBB are classified
as speculative grade.
At 31 December 2022
Cash and cash equivalents
Interest-bearing investments
Derivative financial instruments
At 31 December 2021
Cash and cash equivalents
Interest-bearing investments
Derivative financial instruments
CREDIT RATING
AAA
US$M
AA
US$M
3,796
4,435
–
–
–
–
231
10,217
121
232
9,706
53
A
US$M
437
7,629
154
499
9,474
81
BBB
US$M
2,869
17
8
35
2,715
6
SPECULATIVE
GRADE
US$M
NOT RATED
US$M
TOTAL
US$M
482
1
–
–
–
–
147
153
1
53
38
2
833
25,146
284
819
26,368
142
The carrying amount of the relevant asset classes on the balance sheet represents the maximum amount of credit exposure at the
balance date. The fair value of derivatives shown on the balance sheet represents the risk exposure at the balance date but not the
maximum risk exposure that could arise in the future as a result of changing values.
Insurance and other credit risk
The Group transacts with brokers that are reputable, suitable and approved in accordance with local broker policies. The continuous
due diligence over brokers involves an assessment of the broker’s reputation, regulatory standing and financial strength.
QBE regularly reviews the collectability of receivables and the adequacy of associated provisions for impairment. Concentration risk
for large brokers is also monitored. Balances are monitored on the basis of uncollected debt and debt outstanding in excess of six
months. Brokers are also subject to regular due diligence to ensure adherence to local broker policies and associated requirements.
The following table provides information regarding the ageing of the Group’s financial assets that are past due but not impaired and
which are largely unrated at the balance date:
PAST DUE BUT NOT IMPAIRED
NEITHER PAST
DUE NOR
IMPAIRED
US$M
0 TO 3
MONTHS
US$M
4 TO 6
MONTHS
US$M
7 MONTHS
TO 1 YEAR
US$M
GREATER THAN
1 YEAR
US$M
3,567
223
412
2,789
126
508
256
1
3
421
60
41
102
1
1
2
1
152
44
2
1
1
1
65
16
5
1
35
6
9
TOTAL
US$M
3,985
232
418
3,462
195
560
At 31 December 2022
Premium receivable1
Other trade debtors
Other receivables
At 31 December 2021
Premium receivable1
Other trade debtors
Other receivables
1 Net of a provision for impairment.
123
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
P
e
r
f
o
r
m
a
n
c
e
4.4 Market risk
Overview
Market risk is the risk of adverse impacts on earnings resulting from changes in market factors. Market factors include,
but are not limited to, interest rates, equity prices, credit spreads and foreign exchange rates.
i
e
w
QBE’s approach to managing market risk is underpinned by the Group’s market risk appetite as set by the Board
and is summarised below.
QBE’s approach to managing investment market movements is underpinned by the Group’s investment strategy which outlines QBE’s
view of the markets and its corresponding investment approach.
Investment market risk is managed through the application of risk and exposure limits. These limits are based on the market risk
appetite as determined by the Board and apply to:
• losses generated on the investment portfolio under market stress scenarios. The scenarios assume adverse movements in market
factors and are designed to reflect a significant market stress event; and
• sensitivities to changes in risk factors which have a significant impact on the investment portfolio such as interest rate risk.
Interest rate risk
QBE is exposed to interest rate risk through its holdings in interest-bearing assets. Financial instruments with a floating interest rate
expose the Group to cash flow interest rate risk, whereas fixed interest rate instruments expose the Group to fair value interest rate
risk. Interest-bearing borrowings issued by the Group are measured at amortised cost and therefore do not expose the Group result
to fair value interest rate risk.
QBE’s risk management approach is to minimise interest rate risk by actively managing investment portfolios to achieve a balance
between cash flow interest rate risk and fair value interest rate risk. The Group predominantly invests in high quality, liquid
interest-bearing securities and cash and may use derivative financial instruments to manage the interest rate risk of the fixed interest
portfolio and other financial instruments. The risk management processes over these derivative financial instruments include close
senior management scrutiny, including appropriate board and other management reporting. Derivatives are used only for approved
purposes and are subject to Board-approved risk appetites and delegated authority levels provided to management. The level
of derivative exposure is reviewed on an ongoing basis. Appropriate segregation of duties exists with respect to derivative use,
and compliance with policy, limits and other requirements is closely monitored.
The net central estimate of outstanding claims is discounted to present value by reference to risk-free interest rates. The Group
is therefore exposed to potential underwriting result volatility as a result of interest rate movements. In practice, over the longer term,
an increase or decrease in interest rates is normally offset by a corresponding increase or decrease in inflation. Information relating
to this sensitivity is provided in note 2.3.7. At the balance date, the average modified duration of cash and fixed interest securities
was 1.6 years (2021 2.1 years). Although QBE maintains a shorter asset duration relative to insurance liabilities, the Group’s
overall exposure to interest rate risk is not material given the quantum by which the value of fixed income assets exceeds the value
of insurance liabilities.
All investments are financial assets measured at fair value through profit or loss. Movements in interest rates impact the fair value
of interest-bearing financial assets and therefore impact reported profit or loss after income tax. The impact of a 1.0% increase or
decrease in interest rates on interest-bearing financial assets owned by the Group at the balance date is shown in the table below:
Interest rate movement – interest-bearing financial assets
1 Net of tax at the Group’s prima facie income tax rate of 30%.
SENSITIVITY
%
+1
-1
PROFIT (LOSS)1
2022
US$M
(294)
309
2021
US$M
(398)
328
2
O
p
e
r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
r
e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
124
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Equity price risk
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate or currency risk), whether those changes are caused by factors specific to the
individual financial instrument or its issuer, or factors affecting all similar financial instruments traded on the market.
QBE is exposed to equity price risk on its investment in growth assets and may use derivative financial instruments to manage this
exposure. The risk management processes over these derivative financial instruments are the same as those already explained
in respect of interest rate derivative financial instruments. Exposure is also managed by diversification across international markets
and currencies.
Growth assets are measured at fair value through profit or loss. The impact of a 20% increase or decrease in the value of investments
owned by the Group at the balance date on profit or loss after income tax is shown in the table below:
ASX 200
S&P 500
FTSE 100
EURO STOXX
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
SENSITIVITY
%
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
PROFIT (LOSS)1
2022
US$M
8
(8)
8
(8)
8
(8)
11
(11)
9
(9)
105
(105)
117
(117)
25
(25)
2021
US$M
7
(7)
3
(3)
–
–
–
–
–
–
106
(106)
110
(110)
16
(16)
1 Net of tax at the Group’s prima facie income tax rate of 30%.
QBE is also exposed to price risk on its fixed interest securities as discussed above in relation to interest rate risk, and below in relation
to credit spread risk. All securities are measured at fair value through profit or loss.
Credit spread risk
Movements in credit spreads impact the value of corporate interest-bearing securities, emerging market and high yield debt and
private credit, and therefore impact reported profit or loss after tax. This risk is managed by investing in mostly high quality, liquid
interest-bearing securities and by managing the credit spread duration of the interest-bearing securities portfolio.
The impact of a 0.5% increase or decrease in credit spreads on interest-bearing financial assets held by the Group at the balance
date on profit or loss after income tax is shown in the table below:
Credit spread movement – interest-bearing financial assets 2
1 Net of tax at the Group’s prima facie income tax rate of 30%.
2 Includes infrastructure debt and other investments.
SENSITIVITY
%
+0.5
-0.5
PROFIT (LOSS)1
2022
US$M
(125)
120
2021
US$M
(114)
96
124
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Equity price risk
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate or currency risk), whether those changes are caused by factors specific to the
individual financial instrument or its issuer, or factors affecting all similar financial instruments traded on the market.
QBE is exposed to equity price risk on its investment in growth assets and may use derivative financial instruments to manage this
exposure. The risk management processes over these derivative financial instruments are the same as those already explained
in respect of interest rate derivative financial instruments. Exposure is also managed by diversification across international markets
and currencies.
Growth assets are measured at fair value through profit or loss. The impact of a 20% increase or decrease in the value of investments
owned by the Group at the balance date on profit or loss after income tax is shown in the table below:
ASX 200
S&P 500
FTSE 100
EURO STOXX
Emerging market equity
Unlisted property trusts
Infrastructure assets
Alternatives
SENSITIVITY
PROFIT (LOSS)1
%
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
+20
-20
2022
US$M
(8)
(8)
8
8
8
(8)
11
(11)
9
(9)
105
(105)
117
(117)
25
(25)
2021
US$M
(7)
7
3
(3)
–
–
–
–
–
–
106
(106)
110
(110)
16
(16)
1 Net of tax at the Group’s prima facie income tax rate of 30%.
QBE is also exposed to price risk on its fixed interest securities as discussed above in relation to interest rate risk, and below in relation
to credit spread risk. All securities are measured at fair value through profit or loss.
Credit spread risk
Movements in credit spreads impact the value of corporate interest-bearing securities, emerging market and high yield debt and
private credit, and therefore impact reported profit or loss after tax. This risk is managed by investing in mostly high quality, liquid
interest-bearing securities and by managing the credit spread duration of the interest-bearing securities portfolio.
The impact of a 0.5% increase or decrease in credit spreads on interest-bearing financial assets held by the Group at the balance
date on profit or loss after income tax is shown in the table below:
Credit spread movement – interest-bearing financial assets 2
1 Net of tax at the Group’s prima facie income tax rate of 30%.
2 Includes infrastructure debt and other investments.
SENSITIVITY
%
+0.5
-0.5
PROFIT (LOSS)1
2022
US$M
(125)
120
2021
US$M
(114)
96
125
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
i
e
w
P
e
r
f
o
r
m
a
n
c
e
2
O
p
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r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
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e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
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r
t
D
i
r
e
c
t
o
r
s
Foreign exchange risk
QBE’s approach to foreign exchange management is underpinned by the Group’s foreign currency strategy. The Group’s foreign
exchange exposure generally arises as a result of either the translation of foreign currency amounts to the functional currency
of a controlled entity (operational currency risk) or due to the translation of the Group’s net investments in foreign operations to the
functional currency of the ultimate parent entity of Australian dollars and to QBE’s presentation currency of US dollars (currency
translation risk).
Operational currency risk
Operational currency risk is managed as follows:
• Each controlled entity manages the volatility arising from changes in foreign exchange rates by matching liabilities with assets
of the same currency, as far as is practicable, thus ensuring that any exposures to foreign currencies are minimised. The Group’s
aim is to mitigate, where possible, its operational foreign currency exposures at a controlled entity level.
• Forward foreign exchange contracts are used where possible to protect any residual currency positions. Where appropriate, forward
foreign exchange contracts may also be used in relation to the Group’s borrowings and may be designated as hedge relationships
for accounting purposes. Further information on forward foreign exchange contracts used to manage operational currency risk
is provided in note 5.6.
The risk management process relating to the use of forward foreign exchange contracts involves close senior management scrutiny.
All forward foreign exchange contracts are subject to delegated authority levels provided to management and the levels of exposure
are reviewed on an ongoing basis.
The analysis below demonstrates the impact on profit or loss after income tax of a 10% strengthening or weakening of the major
currencies against the functional currencies of the underlying QBE entities for which the Group has a material exposure at the
balance date. The exposures below reflect the aggregation of operational currency exposures of multiple entities with different
functional currencies. The sensitivity is measured with reference to the Group’s residual (or unmatched) operational foreign currency
exposures at the balance date. Operational foreign exchange gains or losses are recognised in profit or loss in accordance with the
policy set out in note 1.2.4. The sensitivities provided demonstrate the impact of a change in one key variable in isolation while other
assumptions remain unchanged.
The sensitivities shown in the table below are relevant only at the balance sheet date, as any unmatched exposures are actively
monitored by management and the exposure subsequently matched. The table below includes derivatives entered into on 31
December 2022 to mitigate exposures not currently reflected in the Group’s balance sheet relating to unearned premium and deferred
insurance costs balances as their equivalents will be monetary items under AASB 17 Insurance Contracts (refer to note 8.1.2).
2022
2021
EXPOSURE CURRENCY
US dollar
Australian dollar
Canadian dollar
Sterling
Euro
RESIDUAL
EXPOSURE
US$M
1,066
214
196
39
(103)
SENSITIVITY
%
PROFIT (LOSS)1
US$M
+10
‑10
+10
‑10
+10
‑10
+10
‑10
+10
‑10
75
(75)
15
(15)
14
(14)
3
(3)
(7)
7
RESIDUAL
EXPOSURE
US$M
198
95
15
14
9
1 Net of tax at the Group’s prima facie income tax rate of 30%.
SENSITIVITY
%
PROFIT (LOSS)1
US$M
’
+10
-10
+10
-10
+10
-10
+10
-10
+10
-10
14
(14)
7
(7)
1
(1)
1
(1)
1
(1)
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
126
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Currency translation risk
QBE is exposed to currency risk in relation to the translation of:
• the ultimate parent entity’s net investments in foreign operations to its functional currency of Australian dollars; and
• all non-US dollar functional currency operations to the Group’s presentation currency of US dollars.
Currency translation risk in relation to QBE’s investment in foreign operations is monitored on an ongoing basis and may be mitigated
by designation of foreign currency borrowings as a hedge of this risk. Any borrowing that qualifies as a hedging instrument may
be designated as a hedge of the Australian dollar ultimate parent entity’s net investments in foreign operations and any residual
exposure to foreign operations in tradeable currencies may be hedged up to the limit specified in the Group risk appetite statement.
The extent of hedging this exposure is carefully managed to ensure an appropriate balance between currency risk and associated
risks such as liquidity risk and stability of capital adequacy levels.
QBE does not ordinarily seek to use derivatives to mitigate currency translation risk on translation to the ultimate parent entity
functional currency of Australian dollars for the following reasons:
• currency translation gains and losses generally have no cash flow;
• currency translation gains and losses are accounted for in the foreign currency translation reserve (a component of equity) and
therefore do not impact profit or loss unless the related foreign operation is disposed of; and
• management of translation risk needs to be balanced against the impact on capital requirements and liquidity risk.
QBE may, however, elect to use derivatives to manage currency translation risk in order to preserve capital.
Currency management processes are actively monitored by Group Treasury and involve close senior management scrutiny.
All hedge transactions are subject to delegated authority levels provided to management, and the levels of exposure are
reviewed on an ongoing basis. All instruments that are designated as hedges are tested for effectiveness in accordance with
AASB 9 Financial Instruments.
Further information on derivatives and borrowings designated as hedges of net investments in foreign operations is provided
in note 5.6.1.
Foreign exchange gains or losses arising on translation of the Group’s foreign operations from the ultimate parent entity’s functional
currency of Australian dollars to the Group’s US dollar presentation currency are recognised directly in equity in accordance with the
policy set out in note 1.2.4. The Group cannot hedge this exposure.
The analysis below demonstrates the impact on equity of a 10% strengthening or weakening against the US dollar of the major
currencies to which QBE is exposed through its net investments in foreign operations. The basis for the sensitivity calculation
is the Group’s actual residual exposure at the balance date.
EXPOSURE CURRENCY
Australian dollar
Euro
Sterling
New Zealand dollar
Singapore dollar
Hong Kong dollar
2022
2021
RESIDUAL
EXPOSURE
US$M
SENSITIVITY
%
EQUITY INCREASE
(DECREASE)
US$M
RESIDUAL
EXPOSURE
US$M
SENSITIVITY
%
EQUITY INCREASE
(DECREASE)
US$M
3,323
1,504
690
299
127
149
+10
‑10
+10
‑10
+10
‑10
+10
‑10
+10
‑10
+10
‑10
332
(332)
150
(150)
69
(69)
30
(30)
13
(13)
15
(15)
2,702
1,538
782
278
121
116
+10
-10
+10
-10
+10
-10
+10
-10
+10
-10
+10
-10
270
(270)
154
(154)
78
(78)
28
(28)
12
(12)
12
(12)
126
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
Currency translation risk
QBE is exposed to currency risk in relation to the translation of:
• the ultimate parent entity’s net investments in foreign operations to its functional currency of Australian dollars; and
• all non-US dollar functional currency operations to the Group’s presentation currency of US dollars.
Currency translation risk in relation to QBE’s investment in foreign operations is monitored on an ongoing basis and may be mitigated
by designation of foreign currency borrowings as a hedge of this risk. Any borrowing that qualifies as a hedging instrument may
be designated as a hedge of the Australian dollar ultimate parent entity’s net investments in foreign operations and any residual
exposure to foreign operations in tradeable currencies may be hedged up to the limit specified in the Group risk appetite statement.
The extent of hedging this exposure is carefully managed to ensure an appropriate balance between currency risk and associated
risks such as liquidity risk and stability of capital adequacy levels.
QBE does not ordinarily seek to use derivatives to mitigate currency translation risk on translation to the ultimate parent entity
functional currency of Australian dollars for the following reasons:
• currency translation gains and losses generally have no cash flow;
• currency translation gains and losses are accounted for in the foreign currency translation reserve (a component of equity) and
therefore do not impact profit or loss unless the related foreign operation is disposed of; and
• management of translation risk needs to be balanced against the impact on capital requirements and liquidity risk.
QBE may, however, elect to use derivatives to manage currency translation risk in order to preserve capital.
Currency management processes are actively monitored by Group Treasury and involve close senior management scrutiny.
All hedge transactions are subject to delegated authority levels provided to management, and the levels of exposure are
reviewed on an ongoing basis. All instruments that are designated as hedges are tested for effectiveness in accordance with
AASB 9 Financial Instruments.
in note 5.6.1.
Further information on derivatives and borrowings designated as hedges of net investments in foreign operations is provided
Foreign exchange gains or losses arising on translation of the Group’s foreign operations from the ultimate parent entity’s functional
currency of Australian dollars to the Group’s US dollar presentation currency are recognised directly in equity in accordance with the
policy set out in note 1.2.4. The Group cannot hedge this exposure.
The analysis below demonstrates the impact on equity of a 10% strengthening or weakening against the US dollar of the major
currencies to which QBE is exposed through its net investments in foreign operations. The basis for the sensitivity calculation
is the Group’s actual residual exposure at the balance date.
EXPOSURE CURRENCY
Australian dollar
Euro
Sterling
New Zealand dollar
Singapore dollar
Hong Kong dollar
2022
2021
RESIDUAL
EXPOSURE
SENSITIVITY
EQUITY INCREASE
(DECREASE)
RESIDUAL
EXPOSURE
SENSITIVITY
EQUITY INCREASE
(DECREASE)
US$M
3,323
1,504
690
299
127
149
%
+10
‑10
+10
‑10
+10
‑10
+10
‑10
+10
‑10
+10
‑10
US$M
332
(332)
150
(150)
69
(69)
30
(30)
13
(13)
15
(15)
US$M
2,702
1,538
782
278
121
116
%
+10
-10
+10
-10
+10
-10
+10
-10
+10
-10
+10
-10
US$M
270
(270)
154
(154)
78
(78)
28
(28)
12
(12)
12
(12)
127
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2
2
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4.5
Liquidity risk
Overview
Liquidity risk is the risk of having insufficient liquid assets to meet liabilities as they fall due to policyholders and creditors
or only being able to access liquidity at excessive cost.
i
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QBE’s approach to managing liquidity risk is underpinned by the Group’s liquidity risk appetite which is set by the Board
and is summarised below.
QBE manages liquidity risk using a number of tools, as follows:
• cash flow targeting;
• maintenance of a minimum level of liquid assets relative to the Group’s liabilities;
• cash flow forecasting; and
• stress testing and contingency planning.
Liquidity is managed across the Group using a number of cash flow forecasting and targeting tools and techniques. Cash flow
forecasting and targeting are conducted at a legal entity level and involve actively managing operational cash flow requirements.
To supplement the cash flow targeting and to ensure that there are sufficient liquid funds available to meet insurance and investment
obligations, a minimum percentage of QBE’s liabilities is held, at all times, in cash and liquid securities. QBE also maintains a defined
proportion of the funds under management in liquid assets.
QBE actively forecasts cash flow requirements to identify future cash surpluses and shortages to optimise invested cash balances
and limit unexpected calls from the investment pool. The Group limits the risk of liquidity shortfalls resulting from mismatches in the
timing of claims payments and receipts of claims recoveries by negotiating cash call clauses in reinsurance contracts and seeking
accelerated settlements for large reinsurance recoveries.
The following table summarises the maturity profile of the Group’s financial liabilities based on the remaining contractual obligations.
Borrowings and contractual undiscounted interest payments are disclosed by reference to the first call date of the borrowings, details
of which, including redemption terms, are included in note 5.1.
At 31 December 2022
Derivative financial instruments
Trade payables
Other payables and accrued
expenses
Treasury payables
Investment payables
Lease liabilities
Borrowings1
Contractual undiscounted interest
payments
At 31 December 2021
Derivative financial instruments
Trade payables
Other payables and accrued
expenses
Treasury payables
Investment payables
Lease liabilities
Borrowings1
Contractual undiscounted interest
payments
LESS THAN
1 YEAR
US$M
13 TO 36
MONTHS
US$M
37 TO 60
MONTHS
US$M
OVER 5
YEARS
US$M
NO FIXED
TERM
US$M
256
2,620
692
17
3
49
406
155
130
2,123
767
19
51
56
442
162
131
197
11
–
–
88
1,000
195
322
191
46
–
–
90
1,106
268
–
–
–
–
–
70
863
49
–
2
5
–
–
60
1,188
108
–
–
2
–
–
94
481
9
–
1
–
–
–
148
541
17
–
1
–
–
–
–
–
–
–
5
5
–
–
–
–
–
TOTAL
US$M
387
2,818
705
17
3
301
2,750
408
452
2,322
823
19
51
354
3,277
555
1 Excludes capitalised finance costs of $6 million (2021 $9 million).
The maturity profile of the Group’s net discounted central estimate is analysed in note 2.3.6.
2
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3
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4
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p
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D
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’
5
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p
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6
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a
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i
o
n
128
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
The maturity of the Group’s interest-bearing financial assets is shown in the table below:
INTEREST-BEARING FINANCIAL ASSETS MATURING IN:
LESS THAN
1 YEAR
13 TO 24
MONTHS
25 TO 36
MONTHS
37 TO 48
MONTHS
49 TO 60
MONTHS
OVER 5
YEARS
US$M
% p.a.
US$M
% p.a.
US$M
% p.a.
US$M
% p.a.
9,911
4.0
1,954
2.4
9,353
0.3
1,517
0.1
2,905
4.5
1,051
4.0
4,105
0.7
705
0.3
2,007
4.7
1,110
4.3
2,636
1.0
762
0.6
1,220
5.0
396
4.8
2,038
1.2
337
0.7
887
5.1
436
4.2
1,348
1.2
294
0.8
3,398
4.7
704
5.2
3,369
1.3
723
1.1
TOTAL
20,328
4.4
5,651
3.7
22,849
0.7
4,338
0.5
At 31 December 2022
Fixed rate
Weighted average interest rate
Floating rate
Weighted average interest rate
At 31 December 2021
Fixed rate
Weighted average interest rate
Floating rate
Weighted average interest rate
4.6
Operational risk
Overview
Operational risk is the risk of financial loss resulting from inadequate or failed internal processes, people and systems
or from external events.
Operational risk can materialise in a number of forms including fraud perpetrated by employees or by external
parties (e.g. claims fraud or cyber attacks), employment practices (e.g. losses arising from acts inconsistent with
laws or agreements governing employment, employee health or safety, or from diversity or discrimination events
involving internal employees), improper business practices (e.g. failure to meet professional obligations or issues
with the nature or design of an insurance product), business disruption and system failures, or business and transaction
processing failures.
QBE manages operational risk through setting policy, minimum standards, and process and system controls, including
effective segregation of duties, access controls, authorisations and reconciliation procedures, business continuity
management, fraud management, information security and physical security.
QBE identifies, assesses and manages operational risk through the:
• risk and control self-assessment process, which identifies and assesses the key risks to achieving business objectives and
is conducted at the business unit level;
• operational risk appetite statement, which sets out the nature and level of risk that the Board and Group Executive Committee
are willing to take in pursuit of the organisation’s objectives. The operational risk appetite statement is measured through
an assessment of the control environment, key risk indicators, issues and incidents; and
• scenario analysis process, which assesses the impact of potentially extreme scenarios and the appropriateness of our
contingency planning.
Key residual risks from the above processes are monitored by the Executive Risk Committee.
128
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
4.
RISK MANAGEMENT
The maturity of the Group’s interest-bearing financial assets is shown in the table below:
4.7
Compliance risk
Overview
INTEREST-BEARING FINANCIAL ASSETS MATURING IN:
LESS THAN
1 YEAR
13 TO 24
MONTHS
25 TO 36
MONTHS
37 TO 48
MONTHS
49 TO 60
MONTHS
OVER 5
YEARS
TOTAL
US$M
% p.a.
US$M
% p.a.
US$M
% p.a.
US$M
% p.a.
9,911
4.0
1,954
2.4
9,353
0.3
1,517
0.1
2,905
4.5
1,051
4.0
0.7
705
0.3
2,007
4.7
1,110
4.3
1.0
762
0.6
1,220
5.0
396
4.8
1.2
337
0.7
887
5.1
436
4.2
1.2
294
0.8
3,398
20,328
4.7
704
5.2
1.3
723
1.1
4.4
5,651
3.7
0.7
4,338
0.5
4,105
2,636
2,038
1,348
3,369
22,849
At 31 December 2022
Fixed rate
Weighted average interest rate
Floating rate
Weighted average interest rate
At 31 December 2021
Fixed rate
Weighted average interest rate
Floating rate
Weighted average interest rate
4.6
Operational risk
Overview
or from external events.
Operational risk is the risk of financial loss resulting from inadequate or failed internal processes, people and systems
Operational risk can materialise in a number of forms including fraud perpetrated by employees or by external
parties (e.g. claims fraud or cyber attacks), employment practices (e.g. losses arising from acts inconsistent with
laws or agreements governing employment, employee health or safety, or from diversity or discrimination events
involving internal employees), improper business practices (e.g. failure to meet professional obligations or issues
with the nature or design of an insurance product), business disruption and system failures, or business and transaction
processing failures.
QBE manages operational risk through setting policy, minimum standards, and process and system controls, including
effective segregation of duties, access controls, authorisations and reconciliation procedures, business continuity
management, fraud management, information security and physical security.
QBE identifies, assesses and manages operational risk through the:
• risk and control self-assessment process, which identifies and assesses the key risks to achieving business objectives and
is conducted at the business unit level;
• operational risk appetite statement, which sets out the nature and level of risk that the Board and Group Executive Committee
are willing to take in pursuit of the organisation’s objectives. The operational risk appetite statement is measured through
an assessment of the control environment, key risk indicators, issues and incidents; and
• scenario analysis process, which assesses the impact of potentially extreme scenarios and the appropriateness of our
contingency planning.
Key residual risks from the above processes are monitored by the Executive Risk Committee.
Compliance risk is the risk of legal or regulatory penalties, financial loss or impacts and customer detriment resulting
from non-compliance with laws, regulations or conduct standards.
i
e
w
QBE’s approach to managing compliance risk is underpinned by the Group Compliance Risk Policy which is aligned
to the Group RMS and risk appetite set by the Board and is summarised below.
QBE manages compliance risk through the following approach:
• governance arrangements that establish accountability, responsibility and authority in relation to the management of compliance risk;
• a culture based on honesty, integrity and respect that is embedded as part of QBE DNA and the Code of Ethics and Conduct;
• stakeholder management to maintain pro-active and co-operative relationships with lawmakers, regulators and other relevant
r
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external parties;
• strategic priorities and objectives that are aligned to risk appetites set by the Board; and
• people, systems and processes to support effective compliance risk management.
QBE’s approach to compliance management is subject to continuous review and improvement to recognise changes in the regulatory
and legal environment and industry, customer and community expectations.
4.8
Group risk
Overview
Group risk is the risk to a division arising specifically from being part of the wider Group, including financial impact
and loss of support from the Company.
3
G
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4
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QBE’s approach to managing Group risk is supported by divisional Group risk appetite statements where divisions define
the Board-approved plan to address identified Group risk exposures. Sources of Group risk are summarised below.
’
Sources of Group risk may include:
• shared global reinsurance program, including counterparty risk of Equator Re;
• intercompany loans;
• contagion reputational risk;
• credit agency dependency;
• use of Group functions where there is a global operating model in place;
• use of QBE’s internal asset management function – Group Investments;
• Group initiatives or decisions with a material impact on one or more divisions; and
• liquidity and central foreign exchange management.
QBE manages Group risk through various systems, controls and processes, including the management of reinsurance arrangements,
use of intercompany transactions and balances accounting guidance, transfer pricing guidelines, investment management
agreements, capital planning and assessments of the use of Group functions, Group initiatives and contagion reputational events.
5
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6
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129
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0
2
2
Q
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I
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s
u
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a
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G
r
o
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p
1
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m
a
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2
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d
130
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
Overview
QBE’s objective in managing capital is to maintain an optimal balance between debt and equity in order to reduce the
overall cost of capital while satisfying the capital adequacy requirements of regulators and rating agencies, providing
financial security for our policyholders and continuing to provide an adequate return to shareholders.
The Company is listed on the Australian Securities Exchange and its share capital is denominated in Australian dollars.
The Group also accesses international debt markets to diversify its funding base and maintain an appropriate amount
of leverage. Borrowings are diversified across currencies and tenure.
Details of the Group’s approach to capital risk management are disclosed in note 4.1.
5.1
Borrowings
FINAL MATURITY DATE
ISSUE DATE
PRINCIPAL AMOUNT
Senior debt
25 May 2023
Subordinated debt
25 August 2036
13 September 2038
24 May 2042
24 November 2043
2 December 2044
12 November 2045
17 June 2046
25 September 2017
$6 million
25 August 2020
13 September 2021
24 May 2016
21 November 2016
2 December 2014
12 November 2015
17 June 2016
A$500 million1
£400 million
Nil (2021 £327 million)
$400 million/A$689 million1
$700 million/A$1,169 million1
$300 million
$524 million
Total borrowings 2
Amounts expected to be settled within 12 months³
Amounts expected to be settled in greater than 12 months³
Total borrowings
1 Details of related hedging activity are included in note 5.6.1.
2 No finance costs (2021 $3 million) were capitalised during the year.
3 Redemption of the securities are subject to the prior written approval of APRA.
Subordinated debt key terms
Subordinated debt due 2036
2022
US$M
6
6
338
478
–
400
699
300
523
2,738
2,744
406
2,338
2,744
2021
US$M
6
6
362
538
442
400
698
300
522
3,262
3,268
442
2,826
3,268
Interest is payable quarterly in arrears at a rate equal to the three-month BBSW rate plus a margin of 2.75% per annum.
Subordinated debt due 2038
Interest is payable semi-annually in arrears at a fixed rate of 2.5% per annum until 13 September 2028. The rate will reset in 2028
and 2033 to a rate calculated by reference to the then five-year gilt rate plus a margin of 2.061% per annum.
130
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
Overview
QBE’s objective in managing capital is to maintain an optimal balance between debt and equity in order to reduce the
overall cost of capital while satisfying the capital adequacy requirements of regulators and rating agencies, providing
financial security for our policyholders and continuing to provide an adequate return to shareholders.
The Company is listed on the Australian Securities Exchange and its share capital is denominated in Australian dollars.
The Group also accesses international debt markets to diversify its funding base and maintain an appropriate amount
of leverage. Borrowings are diversified across currencies and tenure.
Details of the Group’s approach to capital risk management are disclosed in note 4.1.
5.1
Borrowings
Senior debt
25 May 2023
Subordinated debt
25 August 2036
13 September 2038
24 May 2042
24 November 2043
2 December 2044
12 November 2045
17 June 2046
Total borrowings 2
FINAL MATURITY DATE
ISSUE DATE
PRINCIPAL AMOUNT
25 September 2017
$6 million
25 August 2020
13 September 2021
24 May 2016
21 November 2016
2 December 2014
12 November 2015
17 June 2016
A$500 million1
£400 million
Nil (2021 £327 million)
$400 million/A$689 million1
$700 million/A$1,169 million1
$300 million
$524 million
Amounts expected to be settled within 12 months³
Amounts expected to be settled in greater than 12 months³
Total borrowings
1 Details of related hedging activity are included in note 5.6.1.
2 No finance costs (2021 $3 million) were capitalised during the year.
3 Redemption of the securities are subject to the prior written approval of APRA.
2022
US$M
6
6
338
478
–
400
699
300
523
2,738
2,744
406
2,338
2,744
2021
US$M
6
6
362
538
442
400
698
300
522
3,262
3,268
442
2,826
3,268
Subordinated debt key terms
Subordinated debt due 2036
Subordinated debt due 2038
Interest is payable quarterly in arrears at a rate equal to the three-month BBSW rate plus a margin of 2.75% per annum.
Interest is payable semi-annually in arrears at a fixed rate of 2.5% per annum until 13 September 2028. The rate will reset in 2028
and 2033 to a rate calculated by reference to the then five-year gilt rate plus a margin of 2.061% per annum.
Subordinated debt due 2042
The securities were redeemed on 24 May 2022. Interest was payable semi-annually in arrears at a fixed rate of 6.115% per annum.
Subordinated debt due 2043
Interest is payable semi-annually in arrears at a fixed rate of 7.50% per annum until 24 November 2023. The rate will reset in 2023
and 2033 to a rate calculated by reference to the then 10-year US dollar swap rate plus a margin of 6.03% per annum.
Subordinated debt due 2044
Interest is payable semi-annually in arrears at a fixed rate of 6.75% per annum until 2 December 2024, at which time the rate will reset
to a 10-year mid-market swap rate plus a margin of 4.3% per annum. The rate will reset again, on the same basis, on 2 December 2034.
Subordinated debt due 2045
Interest is payable semi-annually in arrears at a fixed rate of 6.1% per annum until 12 November 2025, at which time the rate will reset to
a 10-year mid-market swap rate plus a margin of 3.993% per annum. The rate will reset again, on the same basis, on 12 November 2035.
Subordinated debt due 2046
Interest is payable semi-annually in arrears at a fixed rate of 5.875% per annum until 17 June 2026. The rate will reset in 2026 and
2036 to a rate calculated by reference to the then 10-year mid-market swap rate plus a margin of 4.395% per annum.
Deferral of interest
QBE has an option to defer payment of interest in certain circumstances and such deferral will not constitute an event of default for
securities due 2036, 2038, 2043, 2044, 2045 and 2046.
Redemption terms
The securities are redeemable at the option of QBE, with the prior written approval of APRA, at any time in the event of certain tax
and regulatory events and on:
• 25 August 2026 and each interest payment date thereafter for securities due 2036;
• any business day within the six-month period up to and including the first reset date of 13 September 2028 and on each reset date
thereafter for securities due 2038; and
• each reset date for securities due 2043, 2044, 2045 and 2046.
Conversion terms
131
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2
0
2
2
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s
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a
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c
e
G
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o
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1
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v
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P
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f
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a
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2
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g
a
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d
fi
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a
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i
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3
G
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a
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c
e
4
R
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D
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The securities due 2036, 2038, 2043, 2044, 2045 and 2046 must be converted into a variable number of the Company’s ordinary
shares, or written off, if APRA determines QBE to be non-viable. The conversion rate is subject to a price floor of 20% of the VWAP
of the shares in the five trading days before the date of issue of the securities.
’
Security arrangements
The claims of bondholders pursuant to the subordinated debt will be subordinated in right of payment to the claims of all senior creditors.
How we account for the numbers
Borrowings are initially measured at fair value net of transaction costs directly attributable to the transaction and
are subsequently measured at amortised cost. Any difference between the proceeds and the redemption amount
is recognised through profit or loss over the period of the financial liability using the effective interest method.
5
R
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F
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a
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132
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.1.1
Fair value of borrowings
Senior debt
Subordinated debt
Total fair value of borrowings
2022
US$M
6
2,561
2,567
2021
US$M
6
3,475
3,481
Consistent with other financial instruments, QBE is required to disclose the basis of valuation with reference to the fair value hierarchy
which is explained in detail in note 3.2.1. The fair value of the Group’s borrowings is categorised as level 2 in the fair value hierarchy.
Fixed and floating rate securities are priced using broker quotes and comparable prices for similar instruments in active markets.
Where no active market exists, floating rate resettable notes are priced at par plus accrued interest.
5.1.2
Financing and other costs
Interest expense on borrowings
Other costs
Total financing and other costs
5.1.3 Movement in borrowings
At 1 January
Net changes from financing cash flows
Other non-cash changes
Foreign exchange
At 31 December
5.2
Cash and cash equivalents
Fixed interest rate
Floating interest rate
Restrictions on use
2022
US$M
166
79
245
2022
US$M
3,268
(412)
2
(114)
2,744
2022
US$M
1
832
833
2021
US$M
177
70
247
2021
US$M
2,955
348
2
(37)
3,268
2021
US$M
14
805
819
Included in cash and cash equivalents are amounts totalling $71 million (2021 $74 million) which are held in Lloyd’s syndicate trust
funds. In order to conduct underwriting business within some territories, Lloyd’s syndicates are required to lodge assets in locally
regulated trust funds. Under Lloyd’s byelaws, these amounts can only be used to pay claims and allowable expenses of the syndicates
and cannot be withdrawn from the trust funds until allowed to be distributed as profit once annual solvency requirements are met.
Also included in cash and cash equivalents is $126 million (2021 $125 million) relating to policyholder trust accounts in the United
Kingdom which can only be accessed by QBE in certain circumstances, such as when QBE is owed a deductible by the policyholder
on a claim. The Group recognises a corresponding payable in relation to these until such an event occurs.
QBE has operations in many countries which have foreign exchange controls and regulations. These controls and regulations can
vary from simple reporting requirements to outright prohibition of movement of funds without explicit prior central bank or regulator
approval. The impact of these controls and regulations may restrict the Group’s capacity to repatriate capital and/or profits.
How we account for the numbers
Cash and cash equivalents include cash at bank and on hand and deposits at call which are readily convertible to cash
on hand and which are used for operational cash requirements. Amounts in cash and cash equivalents are the same
as those included in the consolidated statement of cash flows.
The reconciliation of profit or loss after income tax to net cash flows from operating activities is included in note 8.4.
Consistent with other financial instruments, QBE is required to disclose the basis of valuation with reference to the fair value hierarchy
which is explained in detail in note 3.2.1. The fair value of the Group’s borrowings is categorised as level 2 in the fair value hierarchy.
Fixed and floating rate securities are priced using broker quotes and comparable prices for similar instruments in active markets.
Where no active market exists, floating rate resettable notes are priced at par plus accrued interest.
132
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.1.1
Fair value of borrowings
Senior debt
Subordinated debt
Total fair value of borrowings
5.1.2
Financing and other costs
Interest expense on borrowings
Other costs
Total financing and other costs
5.1.3 Movement in borrowings
At 1 January
Net changes from financing cash flows
Other non-cash changes
Foreign exchange
At 31 December
5.2
Cash and cash equivalents
Fixed interest rate
Floating interest rate
Restrictions on use
2022
US$M
6
2,561
2,567
2022
US$M
166
79
245
2022
US$M
3,268
(412)
2
(114)
2,744
2022
US$M
1
832
833
2021
US$M
6
3,475
3,481
2021
US$M
177
70
247
2021
US$M
2,955
348
2
(37)
3,268
2021
US$M
14
805
819
Included in cash and cash equivalents are amounts totalling $71 million (2021 $74 million) which are held in Lloyd’s syndicate trust
funds. In order to conduct underwriting business within some territories, Lloyd’s syndicates are required to lodge assets in locally
regulated trust funds. Under Lloyd’s byelaws, these amounts can only be used to pay claims and allowable expenses of the syndicates
and cannot be withdrawn from the trust funds until allowed to be distributed as profit once annual solvency requirements are met.
Also included in cash and cash equivalents is $126 million (2021 $125 million) relating to policyholder trust accounts in the United
Kingdom which can only be accessed by QBE in certain circumstances, such as when QBE is owed a deductible by the policyholder
on a claim. The Group recognises a corresponding payable in relation to these until such an event occurs.
QBE has operations in many countries which have foreign exchange controls and regulations. These controls and regulations can
vary from simple reporting requirements to outright prohibition of movement of funds without explicit prior central bank or regulator
approval. The impact of these controls and regulations may restrict the Group’s capacity to repatriate capital and/or profits.
How we account for the numbers
Cash and cash equivalents include cash at bank and on hand and deposits at call which are readily convertible to cash
on hand and which are used for operational cash requirements. Amounts in cash and cash equivalents are the same
as those included in the consolidated statement of cash flows.
The reconciliation of profit or loss after income tax to net cash flows from operating activities is included in note 8.4.
5.3
Contributed equity and reserves
Overview
Contributed equity comprises share capital and capital notes.
Ordinary shares in the Company rank after all creditors, have no par value and entitle the holder to participate
in dividends and the proceeds on winding up of the Company in proportion to the number of shares held.
Capital notes are Additional Tier 1 instruments with discretionary and non-cumulative distributions, and no fixed
redemption date.
5.3.1
Contributed equity
Issued ordinary shares, fully paid
Capital notes
Contributed equity
Share capital
Issued ordinary shares, fully paid at 1 January
Shares issued under the Employee Share and Option Plan
Shares issued under Dividend Reinvestment Plan
Shares issued under Bonus Share Plan
Foreign exchange
Issued ordinary shares, fully paid at 31 December
Shares notified to the Australian Securities Exchange
Less: plan shares subject to non-recourse loans,
de-recognised under accounting standards
Issued ordinary shares, fully paid at 31 December
Capital notes
ISSUE DATE
12 May 2020
16 July 20201
PRINCIPAL AMOUNT
$500 million
$400 million
2022
NUMBER OF
SHARES
MILLIONS
1,477
4
4
–
–
1,485
1,485
–
1,485
US$M
8,891
29
36
–
(600)
8,356
8,358
(2)
8,356
2022
US$M
8,356
886
9,242
2021
NUMBER OF
SHARES
MILLIONS
1,471
4
1
1
–
1,477
1,477
–
1,477
2022
US$M
493
393
886
2021
US$M
8,891
886
9,777
US$M
9,387
31
11
–
(538)
8,891
8,894
(3)
8,891
2021
US$M
493
393
886
1 In July 2020, the terms of these instruments (originally issued in November 2017) were amended such that the notes are written off at a point
of non-viability, as determined by APRA, with no possibility of conversion into ordinary shares of the Company. This resulted in the classification
of these instruments as equity.
Key terms
Capital note issued 12 May 2020
Distributions of 5.875% per annum are paid semi-annually in arrears until 12 May 2025. The rate will reset in 2025 and on every fifth
anniversary thereafter to a rate calculated by reference to the then five-year US Treasury rate plus a margin of 5.513% per annum.
Capital note issued 16 July 2020
Distributions of 5.250% per annum are paid semi-annually in arrears until 16 May 2025. The rate will reset in 2025 and on every fifth
anniversary thereafter to a rate calculated by reference to the then five-year US Treasury rate plus a margin of 3.047% per annum.
Redemption terms
The notes are redeemable at the option of QBE, with the prior written approval of APRA, on each interest reset date or at any time in the
event of certain tax or regulatory events. In the event that APRA was to declare a point of non-viability, the notes would be written off.
133
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3
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4
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6
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134
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.3.2 Reserves
Owner occupied property revaluation reserve1
At 1 January
At 31 December
Cash flow hedge reserve 2
At 1 January
Hedging amounts recognised in other comprehensive income
Hedging amounts reclassified to profit or loss
Taxation
At 31 December
Cost of hedging reserve 3
At 1 January
Amounts recognised in other comprehensive income
Amounts reclassified to profit or loss
Taxation
At 31 December
Foreign currency translation reserve 4
At 1 January
Net movement on translation
Net movement on hedging transactions
At 31 December
Share‑based payment reserve 5
At 1 January
Options and conditional rights expense
Transfers from reserve on vesting of options and conditional rights
Foreign exchange
At 31 December
Premium on purchase of non‑controlling interests 6
At 1 January
Foreign exchange
At 31 December
Total reserves at 31 December
2022
US$M
2021
US$M
1
1
–
104
(72)
(10)
22
5
3
(2)
–
6
(1,765)
222
(1)
(1,544)
164
39
(31)
(10)
162
(13)
1
(12)
(1,365)
1
1
(25)
92
(56)
(11)
–
2
7
(2)
(2)
5
(2,031)
218
48
(1,765)
168
32
(30)
(6)
164
(13)
–
(13)
(1,608)
Each of the above reserves relates to the following:
1 Fair value movements in the carrying value of owner occupied property.
2 Cash flow hedges of foreign exchange and interest rate risk, the accounting policies for which are disclosed in note 5.6.1.
3 Cost of hedging elections as described in note 5.6.1.
4 Exchange gains and losses arising on translation of foreign controlled entities and related hedging instruments, the accounting policies
for which are disclosed in note 5.6.1.
5 Equity-settled share-based payment awards.
6 Movements in ownership interests in controlled entities that do not result in a loss of control and represent the difference between the
amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received.
135
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5.4
Dividends
Overview
Our dividend policy is designed to ensure that we reward shareholders relative to cash profit and maintain sufficient
capital for future investment and growth of the business.
i
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134
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.3.2 Reserves
Owner occupied property revaluation reserve1
At 1 January
At 31 December
Cash flow hedge reserve 2
At 1 January
Taxation
At 31 December
Cost of hedging reserve 3
At 1 January
Hedging amounts recognised in other comprehensive income
Hedging amounts reclassified to profit or loss
Amounts recognised in other comprehensive income
Amounts reclassified to profit or loss
Taxation
At 31 December
At 1 January
Foreign currency translation reserve 4
Net movement on translation
Net movement on hedging transactions
At 31 December
Share‑based payment reserve 5
At 1 January
Options and conditional rights expense
Foreign exchange
At 31 December
At 1 January
Foreign exchange
At 31 December
Total reserves at 31 December
Transfers from reserve on vesting of options and conditional rights
Premium on purchase of non‑controlling interests 6
2022
US$M
2021
US$M
1
1
–
104
(72)
(10)
22
5
3
(2)
–
6
164
39
(31)
(10)
162
(13)
1
(12)
(1,765)
222
(1)
(1,544)
1
1
(25)
92
(56)
(11)
–
2
7
(2)
(2)
5
(2,031)
218
48
(1,765)
168
32
(30)
(6)
164
(13)
–
(13)
Dividend per share (Australian cents)
Franking percentage
Franked amount per share (Australian cents)
Dividend payout (A$M)
Payment date
2022
INTERIM
9
10%
0.9
133
23 September 2022
2021
FINAL
19
10%
1.9
281
12 April 2022
INTERIM
11
10%
1.1
162
24 September 2021
On 17 February 2023, the directors declared a 10% franked final dividend of 30 Australian cents per share payable on 14 April 2023.
The final dividend payout is A$445 million (2021 A$281 million).
Previous year final dividend on ordinary shares – 10% franked (2020 nil)
Interim dividend on ordinary shares – 10% franked (2021 10% franked)
Bonus Share Plan dividend forgone
Total dividend paid
.
Dividend Reinvestment and Bonus Share Plans
2022
US$M
210
87
(3)
294
2021
US$M
–
118
(1)
117
The Company operates a Dividend Reinvestment Plan (DRP) and a Bonus Share Plan (BSP) which allow equity holders to receive
their dividend entitlement in the form of ordinary shares of the Company.
Bonus Share Plan dividend forgone
The amount paid in dividends during the year has been reduced as a result of certain eligible shareholders participating in the BSP
and forgoing all or part of their right to dividends. These shareholders were issued ordinary shares under the BSP. During the year,
349,232 (2021 116,016) ordinary shares were issued under the BSP.
Each of the above reserves relates to the following:
1 Fair value movements in the carrying value of owner occupied property.
2 Cash flow hedges of foreign exchange and interest rate risk, the accounting policies for which are disclosed in note 5.6.1.
4 Exchange gains and losses arising on translation of foreign controlled entities and related hedging instruments, the accounting policies
3 Cost of hedging elections as described in note 5.6.1.
for which are disclosed in note 5.6.1.
5 Equity-settled share-based payment awards.
6 Movements in ownership interests in controlled entities that do not result in a loss of control and represent the difference between the
amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received.
(1,365)
(1,608)
Franking credits
The franking account balance on a tax paid basis at 31 December 2022 was a surplus of A$54 million (2021 A$54 million).
The unfranked part of the dividend is declared to be conduit foreign income. For shareholders not resident in Australia, the dividend
will not be subject to Australian withholding tax.
2
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136
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.5
Earnings per share
Overview
Earnings per share (EPS) is the amount of profit or loss after income tax attributable to each share. Diluted EPS adjusts
the EPS for the impact of shares that are not yet issued but which may be in the future, such as shares potentially
issuable from convertible notes, options and employee share-based payments plans.
For profit after income tax
Basic earnings per share
Diluted earnings per share
2022
US CENTS
2021
US CENTS
48.6
48.2
47.5
47.2
5.5.1 Reconciliation of earnings used for earnings per share measures
Earnings per share is based on profit or loss after income tax attributable to ordinary equity holders of the Company, as follows:
Profit after income tax attributable to ordinary equity holders of the Company
Less: distributions paid on capital notes classified as equity (note 5.3.1)
Profit used in calculating basic and diluted earnings per share
2022
US$M
770
(50)
720
2021
US$M
750
(50)
700
5.5.2
Reconciliation of weighted average number of ordinary shares used for earnings
per share measures
Weighted average number of ordinary shares on issue and used as the denominator in
calculating basic earnings per share
Weighted average number of dilutive potential ordinary shares issued under the Employee Share
and Option Plan
Weighted average number of ordinary shares used as the denominator in calculating diluted
earnings per share
2022
NUMBER OF
SHARES
MILLIONS
2021
NUMBER OF
SHARES
MILLIONS
1,482
11
1,493
1,474
8
1,482
How we account for the numbers
Basic earnings per share is calculated by dividing profit or loss after income tax attributable to members of the
Company, adjusted for the cost of servicing capital notes classified as equity, by the weighted average number
of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
Diluted earnings per share adjusts the weighted average number of shares to include dilutive potential ordinary shares
and instruments with mandatory conversion features. As there are no impacts on interest and other financing costs from
such instruments, diluted earnings per share utilises the same earnings figure used in the determination of basic earnings
per share.
136
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
5.5
Earnings per share
Overview
For profit after income tax
Basic earnings per share
Diluted earnings per share
Earnings per share (EPS) is the amount of profit or loss after income tax attributable to each share. Diluted EPS adjusts
the EPS for the impact of shares that are not yet issued but which may be in the future, such as shares potentially
issuable from convertible notes, options and employee share-based payments plans.
5.5.1 Reconciliation of earnings used for earnings per share measures
Earnings per share is based on profit or loss after income tax attributable to ordinary equity holders of the Company, as follows:
Profit after income tax attributable to ordinary equity holders of the Company
Less: distributions paid on capital notes classified as equity (note 5.3.1)
Profit used in calculating basic and diluted earnings per share
5.5.2
Reconciliation of weighted average number of ordinary shares used for earnings
per share measures
Weighted average number of ordinary shares on issue and used as the denominator in
calculating basic earnings per share
Weighted average number of dilutive potential ordinary shares issued under the Employee Share
Weighted average number of ordinary shares used as the denominator in calculating diluted
and Option Plan
earnings per share
2022
US CENTS
2021
US CENTS
48.6
48.2
47.5
47.2
2022
US$M
770
(50)
720
2021
US$M
750
(50)
700
2022
NUMBER OF
SHARES
MILLIONS
2021
NUMBER OF
SHARES
MILLIONS
1,482
11
1,493
1,474
8
1,482
How we account for the numbers
Basic earnings per share is calculated by dividing profit or loss after income tax attributable to members of the
Company, adjusted for the cost of servicing capital notes classified as equity, by the weighted average number
of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
per share.
Diluted earnings per share adjusts the weighted average number of shares to include dilutive potential ordinary shares
and instruments with mandatory conversion features. As there are no impacts on interest and other financing costs from
such instruments, diluted earnings per share utilises the same earnings figure used in the determination of basic earnings
5.6
Derivatives
Overview
Derivatives may be used as a tool to hedge the Group’s foreign exchange exposures. Each controlled entity manages
operational foreign exchange volatility by matching liabilities with assets of the same currency, as far as practicable.
Forward foreign exchange contracts are used to manage residual currency exposures, with both the foreign exchange
gains or losses on translation of the exposure and the mark-to-market of related derivatives reported through profit
or loss. Forward foreign exchange contracts and purchased currency options may also be utilised in cash flow hedging
of foreign currency borrowings and/or hedging exposure to net investments in foreign operations (NIFO).
Interest rate swaptions are used to hedge exposure to interest rate movements on the Group’s borrowings.
Refer to note 4.4 for additional information relating to QBE’s approach to managing interest rate risk and foreign
exchange risk.
The Group’s exposure to treasury derivatives at the balance date determined by reference to the functional currency of the relevant
controlled entity is set out in the table below:
Forward foreign exchange contracts
not in designated hedges
Forward foreign exchange contracts
used in cash flow hedges
Forward foreign exchange contracts
used in NIFO hedges
Interest rate swaptions
EXPOSURE
US$M
990
(1,404)
1,081
339
2022
FAIR VALUE
ASSET
US$M
FAIR VALUE
LIABILITY
US$M
EXPOSURE
US$M
2021
FAIR VALUE
ASSET
US$M
FAIR VALUE
LIABILITY
US$M
251
–
2
31
284
172
186
29
–
387
2,143
(1,599)
489
363
118
–
11
13
142
161
291
–
–
452
The fair value of forward foreign exchange contracts and interest rate swaptions are categorised as level 2 in the fair value hierarchy.
They are fair valued using present value techniques utilising observable market data, broker quotes and/or comparable prices for
similar instruments in active markets.
How we account for the numbers
Derivatives are initially recognised at fair value, determined as the cost of acquisition excluding transaction costs, and
remeasured to fair value at each reporting date. Remeasurements are recognised in profit or loss at each reporting date,
unless the derivative is designated as part of a qualifying hedge relationship (refer to note 5.6.1).
5.6.1 Designated hedges
The Group’s material designated hedge relationships are analysed below by risk category and are accounted for with reference
to the accounting policies set out at the end of this note. Hedging ratios, being the relationship between the quantity of the hedging
instrument and the quantity of the hedged item, are 1:1 as the nominal values of hedging instruments match those of the hedged items.
Any ineffectiveness arising from factors such as credit risk is not expected to be material. Amounts recognised in equity or reclassified
to profit or loss are disclosed in note 5.3.2.
Cash flow hedges of borrowings
At the balance date, forward foreign exchange contracts were used to hedge foreign currency risk associated with highly probable
forecast transactions in relation to $400 million of subordinated debt maturing in 2043 and $700 million of subordinated debt maturing
in 2044. Foreign currency risk on future coupons and principal amounts is hedged up to and including the first call dates of the
subordinated debt, being 2023 and 2024 respectively. Similarly, an interest rate swaption was put in place to hedge interest rate risk
in relation to coupons on A$500 million of subordinated debt maturing in 2036. The swaption is exercisable in August 2023 and hedges
coupon payments from that date to the first call date in August 2026. These hedges were put in place to more effectively manage
currency exposures and costs of funding.
137
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138
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
Only the spot components of the forward foreign exchange contracts and the intrinsic value of the interest rate swaption are designated
in hedge relationships. For forward foreign exchange contracts, reclassifications of hedging gains and losses to profit or loss are
included in foreign exchange (refer to note 3.1), consistent with the currency movement of the hedged borrowings. For the interest rate
swaption, reclassifications of any cumulative hedging gains or losses to profit or loss will occur as related coupon payments are made
during the period from August 2023 to August 2026. A ‘cost of hedging’ election was made in respect of these hedges, as described
below, and amortisation of the forward and currency basis components is included in financing costs (refer to note 5.1.2) where they
relate to hedged coupons, or in foreign exchange (refer to note 3.1) where they relate to principal amounts.
The interest rate swaption does not generate any cash flows until August 2023, when the potential settlement would occur if the
swaption is in-the-money at that point in time. The timing of cash flows relating to the forward foreign exchange contracts and
corresponding average forward rates are provided in the following table:
2022
MATURING IN:
2021
MATURING IN:
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
Nominal amounts
Average forward rate
Buy US$M/
Sell A$M
US$/A$
477/819
0.58
747/1,251
0.60
–
–
77/130
0.60
1,225/2,071
0.59
–
–
Hedges of currency risk relating to translation of net investments in foreign operations
At the balance date, forward foreign exchange contracts and borrowings were designated as NIFO hedges. Only the spot
components of the forward foreign exchange contracts are designated as being in hedge relationships. The forward and currency
basis components are included in foreign exchange (refer to note 3.1), with a ‘cost of hedging’ election made in respect of US dollar
NIFO hedges, as described below. Cumulative hedging gains or losses recognised in equity are recycled to profit or loss only
on disposal of the foreign operation.
The timing of cash flows relating to the hedging instruments and corresponding average forward rates, if applicable, are provided
in the following table, with borrowings being disclosed by reference to their first call dates where available (refer to note 5.1):
2022
MATURING IN:
2021
MATURING IN:
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
Debt instruments used in US dollar NIFO hedges
Subordinated debt
Senior debt
Debt instruments used in sterling NIFO hedges
Subordinated debt
Forward foreign exchange contracts used in Hong Kong dollar NIFO hedges
528
–
–
6
US$M
US$M
–
–
£M
–
–
327
Nominal amounts
Average forward rate
Forward foreign exchange contracts used in US dollar NIFO hedges
185/970
5.24
A$/HKD
–
–
Buy A$M/
Sell HKDM
Nominal amounts
Average forward rate
Buy A$M/
Sell US$M
A$/US$
418/300
0.72
991/700
0.71
–
–
–
–
–
–
327
175/970
5.55
528
6
–
–
–
–
–
497/350
0.70
–
–
–
–
–
–
–
138
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
5.
CAPITAL STRUCTURE
Only the spot components of the forward foreign exchange contracts and the intrinsic value of the interest rate swaption are designated
in hedge relationships. For forward foreign exchange contracts, reclassifications of hedging gains and losses to profit or loss are
included in foreign exchange (refer to note 3.1), consistent with the currency movement of the hedged borrowings. For the interest rate
swaption, reclassifications of any cumulative hedging gains or losses to profit or loss will occur as related coupon payments are made
during the period from August 2023 to August 2026. A ‘cost of hedging’ election was made in respect of these hedges, as described
below, and amortisation of the forward and currency basis components is included in financing costs (refer to note 5.1.2) where they
relate to hedged coupons, or in foreign exchange (refer to note 3.1) where they relate to principal amounts.
The interest rate swaption does not generate any cash flows until August 2023, when the potential settlement would occur if the
swaption is in-the-money at that point in time. The timing of cash flows relating to the forward foreign exchange contracts and
corresponding average forward rates are provided in the following table:
2022
MATURING IN:
2021
MATURING IN:
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
LESS THAN
1 YEAR
1 TO 5
YEARS
OVER 5
YEARS
Nominal amounts
Average forward rate
Buy US$M/
Sell A$M
US$/A$
477/819
0.58
747/1,251
0.60
–
–
77/130
1,225/2,071
0.60
0.59
–
–
Hedges of currency risk relating to translation of net investments in foreign operations
At the balance date, forward foreign exchange contracts and borrowings were designated as NIFO hedges. Only the spot
components of the forward foreign exchange contracts are designated as being in hedge relationships. The forward and currency
basis components are included in foreign exchange (refer to note 3.1), with a ‘cost of hedging’ election made in respect of US dollar
NIFO hedges, as described below. Cumulative hedging gains or losses recognised in equity are recycled to profit or loss only
on disposal of the foreign operation.
The timing of cash flows relating to the hedging instruments and corresponding average forward rates, if applicable, are provided
in the following table, with borrowings being disclosed by reference to their first call dates where available (refer to note 5.1):
LESS THAN
1 YEAR
OVER 5
YEARS
LESS THAN
1 YEAR
OVER 5
YEARS
2022
MATURING IN:
1 TO 5
YEARS
528
–
–
–
–
–
6
–
185/970
5.24
Debt instruments used in US dollar NIFO hedges
Debt instruments used in sterling NIFO hedges
Subordinated debt
Senior debt
Subordinated debt
Nominal amounts
Average forward rate
Nominal amounts
Average forward rate
US$M
US$M
£M
Buy A$M/
Sell HKDM
A$/HKD
Buy A$M/
Sell US$M
A$/US$
Forward foreign exchange contracts used in US dollar NIFO hedges
Forward foreign exchange contracts used in Hong Kong dollar NIFO hedges
2021
MATURING IN:
1 TO 5
YEARS
528
–
–
6
–
–
–
327
327
175/970
5.55
–
–
–
–
–
–
418/300
0.72
991/700
0.71
–
–
497/350
0.70
–
–
–
–
–
–
–
How we account for the numbers
When a derivative or other financial instrument is designated in a qualifying hedge relationship, the relevant controlled
entity formally documents the relationship between the hedging instrument and hedged item, as well as its risk
management objectives and its strategy for undertaking hedging transactions. The relevant entity also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the hedge effectiveness requirements are
met, including the relevant economic relationship, the effect of credit risk and the hedge ratio.
For qualifying cash flow hedges and NIFO hedges, the gain or loss on the hedging instrument associated with the
effective portion of the hedge is accumulated in equity through other comprehensive income and is subsequently
reclassified to profit or loss when the hedged item also affects profit or loss. For cash flow hedges, this is reflected in
the cash flow hedge reserve; for NIFO hedges, this is reflected in the foreign currency translation reserve (refer to note
5.3.2). The gain or loss on any ineffective portion of the hedging instrument is recognised in profit or loss immediately.
Where the forward and currency basis components of a designated derivative do not form part of the designated hedge
relationship, these components are accounted for at fair value through profit or loss unless a 'cost of hedging' election
is made. Under this election, the fair value of these components at inception of the hedge are amortised through
profit or loss over time periods relevant to the hedge, with other changes in their fair values after inception recognised
in equity through other comprehensive income. This election can be made on a hedge-by-hedge basis and is reflected
in the cost of hedging reserve (refer to note 5.3.2).
Hedge accounting is discontinued when the qualifying hedge no longer meets the criteria for hedge accounting,
including when the risk management objective is no longer met or is no longer relevant; the hedging instrument expires
or is sold, terminated or exercised; the hedged item matures, is sold or repaid; or a hedged forecast transaction
is no longer considered highly probable. When a cash flow hedge is discontinued, any cumulative hedging gain or loss
in equity at that time remains in equity and is reclassified to profit or loss when the hedged item affects profit or loss.
If the hedged item is a forecast transaction that is no longer considered highly probable, the cumulative gain or loss
is immediately reclassified to profit or loss. When a hedge of a net investment in a foreign operation is discontinued,
any cumulative hedging gain or loss at that time remains in equity and is only recycled to profit or loss on disposal
of the foreign operation, forming part of the resulting gain or loss.
139
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P
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f
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a
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c
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2
O
p
e
r
a
t
i
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g
a
n
d
fi
n
a
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c
i
a
l
r
e
v
i
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w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
140
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
6.
TAX
Overview
Income tax expense or credit is the accounting tax outcome for the period and is calculated as the tax payable on
the current period taxable income based on the applicable income tax rate for each jurisdiction, adjusted for changes
in deferred tax assets and liabilities attributable to temporary differences and unused tax losses. The relationship
between accounting profit or loss and income tax expense or credit is provided in the reconciliation of prima facie tax
to income tax expense or credit (refer to note 6.1). Income tax expense does not equate to the amount of tax actually
paid to tax authorities around the world, as it is based upon the accrual accounting concept.
Accounting income and expenses do not always have the same recognition pattern as taxable income and expenses,
creating a timing difference as to when a tax expense or credit can be recognised. These differences usually reverse
over time but, until they do, a deferred tax asset or liability is recognised on the balance sheet. Note 6.2 details the
composition and movements in deferred tax balances and the key management assumptions applied in recognising
tax losses.
Details of franking credits available to shareholders are disclosed in note 5.4.
6.1
Reconciliation of prima facie tax to income tax expense or credit
Profit before income tax
Prima facie tax expense at 30%
Tax effect of non-temporary differences:
Untaxed dividends
Differences in tax rates
Other, including non-taxable income and non-allowable expenses
Prima facie tax adjusted for non-temporary differences
Deferred tax assets recognised
Underprovision (overprovision) in prior years
Income tax expense
Analysed as follows:
Current tax
Deferred tax
Deferred tax expense (credit) comprises:
Deferred tax assets recognised in profit or loss
Deferred tax liabilities recognised in profit or loss
NOTE
6.2.1
6.2.2
2022
US$M
919
276
(3)
(18)
55
310
(181)
12
141
91
50
141
(193)
243
50
2021
US$M
913
274
(2)
(93)
(2)
177
(18)
(3)
156
169
(13)
156
(57)
44
(13)
How we account for the numbers
The current income tax expense or credit is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the countries in which controlled entities operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
to either settle on a net basis or to realise the asset and settle the liability simultaneously. Current and deferred tax
is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
as appropriate.
140
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
6.
TAX
Overview
Income tax expense or credit is the accounting tax outcome for the period and is calculated as the tax payable on
the current period taxable income based on the applicable income tax rate for each jurisdiction, adjusted for changes
in deferred tax assets and liabilities attributable to temporary differences and unused tax losses. The relationship
between accounting profit or loss and income tax expense or credit is provided in the reconciliation of prima facie tax
to income tax expense or credit (refer to note 6.1). Income tax expense does not equate to the amount of tax actually
paid to tax authorities around the world, as it is based upon the accrual accounting concept.
Accounting income and expenses do not always have the same recognition pattern as taxable income and expenses,
creating a timing difference as to when a tax expense or credit can be recognised. These differences usually reverse
over time but, until they do, a deferred tax asset or liability is recognised on the balance sheet. Note 6.2 details the
composition and movements in deferred tax balances and the key management assumptions applied in recognising
tax losses.
Details of franking credits available to shareholders are disclosed in note 5.4.
6.1
Reconciliation of prima facie tax to income tax expense or credit
Profit before income tax
Prima facie tax expense at 30%
Tax effect of non-temporary differences:
Untaxed dividends
Differences in tax rates
Other, including non-taxable income and non-allowable expenses
Prima facie tax adjusted for non-temporary differences
Deferred tax assets recognised
Underprovision (overprovision) in prior years
Income tax expense
Analysed as follows:
Current tax
Deferred tax
Deferred tax expense (credit) comprises:
Deferred tax assets recognised in profit or loss
Deferred tax liabilities recognised in profit or loss
NOTE
6.2.1
6.2.2
2022
US$M
919
276
(3)
(18)
55
310
(181)
12
141
91
50
141
(193)
243
50
2021
US$M
913
274
(2)
(93)
(2)
177
(18)
(3)
156
169
(13)
156
(57)
44
(13)
How we account for the numbers
The current income tax expense or credit is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the countries in which controlled entities operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
to either settle on a net basis or to realise the asset and settle the liability simultaneously. Current and deferred tax
is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
as appropriate.
6.2
Deferred income tax
Deferred tax assets
Deferred tax liabilities
6.2.1 Deferred tax assets
Amounts recognised in profit or loss
Financial assets – fair value movements
Provision for impairment
Employee benefits
Intangible assets
Insurance provisions
Tax losses recognised
Other
Amounts recognised in other comprehensive income and equity
Defined benefit plans
Other
Deferred tax assets before set‑off
Set-off of deferred tax liabilities
Movements
At 1 January
Amounts recognised in profit or loss
Amounts recognised in other comprehensive income
Foreign exchange
At 31 December
NOTE
6.2.1
6.2.2
NOTE
6.2.2
6.2
NOTE
6.1
2022
US$M
587
147
2022
US$M
22
13
66
158
712
309
195
1,475
29
5
34
1,509
(922)
587
2022
US$M
1,344
193
1
(29)
1,509
2021
US$M
521
31
2021
US$M
6
13
70
159
706
197
159
1,310
30
4
34
1,344
(823)
521
2021
US$M
1,306
57
1
(20)
1,344
Critical accounting judgements and estimates
Recoverability of deferred tax assets
QBE assesses the recoverability of deferred tax assets at each balance date. In making this assessment, QBE considers
in particular each controlled entity’s future business plans, history of generating taxable profits, whether the unused
tax losses resulted from identifiable causes which are unlikely to recur and if any tax planning opportunities exist in the
period in which the taxable losses can be utilised.
The recognised deferred tax asset relating to the North American tax group of $390 million (2021 $295 million)
comprises $239 million (2021 $105 million) of carry forward tax losses and $151 million (2021 $190 million) of deductible
temporary differences, net of applicable offsetting deferred tax liabilities, as a result of insurance technical reserves and
the tax deductibility of goodwill and other intangibles.
Uncertainty continues to exist in relation to the utilisation of this asset, which is subject to there being continued future
taxable profits over the period of time in which the losses can be utilised. QBE has made a judgement that the North
American tax group will be able to generate sufficient taxable profits over the foreseeable future, based upon its future
business plans. Key assumptions include an expectation of future taxable profit driven by no material deterioration
in the prior accident year central estimate, a sustained return to underwriting profitability, benefits flowing from initiatives
to reduce the cost base of the division and future increases in investment yields. Losses expire over the next 18 years,
with the majority expiring between 2031 and 2040. The uncertainty around the recognition of the deferred tax asset will
be resolved in future years if taxable profits are generated. Recovery of the asset continues to be sensitive to changes
in the combined operating ratio, premium growth and investment yield assumptions as these items are the key drivers
of future taxable profits.
141
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2
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a
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d
fi
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a
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a
l
r
e
v
i
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3
G
o
v
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r
n
a
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c
e
4
R
e
p
o
r
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D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
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f
o
r
m
a
t
i
o
n
142
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
6.
TAX
6.2.2 Deferred tax liabilities
Amounts recognised in profit or loss
Intangible assets
Insurance provisions
Financial assets – fair value movements
Other provisions
Other
Amounts recognised in other comprehensive income and equity
Defined benefit plans
Deferred tax liabilities before set‑off
Set-off of deferred tax assets
Movements
At 1 January
Amounts recognised in profit or loss
Amounts recognised in other comprehensive income
Foreign exchange
At 31 December
NOTE
6.2.1
6.2
NOTE
6.1
2022
US$M
154
769
37
23
77
1,060
9
9
1,069
(922)
147
2022
US$M
854
243
(9)
(19)
1,069
2021
US$M
155
556
2
38
83
834
20
20
854
(823)
31
2021
US$M
811
44
8
(9)
854
How we account for the numbers
Deferred income tax is provided in full using the liability method on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill or if they arise from the initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted
by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the controlled entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset in the consolidated financial statements when there is a legally enforceable
right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
6.2.3 Tax losses
The Group has not brought to account $217 million (2021 $402 million) of tax losses, which includes the benefit arising from tax losses
in overseas countries. $69 million (2021 $78 million) of tax losses not brought to account have an indefinite life and the remaining
$148 million (2021 $324 million) expire in eight to 18 years. The benefits of unused tax losses will only be brought to account when
it is probable that they will be realised.
This benefit of tax losses will only be obtained if:
• the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the
losses to be realised;
• the Group continues to comply with the conditions for deductibility imposed by tax legislation; and
• no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
6.2.4 Tax consolidation legislation
On adoption of the tax consolidation legislation, the Company and its wholly-owned Australian controlled entities entered into a tax
sharing and tax funding agreement that requires the Australian entities to fully compensate the Company for current tax liabilities
and to be fully compensated by the Company for any current tax or deferred tax assets in respect of tax losses arising from
external transactions occurring after the date of implementation of the tax consolidation legislation. The contributions are allocated
by reference to the notional taxable income of each Australian entity. The head entity is QBE Insurance Group Limited.
7.
GROUP STRUCTURE
Overview
This section provides information to help users understand the Group structure, including the impact of changes in the
financial year. This includes acquisitions and disposals of businesses, intangible assets acquired or developed and the
results of impairment reviews.
How we account for the numbers
7.1
Disposals
143
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t
o
r
s
During the period, the Group disposed of Westwood Insurance Agency in North America, details of which are set out in the table below:
’
142
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
Amounts recognised in other comprehensive income and equity
6.
TAX
6.2.2 Deferred tax liabilities
Amounts recognised in profit or loss
Financial assets – fair value movements
Intangible assets
Insurance provisions
Other provisions
Other
Defined benefit plans
Deferred tax liabilities before set‑off
Set-off of deferred tax assets
Movements
At 1 January
Foreign exchange
At 31 December
Amounts recognised in profit or loss
Amounts recognised in other comprehensive income
NOTE
6.2.1
6.2
NOTE
6.1
2022
US$M
154
769
37
23
77
1,060
9
9
1,069
(922)
147
2022
US$M
854
243
(9)
(19)
1,069
2021
US$M
155
556
2
38
83
834
20
20
854
(823)
31
2021
US$M
811
44
8
(9)
854
Deferred income tax is provided in full using the liability method on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill or if they arise from the initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted
by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax
bases of investments in foreign operations where the controlled entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset in the consolidated financial statements when there is a legally enforceable
right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Intangible assets1
Other assets
Total assets
Total liabilities
Net assets at the date of disposal
Proceeds on disposal (net of transaction costs)2
Net gain on disposal
2022
US$M
329
7
336
3
333
371
38
1 Includes $328 million of goodwill relating to the North American cash-generating unit which has been allocated to Westwood Insurance
Agency, reflecting the intangible value of the business relative to the remainder of the cash-generating unit.
2 Includes $10 million of contingent consideration which has been measured at fair value.
5
R
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144
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
7.2
Intangible assets
Overview
Intangible assets are assets with no physical substance. The most significant classes of intangible assets are detailed below:
Lloyd’s syndicate capacity
The Lloyd’s syndicate capacity intangible asset relates to the syndicate capacity acquired as part of the acquisition
of QBE Underwriting Limited (formerly trading as Limit) in 2000 and costs incurred as a result of increasing capacity
since that date. Syndicate capacity is the aggregate of the premium limits of each member of that syndicate at a point
in time. An existing capital provider has the first right to participate on the next year of account, giving the indefinite right
to participate on all future years of account. The Group has demonstrated a long-term commitment to developing its
operations at Lloyd’s. The value of this asset is in the access it gives to future underwriting profits at Lloyd’s. For these
reasons, Lloyd’s syndicate capacity is deemed to have an indefinite useful life.
Customer relationships
Customer relationships comprise the capitalisation of future profits relating to insurance contracts acquired and the expected
renewal of those contracts. It also includes the value of distribution networks and agency relationships. Customer relationships
are amortised over remaining lives of up to eight years depending on the classes of business to which the assets relate.
Brand names
These assets reflect the revenue generating ability of acquired brands. In some circumstances, brand names
are considered to have an indefinite useful life due to the long-term nature of the asset.
Insurance licences
These assets give the Group the right to operate in certain geographic locations and to write certain classes
of business with a potential to generate additional revenue. In some cases, these are considered to have an indefinite
useful life due to their long-term nature; however, where there is a finite useful life, assets are amortised over the
remaining period, up to 15 years.
Software
This includes both acquired and internally developed software which is not integral or closely related to an item
of hardware such as an underwriting system. Capitalised software is amortised over periods of up to 10 years,
reflecting the period during which the Group is expected to benefit from the use of the software.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets acquired. Goodwill has an indefinite useful life and therefore is not subject to amortisation
but is tested for impairment annually, or more often if there is an indication of impairment.
2022
Cost
At 1 January
Additions
Impairment
Disposals
Foreign exchange
At 31 December
Amortisation
At 1 January
Amortisation1
Disposals
Foreign exchange
At 31 December
Carrying amount
At 31 December
IDENTIFIABLE INTANGIBLES
LLOYD’S
SYNDICATE
CAPACITY
US$M
CUSTOMER
RELATION-
SHIPS
US$M
BRAND
NAMES
US$M
INSURANCE
LICENCES
US$M
SOFTWARE
US$M
OTHER
US$M
GOODWILL
US$M
TOTAL
US$M
86
–
–
–
(10)
76
–
–
–
–
–
454
–
–
(57)
(7)
390
(426)
(13)
56
6
(377)
76
13
26
–
–
–
(1)
25
(22)
–
–
1
(21)
4
139
–
–
–
(7)
132
(77)
(2)
–
5
(74)
58
492
132
(11)
(119)
(31)
463
(239)
(64)
119
10
(174)
289
19
–
–
(9)
–
10
(19)
–
9
–
(10)
2,016
–
–
(328)
(110)
1,578
–
–
–
–
–
3,232
132
(11)
(513)
(166)
2,674
(783)
(79)
184
22
(656)
–
1,578
2,018
1 Amortisation of $63 million is included in underwriting expenses as it relates to intangible assets integral to the Group’s underwriting activities.
144
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
7.2
Intangible assets
Overview
Lloyd’s syndicate capacity
Intangible assets are assets with no physical substance. The most significant classes of intangible assets are detailed below:
The Lloyd’s syndicate capacity intangible asset relates to the syndicate capacity acquired as part of the acquisition
of QBE Underwriting Limited (formerly trading as Limit) in 2000 and costs incurred as a result of increasing capacity
since that date. Syndicate capacity is the aggregate of the premium limits of each member of that syndicate at a point
in time. An existing capital provider has the first right to participate on the next year of account, giving the indefinite right
to participate on all future years of account. The Group has demonstrated a long-term commitment to developing its
operations at Lloyd’s. The value of this asset is in the access it gives to future underwriting profits at Lloyd’s. For these
reasons, Lloyd’s syndicate capacity is deemed to have an indefinite useful life.
Customer relationships comprise the capitalisation of future profits relating to insurance contracts acquired and the expected
renewal of those contracts. It also includes the value of distribution networks and agency relationships. Customer relationships
are amortised over remaining lives of up to eight years depending on the classes of business to which the assets relate.
These assets reflect the revenue generating ability of acquired brands. In some circumstances, brand names
are considered to have an indefinite useful life due to the long-term nature of the asset.
These assets give the Group the right to operate in certain geographic locations and to write certain classes
of business with a potential to generate additional revenue. In some cases, these are considered to have an indefinite
useful life due to their long-term nature; however, where there is a finite useful life, assets are amortised over the
remaining period, up to 15 years.
Customer relationships
Brand names
Insurance licences
Software
Goodwill
This includes both acquired and internally developed software which is not integral or closely related to an item
of hardware such as an underwriting system. Capitalised software is amortised over periods of up to 10 years,
reflecting the period during which the Group is expected to benefit from the use of the software.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets acquired. Goodwill has an indefinite useful life and therefore is not subject to amortisation
but is tested for impairment annually, or more often if there is an indication of impairment.
2022
Cost
At 1 January
Additions
Impairment
Disposals
Foreign exchange
At 31 December
Amortisation
At 1 January
Amortisation1
Disposals
Foreign exchange
At 31 December
Carrying amount
At 31 December
IDENTIFIABLE INTANGIBLES
LLOYD’S
SYNDICATE
CAPACITY
US$M
CUSTOMER
RELATION-
SHIPS
US$M
BRAND
NAMES
US$M
INSURANCE
LICENCES
US$M
SOFTWARE
US$M
OTHER
US$M
GOODWILL
US$M
TOTAL
US$M
86
(10)
76
–
–
–
–
–
–
–
–
76
454
–
–
(57)
(7)
390
(426)
(13)
56
6
13
26
–
–
–
(1)
25
(22)
–
–
1
4
139
–
–
–
(7)
132
(77)
(2)
–
5
(74)
58
492
132
(11)
(119)
(31)
463
(239)
(64)
119
10
(174)
289
(377)
(21)
19
–
–
(9)
–
10
(19)
–
9
–
–
(10)
2,016
3,232
(328)
(110)
1,578
–
–
–
–
–
–
–
132
(11)
(513)
(166)
2,674
(783)
(79)
184
22
(656)
1,578
2,018
1 Amortisation of $63 million is included in underwriting expenses as it relates to intangible assets integral to the Group’s underwriting activities.
145
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
i
e
w
P
e
r
f
o
r
m
a
n
c
e
2
fi
n
a
n
c
i
a
l
O
p
e
r
a
t
i
n
g
a
n
d
IDENTIFIABLE INTANGIBLES
LLOYD’S
SYNDICATE
CAPACITY
US$M
CUSTOMER
RELATION-
SHIPS
US$M
BRAND
NAMES
US$M
INSURANCE
LICENSES
US$M
SOFTWARE
US$M
OTHER
US$M
GOODWILL
US$M
TOTAL
US$M
87
–
–
–
(1)
86
–
–
–
–
455
–
–
–
(1)
454
(412)
(16)
2
(426)
86
28
27
–
–
–
(1)
26
(22)
–
–
(22)
4
148
–
(2)
–
(7)
139
(79)
(2)
4
(77)
62
442
91
–
(1)
(40)
492
(219)
(51)
31
(239)
253
19
–
–
–
–
19
(19)
–
–
(19)
2,107
–
–
–
(91)
2,016
–
–
–
–
3,285
91
(2)
(1)
(141)
3,232
(751)
(69)
37
(783)
–
2,016
2,449
r
e
v
i
e
w
2021
Cost
At 1 January
Additions
Impairment
Disposals
Foreign exchange
At 31 December
Amortisation
At 1 January
Amortisation1
Foreign exchange
At 31 December
Carrying amount
At 31 December
1 Amortisation of $50 million is included in underwriting expenses as it relates to intangible assets integral to the Group’s underwriting activities.
How we account for the numbers
Intangible assets are measured at cost less accumulated amortisation and impairment. Those with a finite useful life are
amortised over their estimated useful life in accordance with the pattern of expected consumption of economic benefits,
with amortisation expense reported in underwriting and other expenses or in amortisation and impairment of intangibles
depending on the use of the asset. Intangible assets with an indefinite useful life are not subject to amortisation but are
tested for impairment annually or more frequently if there are indicators of impairment. Intangible assets with a finite
useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
7.2.1
Impairment testing of intangible assets
Overview
An intangible asset’s recoverable value is the greater of its value in use and its fair value less cost to sell.
For intangible assets with a finite life, if there are indicators that the intangible asset’s recoverable value has fallen below
its carrying value (e.g. due to changing market conditions), an impairment test is performed and a loss is recognised for
the amount by which the carrying value exceeds the asset’s recoverable value.
Intangible assets that have an indefinite useful life, such as goodwill, are tested annually for impairment or more
frequently where there is an indication that the carrying amount may not be recoverable.
Goodwill is allocated to cash-generating units, or groups of cash-generating units, expected to benefit from synergies
arising from the acquisition giving rise to the goodwill. Cash-generating units or groups of cash-generating units reflect
the level at which goodwill is monitored for impairment by QBE. As the Group acquires or disposes of operations
or reorganises the way that operations are managed, reporting structures may change, giving rise to a reassessment
of cash-generating units and the allocation of goodwill to those cash-generating units.
The goodwill relating to certain acquisitions is denominated in currencies other than the US dollar and so is subject
to foreign exchange movements.
Goodwill is analysed by groups of cash-generating units as follows:
North America
International
Australia Pacific
2022
US$M
30
490
1,058
1,578
2021
US$M
358
524
1,134
2,016
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
146
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
Impairment losses
During 2022, software assets of $11 million were impaired following management’s review of their recoverable amounts. During 2021,
insurance licences of $2 million were impaired.
How we account for the numbers
Impairment testing of identifiable intangible assets
The recoverable amount of each intangible asset with an indefinite useful life has been determined by reference
to a value in use calculation based on the following key assumptions and estimates:
• Cash flow forecasts relevant to the initial valuation of the identifiable intangible asset are reviewed and updated
(if appropriate). Cash flow forecasts are based on a combination of actual performance to date and expectations
of future performance based on prevailing and anticipated market factors.
• Discount rates include a beta and a market risk premium sourced from observable market information, and a specific
risk premium appropriate to reflect the nature of the risk associated with the intangible asset or the cash-generating
unit to which the asset is allocated.
Impairment testing of goodwill
The recoverable amount of each cash-generating unit or group of cash-generating units has been determined
by reference to a value in use calculation based on the following key assumptions and estimates:
• Cash flow forecasts reflect combined operating ratio and investment return assumptions that build from the latest
three-year business plan. These forecasts cover a period of five years, with the final two years determined with
reference to the terminal growth rates discussed below. The cash flow forecasts are based on a combination of
historical performance and expectations of future performance based on prevailing and anticipated market factors
and the benefit of committed cost saving measures.
• Terminal value is calculated using a perpetuity growth formula from the end of the cash flow forecast period.
Growth rates reflect the long-term average growth rates of the countries relevant to the cash-generating unit or group
of cash-generating units and are based on observable market information. The terminal growth rates used in impairment
testing are: North America 2.3% (2021 2.3%), Australia Pacific 2.5% (2021 2.5%) and International 2.0% (2021 2.0%).
• Discount rates reflect a beta and a market risk premium sourced from observable market information, and a specific
risk premium appropriate to reflect the nature of the business of each cash-generating unit or group of cash-generating
units. The pre-tax discount rates used were: North America 12.7% (2021 9.7%), Australia Pacific 14.0% (2021 12.8%)
and International 10.8% (2021 8.9%). The post-tax discount rates used were: North America 9.9% (2021 7.6%),
Australia Pacific 9.9% (2021 9.1%) and International 8.6% (2021 7.2%).
Critical accounting judgements and estimates
The Group’s business plan, which is the basis for cash flow forecasts used to determine the recoverable amount
of goodwill, considers the potential impact of climate change through the catastrophe allowance which reflects the
anticipated rise in trends in the frequency and cost of weather-related events, as well as other assumptions, including
relating to premium rate, which reflect QBE’s underwriting strategy and planned management actions in response
to these risks.
The disposal of Westwood Insurance Agency included an allocation of $328 million of goodwill relating to the
North American cash-generating unit (refer to note 7.1). Following the disposal, the remaining North America goodwill
is $30 million.
146
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
Impairment losses
insurance licences of $2 million were impaired.
During 2022, software assets of $11 million were impaired following management’s review of their recoverable amounts. During 2021,
Overview
7.3
Controlled entities
147
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Q
B
E
I
n
s
u
r
a
n
c
e
G
r
o
u
p
1
o
v
e
r
v
P
e
r
f
o
r
m
a
n
c
e
This section lists the Group’s controlled entities. The consolidated financial statements incorporate the assets and
liabilities of all entities controlled by the Company at 31 December 2022 and the results for the financial year then
ended, or for the period during which control existed if the entity was acquired or disposed of during the financial year.
i
e
w
How we account for the numbers
Impairment testing of identifiable intangible assets
The recoverable amount of each intangible asset with an indefinite useful life has been determined by reference
to a value in use calculation based on the following key assumptions and estimates:
• Cash flow forecasts relevant to the initial valuation of the identifiable intangible asset are reviewed and updated
(if appropriate). Cash flow forecasts are based on a combination of actual performance to date and expectations
of future performance based on prevailing and anticipated market factors.
• Discount rates include a beta and a market risk premium sourced from observable market information, and a specific
risk premium appropriate to reflect the nature of the risk associated with the intangible asset or the cash-generating
unit to which the asset is allocated.
Impairment testing of goodwill
The recoverable amount of each cash-generating unit or group of cash-generating units has been determined
by reference to a value in use calculation based on the following key assumptions and estimates:
• Cash flow forecasts reflect combined operating ratio and investment return assumptions that build from the latest
three-year business plan. These forecasts cover a period of five years, with the final two years determined with
reference to the terminal growth rates discussed below. The cash flow forecasts are based on a combination of
historical performance and expectations of future performance based on prevailing and anticipated market factors
and the benefit of committed cost saving measures.
• Terminal value is calculated using a perpetuity growth formula from the end of the cash flow forecast period.
Growth rates reflect the long-term average growth rates of the countries relevant to the cash-generating unit or group
of cash-generating units and are based on observable market information. The terminal growth rates used in impairment
testing are: North America 2.3% (2021 2.3%), Australia Pacific 2.5% (2021 2.5%) and International 2.0% (2021 2.0%).
• Discount rates reflect a beta and a market risk premium sourced from observable market information, and a specific
risk premium appropriate to reflect the nature of the business of each cash-generating unit or group of cash-generating
units. The pre-tax discount rates used were: North America 12.7% (2021 9.7%), Australia Pacific 14.0% (2021 12.8%)
and International 10.8% (2021 8.9%). The post-tax discount rates used were: North America 9.9% (2021 7.6%),
Australia Pacific 9.9% (2021 9.1%) and International 8.6% (2021 7.2%).
Critical accounting judgements and estimates
The Group’s business plan, which is the basis for cash flow forecasts used to determine the recoverable amount
of goodwill, considers the potential impact of climate change through the catastrophe allowance which reflects the
anticipated rise in trends in the frequency and cost of weather-related events, as well as other assumptions, including
relating to premium rate, which reflect QBE’s underwriting strategy and planned management actions in response
The disposal of Westwood Insurance Agency included an allocation of $328 million of goodwill relating to the
North American cash-generating unit (refer to note 7.1). Following the disposal, the remaining North America goodwill
to these risks.
is $30 million.
7.3.1
Controlled entities
Ultimate parent entity
QBE Insurance Group Limited
Controlled entities
Austral Mercantile Collections Pty Limited
Australian Aviation Underwriting Pool Pty Limited
Burnett & Company, Inc.
Elders Insurance (Underwriting Agency) Pty Limited
Equator Reinsurances Limited
General Casualty Company of Wisconsin
General Casualty Insurance Company
Greenhill BAIA Underwriting GmbH
Greenhill International Insurance Holdings Limited
Greenhill Sturge Underwriting Limited
Greenhill Underwriting Espana Limited
Lifeco s.r.o.
NAU Country Insurance Company
North Pointe Insurance Company
Praetorian Insurance Company
QBE (PNG) Limited
QBE Administration Services, Inc.
QBE Americas, Inc.
QBE Asia Pacific Holdings Limited
QBE Asia Services Sdn. Bhd
QBE Blue Ocean Re Limited
QBE Corporate Limited
QBE Emerging Markets Holdings Pty Limited
QBE Employee Share Trust 1
QBE Europe SA/NV
QBE European Operations plc
QBE European Services Limited
QBE European Underwriting Services (Australia) Pty Limited
QBE Finance Holdings (EO) Limited
QBE FIRST Enterprises, LLC
QBE FIRST Property Tax Solutions, LLC
QBE General Insurance (Hong Kong) Limited
QBE Group Services Pty Ltd
QBE Group Shared Services Limited
QBE Holdings (AAP) Pty Limited
QBE Holdings (EO) Limited
QBE Holdings, Inc.
QBE Hongkong & Shanghai Insurance Limited
QBE Insurance (Australia) Limited
COUNTRY OF
INCORPORATION/
FORMATION
Australia
Australia
Australia
United States
Australia
Bermuda
United States
United States
Germany
United Kingdom
United Kingdom
United Kingdom
Czech Republic
United States
United States
United States
PNG
United States
United States
Hong Kong
Malaysia
Bermuda
United Kingdom
Australia
Australia
Belgium
United Kingdom
United Kingdom
Australia
United Kingdom
United States
United States
Hong Kong
Australia
United Kingdom
Australia
United Kingdom
United States
Hong Kong
Australia
EQUITY HOLDING
2022
%
2021
%
100.00
100.00
100.00
80.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
80.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
2
O
p
e
r
a
t
i
n
g
a
n
d
fi
n
a
n
c
i
a
l
r
e
v
i
e
w
3
G
o
v
e
r
n
a
n
c
e
4
R
e
p
o
r
t
D
i
r
e
c
t
o
r
s
’
5
R
e
p
o
r
t
F
i
n
a
n
c
i
a
l
6
i
O
t
h
e
r
n
f
o
r
m
a
t
i
o
n
148
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
QBE Insurance (Fiji) Limited
QBE Insurance (International) Pty Limited
QBE Insurance (Malaysia) Berhad
QBE Insurance (PNG) Limited
QBE Insurance (Singapore) Pte Ltd
QBE Insurance (Vanuatu) Limited
QBE Insurance (Vietnam) Company Limited
QBE Insurance Corporation
QBE Insurance Holdings Pty Limited
QBE International Markets Pte Ltd
QBE Investments (Australia) Pty Limited
QBE Investments (North America), Inc.
QBE Irish Share Incentive Plan1
QBE Latin America Insurance Holdings Pty Ltd
QBE Lenders’ Mortgage Insurance Limited
QBE Management (Ireland) Limited
QBE Management, Inc.
QBE Management Services (Philippines) Pty Limited
QBE Management Services (UK) Limited
QBE Management Services Pty Limited
QBE Mortgage Insurance (Asia) Limited
QBE Partner Services (Europe) LLP
QBE Regional Companies (N.A.), Inc.
QBE Reinsurance Corporation
QBE Reinsurance Services (Bermuda) Limited
QBE Services Inc
QBE Specialty Insurance Company
QBE s.r.o.
QBE Stonington Insurance Holdings Inc
QBE Strategic Capital (Europe) Limited
QBE Strategic Capital (International) Limited
QBE Strategic Capital Company Pty Limited
QBE UK Finance IV Limited
QBE UK Limited
QBE UK Share Incentive Plan1
QBE Underwriting Limited
QBE Underwriting Services (Ireland) Limited (in liquidation)
QBE Underwriting Services (UK) Limited
QBE Ventures Pty Limited
QBE Workers Compensation (NSW) Limited (dormant)
QBE Workers Compensation (VIC) Pty Limited (dormant)
Queensland Insurance (Investments) Pte Limited (in liquidation)
Regent Insurance Company
Sinkaonamahasarn Company Limited (in liquidation)2
Southern National Risk Management Corporation
Southern Pilot Insurance Company
Standfast Corporate Underwriters Limited
Stonington Insurance Company
Trade Credit Collections Pty Limited
Trade Credit Underwriting Agency NZ Limited
Trade Credit Underwriting Agency Pty Limited
Westwood Insurance Agency (sold effective 29 April 2022)3
COUNTRY OF
INCORPORATION/
FORMATION
Fiji
Australia
Malaysia
PNG
Singapore
Vanuatu
Vietnam
United States
Australia
Singapore
Australia
United States
Ireland
Australia
Australia
Ireland
United States
Australia
United Kingdom
Australia
Hong Kong
United Kingdom
United States
United States
Bermuda
Canada
United States
Czech Republic
United States
United Kingdom
United Kingdom
Australia
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ireland
United Kingdom
Australia
Australia
Australia
Fiji
United States
Thailand
United States
United States
United Kingdom
United States
Australia
New Zealand
Australia
United States
EQUITY HOLDING
2022
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
49.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
2021
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
49.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
1 QBE Employee Share Trust, QBE Irish Share Incentive Plan and QBE UK Share Incentive Plan have been included in the consolidated
financial statements as these entities are special purpose entities that exist for the benefit of the Group.
2 Although QBE has less than a 50% equity interest in Sinkaonamahasarn Company Limited, controlled entities have the right to acquire
the remaining share capital.
3 Disclosures relating to the disposal of Westwood Insurance Agency are included in note 7.1.
148
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
7.
GROUP STRUCTURE
QBE Insurance (Fiji) Limited
QBE Insurance (International) Pty Limited
QBE Insurance (Malaysia) Berhad
QBE Insurance (PNG) Limited
QBE Insurance (Singapore) Pte Ltd
QBE Insurance (Vanuatu) Limited
QBE Insurance (Vietnam) Company Limited
QBE Insurance Corporation
QBE Insurance Holdings Pty Limited
QBE International Markets Pte Ltd
QBE Investments (Australia) Pty Limited
QBE Investments (North America), Inc.
QBE Irish Share Incentive Plan1
QBE Latin America Insurance Holdings Pty Ltd
QBE Lenders’ Mortgage Insurance Limited
QBE Management (Ireland) Limited
QBE Management, Inc.
QBE Management Services (Philippines) Pty Limited
QBE Management Services (UK) Limited
QBE Management Services Pty Limited
QBE Mortgage Insurance (Asia) Limited
QBE Partner Services (Europe) LLP
QBE Regional Companies (N.A.), Inc.
QBE Reinsurance Corporation
QBE Reinsurance Services (Bermuda) Limited
QBE Services Inc
QBE Specialty Insurance Company
QBE s.r.o.
QBE Stonington Insurance Holdings Inc
QBE Strategic Capital (Europe) Limited
QBE Strategic Capital (International) Limited
QBE Strategic Capital Company Pty Limited
QBE UK Finance IV Limited
QBE UK Limited
QBE UK Share Incentive Plan1
QBE Underwriting Limited
QBE Underwriting Services (Ireland) Limited (in liquidation)
QBE Underwriting Services (UK) Limited
QBE Ventures Pty Limited
QBE Workers Compensation (NSW) Limited (dormant)
QBE Workers Compensation (VIC) Pty Limited (dormant)
Queensland Insurance (Investments) Pte Limited (in liquidation)
Regent Insurance Company
Sinkaonamahasarn Company Limited (in liquidation)2
Southern National Risk Management Corporation
Southern Pilot Insurance Company
Standfast Corporate Underwriters Limited
Stonington Insurance Company
Trade Credit Collections Pty Limited
Trade Credit Underwriting Agency NZ Limited
Trade Credit Underwriting Agency Pty Limited
Westwood Insurance Agency (sold effective 29 April 2022)3
COUNTRY OF
INCORPORATION/
FORMATION
Fiji
Australia
Malaysia
PNG
Singapore
Vanuatu
Vietnam
Australia
Singapore
Australia
Ireland
Australia
Australia
Ireland
United States
United States
United States
Australia
United Kingdom
Australia
Hong Kong
United Kingdom
United States
United States
Bermuda
Canada
United States
Czech Republic
United States
United Kingdom
United Kingdom
Australia
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ireland
United Kingdom
Australia
Australia
Australia
Fiji
United States
Thailand
United States
United States
United Kingdom
United States
Australia
New Zealand
Australia
United States
2022
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
49.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
2021
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
49.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
1 QBE Employee Share Trust, QBE Irish Share Incentive Plan and QBE UK Share Incentive Plan have been included in the consolidated
financial statements as these entities are special purpose entities that exist for the benefit of the Group.
2 Although QBE has less than a 50% equity interest in Sinkaonamahasarn Company Limited, controlled entities have the right to acquire
the remaining share capital.
3 Disclosures relating to the disposal of Westwood Insurance Agency are included in note 7.1.
All equity in controlled entities is held in the form of shares or through contractual arrangements.
EQUITY HOLDING
How we account for the numbers
Controlled entities
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Control exists when the Group is exposed, or has rights, to variable returns from its involvement with an entity and has
the ability to affect those returns through its power over it. All transactions between and with controlled entities are
eliminated in full. Non-controlling interests in the results and equity of controlled entities are shown separately in the
consolidated statement of comprehensive income, balance sheet and statement of changes in equity.
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Where control of an entity commences during a financial year, its results are included in the consolidated statement
of comprehensive income from the date on which control is obtained. Where control of an entity ceases during
a financial year, its results are included for that part of the year during which the control existed.
A change in ownership of a controlled entity without the gain or loss of control is accounted for as an equity transaction.
2
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3
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4
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150
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Overview
This section includes other information that must be disclosed to comply with the Australian Accounting Standards
or the Corporations Act 2001.
8.1
Other accounting policies
8.1.1 New accounting standards and amendments adopted by the Group
The Group adopted the following new or amended accounting standards from 1 January 2022:
TITLE
AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018–2020 and Other Amendments
AASB 2021-3 Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021
The adoption of these revised standards did not significantly impact the Group’s accounting policies or financial statements.
8.1.2 New accounting standards and amendments issued but not yet effective
TITLE
AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current
or Non-current
OPERATIVE DATE
1 January 2023
AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and
1 January 2023
Definition of Accounting Estimates
AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities
1 January 2023
arising from a Single Transaction
AASB 2022-6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants
AASB 17
Insurance Contracts
1 January 2023
1 January 2023
AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between
1 January 2025
an Investor and its Associate or Joint Venture
The Australian Accounting Standards and amendments detailed in the table above are not mandatory for the Group until the operative
dates stated; however, early adoption is often permitted.
The Group currently plans to adopt the standards and amendments detailed above in the reporting periods beginning on their
respective operative dates. An assessment of the financial impact of the standards and amendments has been undertaken and
they are not expected to have a material impact on the Group’s financial statements, except where noted below.
AASB 17 Insurance Contracts
AASB 17, a new accounting standard for insurance contracts, was adopted by the AASB in July 2017. In June 2020, the IASB issued
Amendments to IFRS 17 which deferred the effective date from 1 January 2021 to 1 January 2023 and made significant amendments
to the standard in response to feedback from, and implementation issues raised by, stakeholders. These amendments were adopted
by the AASB in July 2020.
Measurement of insurance contracts
Measurement models
The standard introduces a new ‘general model’ for the recognition and measurement of insurance contracts. The liability for remaining
coverage (which represents insurance coverage to be provided after the balance date) under the general model is measured as the
sum of:
• the present value of expected future cash flows and a risk adjustment (collectively referred to as the ‘fulfilment cash flows’); and
• a contractual service margin (CSM), being the unearned profit, which is recognised as insurance revenue in profit or loss over
the coverage period of the contracts. The CSM is earned based on a pattern of coverage units which may not be the same as the
pattern of incidence of risk used to earn gross written premium under AASB 1023.
150
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Overview
or the Corporations Act 2001.
8.1
Other accounting policies
This section includes other information that must be disclosed to comply with the Australian Accounting Standards
8.1.1 New accounting standards and amendments adopted by the Group
The Group adopted the following new or amended accounting standards from 1 January 2022:
TITLE
TITLE
AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018–2020 and Other Amendments
AASB 2021-3 Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021
The adoption of these revised standards did not significantly impact the Group’s accounting policies or financial statements.
8.1.2 New accounting standards and amendments issued but not yet effective
AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current
AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and
1 January 2023
AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities
1 January 2023
or Non-current
Definition of Accounting Estimates
arising from a Single Transaction
AASB 2022-6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants
AASB 17
Insurance Contracts
AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between
1 January 2025
an Investor and its Associate or Joint Venture
OPERATIVE DATE
1 January 2023
1 January 2023
1 January 2023
The Australian Accounting Standards and amendments detailed in the table above are not mandatory for the Group until the operative
dates stated; however, early adoption is often permitted.
The Group currently plans to adopt the standards and amendments detailed above in the reporting periods beginning on their
respective operative dates. An assessment of the financial impact of the standards and amendments has been undertaken and
they are not expected to have a material impact on the Group’s financial statements, except where noted below.
AASB 17, a new accounting standard for insurance contracts, was adopted by the AASB in July 2017. In June 2020, the IASB issued
Amendments to IFRS 17 which deferred the effective date from 1 January 2021 to 1 January 2023 and made significant amendments
to the standard in response to feedback from, and implementation issues raised by, stakeholders. These amendments were adopted
AASB 17 Insurance Contracts
by the AASB in July 2020.
Measurement of insurance contracts
Measurement models
sum of:
The standard introduces a new ‘general model’ for the recognition and measurement of insurance contracts. The liability for remaining
coverage (which represents insurance coverage to be provided after the balance date) under the general model is measured as the
• the present value of expected future cash flows and a risk adjustment (collectively referred to as the ‘fulfilment cash flows’); and
• a contractual service margin (CSM), being the unearned profit, which is recognised as insurance revenue in profit or loss over
the coverage period of the contracts. The CSM is earned based on a pattern of coverage units which may not be the same as the
pattern of incidence of risk used to earn gross written premium under AASB 1023.
AASB 17 permits the use of a simplified approach referred to as the ‘premium allocation approach’ (which is similar to the current
basis on which general insurance is brought to account under AASB 1023) if the liability for remaining coverage under the premium
allocation approach is not expected to materially differ from that under the general model, or if the coverage period of the contracts
is not greater than one year. QBE has developed a model and methodology for assessing eligibility of contracts with coverage
periods of greater than one year to apply the premium allocation approach. Our assessment, which involved detailed modelling under
a range of scenarios as well as a qualitative assessment of contract features, has determined that the premium allocation approach
is expected to apply to the vast majority of the Group’s business.
For groups of contracts that apply the premium allocation approach and have a coverage period of one year or less, AASB 17
provides an option to recognise any insurance acquisition costs as expenses when incurred. QBE does not plan to apply this option
and expects to amortise acquisition costs over the coverage period of the related insurance contracts, consistent with current
accounting under AASB 1023.
Onerous contracts
AASB 17 requires the identification of ‘groups’ of onerous contracts which will be determined at a more granular level of aggregation than
the level at which the liability adequacy test is performed under AASB 1023. Contracts that are measured using the premium allocation
approach are assumed not to be onerous unless facts and circumstances indicate otherwise. QBE has developed a framework
for identifying relevant facts and circumstances that may be indicators of possible onerous contracts which includes consideration
of management information for Group planning and performance management.
If facts and circumstances that may be indicators of possible onerous contracts exist, the onerous contract losses are measured based
on an estimation of fulfilment cash flows and are recognised in profit or loss. Onerous contract losses must be measured on a gross
basis (excluding the effect of reinsurance), with the impact on equity and profit or loss mitigated by related income on reinsurance
recoveries to the extent that the onerous contracts are covered by reinsurance. In isolation, the application of the onerous contracts
requirements is expected to result in a decrease in opening equity on adoption of AASB 17.
Risk adjustment
The measurement of insurance contract liabilities will include a risk adjustment which replaces the risk margin under AASB
1023. The risk margin under AASB 1023 reflects the inherent uncertainty in the net discounted central estimate, whereas the risk
adjustment under AASB 17 is defined as the compensation required for bearing the uncertainty that arises from non-financial risk.
The Group intends to apply a cost of capital approach as a key input to determining the risk adjustment for both the liability for
incurred claims and the liability for remaining coverage. When applying the premium allocation approach, no explicit risk adjustment is
determined for the liability for remaining coverage, except when measuring onerous contracts.
The Group expects to adopt an AASB 17 risk adjustment from a target range (expressed as a percentage of expected future cash
flows which are equivalent to the AASB 1023 central estimate), a range that is expected to be slightly lower than the equivalent
AASB 1023 risk margin range. Similar to the risk margin, the risk adjustment includes the benefit of diversification. AASB 17 requires
the disclosure of the confidence level that corresponds to the risk adjustment used in the measurement of insurance contract liabilities.
Discount rates
AASB 1023 requires the net central estimate of outstanding claims to be discounted using risk-free rates as described in note 2.3.4.
AASB 17 requires estimates of future cash flows to be discounted to reflect the time value of money and financial risks related
to those cash flows but does not prescribe a methodology for determining the discount rates used. QBE will apply a ‘bottom-up
approach’ which requires the use of risk-free rates adjusted to reflect the illiquidity characteristics of the insurance contracts, which
will result in higher discount rates relative to current requirements and an increase in opening equity on adoption of AASB 17.
The illiquidity premium within discount rates will be derived based on the long-term weighted average credit spread of a reference
portfolio of assets with a similar currency mix and weighted average duration as the related insurance liabilities over the longer term.
The effect of credit risk and other factors that are not relevant to the illiquidity characteristics of insurance contracts will be eliminated
to estimate the portion of the spread that reflects the illiquidity premium.
Foreign exchange
Insurance contract assets and liabilities that are denominated in foreign currency are treated as monetary items under AASB 17.
This differs from current industry practice in respect of unearned premium and deferred insurance costs which are treated
as non-monetary items. Based on the exchange rates at the transition date, the impact of this change on opening equity is not
expected to be material. The resulting exposures from the change in treatment will be mitigated going forward as part of the Group’s
operational currency risk management strategy, with new forward foreign exchange contracts entered into at 31 December 2022
to mitigate these exposures from 2023.
Interim reporting
QBE expects to apply the option to measure accounting estimates based on assumptions relevant at each reporting date. This means
that estimates made in interim financial statements will be updated in the subsequent annual financial statements where required.
Presentation and disclosure
The standard introduces changes to the presentation and disclosure of insurance line items in the financial statements, introducing
new line items on the statement of comprehensive income and balance sheet and increased disclosures compared with existing
reporting requirements.
151
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152
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Existing insurance and reinsurance contract line items on the balance sheet (including trade debtors arising from general insurance
contracts, unearned premium, deferred insurance costs, gross outstanding claims and reinsurance and other recoveries on outstanding
claims) will be replaced by insurance contract assets and liabilities, and reinsurance contract assets and liabilities. Insurance contract
liabilities under AASB 17 will include all cash flows that directly relate to the fulfilment of insurance contracts (direct business and
inward reinsurance), including acquisition, claims settlement, policy administration and maintenance costs. It also includes other costs
such as direct overheads which are currently recognised in trade and other payables on the balance sheet.
Transition
AASB 17 will be applied retrospectively to all of QBE’s insurance contracts on transition except to the extent that it is impracticable
to do so, in which case either a modified retrospective or fair value approach may be applied. QBE will apply a modified retrospective
approach for the following:
• certain contracts acquired in the past (e.g. as part of a business combination) that, at the time of acquisition, were considered past
expiry and were in their claims settlement period. For these contracts, the related liabilities are expected to be classified as liabilities
for incurred claims, on the basis that it would be impracticable to treat these liabilities as related to unexpired coverage; and
• determination of the CSM for contracts measured under the general model, for which sufficient data on historical assumptions is not
available for the estimation of future cash flows and risk adjustment at initial recognition as well as the amount of CSM earned to profit
or loss up to the transition date, which are key inputs. To the extent that this information is not available without the use of hindsight,
permitted modifications in AASB 17 will be applied to estimate these amounts based on transition date expectations about changes
that occurred between initial recognition and the transition date.
• identification of groups of onerous contracts relating to past underwriting years. These have been assessed based on information
available at the transition date to the extent that reasonable and supportable information about past facts and circumstances is not
available without the use of hindsight.
Financial impact
Based on the above and work performed to date, the impact of AASB 17 adoption on the Group’s reported net assets of $8,882 million
as at 1 January 2022 is currently expected to be modest and within a range of a $50 million decrease to a $150 million increase, or less
than 2% of net assets, before associated tax effects. The opening net asset impact is mainly driven by increases to net assets from
the application of the AASB 17 risk adjustment and higher discount rates reflecting the inclusion of the illiquidity premium, offset by
decreases to net assets driven by onerous contracts and the impact of changes in the pattern of revenue recognition for certain classes
of business (largely resulting from the application of the general model). The requirements of AASB 17 are complex and the actual
impact is subject to the finalisation of key assumptions in relation to each of these components.
The Group’s implementation of AASB 17 is well progressed and work is ongoing to finalise the impacts and to restate comparative
information for reporting on this basis in 2023.
152
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Existing insurance and reinsurance contract line items on the balance sheet (including trade debtors arising from general insurance
contracts, unearned premium, deferred insurance costs, gross outstanding claims and reinsurance and other recoveries on outstanding
claims) will be replaced by insurance contract assets and liabilities, and reinsurance contract assets and liabilities. Insurance contract
liabilities under AASB 17 will include all cash flows that directly relate to the fulfilment of insurance contracts (direct business and
inward reinsurance), including acquisition, claims settlement, policy administration and maintenance costs. It also includes other costs
such as direct overheads which are currently recognised in trade and other payables on the balance sheet.
Transition
approach for the following:
AASB 17 will be applied retrospectively to all of QBE’s insurance contracts on transition except to the extent that it is impracticable
to do so, in which case either a modified retrospective or fair value approach may be applied. QBE will apply a modified retrospective
• certain contracts acquired in the past (e.g. as part of a business combination) that, at the time of acquisition, were considered past
expiry and were in their claims settlement period. For these contracts, the related liabilities are expected to be classified as liabilities
for incurred claims, on the basis that it would be impracticable to treat these liabilities as related to unexpired coverage; and
• determination of the CSM for contracts measured under the general model, for which sufficient data on historical assumptions is not
available for the estimation of future cash flows and risk adjustment at initial recognition as well as the amount of CSM earned to profit
or loss up to the transition date, which are key inputs. To the extent that this information is not available without the use of hindsight,
permitted modifications in AASB 17 will be applied to estimate these amounts based on transition date expectations about changes
that occurred between initial recognition and the transition date.
• identification of groups of onerous contracts relating to past underwriting years. These have been assessed based on information
available at the transition date to the extent that reasonable and supportable information about past facts and circumstances is not
available without the use of hindsight.
Financial impact
Based on the above and work performed to date, the impact of AASB 17 adoption on the Group’s reported net assets of $8,882 million
as at 1 January 2022 is currently expected to be modest and within a range of a $50 million decrease to a $150 million increase, or less
than 2% of net assets, before associated tax effects. The opening net asset impact is mainly driven by increases to net assets from
the application of the AASB 17 risk adjustment and higher discount rates reflecting the inclusion of the illiquidity premium, offset by
decreases to net assets driven by onerous contracts and the impact of changes in the pattern of revenue recognition for certain classes
of business (largely resulting from the application of the general model). The requirements of AASB 17 are complex and the actual
impact is subject to the finalisation of key assumptions in relation to each of these components.
The Group’s implementation of AASB 17 is well progressed and work is ongoing to finalise the impacts and to restate comparative
information for reporting on this basis in 2023.
153
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8.2
Contingent liabilities
Overview
Contingent liabilities are disclosed when the possibility of a future settlement of economic benefits is considered
to be less than probable but more likely than remote. If the expected settlement of the liability becomes probable,
a provision is recognised.
i
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QBE is required to support the underwriting activities of the Group’s controlled entities including corporate members at Lloyd’s. Funds
at Lloyd’s are those funds of the Group which are subject to the terms of the Lloyd’s Deposit Trust Deed and are required to support
underwriting for the following year and the open years of account, determined by a formula prescribed by Lloyd’s each year. At the
balance date, letters of credit and similar forms of support of $2,330 million (2021 $2,177 million) were in place in respect of the
Group’s participation in Lloyd’s, along with cash and investments of $89 million (2021 $106 million). In addition, a controlled entity
has entered into various trust and security deeds with Lloyd’s in respect of assets lodged to support its underwriting activities. These
deeds contain covenants that require the entity to meet financial obligations should they arise in relation to cash calls from syndicate
participations. A cash call would be made first on the assets held in syndicate trust funds and would only call on funds at Lloyd’s after
syndicate resources were exhausted. Only if the level of these trust funds was not sufficient would a cash call result in a draw down
on the letters of credit and other assets lodged with Lloyd’s.
In the normal course of business, the Group is also exposed to contingent liabilities in relation to claims litigation and regulatory
examinations arising out of its insurance and reinsurance activities. The Group may also be exposed to the possibility of contingent
liabilities in relation to insurance and non-insurance litigation including but not limited to regulatory test cases and class actions,
taxation and compliance matters, which may result in legal or regulatory penalties and financial or non-financial losses and
other impacts. QBE is currently defending a representative class action in Australia relating to policyholders with business
interruption policies.
Entities in the Group may also provide guarantees to support representations in commercial transactions.
8.3
Offsetting financial assets and liabilities
The Group has $228 million (2021 $243 million) receivable from and payable to a single counterparty which are fully set off in the
balance sheet in accordance with Australian Accounting Standards, on the basis that the Group intends to settle these on a net basis
and has a legally enforceable right to do so.
2
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154
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
8.4
Reconciliation of profit after income tax to net cash flows from operating
activities
Overview
AASB 1054 Australian Additional Disclosures requires a reconciliation of profit or loss after income tax to net cash flows
from operating activities.
Profit after income tax
Adjustments for:
Depreciation and impairment of property, plant and equipment
Amortisation of right-of-use lease assets
Amortisation/impairment of intangibles
Gain on sale of entities and businesses
Share of net loss of associates
Net foreign exchange (gains) losses
Fair value losses on financial assets
Equity-settled share-based payments expense
Balance sheet movements:
Increase in trade debtors
Increase in net operating assets
Increase in trade payables
Increase in gross outstanding claims liability
Increase in unearned premium
Increase in deferred insurance costs
Increase in net defined benefit obligation
Decrease in net tax assets
Net cash flows from operating activities
2022
US$M
778
31
61
90
(38)
7
(14)
1,295
39
(2,612)
(164)
1,796
900
934
(378)
–
67
2,792
2021
US$M
757
37
60
71
–
7
4
409
32
(1,920)
(229)
1,755
753
1,422
(474)
2
68
2,754
155
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8.4
Reconciliation of profit after income tax to net cash flows from operating
8.5
Share‑based payments
Overview
154
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
activities
Overview
from operating activities.
Profit after income tax
Adjustments for:
Depreciation and impairment of property, plant and equipment
Amortisation of right-of-use lease assets
Amortisation/impairment of intangibles
Gain on sale of entities and businesses
Share of net loss of associates
Net foreign exchange (gains) losses
Fair value losses on financial assets
Equity-settled share-based payments expense
Balance sheet movements:
Increase in trade debtors
Increase in net operating assets
Increase in trade payables
Increase in gross outstanding claims liability
Increase in unearned premium
Increase in deferred insurance costs
Increase in net defined benefit obligation
Decrease in net tax assets
Net cash flows from operating activities
2022
US$M
778
31
61
90
(38)
7
(14)
1,295
39
(2,612)
(164)
1,796
900
934
(378)
–
67
2,792
2021
US$M
757
37
60
71
–
7
4
409
32
(1,920)
(229)
1,755
753
1,422
(474)
2
68
2,754
Share-based payments are equity-based compensation schemes provided to employees and executives. The Company
issues shares from time to time under an Employee Share and Option Plan (the Plan). Any full-time or part-time employee
of the Group or any equally-owned joint venture who is offered shares or options is eligible to participate in the Plan.
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AASB 1054 Australian Additional Disclosures requires a reconciliation of profit or loss after income tax to net cash flows
Share schemes
8.5.1
A summary of deferred equity award plans is set out below:
Current deferred equity plans
PLAN
AVAILABLE TO:
NATURE OF AWARD
VESTING CONDITIONS
Annual
Performance
Incentive
(API) (2022)
Executives and
other key senior
employees
Long‑term
Incentive (LTI)
(2019–2022)
Executives and
other key senior
employees
• 60%-67% delivered in
cash (50% in the case
of the Group CEO).
• 33%-40% deferred
as conditional
rights to fully paid
ordinary shares of the
Company (50% in the
case of the Group
CEO).
• Conditional rights to
fully paid ordinary
shares of the
Company.
The conditional rights are deferred in equal tranches over two, three
or four years, dependent on the vesting period of the award.
API outcomes are subject to the achievement of:
• performance outcomes measured through a business scorecard
containing key financial measures alongside strategically important
non-financial measures; and
• individual performance objectives measured both on what has been
achieved and how it was achieved during the year.
The conditional rights vest in three tranches on achievement of the
performance measures at the end of a three-year period as follows:
• 33% at the end of the three-year performance period;
• 33% on the first anniversary of the end of the performance period; and
• 34% on the second anniversary of the end of the performance period.
Vesting is subject to performance conditions as follows:
• For 2022 awards, 70% of conditional rights are subject to the
achievement against the Group cash ROE performance target based
on a three-year arithmetic average; and 30% of conditional rights are
based on the Group’s relative total shareholder return, compared against
a global insurance peer group, over a three-year performance period.
• For 2019-2021 awards, 50% of conditional rights are subject to
the achievement against the Group cash ROE performance target
based on the average of three individual annual performance ranges
set over three individual years (for 2021 awards), or a three-year
arithmetic average (for 2019 and 2020 awards); and 50% of conditional
rights are based on the Group’s relative total shareholder return,
compared against two independent peer groups, over a three-year
performance period.
Legacy deferred equity plans
PLAN
AVAILABLE TO:
NATURE OF AWARD
VESTING CONDITIONS
Executive
Incentive Plan
(EIP)
(2017–2021)
Executives
(before 1 Jan
2019) and other
key senior
employees
• 40%-50% delivered
in cash.
The conditional rights are deferred in four equal tranches, such that 25%
vests on each of the first, second, third and fourth anniversaries of the award.
• 50%-60% deferred
as conditional
rights1 to fully paid
ordinary shares of
the Company.
EIP outcomes were subject to the achievement of:
• a blend of divisional combined operating ratios (COR) for 2021,
or Group COR for 2017-2020, and Group cash ROE targets;
• divisional COR targets in the case of divisional employees; and
• individual performance objectives reflecting QBE’s strategic priorities.
2
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3
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4
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p
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6
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156
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Short‑term
Incentive (STI)
(2014–2021)
Executives and
other key senior
employees
• 67% delivered in cash
(50% in the case
of the Group CEO).
The conditional rights are deferred in two equal tranches, such that 50%
vests on the first anniversary of the award and 50% vests on the second
anniversary of the award.
• 33% deferred as
conditional rights
to fully paid ordinary
shares of the Company
(50% in the case of the
Group CEO).
STI outcomes were subject to the achievement of:
• a blend of divisional CORs for 2021, or Group COR for 2017-2020,
and Group cash ROE targets;
• divisional COR targets2 in the case of divisional employees; and
• individual performance objectives reflecting QBE’s strategic priorities.
1 For participants outside Australia, the deferred component was generally delivered in equal shares of conditional rights and cash.
2 Divisional return on allocated capital targets until 31 December 2016.
Additionally, for both current and legacy deferred equity plans:
• plan rules provide suitable discretion for the People & Remuneration Committee to adjust any formulaic outcome to ensure that
awards made under the API, LTI, EIP and STI appropriately reflect performance;
• during the period from the grant date to the vesting date, further conditional rights are issued under the BSP to reflect dividends
paid on ordinary shares of the Company. These conditional rights are subject to the same vesting conditions as the original grant
of conditional rights;
• recipients must remain in the Group’s service throughout the service period in order for the awards to vest, except in cases where
good leaver provisions apply. Vesting is also subject to malus, with clawback provisions applicable to allocations since 2021 under
the plans;
• under good leaver provisions (e.g. retirement, redundancy, ill health, injury or mutually agreed separation), conditional rights remain
subject to the performance and vesting conditions; and
• once vested, conditional rights can be exercised for no consideration.
8.5.2 Conditional rights
Details of the number of employee entitlements to conditional rights to ordinary shares granted, vested and transferred to employees
during the year are as follows:
At 1 January
Granted
Dividends attaching
Vested and transferred to employees
Forfeited
At 31 December
Weighted average share price at date of vesting of conditional rights during the year
Weighted average fair value of conditional rights granted during the year
2022
NUMBER OF
RIGHTS
10,983,929
6,938,596
306,532
(3,741,501)
(1,826,998)
12,660,558
A$11.43
A$11.20
2021
NUMBER OF
RIGHTS
13,247,240
4,061,715
83,887
(4,196,217)
(2,212,696)
10,983,929
A$9.41
A$9.23
156
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
Short‑term
Executives and
• 67% delivered in cash
The conditional rights are deferred in two equal tranches, such that 50%
Incentive (STI)
other key senior
(50% in the case
vests on the first anniversary of the award and 50% vests on the second
(2014–2021)
employees
of the Group CEO).
anniversary of the award.
• 33% deferred as
conditional rights
to fully paid ordinary
shares of the Company
(50% in the case of the
STI outcomes were subject to the achievement of:
• a blend of divisional CORs for 2021, or Group COR for 2017-2020,
and Group cash ROE targets;
• divisional COR targets2 in the case of divisional employees; and
Group CEO).
• individual performance objectives reflecting QBE’s strategic priorities.
1 For participants outside Australia, the deferred component was generally delivered in equal shares of conditional rights and cash.
2 Divisional return on allocated capital targets until 31 December 2016.
Additionally, for both current and legacy deferred equity plans:
• plan rules provide suitable discretion for the People & Remuneration Committee to adjust any formulaic outcome to ensure that
awards made under the API, LTI, EIP and STI appropriately reflect performance;
• during the period from the grant date to the vesting date, further conditional rights are issued under the BSP to reflect dividends
paid on ordinary shares of the Company. These conditional rights are subject to the same vesting conditions as the original grant
• recipients must remain in the Group’s service throughout the service period in order for the awards to vest, except in cases where
good leaver provisions apply. Vesting is also subject to malus, with clawback provisions applicable to allocations since 2021 under
of conditional rights;
the plans;
• under good leaver provisions (e.g. retirement, redundancy, ill health, injury or mutually agreed separation), conditional rights remain
subject to the performance and vesting conditions; and
• once vested, conditional rights can be exercised for no consideration.
Details of the number of employee entitlements to conditional rights to ordinary shares granted, vested and transferred to employees
8.5.2 Conditional rights
during the year are as follows:
At 1 January
Granted
Dividends attaching
Forfeited
At 31 December
Vested and transferred to employees
Weighted average share price at date of vesting of conditional rights during the year
Weighted average fair value of conditional rights granted during the year
2022
NUMBER OF
RIGHTS
10,983,929
6,938,596
306,532
(3,741,501)
(1,826,998)
12,660,558
A$11.43
A$11.20
2021
NUMBER OF
RIGHTS
13,247,240
4,061,715
83,887
(4,196,217)
(2,212,696)
10,983,929
A$9.41
A$9.23
8.5.3 Fair value of conditional rights
The fair value of conditional rights granted during the year was determined using the following significant assumptions:
Five-day volume weighted average price of instrument at grant date
Expected volatility
Risk-free rate
Expected life of instrument
2022
2021
A$
%
%
Years
11.42–12.61
28–29
1.49–3.12
0.1–5.0
9.30–12.01
25–27
0.09–0.81
0.1–5.0
The fair value is determined using appropriate models including Monte Carlo simulations, depending on the vesting conditions.
Some of the assumptions used may be based on historical data which is not necessarily indicative of future trends. Reasonable
changes in these assumptions would not have a material impact on the Group’s financial statements.
8.5.4 Employee options
The market value of all shares underlying the options at the balance date was A$0.2 million (2021 A$0.2 million). During 2022, no
options (2021 nil) were cancelled or forfeited. At 31 December 2022, 17,000 remained, excluding notional dividends (2021 17,000).
The options were issued to employees in 2004 in lieu of shares under the Plan. The options vested immediately and are exercisable
until March 2024.
157
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2
0
2
2
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G
r
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1
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P
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a
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2
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8.5.5 Share-based payment expense
This expense, which includes amounts in relation to cash-settled share-based payment awards, was $44 million (2021 $36 million).
These amounts are included in underwriting and other expenses.
8.5.6 Shares purchased on-market
The Group may purchase shares on-market to satisfy entitlements under employee share schemes. The Group acquired 0.1 million
(2021 0.1 million) such shares during the period at an average price of A$11.78 (2021 A$11.07).
3
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How we account for the numbers
The fair value of the employee services received in exchange for the grant of equity-settled instruments is recognised
as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value
of the instruments granted, excluding the impact of any non-market vesting conditions. The impacts of non-market vesting
conditions are included in assumptions about the number of instruments that are expected to become exercisable.
The fair value of each instrument is recognised evenly over the service period ending at the vesting date; however,
at each balance date, the Group revises its estimates of the number of instruments that are expected to become
exercisable due to the achievement of non-market vesting conditions. The Group recognises the impact of the revision
of original estimates, if any, in profit or loss with a corresponding adjustment to equity.
4
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5
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6
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158
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
8.6
Key management personnel
Overview
AASB 124 Related Party Disclosures requires disclosure of the compensation of directors (executive and non-executive)
and those persons having authority and responsibility for planning, directing and controlling the activities of the Group,
either directly or indirectly. This group is collectively defined as key management personnel. Additional details in respect
of key management personnel and their remuneration are shown in the Remuneration Report.
Short-term employee benefits
Post-employment benefits
Other long-term employment benefits
Share-based payments
2022
US$000
13,446
192
101
7,088
20,827
2021
US$000
15,711
166
82
11,254
27,213
How we account for the numbers
Short-term employee benefits – profit sharing and bonus plans
A provision is recognised for profit sharing and bonus plans where there is a contractual obligation or where past
practice has created a constructive obligation at the end of each reporting period. Bonus or profit sharing obligations
are settled within 12 months from the balance date.
Post-employment benefits – defined contribution plans
Defined contribution plans are post-employment benefit plans under which an entity pays a fixed contribution into a fund
during the course of employment and has no legal or constructive obligation to pay further contributions if the fund does
not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.
Contributions to defined contribution plans are expensed as incurred.
Other long-term employee employment benefits
The liabilities for long service leave and annual leave are recognised in the provision for employee benefits and
measured as the present value of expected future payments to be made in respect of services provided by employees
up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using high quality corporate bond yields with terms and currencies that match, as closely as possible,
the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
Share-based payments
Further information in relation to remuneration under equity-based compensation schemes is provided in note 8.5.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date or when
an employee accepts voluntary redundancy in exchange for these benefits. When applicable, the Group recognises
termination benefits at the earlier of the date when the Group:
• can no longer withdraw the offer of those benefits; and
• recognises costs for a restructuring that is within the scope of AASB 137 Provisions, Contingent Liabilities
and Contingent Assets and involves the payment of termination benefits.
In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting
period are discounted to present value.
158
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
8.6
Key management personnel
Overview
AASB 124 Related Party Disclosures requires disclosure of the compensation of directors (executive and non-executive)
and those persons having authority and responsibility for planning, directing and controlling the activities of the Group,
either directly or indirectly. This group is collectively defined as key management personnel. Additional details in respect
of key management personnel and their remuneration are shown in the Remuneration Report.
Short-term employee benefits
Post-employment benefits
Other long-term employment benefits
Share-based payments
2022
US$000
13,446
192
101
7,088
20,827
2021
US$000
15,711
166
82
11,254
27,213
How we account for the numbers
Short-term employee benefits – profit sharing and bonus plans
A provision is recognised for profit sharing and bonus plans where there is a contractual obligation or where past
practice has created a constructive obligation at the end of each reporting period. Bonus or profit sharing obligations
are settled within 12 months from the balance date.
Post-employment benefits – defined contribution plans
Defined contribution plans are post-employment benefit plans under which an entity pays a fixed contribution into a fund
during the course of employment and has no legal or constructive obligation to pay further contributions if the fund does
not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.
Contributions to defined contribution plans are expensed as incurred.
Other long-term employee employment benefits
The liabilities for long service leave and annual leave are recognised in the provision for employee benefits and
measured as the present value of expected future payments to be made in respect of services provided by employees
up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using high quality corporate bond yields with terms and currencies that match, as closely as possible,
the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
Share-based payments
Termination benefits
Further information in relation to remuneration under equity-based compensation schemes is provided in note 8.5.
Termination benefits are payable when employment is terminated before the normal retirement date or when
an employee accepts voluntary redundancy in exchange for these benefits. When applicable, the Group recognises
termination benefits at the earlier of the date when the Group:
• can no longer withdraw the offer of those benefits; and
• recognises costs for a restructuring that is within the scope of AASB 137 Provisions, Contingent Liabilities
and Contingent Assets and involves the payment of termination benefits.
In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting
period are discounted to present value.
159
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p
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t
2
0
2
2
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1
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8.7
Defined benefit plans
Overview
Defined benefit plans are post-employment plans which provide benefits to employees on retirement, disability or death.
The benefits are based on years of service and an average salary calculation. Contributions are made to cover the current
cash outflows from the plans and a liability is recorded to recognise the estimated accrued but not yet funded obligations.
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FAIR VALUE OF PLAN ASSETS
PRESENT VALUE OF
PLAN OBLIGATIONS
NET RECOGNISED SURPLUSES
(DEFICITS)
DATE OF LAST
ACTUARIAL
ASSESSMENT
2022
US$M
2021
US$M
2022
US$M
2021
US$M
2022
US$M
2021
US$M
Defined benefit plan surpluses
Iron Trades Insurance staff trust
Janson Green final salary
superannuation scheme1
31 Dec 2022
31 Dec 2022
Defined benefit plan deficits
QBE the Americas plan1
Other plans 2
31 Dec 2022
31 Dec 2022
205
117
322
154
23
177
365
197
562
214
34
248
(164)
(112)
(276)
(167)
(36)
(203)
(285)
(185)
(470)
(224)
(53)
(277)
41
5
46
(13)
(13)
(26)
80
12
92
(10)
(19)
(29)
1 Defined benefit plan obligations are funded.
2 Other plans include $9 million (2021 $11 million) of defined benefit post-employment plan obligations that are not funded.
The measurement of assets and liabilities in defined benefit plans makes it necessary to use assumptions about discount rates,
expected future salary increases, investment returns, inflation and life expectancy. If actual outcomes differ materially from actuarial
assumptions, this could result in a significant change in employee benefit expense recognised in profit or loss or in actuarial
remeasurements recognised in other comprehensive income, together with the defined benefit assets and liabilities recognised
in the balance sheet.
The Group does not control the investment strategies of defined benefit plans; they are managed by independent trustees.
Nonetheless, the Group has agreed, as part of ongoing funding arrangements, that the trustees should manage their strategic asset
allocation in order to minimise the risk of material adverse impact. In particular, the Group has agreed with the trustees to reduce the
level of investment risk by investing in assets that match, where possible, the profile of the liabilities. This involves holding a mixture
of government and corporate bonds. The Group believes that due to the long-term nature of the plan liabilities, a level of continuing
equity investment is also appropriate.
The charge recognised in profit or loss in the year of $2 million (2021 $2 million) is included in underwriting expenses. Total employer
contributions expected to be paid to the various plans in 2023 amount to $1 million.
How we account for the numbers
The surplus or deficit recognised in the balance sheet in respect of defined benefit plans is the present value of the defined
benefit obligation at the balance date less the fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate
or government bonds that are denominated in the currency in which the benefits will be paid, and that have a term
to maturity approximating the term of the related superannuation liability. Remeasurement gains and losses arising
from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur,
and are recognised in other comprehensive income. Past service costs are recognised immediately in profit or loss.
2
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3
G
o
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n
a
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e
4
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p
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D
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s
’
5
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6
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160
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
8.8
Remuneration of auditors
Overview
QBE may engage the external auditor for non-audit services other than excluded services subject to the general
principle that fees for non-audit services should not exceed 50% of all fees paid to the external auditor in any one
financial year. The Board believes some non-audit services are appropriate given the external auditor’s knowledge
of the Group. External tax services are generally provided by an accounting firm other than the external auditor.
Consistent with prior periods, the external auditor cannot provide the excluded services of preparing accounting
records or financial reports or acting in a management capacity.
PricewaterhouseCoopers (PwC) Australian firm
Audit or review of financial reports of the ultimate parent entity
Audit of financial reports of controlled entities
Audit of statutory returns
Other assurance services
Taxation services
Advisory services
Related practices of PwC Australian firm (including overseas PwC firms)
Audit of financial reports of controlled entities
Audit of statutory returns
Other assurance services
Taxation services
Advisory services
Audit and assurance services
Other services
Other auditors
Audit of financial reports of controlled entities
2022
US$000
2021
US$000
2,051
2,223
553
725
14
–
5,566
8,247
2,691
135
11
1,058
12,142
17,708
16,625
1,083
17,708
1,231
2,022
2,258
591
515
14
524
5,924
9,157
2,640
53
34
72
11,956
17,880
17,236
644
17,880
1,101
160
Notes to the financial statements continued
FOR THE YEAR ENDED 31 DECEMBER 2022
8.
OTHER
8.8
Remuneration of auditors
Overview
QBE may engage the external auditor for non-audit services other than excluded services subject to the general
principle that fees for non-audit services should not exceed 50% of all fees paid to the external auditor in any one
financial year. The Board believes some non-audit services are appropriate given the external auditor’s knowledge
of the Group. External tax services are generally provided by an accounting firm other than the external auditor.
Consistent with prior periods, the external auditor cannot provide the excluded services of preparing accounting
records or financial reports or acting in a management capacity.
Related practices of PwC Australian firm (including overseas PwC firms)
Audit of financial reports of controlled entities
PricewaterhouseCoopers (PwC) Australian firm
Audit or review of financial reports of the ultimate parent entity
Audit of financial reports of controlled entities
Audit of statutory returns
Other assurance services
Taxation services
Advisory services
Audit of statutory returns
Other assurance services
Taxation services
Advisory services
Audit and assurance services
Other services
Other auditors
Audit of financial reports of controlled entities
2022
US$000
2021
US$000
2,051
2,223
553
725
14
–
5,566
8,247
2,691
135
11
1,058
12,142
17,708
16,625
1,083
17,708
1,231
2,022
2,258
591
515
14
524
5,924
9,157
2,640
53
34
72
11,956
17,880
17,236
644
17,880
1,101
8.9
Ultimate parent entity information
Overview
The Corporations Act 2001 requires the disclosure of summarised financial information relating to the ultimate parent
entity, QBE Insurance Group Limited.
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8.9.1
Summarised financial data of QBE Insurance Group Limited (the Company)
Profit (loss) after income tax
Other comprehensive loss
Total comprehensive loss
Assets due within 12 months1
Shares in controlled entities
Total assets
Liabilities payable within 12 months 2
Borrowings
Total liabilities
Net assets
Contributed equity
Treasury shares held in trust
Foreign currency translation reserve
Other reserves
Retained profits
Total equity
1 Includes amounts due from QBE companies of $360 million (2021 $667 million).
2 Includes amounts due to QBE companies of $241 million (2021 $379 million).
8.9.2 Guarantees and contingent liabilities
Support of the Group’s participation in Lloyd’s
Support of other insurance operations of controlled entities
2022
US$M
225
(795)
(570)
1,192
13,072
14,264
334
2,972
3,306
10,958
9,242
(1)
(39)
112
1,644
10,958
2021
US$M
(73)
(727)
(800)
1,737
14,012
15,749
451
3,511
3,962
11,787
9,777
(2)
137
112
1,763
11,787
2022
US$M
2,330
2,383
2021
US$M
2,177
2,512
8.9.3 Tax consolidation legislation
The accounting in relation to the legislation is set out in note 6.2.4. On adoption of the tax consolidation legislation, the directors of the
Company and its wholly-owned Australian controlled entities entered into a tax sharing and tax funding agreement that requires the
Australian entities to fully compensate the Company for current tax liabilities and to be fully compensated by the Company for any
current tax or deferred tax assets in respect of tax losses arising from external transactions occurring after the date of implementation
of the tax consolidation legislation. The contributions are allocated by reference to the notional taxable income of each Australian entity.
Details of franking credits available to shareholders are shown in note 5.4.
How we account for the numbers
The financial information of the ultimate parent entity of the Group has been prepared on the same basis as the
consolidated financial report except for shares in controlled entities, which are recorded at cost less any provision
for impairment.
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Directors' declaration
FOR THE YEAR ENDED 31 DECEMBER 2022
In the directors’ opinion:
(a) the financial statements and notes set out on pages 88 to 161 are in accordance with the Corporations Act 2001, including:
(i) complying with accounting standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its performance for the financial
year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Note 1.2.1 confirms that the financial statements comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declarations by the Group Chief Executive Officer and Group Chief Financial Officer required
by section 295A of the Corporations Act 2001 and as recommended under the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations.
Signed in Sydney this 17th day of February 2023 in accordance with a resolution of the directors.
Michael Wilkins AO
Director
Andrew Horton
Director
162
Directors' declaration
FOR THE YEAR ENDED 31 DECEMBER 2022
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
In the directors’ opinion:
requirements; and
year ended on that date; and
(a) the financial statements and notes set out on pages 88 to 161 are in accordance with the Corporations Act 2001, including:
(i) complying with accounting standards, the Corporations Regulations 2001 and other mandatory professional reporting
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its performance for the financial
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Note 1.2.1 confirms that the financial statements comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declarations by the Group Chief Executive Officer and Group Chief Financial Officer required
by section 295A of the Corporations Act 2001 and as recommended under the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations.
Signed in Sydney this 17th day of February 2023 in accordance with a resolution of the directors.
Michael Wilkins AO
Director
Andrew Horton
Director
Report on the audit of the Financial Report
Our opinion
In our opinion:
The accompanying Financial Report of QBE Insurance Group Limited (the Company) and its controlled entities (together the Group)
is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its financial performance for the year
then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
• the consolidated balance sheet as at 31 December 2022
• the consolidated statement of comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• the notes to the financial statements, which include significant accounting policies and other explanatory information
• the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
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PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999
Liability limited by a scheme approved under Professional Standards Legislation.
164
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Our audit approach
An audit is designed to provide reasonable assurance about whether the Financial Report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the Financial Report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Report
as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and
the industry in which it operates.
MATERIALITY
KEY AUDIT
MATTERS
AUDIT
SCOPE
Materiality
• For the purpose of our audit we used overall Group materiality of US$70 million, which represents approximately 0.5% of the
Group’s net earned premium.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing
and extent of our audit procedures and to evaluate the effect of misstatements on the Financial Report as a whole.
• We chose Group net earned premium because, in our view, it is a key financial statement metric used in assessing the
performance of the Group and is not as volatile as other profit or loss measures.
• We utilised a 0.5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.
Audit scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events.
• In conjunction with component auditors, we conducted an audit of the most financially significant components, being the
Australia Pacific, International and North America divisions. In addition, we performed specified risk focused audit procedures
in relation to the captive reinsurer, Equator Re, and other head office entities. Further audit procedures were performed over the
consolidation process.
• We determined the level of direction and supervision we needed to have over the audit work performed by component auditors
to be satisfied that sufficient audit evidence had been obtained for the purposes of our opinion.
• We kept in regular communication with component auditors throughout the year with conference calls and written instructions.
Further, we visited and met with management and component auditors in London and Sydney.
• We also ensured that our team, including the component auditors across the Group, possessed the appropriate competence and
capabilities needed for the audit of a complex global insurer. This included industry expertise as well as specialists and experts
in IT, actuarial, tax and valuations.
164
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Our audit approach
An audit is designed to provide reasonable assurance about whether the Financial Report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the Financial Report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Report
as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and
the industry in which it operates.
MATERIALITY
KEY AUDIT
MATTERS
AUDIT
SCOPE
Materiality
Group’s net earned premium.
• For the purpose of our audit we used overall Group materiality of US$70 million, which represents approximately 0.5% of the
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing
and extent of our audit procedures and to evaluate the effect of misstatements on the Financial Report as a whole.
• We chose Group net earned premium because, in our view, it is a key financial statement metric used in assessing the
performance of the Group and is not as volatile as other profit or loss measures.
• We utilised a 0.5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.
Audit scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events.
• In conjunction with component auditors, we conducted an audit of the most financially significant components, being the
Australia Pacific, International and North America divisions. In addition, we performed specified risk focused audit procedures
in relation to the captive reinsurer, Equator Re, and other head office entities. Further audit procedures were performed over the
consolidation process.
• We determined the level of direction and supervision we needed to have over the audit work performed by component auditors
to be satisfied that sufficient audit evidence had been obtained for the purposes of our opinion.
• We kept in regular communication with component auditors throughout the year with conference calls and written instructions.
Further, we visited and met with management and component auditors in London and Sydney.
• We also ensured that our team, including the component auditors across the Group, possessed the appropriate competence and
capabilities needed for the audit of a complex global insurer. This included industry expertise as well as specialists and experts
in IT, actuarial, tax and valuations.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report
for the current period. The key audit matters were addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes
of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit Committee.
Key audit matter
Valuation of net outstanding claims liability
(Refer to note 2.3) US$17,428 million
The liability for outstanding claims relates to claims incurred
during the year or prior periods, net of any reinsurance and
other recoveries.
The liability for outstanding claims is estimated by the Group
as a central estimate but, as is the case with any accounting
estimate, there is a risk that the ultimate claims paid will differ
from the initial estimate. A risk margin is therefore applied by
the Group to reflect the uncertainty in the estimate. The central
estimate and risk margin combined, which are estimated based
on judgements and actuarial expertise, are intended to achieve
a probability of adequacy within the Group’s desired range
of 87.5% - 92.5%, being the estimated overall sufficiency of the
liability to pay future claims.
We considered the valuation of the net outstanding claims
liability a key audit matter due to:
• The significant judgement required by the Group and the
inherent uncertainty in estimating the expected future
payments for claims incurred, including those not yet reported.
• The uncertainty related to catastrophe events, particularly
those occurring closer to year end, and in relation to classes
of business where there is a greater length of time between
the initial claim event and settlement, because of the
inherent difficulty in assessing amounts until further evidence
is available.
• The uncertainty created by the COVID-19 pandemic
on particular classes of business including property
business interruption as a result of ongoing legal test cases
and other factors.
• Models used to calculate the net outstanding claims liability
across the Group are complex and judgement is applied
in determining the appropriate construct of the models.
• The higher degree of auditor judgement and effort in performing
procedures and evaluating audit evidence related to significant
assumptions, particularly loss ratios, claim frequencies and
average claim sizes, and allowance for future claims inflation.
• The audit effort required the use of experts with specialised
skills and knowledge.
How our audit addressed the key audit
matter
Together with PwC actuarial experts, our procedures included:
Gross discounted central estimate
• Evaluating the design of the Group’s relevant controls
over the claims reserving process and assessing whether
a sample of these controls operated effectively throughout
the year.
• Evaluating whether the Group’s actuarial methodologies were
consistent with recognised practices and with prior periods.
• Evaluating the appropriateness and reliability of data
used to derive the central estimate, including testing
a sample of case estimates and settlements by agreeing
to underlying documentation.
• Assessing the appropriateness of significant actuarial
assumptions such as loss ratios, claim frequencies and
average claim sizes, and claims inflation expectations,
focusing on those classes of business which have been
impacted by the COVID-19 pandemic and more recently
the higher inflationary environment. We assessed these
assumptions by comparing them with our expectations based
on the Group’s experience, current trends and benchmarks,
and our own industry knowledge.
• Testing the discount assumptions applied through evaluating
the yield curves and claims payment patterns. This included
comparing the rates applied to external market data and the
payment patterns to historical information.
Reinsurance and other recoveries
• Evaluating a sample of reinsurance recoveries held
by divisions and the Group against underlying contracts
to assess the existence of cover and appropriateness of their
recognition.
• Assessing the recoverability of reinsurance recoveries
by considering the payment history and credit
worthiness of reinsurer counterparties for a sample
of reinsurance recoveries.
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166
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Key audit matter
How our audit addressed the key audit
matter
Risk margin and probability of adequacy
• Assessing the Group’s approach to setting the risk margin
in accordance with the requirements of Australian Accounting
Standards, with a focus on the assessed level of uncertainty
in the net central estimate leading to a change in the margin
year on year.
• Considering the Group’s key judgements about the variability
of each class of business underwritten and the extent
of correlation within each division based on the Group’s
experience and prior periods.
• Evaluating the Group’s calculation of the probability of
adequacy for reasonableness and consistency with previous
valuations by developing an understanding of and testing the
actuarial techniques applied by the Group.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
Carrying value of goodwill
(Refer to note 7.2.1) US$1,578 million
An impairment assessment is performed annually by the
Group, or more frequently if events or circumstances indicate
that the carrying value of goodwill may be impaired.
Potential impairment is identified by comparing the value-in-use
of a cash-generating unit (CGU) to its carrying value, including
goodwill. The value-in-use for each of the CGUs is estimated
by the Group using a discounted cash flow model which
includes significant judgements and assumptions relating
to cash flow projections, investment returns, terminal growth
rates and discount rates.
We considered the carrying value of goodwill a key audit matter
due to:
• The inherent estimation uncertainty and subjectivity in
judgements in a number of assumptions, including cash flow
projections, investment returns, terminal growth rates, and
discount rates.
• Models used to calculate value-in-use are complex and
judgement is applied in determining the appropriate construct
of the models.
• The higher degree of auditor judgement and effort in performing
procedures and evaluating audit evidence in relation to
significant assumptions, particularly cash flow projections.
Our procedures included:
• Evaluating the determination and composition of the CGUs
to which goodwill is allocated.
• Evaluating the appropriateness of the value-in-use
methodology adopted against the requirements of Australian
Accounting Standards.
• Developing an understanding of the process by which the
cash flow projections were developed and comparing the
cash flows included in the impairment assessment with the
three year business plan presented to the Board.
• Evaluating the appropriateness of significant assumptions
used to derive the cash flow projections by comparing
to external market and industry data where available,
and current and past performance of the CGUs.
• Together with PwC valuation experts, we:
– Assessed the consistency of the terminal growth rates and
investment returns with available external information.
– Reperformed the calculation of the discount rates applied
to cash flow projections, comparing key inputs (including
risk-free rates, market premiums and unlevered betas)
to industry and other benchmarks.
• Testing the mathematical accuracy of the models which were
• The audit effort required the use of experts with specialised
used to determine the value-in-use of the CGUs.
skills and knowledge.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
166
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
How our audit addressed the key audit
matter
Risk margin and probability of adequacy
• Assessing the Group’s approach to setting the risk margin
in accordance with the requirements of Australian Accounting
Standards, with a focus on the assessed level of uncertainty
in the net central estimate leading to a change in the margin
year on year.
• Considering the Group’s key judgements about the variability
of each class of business underwritten and the extent
of correlation within each division based on the Group’s
experience and prior periods.
• Evaluating the Group’s calculation of the probability of
adequacy for reasonableness and consistency with previous
valuations by developing an understanding of and testing the
actuarial techniques applied by the Group.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
Carrying value of goodwill
(Refer to note 7.2.1) US$1,578 million
An impairment assessment is performed annually by the
Our procedures included:
Group, or more frequently if events or circumstances indicate
that the carrying value of goodwill may be impaired.
• Evaluating the determination and composition of the CGUs
to which goodwill is allocated.
Potential impairment is identified by comparing the value-in-use
• Evaluating the appropriateness of the value-in-use
of a cash-generating unit (CGU) to its carrying value, including
methodology adopted against the requirements of Australian
goodwill. The value-in-use for each of the CGUs is estimated
Accounting Standards.
by the Group using a discounted cash flow model which
includes significant judgements and assumptions relating
to cash flow projections, investment returns, terminal growth
rates and discount rates.
• Developing an understanding of the process by which the
cash flow projections were developed and comparing the
cash flows included in the impairment assessment with the
three year business plan presented to the Board.
We considered the carrying value of goodwill a key audit matter
• Evaluating the appropriateness of significant assumptions
due to:
discount rates.
of the models.
• The inherent estimation uncertainty and subjectivity in
judgements in a number of assumptions, including cash flow
projections, investment returns, terminal growth rates, and
• Models used to calculate value-in-use are complex and
judgement is applied in determining the appropriate construct
• The higher degree of auditor judgement and effort in performing
procedures and evaluating audit evidence in relation to
significant assumptions, particularly cash flow projections.
used to derive the cash flow projections by comparing
to external market and industry data where available,
and current and past performance of the CGUs.
• Together with PwC valuation experts, we:
– Assessed the consistency of the terminal growth rates and
investment returns with available external information.
– Reperformed the calculation of the discount rates applied
to cash flow projections, comparing key inputs (including
risk-free rates, market premiums and unlevered betas)
to industry and other benchmarks.
• Testing the mathematical accuracy of the models which were
• The audit effort required the use of experts with specialised
used to determine the value-in-use of the CGUs.
skills and knowledge.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
Key audit matter
Key audit matter
How our audit addressed the key audit
matter
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Recoverability of deferred tax assets in the North
American tax group
(Refer to note 6.2.1) US$390 million
The Group holds deferred tax assets comprised of carry
forward tax losses and deductible temporary differences
related to the North American tax group.
The Group performs a recoverability assessment at each
balance date in order to evaluate the expected utilisation of the
deferred tax assets. The assessment is largely dependent upon
the future profitability of the North American CGU, as well as
the period over which tax losses will be available for recovery,
and the execution of any future tax planning strategies.
We considered the recoverability of the deferred tax assets
in the North American tax group a key audit matter due to:
• The inherent estimation uncertainty and subjectivity in
judgements in a number of assumptions, including cash flow
projections, investment returns, and terminal growth rates.
• The higher degree of auditor judgement and effort in
performing procedures and evaluating audit evidence related
to significant assumptions, particularly cash flow projections.
Our procedures included:
• Evaluating the appropriateness of the recoverability
assessment against the requirements of Australian
Accounting Standards, and in particular the “convincing
other evidence” test under AASB 112 Income Taxes.
• Evaluating the appropriateness of significant assumptions
used to derive the cash flow projections, by comparing
with external market and industry data where available,
and current and past performance of the North American
tax group.
• Testing the mathematical accuracy of the model which
was used to determine the recoverability of the deferred
tax assets.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
Valuation of level 3 investments
(Refer to note 3.2.1) US$1,809 million
The Group held US$27,299 million of investments at 31 December
2022, of which US$1,809 million were classified as level 3
in accordance with AASB 13 Fair Value Measurement.
The Group exercises judgement in valuing level 3 investments
as there are significant unobservable inputs as a result
of market illiquidity and/or instrument complexity.
The level 3 investments held at fair value largely consist
of infrastructure assets and unlisted property trusts.
We considered the valuation of level 3 investments a key audit
matter due to:
• The extent of judgement involved in determining the fair
value of investments as a result of significant unobservable
market inputs.
• The level of effort required in evaluating audit evidence
obtained in relation to the valuation, and use of experts with
specialised skills and knowledge.
Our procedures included:
• Evaluating the design of the Group’s relevant controls over
the investments process and assessing whether a sample
of these controls operated effectively throughout the year.
• Evaluating the appropriateness of the valuation
methodologies used against the requirements of Australian
Accounting Standards.
• For a sample of infrastructure assets and unlisted property
trusts, where the Group determines the fair value with
reference to external information, we:
– Compared the price used by the Group to the 31 December
2022 price quoted by the fund manager.
– Obtained the most recent audited financial statements of the
relevant funds and evaluated the reliability and accuracy
of past statements.
– Inspected the most recent reports provided by the fund
manager setting out the controls in place at the fund
manager, and that included an independent audit opinion
over the design and operating effectiveness of those
controls, where available.
We also considered the appropriateness of the Group’s
disclosures against the requirements of Australian
Accounting Standards.
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168
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Key audit matter
How our audit addressed the key audit
matter
Operation of IT systems and controls
The Group’s operations and financial reporting are heavily
dependent on IT systems, including automated accounting
procedures and IT dependent manual controls.
The Group’s IT controls over IT systems include:
• The framework of governance over IT systems.
• Controls over program development and changes.
• Controls over access to programs, data and IT operations.
• Governance over generic and privileged user accounts.
We considered this a key audit matter given the reliance on the
IT systems in the financial reporting process and the impact
on relevant controls we seek to rely on as part of the audit.
Together with IT specialists, our procedures included:
• Evaluating the design and testing the operating effectiveness
of key controls over the continued integrity of the IT systems
that are relevant to financial reporting. Where we identified
design and operating effectiveness weaknesses relating
to IT systems or application controls relevant to the audit,
we performed alternative audit procedures.
• Assessing the operation of key applications to establish the
accuracy of selected calculations, the correct generation
of certain reports, and to evaluate the correct operation
of selected automated controls and technology-dependent
manual controls.
• Where technology services were provided by a third party,
we considered assurance reports from the third party’s
auditor on the design and operating effectiveness of controls
and management’s monitoring controls over third parties.
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Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
The Group’s operations and financial reporting are heavily
Together with IT specialists, our procedures included:
Key audit matter
Operation of IT systems and controls
dependent on IT systems, including automated accounting
procedures and IT dependent manual controls.
The Group’s IT controls over IT systems include:
• The framework of governance over IT systems.
• Controls over program development and changes.
• Controls over access to programs, data and IT operations.
• Governance over generic and privileged user accounts.
We considered this a key audit matter given the reliance on the
IT systems in the financial reporting process and the impact
on relevant controls we seek to rely on as part of the audit.
manual controls.
How our audit addressed the key audit
matter
• Evaluating the design and testing the operating effectiveness
of key controls over the continued integrity of the IT systems
that are relevant to financial reporting. Where we identified
design and operating effectiveness weaknesses relating
to IT systems or application controls relevant to the audit,
we performed alternative audit procedures.
• Assessing the operation of key applications to establish the
accuracy of selected calculations, the correct generation
of certain reports, and to evaluate the correct operation
of selected automated controls and technology-dependent
• Where technology services were provided by a third party,
we considered assurance reports from the third party’s
auditor on the design and operating effectiveness of controls
and management’s monitoring controls over third parties.
169
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Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual
Report for the year ended 31 December 2022, but does not include the Financial Report and our auditor’s report thereon.
Our opinion on the Financial Report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon.
In connection with our audit of the Financial Report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the Financial Report or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the Financial Report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the Financial Report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the Financial Report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
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Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards
Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor’s report.
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Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Report on the Remuneration Report
Our opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 62 to 84 of the Directors’ Report for the year ended 31 December 2022.
In our opinion, the Remuneration Report of QBE Insurance Group Limited for the year ended 31 December 2022 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
Voula Papageorgiou
Partner
Sydney
17 February 2023
170
Independent auditor's report
TO THE MEMBERS OF QBE INSURANCE GROUP LIMITED
Report on the Remuneration Report
Our opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 62 to 84 of the Directors’ Report for the year ended 31 December 2022.
In our opinion, the Remuneration Report of QBE Insurance Group Limited for the year ended 31 December 2022 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
Voula Papageorgiou
Partner
Sydney
17 February 2023
Shareholder information
The Company was incorporated in Australia, is listed on the Australian Securities Exchange (ASX) and trades under the code ‘QBE’.
Registered office
QBE Insurance Group Limited
Level 18, 388 George Street
Sydney NSW 2000 Australia
Telephone: +61 2 9375 4444
Facsimile: +61 2 9231 6104
Website: www.qbe.com
QBE website
QBE’s website provides investors with information about QBE including annual reports, corporate governance statements,
sustainability reports, half-yearly reports and announcements to the ASX. The website also offers regular QBE share price updates,
a calendar of events, a history of QBE’s dividends and online access to your shareholding details via the share registry.
Shareholder information and enquiries
Enquiries and correspondence regarding shareholdings can be directed to QBE’s share registry:
Computershare Investor Services Pty Limited (Computershare)
GPO Box 2975
Melbourne VIC 3001 Australia
452 Johnston Street
Abbotsford VIC 3067 Australia
Telephone: 1300 723 487 (Australia)
Telephone: +61 3 9415 4840 (International)
Website: www.computershare.com.au
Email: qbe.queries@computershare.com.au
For security purposes, you will need to quote your Securityholder Reference Number (SRN) or Holder Identification Number (HIN).
If you are broker (CHESS) sponsored, queries relating to incorrect registrations and changes to name and/or address can only
be processed by your stockbroker. Please contact your stockbroker. Computershare cannot assist you with these changes.
Shareholding details online
Manage your shareholding online by visiting QBE’s share registry, Computershare. Log onto www.investorcentre.com to view your
holding balance and dividend statements, to update your address (if you are registered with an SRN) or direct credit instructions,
provide DRP or BSP instructions or change/add your tax file number (TFN)/Australian Business Number (ABN) details.
You may also register to receive shareholder documentation electronically including your dividend statements, notices of meetings
and proxy and annual reports.
Privacy legislation
Chapter 2C of the Corporations Act 2001 requires information about you as a securityholder (including your name, address and
details of the securities you hold) to be included in QBE’s share register. These details must continue to be included in the public
register even if you cease to be a securityholder. A copy of the privacy policy is available on Computershare’s website.
Dividends
QBE pays cash dividends to shareholders resident in Australia and New Zealand by direct credit. Shareholders in the United Kingdom
and the United States also have the option to receive their cash dividends by direct credit, although it is not mandatory. The benefit
to shareholders of the direct credit facility is access to cleared funds quickly and securely, reducing the risk of cheques being lost
or stolen. Shareholders in other countries will receive cheque payments in Australian dollars if they have not elected to receive their
payment by direct credit. Shareholders receive a dividend statement for tax records, either by post or by email depending on the
selected communications option.
Eligible shareholders can participate in QBE’s DRP and BSP when the plans are active. The DRP enables shareholders to subscribe
for additional shares. The BSP is a bonus share plan whereby the dividend entitlement is forgone for bonus shares in lieu of the
dividend. In order to participate in either the DRP or BSP, shareholders must have a minimum shareholding of 100 shares and have
a registered address in Australia or New Zealand.
Participants may change their election to participate in the DRP and BSP at any time. DRP/BSP election cut-off dates and application
forms are available from QBE’s website.
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Shareholder information continued
Tax file number (TFN), Australian Business Number (ABN) or exemption – Australian residents
You can confirm whether you have lodged your TFN, ABN or exemption by visiting Computershare’s Investor Centre. If you choose
not to lodge these details, QBE is obliged to deduct tax at the highest marginal rate (plus the Medicare levy) from the unfranked
portion of dividends paid. Australian shareholders living abroad should advise Computershare of their resident status.
Conduit foreign income (CFI)
Shareholders will receive CFI credits in respect of the whole unfranked portion of QBE dividends. These credits exempt non-resident
shareholders from Australian withholding tax.
Unpresented cheques/unclaimed money
Under the Unclaimed Moneys Act 1950, unclaimed dividends six or more years old must be given to the Australian Capital Territory.
It is very important that shareholders bank outstanding dividend cheques promptly and advise Computershare immediately of changes
of address or bank account details.
Recent QBE dividends
DATE PAID
28 March 2013
23 September 2013
31 March 2014
23 September 2014
13 April 2015
2 October 2015
14 April 2016
28 September 2016
13 April 2017
29 September 2017
20 April 2018
5 October 2018
18 April 2019
4 October 2019
9 April 2020
25 September 2020
24 September 2021
12 April 2022
23 September 2022
TYPE
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Interim
Final
Interim
RECORD DATE
8 March 2013
2 September 2013
13 March 2014
29 August 2014
6 March 2015
28 August 2015
11 March 2016
26 August 2016
10 March 2017
25 August 2017
9 March 2018
24 August 2018
8 March 2019
23 August 2019
6 March 2020
21 August 2020
20 August 2021
8 March 2022
19 August 2022
AUSTRALIAN
CENTS
PER SHARE
FRANKING
%
10
20
12
15
22
20
30
21
33
22
4
22
28
25
27
4
11
19
9
100
100
100
100
100
100
100
50
50
30
30
30
60
60
30
10
10
10
10
Annual General Meeting
The Annual General Meeting of QBE Insurance Group Limited will be held at 10am on Friday, 12 May 2023. Details of the meeting,
including information about how to vote, will be contained in our notice of meeting.
Annual Report mailing list
Amendments to the Corporations Act 2001 have removed the obligation for companies to mail an annual report to shareholders.
To improve efficiency, save costs and reduce our impact on the environment by minimising unnecessary use of paper and printing
resources, QBE’s Annual Report is published on our website at www.qbe.com.
If you wish to receive a hard copy of the Annual Report, please update your communication preferences by logging into your
shareholding at www.investorcentre.com.
172
Shareholder information continued
You can confirm whether you have lodged your TFN, ABN or exemption by visiting Computershare’s Investor Centre. If you choose
not to lodge these details, QBE is obliged to deduct tax at the highest marginal rate (plus the Medicare levy) from the unfranked
portion of dividends paid. Australian shareholders living abroad should advise Computershare of their resident status.
Shareholders will receive CFI credits in respect of the whole unfranked portion of QBE dividends. These credits exempt non-resident
Under the Unclaimed Moneys Act 1950, unclaimed dividends six or more years old must be given to the Australian Capital Territory.
It is very important that shareholders bank outstanding dividend cheques promptly and advise Computershare immediately of changes
Conduit foreign income (CFI)
shareholders from Australian withholding tax.
Unpresented cheques/unclaimed money
of address or bank account details.
Recent QBE dividends
DATE PAID
28 March 2013
23 September 2013
31 March 2014
23 September 2014
13 April 2015
2 October 2015
14 April 2016
28 September 2016
13 April 2017
29 September 2017
20 April 2018
5 October 2018
18 April 2019
4 October 2019
9 April 2020
25 September 2020
24 September 2021
12 April 2022
23 September 2022
TYPE
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Interim
Final
Interim
RECORD DATE
8 March 2013
2 September 2013
13 March 2014
29 August 2014
6 March 2015
28 August 2015
11 March 2016
26 August 2016
10 March 2017
25 August 2017
9 March 2018
24 August 2018
8 March 2019
23 August 2019
6 March 2020
21 August 2020
20 August 2021
8 March 2022
19 August 2022
AUSTRALIAN
CENTS
PER SHARE
FRANKING
10
20
12
15
22
20
30
21
33
22
4
22
28
25
27
4
11
19
9
%
100
100
100
100
100
100
100
50
50
30
30
30
60
60
30
10
10
10
10
The Annual General Meeting of QBE Insurance Group Limited will be held at 10am on Friday, 12 May 2023. Details of the meeting,
including information about how to vote, will be contained in our notice of meeting.
Annual General Meeting
Annual Report mailing list
Amendments to the Corporations Act 2001 have removed the obligation for companies to mail an annual report to shareholders.
To improve efficiency, save costs and reduce our impact on the environment by minimising unnecessary use of paper and printing
resources, QBE’s Annual Report is published on our website at www.qbe.com.
If you wish to receive a hard copy of the Annual Report, please update your communication preferences by logging into your
shareholding at www.investorcentre.com.
Tax file number (TFN), Australian Business Number (ABN) or exemption – Australian residents
Top 20 shareholders as at 31 January 2023
NAME
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
Buttonwood Nominees Pty Ltd
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited (NT-Comnwlth Super Corp A/C)
HSBC Custody Nominees (Australia) Limited – A/C 2
HSBC Custody Nominees (Australia) Limited – GSCO ECA
Netwealth Investments Limited (Wrap Services A/C)
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd (DRP A/C)
BNP Paribas Noms (NZ) Ltd (DRP)
ECapital Nominees Pty Limited (Accumulation A/C)
Mutual Trust Pty Ltd
HSBC Custody Nominees (Australia) Limited -GSI EDA
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
QBE substantial shareholders as at 31 January 2023
NAME
AustralianSuper Pty Ltd
State Street Corporation
Vanguard Group (The Vanguard Group, Inc and its controlled entities)
BlackRock Group (and its associated entities)
Macquarie Group Limited
1 Percentage of total at date of notice.
NUMBER
OF SHARES
503,774,141
350,927,399
181,216,948
83,012,852
59,301,799
38,332,106
30,301,515
20,203,333
9,540,088
8,363,538
4,938,802
4,148,730
4,093,036
3,669,264
3,230,182
2,346,289
1,969,946
1,812,215
1,335,575
1,239,960
1,313,757,718
% OF
TOTAL
33.93
23.64
12.21
5.59
3.99
2.58
2.04
1.36
0.64
0.56
0.33
0.28
0.28
0.25
0.22
0.16
0.13
0.12
0.09
0.09
88.49
NUMBER OF
SHARES
124,439,018
90,387,067
80,289,148
79,689,478
77,605,494
% OF TOTAL 1
DATE OF NOTICE
8.39
6.09
6.06
6.03
5.23
1 August 2022
4 October 2022
17 May 2019
6 June 2019
14 September 2022
Distribution of shareholders and shareholdings as at 31 January 2023
SIZE OF HOLDING
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
NUMBER OF
SHAREHOLDERS
43,209
24,777
3,889
2,204
95
74,174
%
58.26
33.40
5.24
2.97
0.13
100.00
NUMBER
OF SHARES
16,520,112
56,026,919
27,282,596
47,033,248
1,337,844,455
1,484,707,330
%
1.11
3.77
1.84
3.17
90.11
100.00
Shareholdings of less than a marketable parcel as at 31 January 2023
Holdings of 37 or fewer shares¹
SHAREHOLDERS
SHARES
NUMBER
3,723
% OF TOTAL
5.02
NUMBER
48,419
% OF TOTAL
0.0033
1 Determined based on less than marketable parcel of $500 based on a closing price of $13.74 on 31 January 2023.
173
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Financial calendar
YEAR
MONTH
DAY
ANNOUNCEMENT
2023
February
17
Results and dividend announcement for the full year ended 31 December 2022
March
April
May
June
August
6
7
8
14
12
30
101
171
181
211
Shares begin trading ex dividend
Record date for determining shareholders’ entitlement to the 2022 final dividend
DRP/BSP election close date – last day to nominate participation in the DRP or BSP
Payment date for the 2022 final dividend
2023 Annual General Meeting
Half year end
Results and dividend announcement for the half year ended 30 June 2023
Shares begin trading ex dividend
Record date for determining shareholders’ entitlement to the 2023 interim dividend
DRP/BSP election close date – last day to nominate participation in the DRP or BSP
September 221
Payment date for the 2023 interim dividend
December
31
Full year end
1 Dates shown may be subject to change.
174
Financial calendar
10-year history
FOR THE YEAR ENDED 31 DECEMBER
YEAR
MONTH
DAY
ANNOUNCEMENT
2022
2021
2020
2019 1
2018 1
2017 1
2016
2015
2014
2013
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February
17
Results and dividend announcement for the full year ended 31 December 2022
March
Shares begin trading ex dividend
Record date for determining shareholders’ entitlement to the 2022 final dividend
DRP/BSP election close date – last day to nominate participation in the DRP or BSP
Payment date for the 2022 final dividend
2023 Annual General Meeting
Half year end
Results and dividend announcement for the half year ended 30 June 2023
Shares begin trading ex dividend
Record date for determining shareholders’ entitlement to the 2023 interim dividend
DRP/BSP election close date – last day to nominate participation in the DRP or BSP
April
May
June
August
6
7
8
14
12
30
101
171
181
211
September 221
Payment date for the 2023 interim dividend
December
31
Full year end
1 Dates shown may be subject to change.
Profit or loss information
Gross written premium
Gross earned premium
Net earned premium
Claims ratio
Commission ratio
Expense ratio
Combined operating ratio
Investment income (loss)
before net fair value
gains/losses
after net fair value
gains/losses
Insurance profit (loss)
Insurance profit (loss) to
net earned premium
Financing and other costs
Operating profit (loss)
before income tax
after income tax and
non-controlling interests
Balance sheet and share
information
Number of ordinary shares
on issue 2
Shareholders' equity
Total assets
Net tangible assets
per share 2
Borrowings to total capital
Basic earnings (loss)
per share 2
Basic earnings (loss)
per share – adjusted cash
basis3
Diluted earnings (loss)
per share
Return on average
shareholders' equity
Dividend per share
Dividend payout
Total investments and cash 4
US$M 20,001
US$M 19,067
US$M 14,327
58.1
14.8
12.8
85.7
%
%
%
%
18,457
17,035
13,408
62.4
15.5
13.6
91.5
14,643
14,008
11,708
76.3
16.1
15.0
107.4
13,442
13,257
11,609
69.8
15.6
14.6
100.0
13,657
13,601
11,640
63.6
16.9
15.4
95.9
13,328
13,611
11,351
71.5
17.1
15.9
104.5
14,395
14,276
11,066
58.2
18.4
17.4
94.0
15,092
14,922
12,314
60.4
17.2
17.3
94.9
16,332
16,521
14,084
63.2
16.8
16.1
96.1
17,975
17,889
15,396
64.5
16.8
16.5
97.8
US$M
519
531
432
555
US$M
US$M
%
US$M
US$M
US$M
(776)
1,533
122
1,215
226
(727)
1,036
647
10.7
245
919
770
9.1
247
(6.2)
252
913
(1,472)
750
(1,517)
5.6
257
672
571
690
547
826
7.1
305
576
641
541
676
758
(60)
746
1,075
665
1,031
814
1,074
(0.5)
302
9.7
294
627
(793)
1,072
567
(1,212)
844
8.4
244
953
687
7.6
297
931
742
691
772
841
5.5
345
(448)
(254)
millions
1,485
8,990
US$M
US$M 49,502
1,477
8,881
49,303
1,471
8,491
46,625
1,305
8,153
40,035
1,327
8,381
1,358
8,859
39,582 43,862
1,370
10,284
41,583
1,363
1,370
10,505
11,030
42,176 45,000
1,247
10,356
47,271
US$
%
US cents
US cents
US cents
4.70
23.4
48.6
57.2
48.2
8.6
4.36
26.9
4.05
25.8
4.11
24.0
4.22
24.5
4.29
27.1
4.90
24.1
5.07
24.0
5.32
24.1
4.75
32.8
47.5
(108.5)
41.8
29.0
(91.5)
61.6
50.3
57.4
(22.8)
54.6
(60.7)
55.7
51.4
(19.2)
65.5
65.3
63.5
62.9
47.2
(108.5)
41.5
28.6
(91.5)
60.8
49.8
55.8
(22.8)
’
%
Australian
cents
39
578
US$M 28,167
A$M
8.6
(18.2)
6.7
4.5
(13.0)
8.1
6.4
6.9
(2.3)
30
443
28,967
4
59
27,735
52
681
24,374
50
669
22,887
26
356
26,141
54
741
25,235
50
685
37
492
26,708 28,583
32
394
30,619
1 Profit or loss information for 2017 to 2019 excludes the results of discontinued operations.
2 Reflects shares on an accounting basis.
3 Calculated with reference to adjusted cash profit or loss, being profit or loss after tax adjusted for impairment of intangibles and other
non-cash items net of tax as well as coupons on Additional Tier 1 instruments.
4 Includes financial assets at fair value through profit or loss, cash and cash equivalents and investment properties; excludes balances
held for sale.
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176
Glossary
Accident year claims
The matching of all claims occurring (regardless of when reported or paid) during a given
12-month period with all premium earned over the same period.
Acquisition costs
The total of net commission and underwriting and other expenses incurred in the generation
of net earned premium and often expressed as a percentage of net earned premium.
Admitted insurance
Insurance written by an insurance company that is admitted (or licensed) to do business in the
state in the United States in which the policy was sold.
Agent
One who negotiates contracts of insurance or reinsurance as an insurance company’s
representative i.e. the agent’s primary responsibility is to the insurance company, not the
insured party.
Aggregate reinsurance
Reinsurance cover that provides protection for an accumulation of claims arising from multiple
events over a specified period of time.
APRA
Australian Prudential Regulation Authority, being the Group’s primary insurance regulator.
Attachment point
The amount of claims retained by the cedant in a reinsurance arrangement, after which
reinsurance protection will apply.
Borrowings to total capital
The Group’s gearing ratio (also referred to as debt to total capital), calculated as borrowings
expressed as a percentage of total capital. Total capital is shareholders’ equity plus Tier 1
instruments classified as liabilities (which are excluded from borrowings for the purposes of this
calculation), and subordinated debt.
Broker
Capacity
One who negotiates contracts of insurance or reinsurance on behalf of an insured party, receiving
a commission from the insurance or reinsurance company for placement and other services
rendered. In contrast with an agent, the broker’s primary responsibility is to the insured party,
not the insurance company.
In relation to a Lloyd’s member, the maximum amount of insurance premium (gross of reinsurance
but net of brokerage) which a member can accept. In relation to a syndicate, it is the aggregate
of each member’s capacity allocated to that syndicate.
Captive
A licensed entity within the Group that provides reinsurance protection to other controlled entities.
Cash profit or loss
Profit or loss after tax attributable to QBE shareholders, adjusted for the post-tax effect
of amortisation and impairment of intangibles and other non-cash items.
Casualty insurance
Insurance that is primarily concerned with the claims resulting from injuries to third persons
or their property (i.e. not the policyholder) and the resulting legal liability imposed on the insured.
It includes, but is not limited to, general liability, employers’ liability, workers’ compensation,
professional liability, public liability and motor liability insurance.
Catastrophe claims ratio
Total of all net claims resulting from catastrophe events as a percentage of net earned premium.
Catastrophe reinsurance
A reinsurance contract (often in the form of excess of loss reinsurance) that, subject to specified
limits and retention, compensates the ceding insurer for financial losses related to an accumulation
of claims resulting from a catastrophe event or series of events.
Claim
Claims incurred
Claims provision
The amount payable under a contract of insurance or reinsurance arising from a loss relating
to an insured event.
The aggregate of all claims paid during an accounting period adjusted for the change in the
claims provision in that accounting period.
The estimate of the most likely cost of settling present and future claims and associated claims
adjustment expenses plus a risk margin to cover possible fluctuation of the liability.
177
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2
0
2
2
Accident year claims
The matching of all claims occurring (regardless of when reported or paid) during a given
Claims ratio
Net claims incurred as a percentage of net earned premium.
12-month period with all premium earned over the same period.
Coefficient of variation
The measure of variability in the net discounted central estimate used in the determination of the
probability of adequacy.
Combined operating ratio
(COR)
The sum of the net claims ratio, commission ratio and expense ratio. A combined operating ratio
below 100% indicates an underwriting profit. A combined operating ratio over 100% indicates
an underwriting loss.
Commercial lines
Refers to insurance for businesses, professionals and commercial establishments.
Commission
Fee paid to an agent or broker as a percentage of the policy premium. The percentage varies
widely depending on coverage, the insurer and the marketing methods.
Commission ratio
Net commission expense as a percentage of net earned premium.
Credit spread
The difference in yield between a bond and a reference yield (e.g. BBSW or a fixed sovereign
bond yield).
Credit spread duration
The weighted average term of cash flows for a corporate bond. It is used to measure the price
sensitivity of a corporate bond to changes in credit spreads.
Deductible
The amount or proportion of some or all losses arising under an insurance contract that the
insured must bear.
Deferred acquisition costs
Acquisition costs relating to the unexpired period of risk of contracts in force at the balance date
which are carried forward from one accounting period to subsequent accounting periods.
Ex‑cat claims ratio
Net claims excluding catastrophe claims, prior accident year claims development and movements
in risk margin, as a percentage of net earned premium.
Excess of loss reinsurance
A form of reinsurance in which, in return for a premium, the reinsurer accepts liability for claims
settled by the original insurer in excess of an agreed amount, generally subject to an upper limit.
Captive
A licensed entity within the Group that provides reinsurance protection to other controlled entities.
Expense ratio
Underwriting and administrative expenses as a percentage of net earned premium.
Cash profit or loss
Profit or loss after tax attributable to QBE shareholders, adjusted for the post-tax effect
of amortisation and impairment of intangibles and other non-cash items.
Facultative reinsurance
The reinsurance of individual risks through a transaction between the reinsurer and the cedant
(usually the primary insurer) involving a specified risk.
General insurance
Generally used to describe non-life insurance business including property and casualty insurance.
Gross claims incurred
The amount of claims incurred during an accounting period before deducting reinsurance recoveries.
Gross earned premium (GEP)
The proportion of gross written premium recognised as revenue in the current accounting period,
reflecting the pattern of the incidence of risk and the expiry of that risk.
176
Glossary
Acquisition costs
The total of net commission and underwriting and other expenses incurred in the generation
of net earned premium and often expressed as a percentage of net earned premium.
Admitted insurance
Insurance written by an insurance company that is admitted (or licensed) to do business in the
state in the United States in which the policy was sold.
Agent
One who negotiates contracts of insurance or reinsurance as an insurance company’s
representative i.e. the agent’s primary responsibility is to the insurance company, not the
insured party.
Aggregate reinsurance
Reinsurance cover that provides protection for an accumulation of claims arising from multiple
events over a specified period of time.
APRA
Australian Prudential Regulation Authority, being the Group’s primary insurance regulator.
Attachment point
The amount of claims retained by the cedant in a reinsurance arrangement, after which
reinsurance protection will apply.
Borrowings to total capital
The Group’s gearing ratio (also referred to as debt to total capital), calculated as borrowings
expressed as a percentage of total capital. Total capital is shareholders’ equity plus Tier 1
instruments classified as liabilities (which are excluded from borrowings for the purposes of this
calculation), and subordinated debt.
Broker
Capacity
One who negotiates contracts of insurance or reinsurance on behalf of an insured party, receiving
a commission from the insurance or reinsurance company for placement and other services
rendered. In contrast with an agent, the broker’s primary responsibility is to the insured party,
not the insurance company.
In relation to a Lloyd’s member, the maximum amount of insurance premium (gross of reinsurance
but net of brokerage) which a member can accept. In relation to a syndicate, it is the aggregate
of each member’s capacity allocated to that syndicate.
Casualty insurance
Insurance that is primarily concerned with the claims resulting from injuries to third persons
or their property (i.e. not the policyholder) and the resulting legal liability imposed on the insured.
It includes, but is not limited to, general liability, employers’ liability, workers’ compensation,
professional liability, public liability and motor liability insurance.
Catastrophe claims ratio
Total of all net claims resulting from catastrophe events as a percentage of net earned premium.
Catastrophe reinsurance
A reinsurance contract (often in the form of excess of loss reinsurance) that, subject to specified
limits and retention, compensates the ceding insurer for financial losses related to an accumulation
of claims resulting from a catastrophe event or series of events.
Claim
The amount payable under a contract of insurance or reinsurance arising from a loss relating
to an insured event.
Claims incurred
The aggregate of all claims paid during an accounting period adjusted for the change in the
claims provision in that accounting period.
Claims provision
The estimate of the most likely cost of settling present and future claims and associated claims
adjustment expenses plus a risk margin to cover possible fluctuation of the liability.
Gross written premium (GWP)
The total premium on insurance underwritten by an insurer or reinsurer during an accounting
period, before deduction of reinsurance premium.
Incurred but not enough
reported (IBNER)
The upward adjustment to claims incurred as a result of the initial under-estimation of the ultimate
cost of claims.
Incurred but not reported
(IBNR)
Claims arising out of events that have occurred before the end of an accounting period but have
not been reported to the insurer by that date.
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Insurance profit or loss
The sum of the underwriting result and net investment income or loss on assets backing
policyholders’ funds.
Insurance profit margin
The ratio of insurance profit or loss to net earned premium.
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178
Glossary continued
Inward reinsurance
See Reinsurance.
Lead/non‑lead underwriter
A lead underwriter operates in the subscription market and sets the terms and price of an insurance
or reinsurance policy. The follower or non-lead underwriter is an underwriter of a syndicate or an
insurance or reinsurance company that agrees to accept a proportion of a given risk on terms set
by the lead underwriter.
Lenders’ mortgage insurance
(LMI)
A policy that protects the lender (e.g. a bank) against non-payment or default on the part of the
borrower on a residential property loan.
Letters of credit (LoC)
Written undertaking by a financial institution to provide funding if required.
Limit
Lloyd’s
The maximum amount that a reinsurer will pay in respect of claims covered by a reinsurance contract.
Insurance and reinsurance market in London. It is not a company but is a society of individuals
and corporate underwriting members.
Lloyd’s managing agent
An underwriting agent which has permission from Lloyd’s to manage one or more syndicates and
carry on underwriting and other functions for a member.
Long‑tail
Classes of insurance business involving coverage for risks where notice of a claim may not
be received for many years and claims may be outstanding for more than one year before they
are finally quantifiable and settled by the insurer.
Managing General Agent (MGA) A wholesale insurance agent with the authority to accept placements from (and often to appoint)
retail agents on behalf of an insurer. MGAs generally provide underwriting and administrative
services such as policy issuance on behalf of the insurers they represent. Some may handle claims.
Maximum event retention (MER) An estimate of the largest claim to which an insurer will be exposed (taking into account the
probability of that loss event at a return period of one in 250 years) due to a concentration
of risk exposures, after netting off any potential reinsurance recoveries and inward and outward
reinstatement premiums.
Modified duration
The weighted average term of cash flows in a bond. It is used to measure the price sensitivity
of a bond to changes in interest rates.
Multi‑peril crop insurance
(MPCI)
United States federally regulated crop insurance protecting against crop yield losses by allowing
participating insurers to insure a certain percentage of historical crop production.
Net claims incurred
The amount of claims incurred during an accounting period after deducting reinsurance recoveries.
Net claims ratio
Net claims incurred as a percentage of net earned premium.
Net earned premium (NEP)
Net written premium adjusted by the change in net unearned premium.
Net written premium (NWP)
The total premium on insurance underwritten by an insurer during a specified period after the
deduction of premium applicable to reinsurance.
Outstanding claims liability
The amount of provision established for claims and related claims expenses that have occurred
but have not been paid.
Personal lines
Insurance for individuals and families, such as private motor vehicle and homeowners’ insurance.
Policyholders’ funds
The net insurance liabilities of the Group.
Premium
Amount payable by the insured or reinsured in order to obtain insurance or reinsurance protection.
Premium solvency ratio
Ratio of net tangible assets to net earned premium. This is an important industry indicator
in assessing the ability of general insurers to settle their existing liabilities.
Prescribed Capital Amount
(PCA)
The sum of the capital charges for asset risk, asset concentration risk, insurance concentration
risk and operational risk as required by APRA. The PCA must be disclosed at least annually.
Probability of adequacy
A statistical measure of the level of confidence that the outstanding claims liability will
be sufficient to pay claims as and when they fall due.
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178
Glossary continued
Inward reinsurance
See Reinsurance.
Lead/non‑lead underwriter
A lead underwriter operates in the subscription market and sets the terms and price of an insurance
or reinsurance policy. The follower or non-lead underwriter is an underwriter of a syndicate or an
insurance or reinsurance company that agrees to accept a proportion of a given risk on terms set
by the lead underwriter.
Lenders’ mortgage insurance
A policy that protects the lender (e.g. a bank) against non-payment or default on the part of the
(LMI)
borrower on a residential property loan.
Limit
Lloyd’s
The maximum amount that a reinsurer will pay in respect of claims covered by a reinsurance contract.
Insurance and reinsurance market in London. It is not a company but is a society of individuals
and corporate underwriting members.
Lloyd’s managing agent
An underwriting agent which has permission from Lloyd’s to manage one or more syndicates and
carry on underwriting and other functions for a member.
Long‑tail
Classes of insurance business involving coverage for risks where notice of a claim may not
be received for many years and claims may be outstanding for more than one year before they
are finally quantifiable and settled by the insurer.
Managing General Agent (MGA) A wholesale insurance agent with the authority to accept placements from (and often to appoint)
retail agents on behalf of an insurer. MGAs generally provide underwriting and administrative
services such as policy issuance on behalf of the insurers they represent. Some may handle claims.
Maximum event retention (MER) An estimate of the largest claim to which an insurer will be exposed (taking into account the
probability of that loss event at a return period of one in 250 years) due to a concentration
of risk exposures, after netting off any potential reinsurance recoveries and inward and outward
reinstatement premiums.
Net claims ratio
Net claims incurred as a percentage of net earned premium.
Net earned premium (NEP)
Net written premium adjusted by the change in net unearned premium.
Net written premium (NWP)
The total premium on insurance underwritten by an insurer during a specified period after the
deduction of premium applicable to reinsurance.
Outstanding claims liability
The amount of provision established for claims and related claims expenses that have occurred
but have not been paid.
Personal lines
Insurance for individuals and families, such as private motor vehicle and homeowners’ insurance.
Policyholders’ funds
The net insurance liabilities of the Group.
Premium
Amount payable by the insured or reinsured in order to obtain insurance or reinsurance protection.
Letters of credit (LoC)
Written undertaking by a financial institution to provide funding if required.
Proportional reinsurance
A type of reinsurance in which the insurer and the reinsurer share claims in the same
proportion as they share premiums.
Prudential Capital Requirement
(PCR)
The sum of the PCA plus any supervisory adjustment determined by APRA. The PCR may
not be disclosed.
Recoveries
Reinsurance
The amount of claims recovered from reinsurance, third parties or salvage.
An agreement to indemnify an insurer by a reinsurer in consideration of a premium with respect
to agreed risks insured by the insurer. The enterprise accepting the risk is the reinsurer and
is said to accept inward reinsurance. The enterprise ceding the risks is the cedant or ceding
company and is said to place outward reinsurance.
Reinsurance to close
A reinsurance agreement under which members of a syndicate, for a year of account to be
closed, are reinsured by members who comprise that or another syndicate for a later year of
account against all liabilities arising out of insurance business written by the reinsured syndicate.
Reinsurer
Retention
The insurer that assumes all or part of the insurance or reinsurance liability written by another
insurer. The term includes retrocessionaires, being insurers that assume reinsurance from
a reinsurer.
That amount of liability for which an insurer will remain responsible after it has completed
its reinsurance arrangements.
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Modified duration
The weighted average term of cash flows in a bond. It is used to measure the price sensitivity
of a bond to changes in interest rates.
Retrocession
Reinsurance of a reinsurer by another reinsurance company.
’
Multi‑peril crop insurance
United States federally regulated crop insurance protecting against crop yield losses by allowing
(MPCI)
participating insurers to insure a certain percentage of historical crop production.
Return on allocated capital
(RoAC)
Divisional management-basis profit as a percentage of allocated capital as determined by the
Group’s economic capital model.
Net claims incurred
The amount of claims incurred during an accounting period after deducting reinsurance recoveries.
Return on equity (ROE)
Net profit after tax as a percentage of average shareholders’ equity.
Short‑tail
Classes of insurance business involving coverage for risks where claims are usually known
and settled within 12 months.
Stop loss reinsurance
A form of excess of loss reinsurance which provides that the reinsurer will pay some or all of the
reinsured’s claims in excess of a stated percentage of the reinsured’s premium income, subject
(usually) to an overall limit of liability.
Surplus (or excess) lines
insurers
In contrast to admitted insurers, every state in the United States also allows non-admitted
(or surplus lines or excess lines) carriers to transact business where there is a special need that
cannot or will not be met by admitted carriers. The rates and forms of non-admitted carriers
generally are not regulated in that state, nor are the policies back-stopped by the state insolvency
fund covering admitted insurance. Brokers must inform insurers if their insurance has been
placed with a non-admitted insurer.
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Survival ratio
A measure of how many years it would take for dust disease claims to exhaust the current
level of claims provision. It is calculated on the average level of claims payments in the last
three years.
179
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180
Glossary continued
Syndicate
A member or group of members underwriting insurance business at Lloyd’s through the agency
of a managing agent.
Total investment income or loss Gross investment income or loss including foreign exchange gains and losses and net
of investment expenses.
Total shareholder return (TSR) A measure of performance of a company’s shares over time. It includes share price appreciation
and dividend performance.
Treaty reinsurance
Reinsurance of risks in which the reinsurer is obliged by agreement with the cedant to accept,
within agreed limits, all risks to be underwritten by the cedant within specified classes of business
in a given period of time.
Underwriting
The process of reviewing applications submitted for insurance or reinsurance coverage, deciding
whether to provide all or part of the coverage requested and determining the applicable premium.
Underwriting expenses
The aggregate of policy acquisition costs, excluding commissions, and the portion
of administrative, general and other expenses attributable to underwriting operations.
Underwriting result
The amount of profit or loss from insurance activities exclusive of net investment income or loss
and capital gains or losses.
Underwriting year
The year in which the contract of insurance commenced or was underwritten.
Unearned premium
The portion of a premium representing the unexpired portion of the contract term
as of a certain date.
Volume weighted average price
(VWAP)
A measure of the average trading price during a period, adjusted for the volume of transactions.
This is often used for determining the share price applicable to dividend and other
share-related transactions.
180
Glossary continued
Syndicate
A member or group of members underwriting insurance business at Lloyd’s through the agency
Total investment income or loss Gross investment income or loss including foreign exchange gains and losses and net
Total shareholder return (TSR) A measure of performance of a company’s shares over time. It includes share price appreciation
Treaty reinsurance
Reinsurance of risks in which the reinsurer is obliged by agreement with the cedant to accept,
within agreed limits, all risks to be underwritten by the cedant within specified classes of business
of a managing agent.
of investment expenses.
and dividend performance.
in a given period of time.
Underwriting
The process of reviewing applications submitted for insurance or reinsurance coverage, deciding
whether to provide all or part of the coverage requested and determining the applicable premium.
Underwriting expenses
The aggregate of policy acquisition costs, excluding commissions, and the portion
of administrative, general and other expenses attributable to underwriting operations.
Underwriting result
The amount of profit or loss from insurance activities exclusive of net investment income or loss
and capital gains or losses.
Underwriting year
The year in which the contract of insurance commenced or was underwritten.
Unearned premium
The portion of a premium representing the unexpired portion of the contract term
as of a certain date.
Volume weighted average price
A measure of the average trading price during a period, adjusted for the volume of transactions.
(VWAP)
This is often used for determining the share price applicable to dividend and other
share-related transactions.
Design Communication and Production by ARMSTRONG
Armstrong.Studio
QBE Insurance Group Limited
Level 18, 388 George Street, Sydney NSW 2000 Australia
Telephone: +61 2 9375 4444
www.qbe.com