QBE Insurance Group Global Operational Transformation Program

Transcription

1 QBE Insurance Group Global Operational Transformation Program John Neal Group Chief Executive Officer Neil Drabsch Group Chief Financial Officer Colin Fagen Chief Executive Officer, Australian & NZ Operations Tuesday 2 July 2013 All figures in US$ unless otherwise stated 1

2 Agenda 1. Introduction and overview of value creation model JN 2. Operational excellence global reach and scale JN 3. Australian Operations case study CF 4. Financial strength and flexibility ND 5. Closing remarks JN 6. Q & A JN/ND/CF 2 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

3 Introduction and overview of value creation model John Neal Group Chief Executive Officer 3 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

4 In February we rolled out our refreshed vision QBE has a vision to be the most successful global insurer and reinsurer in the eyes of our customers, our people, our shareholders and the community 4 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

5 Value creation model Confidence in immediate (FY13) business plans Leveraging the value opportunities of our global business Implementing Group wide programs of change to improve performance 5 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

6 Operational excellence: global reach and scale John Neal Group Chief Executive Officer 6 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

7 Operational excellence: delivering a repeatable, globally scalable engine for growth 1. SIMPLIFICATION Simplify how we do things today, both across and within divisions 2. STANDARDISATION Adopt the one best QBE way of working globally and consolidate for scale in the right location 3. ONGOING EXCELLENCE (scalability) Use our global scale to learn, innovate and continuously improve Our recently established Group Shared Services Centre (GSSC) is integral to operational transformation A simplified and unified operating model Roles clearly defined and accountabilities understood Process improvement, reduction in administrative activities and improved documentation Greater repeatability, consistency and higher quality outcomes Core teams of skilled staff carrying out high-value tasks Establishing platform for QBE as employer of choice Acquisition ready streamlined back office model will fast track integration 7 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

8 Key objectives of GSSC establishment Cost Effectiveness 1. Optimise resource cost model 2. Standardise - drive economies of scale 3. Reduce rework Business 1. Create scale Growth 2. More easily absorb transaction volume growth 1. Improve performance management Service Quality 2. Improve process control 3. Improve turnaround time 4. Reduce leakage 5. Facilitate continuous improvement Acquisition Integration 1. Centralised and standardised processing 2. Simplified acquisition integration 8 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

9 Why Manila? Why a captive model? Why Manila? Philippines is now the #1 location for voice services* Cost competitiveness Robust and reliable infrastructure Government support and public-private partnership Proven capability Captive The business establishes its own dedicated subsidiary and ownership of all assets and staff is retained Low operational risk and medium scalability e.g. QBE model Build, Operate, Transfer The outsource provider helps the client set up the centre from start to finish. Management is transferred to the client once the centre is established Medium to high operational risk and medium scalability Delivery Models Third Party Provider An entire process or services is moved out of its organisation and managed by a third party service provider High scalability and operational risk Virtual Captive An entity is formed with a split in investment, revenues and control between client and provider Medium operational risk and medium to high scalability An average GSSC recruit 100% tertiary educated 95% hold an undergraduate degree 30% have post graduate qualifications Minimum of 2 years relevant post graduate work experience 34 years of age Commutes >1 hour to work each day Why a captive model? Captive models have historically been favoured to maximise managerial control and ownership by the wider organisation *Source: Annual IBM Global Location Trends Report, January QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

10 Operational transformation initiatives will deliver annual run-rate benefits of at least $250M by the end of FY15 COST AND BENEFIT IMPACT (P&L) US$ 300M Total project cost revised downwards $20M but increased expense in FY Excludes estimated global claims procurement run-rate savings of at least $90M by FY Cost savings (earned in year) -200 FY13 FY14 FY15 Cost savings (run-rate at year end) Implementation and restructuring costs 10 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

11 Overview of $250M transformation program savings by functional work streams Finance HR Claims Significant portion of global workload via GSSC Review of current processes to eliminate waste Consolidation, standardisation and process improvement Easier and faster group wide financial reporting Deliver target operating model and develop centres of excellence Outsourced payroll for AO and EO Move administrative processes to the GSSC Remaining business partners in divisions delivering improved service Codify processes and roles and improve process design/productivity Back office claims roles moving offshore Establishing expert team to manage complex claims within divisions Blend of GSSC and outsourcing arrangements for NA Operations Clear and distinct roles, responsibilities and metrics for front, middle and back office functions Productivity and process improvement via centralisation of roles in GSSC IT Cross-divisional IT management and architecture functions Consolidate two data centres per division Enhance service through process simplification and automation via outsourced delivery centres Non-claims procurement Implement Group wide strategic sourcing and procurement capability Establish global category management with global accountability Work with business units to deliver savings whilst maintaining quality 11 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

12 Global procurement initiatives: ranked by value and degree of complexity 12 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013 * Included within $250m GOTP savings on slide 10

13 Transformation timeline AO On track for majority completion by 1Q14 EO Planning in progress Commence 2Q14 and complete by 2Q15 Other divisions AO NA EO FY13 FY14 FY15 GSSC Established in Manila NA Plan completed June Commence 4Q13 Complete majority of activity by 2Q15 Further iterations 13 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

14 Australia & New Zealand Colin Fagen Chief Executive Officer, Australian & NZ operations 14 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

15 Key objectives of GSSC establishment for Australia Cost Effectiveness 1. Optimise resource cost model 2. Standardise - drive economies of scale 3. Reduce rework Business 1. Create scale Growth 2. More easily absorb transaction volume growth 1. Improve performance management Service Quality 2. Improve process control 3. Improve turnaround time 4. Reduce leakage 5. Facilitate continuous improvement Acquisition Integration 1. Centralised and standardised processing 2. Simplified acquisition integration 15 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

16 Australia will deliver annual run-rate benefits of at least $85M by the end of FY15 COST AND BENEFIT IMPACT (P&L) Cost savings (earned in year) -60 FY13 FY14 FY15 Cost savings (run-rate at year end) Implementation and restructuring costs Excludes claims procurement 16 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

17 Australia s transformation: all streams on track to deliver Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 $85M savings by FY15 Finance $6M HR $5M Claims $6M Operations $36M IT Non-claims procurement Legend Planning Transition to GSSC / third party $15M $17M 17 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

18 Parallel processes: knowledge transition Processes picked up from Australia, structured and transferred to GSSC before rehearsal and gradual go live Operational excellence assessments Pre go-live T+1 T+15 T+30 T+60 T+90 Design Solution design Transition Technology enablement Change management & communication activities for retained organisation Service Delivery 1 week 4-5 weeks 4-6 weeks 2 weeks 2 weeks 4 weeks Service Onshore Offshore Volume KT prep rehearsal Stabilisation KT KT Go Live ramp testing Checkpoint: Geographic Lead Transition Lead Business Owner Recruit Implement operational excellence & quality assurance GSSC Operations Production Checkpoint +60 days: Transition lead Operations manager/ Service manager Business owner Onshore streams lead Checkpoint +90 days: Transition lead Operations manager/ Service manager Business owner Onshore stream lead Stage Gates & Stage Gate1: Solution Responsibility design sign off BU/project Geographic steering committee Head of GSSC Design authority 18 Stage Gate 2: Pre KT sign off Business stream lead Onshore stream lead KT factory lead Stage Gate 3: Pre SRT sign off Business stream lead Onshore stream lead Functional operations Lead KT factory lead Lead ops managers QBE Insurance Group - Global Operational Transformation Program - 2 July 2013 Stage Gate 4: Go/no-go sign off Geographic steering committee Head of GSSC Design authority Stage Gate 5: Transition exit Head of GSSC Design authority Functional ops lead

19 Process reengineering: operations 19 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

20 Developing our Employee Brand: GSSC Employee Value Proposition OUR EVP PROMISE We believe that our people s ultimate ability and potential should be realised through their employment at QBE. We are committed to supporting and developing everyone to realise their full potential. We will help them make it happen for the benefit of both themselves and QBE and we will reward them well for their effort and performance. HOW WE MAKE WORKING AT QBE A SPECIAL EXPERIENCE OPPORTUNITY CULTURE REWARD 20 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

21 The GSSC is already delivering improvements in our operational metrics Function Metric Result* Claims Motor Direct Finalisation rates 36% improvement in finalisation rates Claims Motor Intermediated Finalisation rates 6% improvement in finalisation rates Claims Motor Financial Institutions Claims Customer Support Credit Control ebusiness Finalisation rates 2% improvement in finalisation rates YTD tax invoice turnaround (Working Days) YTD same day claims registration % Outstanding debtors >90 days as % of GWP 13% improvement in meeting SLAs 6% improvement in same day claims registrations 22% reduction in outstanding debts Unmatched cash as % of GWP 2% reduction in unmatched cash % ereferrals completed within 1 hour % Manual quotes completed within 2 days % Renewals actioned prior to 6 weeks before expiry 2% improvement in ereferrals completed within 1 hour 0.5% improvement in manual quotes 75% improvement in renewals actioned * Comparison is based on YTD 2013 compared with FY QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

22 We are already realising efficiencies through the GSSC Motivated Workforce Clear team structures Clearly defined responsibilities Flexible resource pool Consistent Processes Daily reporting has driven process consistency Key improvements made to existing processes Solid Performance Exceeding both our quality and performance SLAs Positive customer feedback Volume of work in progress (shown in units) /06/ /06/2013 7/06/ /05/ /05/ /05/ /05/2013 3/05/ /04/ /04/ /04/2013 5/04/ /03/ /03/ /03/2013 8/03/2013 1/03/ /02/ /02/2013 8/02/2013 1/02/ /01/ /01/ /01/2013 4/01/ /12/ /12/ /12/2012 7/12/2012 Business as Intermediary Intermediary Intermediary BAU usual Target target ID distribution TOTAL ID distribution MOTOR ID distribution PROP motor property 22 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

23 Customer feedback on the GSSC has been positive We have already begun receiving customer commendations for the high customer service they have experienced in dealing with our GSSC teams: April "Please give him [the GSSC claims officer] a pat on the back. I'm in a very difficult situation, and he showed me nothing but understanding and kindness. His whole manner towards me has been perfect. He is a real credit to QBE April "She [GSSC claims officer] was terrific. She was absolutely terrific May Claims officers from Manila are very courteous May The GSSC claims officer let me know exactly what to expect with my claim and kept his promise in calling me back even BEFORE he said he was going to! Professional customer service" April She [GSSC claims officer] has been wonderful and very helpful 23 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

24 Broker networks remain supportive and informed May April April 22, 2013 Ultimately QBE is responsible for making decisions on how to best manage their business, and we respect this We can understand the She [GSSC Claims officer] reasons why QBE has has been wonderful and very helpful undertaken this journey May April We have appreciated the opportunity to have discussions and input into the process We will be judging QBE on their execution and performance that s what matters to us 24 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

25 A large proportion of impacted staff in Australia have been redeployed to date Overview of FTE redeployment to mid June High redeployment driven by AO strategy to reduce redundancy and manage via natural turnover Staff that have accepted VAP may opt back into redeployment Total Impacted to mid June Redeployed to mid June Voluntary Acceptable Positions (VAP) Contract staff (not for renewal) Redundancies to mid June Natural turnover to mid June In redeployment 25 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

26 Delivering operational excellence Australia's transformation report card Model established in Australia Consistent processes across Australia Speed of improvement when influx of claims or policy count increases Sales & distribution balance - scalability Australia s retained organisation refocused on high priority tasks Increase value and return from IT strategy Acquisition ready 26 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

27 Financial strength and flexibility Neil Drabsch Group Chief Financial Officer 27 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

28 Financial strength and flexibility Financial strength and flexibility is integral to QBE s value creation model Balancing the capital needs of all stakeholders Flexibility for future growth Optimising gearing Achievable ambition for book equity growth Capital has been strengthened over the past 18 months through capital initiatives Share placement A$600M (2012) Issued Tier 2 subordinated convertible securities $500M (2012) Lower dividend payout policy (likely weighted 40% interim: 60% final) Tender to repurchase SCS and issue $300M equity (2013) 28 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

29 Financial strength and flexibility Uncertainty surrounding APRA LAGIC framework resolved PCA multiple expected to be within our targeted range of x APRA requirement at 30 June 2013 APRA conglomerates capital standard not expected to have any impact and QBE currently not being considered a Level 3 group Uncertainty surrounding revised S&P model resolved Insurer financial strength rating affirmed at A+ and outlook revised to stable from negative Issuer credit rating revised down to A- from A as expected Initiatives to optimise liability management Reduce borrowings Take advantage of current low interest rates 29 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

30 Financial strength and flexibility: liability management $220M of sub-debt repaid at first call date on 1 July 2013 $600M 5 year 2.4% pa coupon senior debt issue completed in April Proceeds largely used to repay/repurchase SCS Majority of SCS repaid or repurchased $234M put option exercised $317M repurchased via tender including the issue of 20.9M ordinary shares bolstering T1 capital $223M redemption value outstanding at 30 June 2013 (excluding QBE owned) Potential SCS dilution fallen from 80M shares at 31 December 2012 to 52M shares at 30 June 2013 On target for debt to equity to be less than 40% by 31 December QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

31 Financial strength and flexibility: non-core asset sales and other initiatives Non-core asset sales with cumulative sale proceeds of around $80M expected by year end including Australian broker/agency NCIB (subject to Steadfast IPO) and Invivo Majority stake in QBE Macedonia Other initiatives being considered Further sale of non-core assets Commutation and sale of run-off portfolios Purchase of additional reinsurance 31 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

32 Summary and 1H13 update John Neal Group Chief Executive Officer 32 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

33 Summary and 1H13 update Reflect on work done to date Demonstrated successes Roadblocks identified and remediated Renewed Executive level bench strength Platform for growth and accelerated synergies from future acquisitions Building towards our goal of being a truly global organisation 33 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

34 Summary and 1H13 update Premium rate increases in line with expectations at +5% overall Annualised first half investment yield expected to be in line with FY13 guidance of approximately 2.25% Sustained A$ weakness is positive for A$ earnings but adversely impacts reported US$ premium and earnings Large individual risk and catastrophe losses are expected to be within our allowances of 9.5% of NEP (ex crop) Relatively quiet period for catastrophe incidence (but main risk resides in 2H) Slightly higher than usual incidence of large individual risk losses Currency weighted average discount rate has increased since 31 Dec 2012 with expected positive impact on central estimate of outstanding claims at 30 June 2013 Balance sheet strengthened through capital initiatives 34 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013

35 Important disclaimer The information in this presentation provides an overview of QBE s global operational transformation program. This presentation should be read in conjunction with all information which QBE has lodged with the Australian Securities Exchange ( ASX ). Copies of those lodgements are available from either the ASX website com.au or QBE s website Prior to making a decision in relation to QBE s securities, products or services, investors, potential investors and customers must undertake their own due diligence as to the merits and risks associated with that decision, which includes obtaining independent financial, legal and tax advice on their personal circumstances. This presentation contains certain "forward-looking statements for the purposes of the U.S. Private Securities Litigation Reform Act of The words "anticipate", believe", "expect", "project", "forecast", "estimate", "likely", "intend", "should", "could", "may", "target", "plan" and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of QBE that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. You are cautioned not to place undue reliance on forward-looking statements. Such forward-looking statements only speak as of the date of this presentation and QBE assumes no obligation to update such information. Any forward-looking statements assume large individual risk and catastrophe claims do not exceed the significant allowance in our business plans; no overall reduction in premium rates; no significant fall in equity markets and interest rates; no major movement in budgeted foreign exchange rates; no material change to key inflation and economic growth forecasts; recoveries from our strong reinsurance panel; and no substantial change in regulation. Should one or more of these assumptions prove incorrect, actual results may differ materially from the expectations described in this presentation. Comments on 1H13 are based on estimates at this date and subject to completing the consolidation process and management, actuarial and external auditors review. 35 QBE Insurance Group - Global Operational Transformation Program - 2 July 2013