QBE Insurance Group Limited (QBE) Earnings Call Transcript & Summary

My name is Mike Wilkins. I'm the Chairman of QBE Insurance Group Limited. And on behalf of your Board, it's my pleasure to welcome you to this AGM. The humanitarian and economic crisis unleashed by COVID-19 is unlike anything we've seen before, and the global response has led to rapid changes in the way we live, work and interact as a society. This has necessitated changes to the way we are conducting this meeting to ensure that we protect the health and safety of everyone involved. I want to thank all of our shareholders and the QBE team for their support of this virtual gathering. I'd like to start by acknowledging the traditional owners of the land that I'm speaking to you from today, the Gadigal people of the Eora Nation. We also acknowledge the traditional owners of country throughout Australia and recognize their continuing connection to land, waters and culture. We pay our respects to their elders, past, present and emerging. Every effort has been made to ensure that this meeting runs smoothly. Facility has been made for shareholders to ask questions online and over the phone, and we will open the lines later in the meeting. I've also endeavored to address questions submitted prior to the meeting in my formal remarks. If any technological issues do arise and it becomes necessary to provide any procedural information in respect of this meeting, updates will be provided on our website. A recording of the meeting will also be available on our website. There being a quorum present, I declare the meeting open. The Notice of Meeting, which was sent to shareholders on the 1st of April 2020, will be taken as read. The minutes of the 2019 Annual General Meeting being in order was signed, and a copy is available for shareholders upon request via Computershare. Of course, joining me in this virtual meeting is your group Chief Executive, Pat Regan. My fellow nonexecutive directors are also online. Our Deputy Chairman, John Green, Stephen Fitzgerald, Kathy Lisson, Sir Brian Pomeroy, Jann Skinner and Rolf Tolle. I should note that the tyranny of distance means that for many, it's either very early in the morning or very late in the evening. Our Group General Counsel and Company Secretary, Carolyn Scobie, is also online. Simon Carson of Computershare Investor Services will act as returning officer for the purposes of conducting and determining the results of the poll. Partners from our external auditors, PricewaterhouseCoopers, Voula Papageorgiou and Bret Griffin, are also online and able to answer questions regarding the conduct of the audit. Like other companies in recent years, we've decided to go to a poll on each resolution described in the notice of meeting. A poll recognizes the votes of those shareholders present today and those who voted by proxy. Each share in QBE carries 1 vote. The directors believe that a poll gives all shareholders an equal voice in determining the matters before the meeting. There are a number of procedural matters, which I must draw to your attention. These are different to previous years given our virtual format. Today's meeting is being held virtually via the Lumi platform. This allows shareholders, proxies, corporate representatives and guests to attend the meeting online. All attendees can watch a live webcast of the meeting or listen through the teleconference. In addition, shareholders and proxies have the ability to ask questions and submit votes in real time. If you're watching the live webcast, whilst also listening through the teleconference, you may notice a slight delay with the webcast. As I mentioned earlier, voting today will be conducted by way of a poll on all items of business, and I refer you to the instructional slide now on your screen. If you're eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There's no need to press submit or click the enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear, and please submit your votes at any time whilst the voting is open. I'll give you a warning before I move to close the voting at the end of the meeting. Proxy holders should note that all directed votes have been accumulated and recorded. Only proxy holders with open votes are asked to record a vote in favor or against a resolution or an abstention. As set out in the Notice of Meeting, as the Chairman of the meeting, I'll be voting all undirected proxies in favor of each item of business to the extent permitted by applicable laws in each case, with the exception of items 5 and 6 for which undirected proxies will be voted against. I now formally vote all undirected proxies in this manner and all directed proxies in accordance with the directions provided by shareholders. The proxy results for each item will now appear on the screen. Shareholders who are participating online may ask a question at any time. However, they'll be answered at the appropriate time of the meeting. And I refer you to the instructional slide now on your screen. To ask a question via Lumi, press on the Speech Bubble icon. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Once you finish typing, please press the arrow symbol to send. If you are having any difficulties in asking a question, please refer to the user guide, which can be accessed through the platform. For those who would like to ask a question by telephone, you may do so by calling the telephone numbers set out on Page 1 of your Notice of Meeting and entering the participant PIN code, which is 26749522#. For Australia, the toll-free number is 1-800-093-491. For New Zealand, the toll-free number is 0800-452-257. And for international callers, the number is +612 8047 9393. To ask a question via telephone, press 01 on your phone and you'll be connected to an operator. To cancel your request, press 2 on your phone. If you have a question already prepared, please submit it now. Ladies and gentlemen, I want to open my formal remarks today by acknowledging the more than 11,000 people who make up the QBE family right around the world. The rapid emergence and spread of COVID-19 has meant that many of our people have been forced to rapidly adapt to changes in where and how they work. And that's only been possible because of our robust business continuity arrangements and the technology tools that we've developed and deployed across the business to build the QBE of the future. It means that right across the 27 countries in which we work, we've been able to support the health, safety and well-being of our people. In turn, our teams have responded magnificently and on behalf of the Board, I'd like to take this opportunity to extend my thanks to them for their hard work, their customer focus and for their resilience through these challenging times. No business will be immune from the unprecedented health and economic crisis sparked by COVID-19. However, your Board, together with our CEO, Pat Regan and his leadership team, have recently taken a number of important and prudent steps so that QBE is well placed to withstand the economic challenges ahead and to thrive in the future. On March 30, we withdrew our previously published combined operating ratio target and our net investment return target for 2020. This was a responsible and sensible step in light of the significant uncertainties within the global economy and within investment markets right now. We also executed a comprehensive capital plan designed to bolster the group's capital position and to improve our earnings resilience. This included the issuance of USD 500 million of additional Tier 1 capital notes to wholesale investors, and that was completed yesterday, which is a good result and a clear endorsement of our plan. We also raised an additional USD 750 million in equity from institutional shareholders in April, which was also well supported. And we currently have an offer to existing shareholders to participate in a share purchase plan to raise up to USD 75 million. In developing this plan, the Board has been careful to ensure our retail shareholders are treated fairly and the holdings are not unduly or unfairly diluted. Our intention is to ensure that almost all participating retail shareholders receive at least their pro rata allocation with a better outcome possible, subject to the level of overall demand. Indeed, with the maximum allowable SPP allocation capped at AUD 30,000, there are fortunately very few retail investors on our register who will receive less than the pro rata allocation. And I should note that many of those would be QBE staff or members of the Board. Applications to participate in the SPP are open until the 11th of May. Our capital plan takes us to well above our own target for capital and comfortably within the AA S&P capital levels. It will make QBE even stronger in the face of the challenging environment in which we all find ourselves, and will position the business to be able to take advantage of opportunities that might arise as the world recovers. And Pat's going to talk some more about those measures shortly. While the economic consequences of this pandemic will be significant, we must remember that this is, first and foremost, a human tragedy for those sick with the virus or those who have lost loved ones, jobs, livelihoods or businesses. It's a tragedy for the whole world, which will reverberate for generations to come. When the recovery does inevitably come, QBE will be there to support our customers and our communities, true to our purpose. Just as we were earlier this year when so many of our Australian customers were impacted by the unprecedented bushfires that swept across large parts of the country, leaving a trail of destruction and devastation. Touching briefly on the group's performance in the 2019 financial year, unseasonal weather in parts of the United States did impact QBE's results in 2019. However, the group's statutory net profit after tax of $550 million represented a 41% increase on the 2018 year, while the adjusted cash return on equity was 8.9%, up from 8% in the prior year. The Board took this into account when determining a final dividend of AUD 0.27 per share, which was paid last month. When combined with the AUD 0.25 per share dividend declared at the half year, this represents a 2019 full year dividend of AUD 0.52 per share. I'd now like to address the resolutions requisitioned by a small group of shareholders that you've been asked to consider today, the resolutions 5 and 6 on the Notice of Meeting. In both cases, the substantive parts of those resolutions, Parts 5(b) and 6(b), may only be formally considered if shareholders vote in favor of resolutions 5(a) and 6(a) which seek to amend the QBE constitution. However, I'd just like to summarize your Board's position with regards to both. Resolution 5(b) relates to QBE's approach to climate change and calls on the company to publish exposure reduction targets for oil and gas. Now here, I want to be very clear. Climate change is a material risk for QBE, and we believe we must play a part in the global response to this challenge. We support the objectives of the Paris agreement, and we made a number of important changes within our business to limit our own environmental impact. We've also made changes to our investment and underwriting portfolio, including our commitment to phase out all direct insurance services for all thermal coal customers by the first of January 2030, at the latest. We're making good progress on our climate change action plan, consistently delivering on the commitments that we've made to our shareholders. This has been recognized externally, including by nonprofit climate research provider, CDP, which scored QBE a B for corporate transparency and action in 2019, up 2 places on the prior year. QBE was also named the Finder Green Insurer of the Year earlier this year. All of this validates our comprehensive approach to this issue. We've already committed to setting metrics and targets to measure and monitor climate-related risks and opportunities during this 2020 year. The targets will be portfolio-wide, not just confined to oil and gas as the proposed resolution asks, and they'll be published in our 2020 annual report, 1 year earlier than the timing described in the proposed resolution. And it's on this basis that your Board strongly recommends shareholders vote against this resolution. Shareholders have also been asked to vote on a resolution calling on QBE to develop a policy regarding World Heritage and Ramsar sites. Again, the Board recommends that shareholders vote against this resolution as we've outlined -- and we've outlined our reasons in the Notice of Meeting. However, I would note that the basis for this resolution appears to be a proposal here in New South Wales to raise the height of the Warragamba Dam wall to provide flooding mitigation for communities downstream. In particular, there are concerns about the potential impacts on the World Heritage, environmental and cultural heritage values. I want to emphasize that QBE has absolutely no role in deciding whether this project proceeds. This is a matter for relevant state and federal authorities, and I'm confident that they will carefully consider all of the potential impacts including World Heritage values. While we welcome the interest the proponents of this resolution have shown in QBE, there are other more relevant and appropriate forums for stakeholders to engage on this proposal, including the environmental impact studies currently underway, and I'd encourage them to engage through that mechanism. Ladies and gentlemen, to summarize and conclude. 2019 was a positive year for your company as we further embedded the important disciplines that are so fundamental to the long-term successful operation of a property and casualty insurance company. We made good progress on our sustainability journey and, in particular, on our climate change action plan. And on behalf of the Board, let me say again how proud we are with the positive external recognition that that's received. We continue to invest in the development of our people and the systems that support our operations. Both of these resources are fundamental to the future success of our organization. And as we confront the challenges of a global pandemic, we've strengthened the financial resources of the organization to enable us to cope with a range of extreme scenarios and so that we can emerge strongly on the other side. I, again, thank all of our people for their focus and dedication during 2019 and during this unprecedented period. And I particularly want to mention Pat and his group Executive Committee for their leadership and untiring efforts for QBE. I'd also like to thank my Board colleagues for their support, wise counsel and commitment and for the immense privilege that I have to serve as Chairman of this great company. As shareholders would be aware, my predecessor, Marty Becker, decided to step down as Chairman and subsequently as a nonexecutive director earlier this year. And I want to pay tribute to Marty's service to our company and to the strong legacy that he leaves. And finally, ladies and gentlemen, thank you, our shareholders, for your continued support and belief in our organization. I'll now ask Pat Regan, our Chief Executive, to address the meeting. And then following Pat's remarks, we'll move to the shareholder questions. Pat?

Thank you, Mike. I would also like to welcome shareholders to this unusual Annual General Meeting and engage my thanks to you for engaging with your company in this new way. Almost overnight, COVID-19 has changed how we live and how we work. For some, this has created new hardships, particularly for those now experiencing unemployment because, for example, they simply cannot work from home. It's also changed how we communicate, both personally and professionally. I'm pleased that technology has allowed us to meet in this virtual way just as investments that QBE has made in technology over the last couple of years are also ensuring that our global teams are well equipped to meet the needs of our customers at this critical time. Our workforce is, of course, largely office-based. And in every one of our businesses, our people have made a smooth transition to home-based operations, working and collaborating remotely. That technology enablement has been one of the 4 key areas that we've made focus on over the last couple of years, which means QBE confronts the current economic and health crisis from a position of strength. We've simplified our business, reducing our geographical footprint. This has streamlined how we manage the group and enabled significant cost reductions. In addition, we've systematically overhauled our underwriting capability, culture and performance, primarily via our Brilliant Basics and cell review programs. This has enabled us to upgrade our core capabilities of pricing, risk selection and claims management and achieve a consistent approach to doing business across the group. We've also revolutionized our culture right across the company through our QBE DNA. At times like these, culture is more important than ever. As the saying goes, culture eats strategy for breakfast. Today, we are more agile, more innovative and more creative company. And this has been well and truly on display as our people have adapted to the changes imposed on them by the global response to COVID-19. This whole program of work both underpinned the strength of our financial performance in 2019 and will also be vital to our ability to withstand and navigate the challenges ahead. And let me recap briefly on our financial performance for 2019. We have made good progress across all of our group-wide strategic priorities and achieved positive results in Australia Pacific and in international, while also starting to see improvement in the underlying fundamentals of our North American business. We continue to see improvements in the quality and resilience of our earnings, underpinned by those cell reviews and Brilliant Basic programs. We achieved rate increases across the group of 6.3%, with increases in the second half of the year, the strongest we've seen in more than a decade at 8.3%. Our attritional claims ratio improved again by nearly 3% to 47.5%. Since peaking in the second half of 2017, the attritional claims ratio has now improved by almost 7%. And also worth highlighting that in Australia Pacific, the attritional claims ratio has improved now by almost 11% since we introduced the cell reviews and Brilliant Basic program there in the second half of 2016. In line with our cost commitments, we saved over $100 million in 2019, with $70 million of that underlying savings, nearly double our target for the year and well underway to our $130 million target. And our investment returns in 2019 exceeded the upper end of our guidance, delivering a return of 3.6%, with returns of pretty much all of our asset classes ahead of the relevant benchmarks. The strong rate gains we saw at the end of 2019 continued into the first quarter of this year. In Q1, we achieved organic premium growth of more than 9% and the rate increases across the group of 7.5%, and retention right across the group was strong. This is all despite the challenges of COVID-19 and a real testament, I think, to the hard work of our teams. However, the world has obviously changed dramatically. And I'm going to spend a few moments now updating shareholders on how your business is responding to these unprecedented set of events. First and foremost, our priority has been the protection of the health and well-being of our people. As this situation has evolved, we responded rapidly both due to the advice of the World Health Organization and local authorities. I've been really proud of the way our people have adapted to these new circumstances and the extraordinary work they're all doing to access the tools, equipment and support they need to work effectively, productively and stay connected to their colleagues and their customers. Importantly, this has meant we've been able to maintain our customer service levels. And support our customers as they themselves come to terms with the pressures of COVID-19's and the change in their own circumstances. We've been proactive in seeking to alleviate some of the pressures with a range of tailored initiatives for our customers now in place across our businesses. To give you a few examples of that, here in Australia, we've launched our COVID-19 relief benefit, which puts $50 back into the pockets of our motor car insurance customers, representing an average 25% saving for our motor insurance policies from April to June. This is a small but tangible way we can help. And of course, reflects the fact that COVID-19 travel restrictions have resulted in fewer vehicles on the road and fewer insurance claims. We've also launched small and medium business relief package, which contains a suite of measures designed to assist this critical section of the economy. In North America, our team were also directly supporting our customers, including through deferred premium collections for our U.S. crop customers. Our North American operations donated 95,000 face masks to hospitals and medical facilities facing shortages and the team have been working to deliver with our broker partners to deliver those masks to clients in need. And I also wanted to share an example from the U.K. Our underwriting and claims teams were recently approached by a large multinational pharmaceutical business, for which we provide employees' liability cover. A number of that business' highly qualified research teams were keen to volunteer alongside the National Health Service in testing suspected COVID-19 patients in hospitals and in clinics across the U.K. But naturally, the pharmaceutical business wanted to extend the employees' liability cover for this out-of-remit activity. By applying both our underwriting discipline, but also balanced with a flexible approach, the QBE team assessed the hazards and found ways to manage the risk. So the pharmaceutical business could get the cover and also enable this important work to be carried out at no additional cost to the customer. At times like this, it's also vital that businesses step up to assist the most in need in the communities, which is why last month, we directed AUD 2.6 million to support QBE Foundation's existing charity partners across the world in dealing with the increased demand for their services due to COVID-19. These funds are being deployed through a range of agencies, including QBE's disaster relief partners, the Red Cross and Save The Children. Just one example of where these funds will have an immediate effect is in Save The Children's work in Papua New Guinea, Vanuatu, the Solomon Islands and Fiji where communities are at even greater risk in the wake of tropical cyclone Harold. Our support will assist Save The Children with promoting social distancing and ensuring families can buy essential food and hygiene supplies by delivering cash transfers using mobile phones, also delivering public health messages through engagement with the communities and rolling out an online education platform. Naturally, the insurance industry will not be immune to the impacts of COVID-19. The global economic recovery from this pandemic will be prolonged. However, we're taking steps to ensure QBE is prepared for both the challenges but also the opportunities ahead. I'll talk shortly about how we're well insulated from a capital management point of view. However, at the same time, we're protecting the financial strength of the business. I believe it's now more important than ever that the entire insurance industry accelerate the momentum on our transformation to a digital business. The digital disruption and related trends that were underway before the onset of this global pandemic will only become faster and more pronounced through the recovery. COVID-19 has turbocharged how we all use and engage with technology in an unprecedented and irreversible way. Our customers will expect that we keep pace with that. For our industry, the pace of this change means that there will be inevitably fast adopters, while others will get left behind. It's more important than ever that QBE accelerates our own program of work to build the best-in-class data and digital capabilities to make sure we're better able than ever to support our customers and to position QBE for growth. This will remain a core focus for us in 2020 and beyond. Turning to our capital position. As Mike discussed earlier, we've made a series of what we think are prudent choices to put in place a comprehensive capital plan to protect the strength of our business in response to the current economic crisis. We've significantly derisked our investment book, including exiting all equities and lower grade credit risk. We've improved our reinsurance protections by purchasing additional crop reinsurance, and we've also further reduced our North American wind and cat retention ahead of the North American windstorm season. We successfully completed a $750 million equity raise, which I'm pleased to say, was overwhelmingly supported by our investors, with the level of demand for the group shares, resulting in the book being heavily oversubscribed. We're able to allocate 100% of the issue to existing shareholders and all shareholders who elected to participate were allocated at least their pro rata to their existing holdings. Importantly, eligible retail shareholders also now have the opportunity to participate in a non-underwritten share purchase plan, which is also receiving strong interest. This plan overall takes QBE's capital position to an extremely strong level and above the top end of our internal benchmark range. It positions us to both withstand almost any foreseeable scenario, but also makes us well positioned to take advantage of growth opportunities as they arise. [ And however that ] remains uncertain, QBE confronts these challenges from a position of strength. And we thank our shareholders for your ongoing support of QBE.

Pat, thank you for your remarks. Ladies and gentlemen, this is a shareholders meeting, and therefore, only shareholders, their attorneys, proxies and authorized corporate representatives are entitled to vote and ask questions. Questions relating to the personal or business affairs of shareholders, including as a customer, are not appropriate for the AGM but can be answered outside the meeting. This year, we again asked shareholders to submit questions prior to the meeting. Whilst we've not provided individual responses, the key themes within the questions have been answered through my address or through Pat's address. And we thank shareholders for taking the time to submit questions as we value your views. I'm now opening up the meeting to questions from shareholders. Questions can be submitted at any time on any of the items of business during the meeting, either online or by telephone. All questions should be addressed to me as the Chairman and should start with the item of business to which it relates. I ask that you keep your question short and to the point so that as many shareholders as possible have a chance to participate in today's meeting. Please note that as our time is limited, it's possible that not all questions will be able to be answered today. And if we receive multiple questions on one topic, they may be amalgamated together. I refer you to the instructional slide now on your screen. What we will do is deal with questions that have come via the Lumi app first and then move to those that are on the telephone.

The first question has come through. It's an interesting question, which asks, as the largest shareholder, who is Maple-Brown Abbott's representative on the Board? Well, Maple-Brown Abbott is a top 25 shareholder. He's not our largest shareholder. And there is no representative of Maple-Brown Abbott on our Board, although I do acknowledge that I was a Director of Maple-Brown Abbott from 2017 until -- 2007 until 2016. There are some amalgamated questions that have come through from a number of shareholders, which relate really to resolution 5(b). The question really is around why did we separate thermal coal but we're lumping oil and gas with portfolio-wide metrics and targets. Well, I don't think that's the case. What we have committed to do is we've committed to be very clear about our targets during this 2020 year. And as I said during my remarks, we'll publish those targets as part of our 2020 annual report. That will be specific targets, and that's the commitment that we've made. And it's what's also set out in our climate change action plan. I think the other question that really comes from this is, are we willing to underwrite and invest in unconventional and extreme oil and gas extraction? We've set out in our annual report and also in our sustainability report the way in which we try to bring ESG considerations into the determination of any portfolio that we would seek to underwrite. And certainly, if we're put with unconventional and extreme oil and gas extraction, we would apply those same principles. Although I've got to say, and Pat, you might have a comment here, I'm not aware that we've been asked to consider any of those types of activities.

No, Mike. And we obviously also make a similar consideration for any investment activities that we undertake.

Yes, true. There is a further question, which is, again, related to this. It's concerning QBE has left the Business Council of Australia in 2019. And the question asks what industry association does QBE now lobby for ambitious and effective policies to reduce emissions and climate adoption. Well, there are a variety of ways in which QBE does this, including quite directly. But also, we are a member of the Insurance Council of Australia's Climate Action Group and fully support the activities and recommendations of that group as well as also being a member of the Geneva Association, which also makes significant business application around its approach to lobbying for climate change and for action. There's a quite a detailed question that's come through regarding the potential raising of the Warragamba Dam from a shareholder, who's an indigenous woman and whose country is behind the dam wall, talking about the impact that is going to be felt on rock at sites and traditional camp sites and so on. The question that is being asked, I think, is how is QBE going to deal with this issue? As I mentioned during my remarks, QBE basically has no role to play in terms of the determination of whether the raising of the Warragamba Dam wall will go ahead or not. We believe that the appropriate way to deal with this is through the environmental impact studies, which are currently underway. And which I'm sure will consider not only the impact on World Heritage and Ramsar sites as well as on indigenous country. But also we'll weigh that up against the downstream benefits for property and life of the flood mitigation that comes with this. But as I mentioned in my presentation, that decision will be made by federal and state authorities, not QBE. There's also a question related to that asking, can we confirm that QBE will not directly or indirectly, through peak bodies or other subsidiary companies, invest and ensure advocate for the proposal to raise the Warragamba Dam wall. Well, certainly, QBE is not intending to make any submission on this. We do note that the Insurance Council of Australia has made a submission, which deals with the mitigation benefits, but also, which raises the issues around the effects upstream on that. And as I said earlier, we believe that the approach to this is -- or the best approach to this is in terms of dealing through the environmental impact studies, which will, I'm sure, consider all parts of that. And then I think we have one last question before I go to those on the phone, which asks whether we'll consider using this technology for future AGMs, even if things go back to normal in the not-too-distant future. I guess that's something that we'd have to take on board. We're aware that the treasurer actually gave a 6-month exemption for this type of meeting to be held. If that is extended, then we would consider the ways in which we can do this. But at this stage, that exemption is only there for 6 months. I think at the moment, that has dealt with the questions that have come through online. We may now go to those that have come via the telephone.

Just while waiting here, I might add on the last point, Mike. I think this current crisis is changing how we do all of our business using technology. And I think we committed to reducing our travel for a variety of impacts, the health and well-being of our people but also the climate impacts of that. We reduced travel by 20% in 2019 before the impacts. And obviously, the reductions this year will be profound. But I think this will -- this change will be set to stay. I think we'll reduce the amount of travel we do, I do, and its associated impact on the environment.

With the joys of technology, we are waiting for the questions from the teleconference.

Your line is now open.

Thank you. Yes. I wanted to ask that in a meeting back in March QBE had with the Market Forces group, you told that group that it's basing its climate risk metrics and targets on a 1.7 degrees of warming scenario. So my question, I guess, is in 2 parts. The first part is why not the 1.5 degrees in line with the ultimate goal of the Paris agreement? And the second part is if QBE has modeled the hit its earnings will suffer with that additional 0.2 degrees of warming? And if you do have a figure on the earnings hit, what is it? And will it be revealed to shareholders?

Well [ Mr. Brait ], certainly, we've done extensive work on this, and we're satisfied with the 1.7 degree model that we are using. And in fact, Carbon Brief in its assessment of pathways, acknowledged that, that was consistent with something still approaching the 2-degree target of the Paris agreement. We set out in our sustainability report significant information on that. And I'm sure that, that report will continue to discuss the approach that we're taking to achieving that, the principles of the Paris agreement.

Next question is from [ Jo Dodds ].

I'm speaking in regard to item 1. I'm again speaking out about the climate crisis after watching my town lose 69 homes in 2018. And that's when Bushfire Survivors for Climate Action formed to give a voice to those who understand how savage the impacts of climate-fueled bushfires already are. This year's fire threatened my home for 6 weeks. And in my shire alone, 400 more homes and 2 lives are now lost. There was an out-of-control burn 6 kilometers from my house only last week. I want to make it clear. I will never feel completely safe at home again. Now at last year's AGM, in response to questions about QBE's willingness to underwrite polluting oil and gas, both the Chairman and the CEO insisted that the new energy policy was a living document. Mr. Becker said we'll continue to assess QBE's climate and energy policies for tar sands, gas, oil, et cetera, and insisted that the policy could change tomorrow. We're a year later with no change. And considering the last 12 months have included the worst bushfire season in Australia's known history, why has nothing changed? Now I spoke to several board members after the last AGM, and they had tears in their eyes when they heard the stories of my community. It leaves me wondering if they were just crocodile tears and if QBE's energy policy is still a living document or whether it has died due to neglect.

Ms. Dodds, firstly, can I just express my great concern for you and for your community. I've seen firsthand the devastation that bushfires can cause and the disruption to our lives. And I certainly understand your concern that because of bushfire, you cannot feel totally safe at home any longer. And I'm very sorry about that. Our energy and our climate action plan are living documents, and we continue to look at that. I mentioned during my remarks and in terms of the answer to the previous question that we do take into account the exposures that are -- that we are facing, and we try to apply ESG considerations to everything that we underwrite. And also, as Pat said, we apply those same considerations in terms of the investments that we make. We believe that importantly, mitigation and community preparedness is something that also needs to be bought into this whole equation. And it's why we make significant contributions to our community partners, Red Cross and Save The Children, to try to ensure that we are there not just after the event, but also that there can be work on that mitigation and preparedness. So as I said, I empathize with you and with the issues that you and your community have had to go through over the course of the last couple of years, and I hope that the [ coming ] bushfire season is a respite for all of us.

So can I just add, there is no way that we can mitigate in a way that will protect my house from the next fire. And if I have to come to the next AGM with no house, God help us all.

I hope that, that is not the case for you.

Thank you.

The next question next question is from [ Harrison Barkett ].

So [ Harrison Barkett ] here. Last year, the UNESCO World Heritage Committee said that the inundations -- the inundation within the Blue Mountains World Heritage property resulting from the raising of the Warragamba Dam wall are likely to have an impact on the outstanding universal values of the property. And the International Commission For Monuments and Sites, the peak archeological body in the world, said that neither the decision-making or process for the proposed raising of the Warragamba Dam wall nor the preemptive proposed New South Wales enabling legislation comply with World Heritage obligations. My questions are to the Chairman. If QBE has no involvement with the Warragamba project as he stated today, why does the Board not immediately incorporate the PSI guide written by the World Wildlife Fund and the UNEP FI's Principles for Sustainable Insurance into its policies as it said it supports in its brief to shareholders recently?

[ Mr. Barkett ], thank you for your question. The guide you're referring to is protecting our World Heritage, which was released in October of 2019. That's certainly is separate to the PSI, but it's an adjunct to it. We've begun the process of investigating the implications of that guide. And that will be ongoing during the course of this year. And as you would appreciate, the COVID-19 crisis has actually distracted us from being able to deal with that as quickly as we might otherwise have done. But we will certainly be considering that. And we'll make any adjustments after that due consideration. However, I should also make the point here that our first priority, particularly from the perspective of the Principles for Sustainable Insurance is climate risk. And that's the one where we'll be putting most of our efforts.

Can you give shareholders a timeline for your implementation of those guidelines for World Heritage?

No, I can't at this stage because, as I said, we're considering our process on that at the moment. And frankly, I don't know how long this COVID-19 issue is going to be with us and as I said, that's actually certainly distracted us from being able to consider that as quickly as we might have liked We have another question on the phone, I think.

The next question is from [ Stuart Barner ].

So my question relates -- relates to resolution 5(b). I'm from Australian Ethical Investment. QBE's current energy policy does signal that QBE is taking a business-as-usual approach to the oil and gas, investing in and underwriting that sector. At the same time, oil and gas projects, which are already planned even over the next 5 years put us on a trajectory for global warming over 2 degrees and even further away from a hope of limiting moving to 1.5 degrees. So just to drill down and to understand the climate work that's currently being undertaken, which you've spoken about, will that work include specific climate criteria for new oil and gas projects before QBE makes a decision whether to ensure what we're investing in, in order to safeguard that QBE doesn't support projects, which are contrary to its support for the Paris agreement and which will violate Australian and international climate commitments?

Well, [ Mr. Barner ], thank you for your question. As we noted, in the Climate Change section of our 2019 Annual Report, we do apply ESG principles to any consideration regarding underwriting requests that come to us. But also, we apply that to investments that we make as well. And that would continue to be the case in terms of any new proposals, particularly to underwrite oil and gas or any other type of underwriting. We would apply those same principles to it.

And do they relate to alignment with the Paris Climate agreement and QBE's stated support for that -- for the objectives of that agreement?

Yes, they do. And they also align with principle one of the Principles for Sustainable Insurance, which is about embedding ESG considerations into our decision-making.

Can I ask another question in relation to Resolution 6(b)? You had said that the proposal to raise the Warragamba Dam wall is a matter for relevant government authorities and that QBE has no role in deciding whether the project proceeds. Having said that, QBE's industry association, the Insurance Council of Australia, the ICA, has taken a position and has privately lobbied and publicly advocated for the decisions to be made to allow the project to proceed. Given that QBE is one of Australia's 4 largest general insurers, which together account for the vast majority of the Australian general insurance market, given that you and those other large insurers are all members of the Insurance Council of Australia have all committed to the Principles for Sustainable Insurance, my question is how can QBE work with its peers to help safeguard that the Insurance Council does not advocate and lobby for government approval of projects, which are contrary to the Principles for Sustainable Insurance?

Well, QBE is a member of the Insurance Council. We've been a signatory to the Principles for Sustainable Insurance since 2015, and I'm certainly aware of at least one other, if not 2 other of the 4 major insurers in Australia that are also signatories to PSI. We've also -- we are also members of the Insurance Council's Climate Action committee and support the approach that has come out regarding the ICA, and hence, the Australian insurance industry's approach to climate change. So I think we are playing our part in terms of shaping the approach of the community -- the insurance industry to that. In respect to your question about Resolution 6(b), my understanding of the Insurance Council's submission in respect of the Warragamba Dam wall is it has dealt with the issue of the benefits of mitigation downstream, but also has raised concerns about the upstream impact on that, which I think is an appropriate balanced approach to take to that.

But it is taking a position that the project should proceed. So it is not leaving the balancing of those considerations in the hands of, as you say, the appropriate authorities being the relevant government authorities.

Well, the Insurance Council will certainly not be making a decision on that. That will be a matter for federal and state authorities. And I'm sure they will take into consideration all of the submissions that are made to the environmental impact assessment process.

Thank you, Chair.

Do we have any other questions on the phone? Is there? We have a couple of other questions that have come through online, asking us what post codes or suburbs is QBE no longer prepared to offer general insurance due to heightened risk of bushfire, flood or cyclone? And Pat, I might ask you about that one.

Thanks, Mike. Thanks for the question, Daniel. No areas specifically, Daniel. However, clearly, there's areas of the country, and we should state that we obviously see climate change as a major risk as an insurance company, and the impacts of climate change, obviously, increase the frequency of weather-related events. So there are areas of Australia that it gets harder to provide affordable insurance, particularly those areas prone to either bushfire impacts or cyclone impacts. So we're trying to work with government to do mitigation, as Mike talked to earlier, to make that the impact of those events more manageable and to make insurance in all areas more affordable.

Thanks, Pat. We've had a question come through from a shareholder asking why their specific question and comments haven't been asked. As I mentioned during my introduction to these questions, we have included questions in groupings where that's appropriate to do so. And I believe that we've addressed the question broadly rather than specifically asking -- addressing that question. The next online question regards -- is in regard to future dividends in the 2021 financial year, regarding our outlook and our increased capital on issue. Well, we're currently in our 2020 financial year and 4.5 months, give or take, into that. And given the uncertainty that's around with COVID-19, it's very difficult to talk about what our next dividend -- our interim dividend may be, let alone go to 2021. However, our current policy subject to the new guidelines that have been introduced by APRA, is that we have a dividend payout ratio of 60% to 80%. I think?

Yes, up to 65%.

I beg your pardon, up to 65%. And we would, first and foremost, look to apply that across that year. But as I said, subject to the performance of the business, subject to what happens from a COVID-19 point of view and also subject to the guidelines that APRA has recently introduced for insurance companies and financial institutions. We also now have quite a detailed question and comment regarding Resolution 6(b) and the ultimate question is how and when will the QBE Board engage with our customers in the Blue Mountains community about their views on the Warragamba Dam projects and the risks it poses to the UNESCO status of the Blue Mountains and the tourist economy of the Blue Mountains? Well, as I've mentioned a few times, this is a decision that is going to be made by federal and state authorities. It's not a decision that QBE is going to make. We believe that the best and most appropriate way in which shareholders and, in fact, all communities can deal with this is by participating in the environmental impact assessment studies and making sure that the approach that is taken in terms of making that decision is a balanced approach. We have a follow-up question from [ Mr. Brait ] regarding have we modeled how much more of a hit to our earnings we will suffer with an additional 0.2 degree of warming coming from that. We have modeled what we think this is going to be. We have said that we will be submitting in our 2020 annual report, the metrics and targets around what is coming from our modeling but also from our reporting against the recommendations of the task force on climate-related financial disclosures. And I should note that not only are there risks that come with this, but there are also opportunities. And we'll be looking to actually deal with both of those. We have another question that asks us whether recommendations or the Resolution 6(b) would be against QBE's value framework in supporting a project that would fracture the aboriginal culture, heritage and the longest intact story line of this side of the country. I don't think I can be any clearer that this is not a decision that QBE will make. This is a decision that will be made by state and federal authorities, and I again recommend that those interested parties make a submission through the environmental impact assessment studies, which are currently underway. And Pat, there's a question here that talks about why will you not insure customers of thermal coal and not the miners themselves? I think that's asking whether we will actually insure the miners or the customers of...

Yes, I mean, obviously, in -- obviously, most states, worker's consortium provided by the states itself, obviously, including New South Wales and Victoria.

So we have said that we would continue to support statutory insurances that are required of those lines, but that is it. No further questions on the phone? Well, ladies and gentlemen, I'm told that there are no further questions on the phone, and there are no further questions that have come through online. So as there is no further business, I'll shortly be closing the polls for all items of business. So I now ask any shareholders who have not submitted their votes yet to do so now. [Voting]

I now close the poll and declare the meeting closed. Ladies and gentlemen, thank you for voting, and the results of each item will be announced on the ASX shortly. And thank you to our shareholders and our guests for attending this meeting. This meeting is now closed. Thank you.