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

Good morning, ladies and gentlemen. Thank you for joining me today at our 2021 Annual General Meeting. For those of you that I haven't met, my name is Mike Wilkins. I'm the Chairman of QBE Insurance Group Limited. On -- and on behalf of your Board, it's my pleasure to welcome you to this AGM. I also welcome those joining us via the web and via teleconference. If you're watching the live webcast while also listening through the teleconference, you may notice a slight delay with the webcast. Before we begin, I'd like to acknowledge the traditional owners of the land on which I stand today, the Gadigal people of the Eora Nation, and recognize their continuing connection to land, waters and culture. I pay my respects to elders, past, present and emerging and any First Nations people joining us today. Every effort has been made to ensure that this meeting runs smoothly. Arrangements have 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. Shareholders here in person will also have a chance to ask questions when we reach that part of the meeting. If any technological issues do arise and it becomes necessary to provide any procedural information in respect to 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 2021, will be taken as read. The minutes of the 2020 Annual General Meeting being in order was signed, and a copy is available for shareholders upon request via Computershare. Of course, joining me via teleconference is our Interim Group Chief Executive Officer, Richard Pryce. My fellow director, Jann Skinner, is here with me in the room. And our other directors are joining via teleconference, our Deputy Chairman, John Green; Stephen Fitzgerald; Kathy Lisson; Sir Brian Pomeroy; Eric Smith; Tan Le; and Rolf Tolle. Our Group General Counsel and Company Secretary, Carolyn Scobie, is also here with me. Maria Dzopalic 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 Renae Cooper, are also here. 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 one 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. As I mentioned earlier, voting today will be conducted by way of a poll on all items of business. Shareholders who are attending in person have been issued with a Lumi device. Please refer to the screen behind me for instructions on how to vote. When voting opens, use the scroll wheel to highlight the resolution you wish to vote on then press the green square. Once you've read the resolution, press the green square again to see the voting options. Press 1 to vote for, 2 to vote against or 3 to abstain. Press the green square to move on to the next resolution or the red triangle to return to the full list of resolutions. Shareholders online should refer to the instructional slide now on your screen for voting instructions. If you're eligible to vote at this meeting and you've logged on as a shareholder, a new voting 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 the voting closed. I now declare voting open on all items of business. The voting icon will soon appear. 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. Proxyholders should note that all directed votes have been accumulated and recorded. Only proxyholders 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 law in each case with the exception of items 4(a) and 4(b), 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, which is now on your screen. [Operator Instructions] Shareholders who've attended in person will have an opportunity to ask questions when we've reached that part of the meeting. I refer you to the instructional slide now behind me. To ask a question via the Lumi device, press on the microphone icon. When prompted, press the green square to confirm. Your microphone will turn on when you reach the front of the queue. When I call on you, you may ask your question using the Lumi device as a microphone. Please stand and ensure you're speaking clearly into the microphone so that you can be heard. To leave the queue, simply press the microphone icon and confirm your choice by pressing the green square. For those who'd 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 quoting QBE or entering the participation reference code number, 10013149. [Operator Instructions] And we're going to actually give you an exam on all of that before we move to the official part of the meeting. Thank you for your forbearance with that. As I said, there's a number of procedural matters that we needed to go through. I'll now give my Chairman's address to the meeting. As our Interim Group Chief Executive, Richard Pryce, resides in London, he was unable to travel due to COVID restrictions. And accordingly, I'll present a combined Chair and Group Chief Executive Officer address for this Annual General Meeting. However, as I indicated earlier, Richard has joined us by phone and is available to answer questions. It's heartening to be able to meet in person for this year's AGM. However, we remain acutely aware that the world continues to battle the effects of the pandemic and the many repercussions beyond the disease itself, including the long-term economic, social and health-related consequences. While there's reason for cautious optimism with the rollout of the vaccine gaining momentum, we're conscious that the prospects for economic recovery vary widely between countries and sectors. In the markets in which we operate, the economic outlook has improved, with the global economy now projected to grow at 6% this calendar year according to the International Monetary Fund. While monetary stimulus may be required in the short term to aid in the recovery and uncertainty remains, clearly, indicators support a greatly improved global economic outlook for 2021. In addition to the pandemic, we also witnessed significantly higher than normal catastrophe events around the world in 2020, which included a record number of storms in the U.S. and major bushfires. This has continued into 2021, and I'll discuss this in more detail when I provide an update on our first quarter performance. Throughout these challenging events, we continued to adapt the way we operate in response to the significant hardship some of our customers and communities are facing. In response to the pandemic, in Australia, we provided a range of additional support measures and financial relief, including premium rebates and payment holidays. We also scaled up our support for our customers and our communities in response to significant weather events, paying claims as quickly as possible and supporting with disaster relief and risk management education. In addition, we continued our important work with charity partners, the Red Cross and Save the Children. This ongoing support for our customers and our communities is made possible by the hard work and dedication of our people. I'm proud of how our teams have responded in this time of uncertainty despite the many challenges that they've faced with long periods of working remotely and, for some, the terrible personal consequences of the pandemic. On behalf of the Board, I extend my sincere thanks to all of our people and to Richard and the entire executive team for their adaptability and perseverance. Moving now to performance. Your Board recognizes the disappointing headline statutory loss that was reported in 2020. The results were impacted by COVID-19 as well as heightened catastrophe activity along with an unacceptable level of prior year reserve deterioration. On investments, we decided early in 2020 to adopt a conservative asset allocation given greatly increased economic uncertainty. And whilst we had a stronger end to the year, our annual investment return was much lower than expected. In light of the substantial 2020 statutory loss, the Board elected not to declare a final dividend. In arriving at that decision, we were conscious of maintaining a strong balance sheet, which provides us with considerable flexibility for future investment in, and growth of, our business. However, we do expect to resume dividend payments in 2021, up to 65% of adjusted cash profit, as the economies in which we operate recover and QBE returns to profitability. Despite the challenging landscape, the strength and resilience of our business is evident in the group's underlying financial performance. Pricing momentum accelerated during 2020, especially in the Northern Hemisphere, and this contributed to a further improvement in our attritional claims ratio. Encouragingly, growth in our top line was stronger than it has been for many years, with underlying gross written premium up 10% from 2019, underpinned by an average group-wide premium rate increase of 9.8%. Strong market conditions are continuing into 2021, as evidenced by the 8.9% premium rate increase achieved in the first quarter, compared with 7.3% in the first quarter of 2020. Each of our divisions achieved premium rate increases in line with our expectations and stronger than the increases recorded in the prior corresponding period, including 10.2% in North America, 9.1% in international and 7.5% in Australia Pacific. The top line has improved meaningfully with headline GWP increasing 28% compared with the first quarter of 2020 or 23% on a constant currency basis. This reflects premium rate increases and continued growth in select areas of the global portfolio, coupled with a very substantial uplift in Crop premiums due to significantly higher commodity prices and underlying growth. Excluding Crop insurance, constant currency GWP growth was 13%, while the overall net earned premium growth was 6% on a constant currency basis. Earned premium growth is expected to increase across the remainder of 2021, in line with premium earning patterns. During the first quarter, we saw further devastating catastrophe events with Texas experiencing winter freeze in mid-February, which triggered widespread and sustained power outages and contributed to significant water damage from burst pipes. This was followed in March by widespread flooding in the Hawkesbury-Nepean Valley in the New South Wales mid-north coast and Southeast Queensland, which ranged in severity from a 1-in-50 to a 1-in-100 year event. [ Western Australia was also recently impacted by Cyclone ] Seroja with widespread property damage and power outages. These and other events contributed to a net catastrophe cost of around $260 million, which is above the group's first quarter allowance of around $180 million and also above the $230 million of catastrophe claims incurred in the first quarter of 2020. Despite the adverse catastrophe outcome, the group's overall first quarter combined operating ratio is in line with our expectations. Our position with respect to the net ultimate cost of COVID-19 remains unchanged. During the first quarter, global yield curves steepened sharply as the economy began to recover and central banks maintained stimulatory monetary policy settings. The decision to adopt slightly shorter asset duration relative to the group's insurance liabilities resulted in a net mark-to-market gain from higher risk-free rates of around $70 million. Moreover, the shift in yield curves during the quarter has increased the group's fixed income running yield to around 50 basis points at the end of that quarter from around 40 basis points at the end of 2020. Moving on to our balance sheet. As the pandemic emerged, we took preemptive action to strengthen our capital position and protect the balance sheet against potential downside scenarios. These action has proved beneficial, enabling us to capitalize on profitable growth opportunities as they arise as well as support our target regulatory capital range and our gearing level. At the end of the first quarter, capital remains strong with our APRA PCA multiple increasing marginally to 1.73x from 1.72x at the end of 2020, and in the top half of our target PCA range of 1.6 to 1.8x. During 2020, we saw changes to the Group Executive Committee with the departure of our Group Chief Executive Officer, Pat Regan, due to a breach of our Group Code of Ethics and Conduct. The Board acted swiftly in its decision, demonstrating our commitment to strong corporate governance and the importance of all employees being held to the same standards. Following the departure of Pat Regan, we announced that we'd undertake a review of QBE's culture, which commenced this year through our Culture Accelerator program. The Culture Accelerator will help enhance our culture whilst also building a blueprint for the future success of our business. It seeks to build on the great foundations we have with our QBE DNA to empower and motivate our people and help us reach the next stage in our evolution. Through this process, we're committed to listening to our people and involving them along the way in an environment where everyone feels safe to speak up on matters, big and small. With the support of the QBE Group Board sponsors, John Green and Tan Le and the GEC, the Culture Accelerator will see us define our target culture, better understand our culture today and then set our blueprint for change. We're also aware of the important role a diverse and inclusive workforce plays in building our culture for the future, and we maintain our ongoing commitment in this area. We're very pleased to be recognized in the top 100 of Equileap's 2021 Gender Equality Global Report and also to be included as a member of the 2021 Bloomberg Gender-Equality Index. We came close to achieving our goal of having 35% women in leadership by 2020 with 34.8%, and we achieved our target of having 30% women on the Group Board. However, we know that there's more to do, and we've since developed a new target of having 40% women in leadership and on the Group Board by 2025. In highlighting our commitment to diversity, we're pleased to announce the appointments of Fiona Larnach as our new Group Chief Risk Officer; and Sue Houghton as our new Chief Executive Officer, Australia Pacific, with a Group Executive Committee now comprising 45% women. In March this year, we're also pleased to announce the appointment of Andrew Horton as Group Chief Executive Officer, replacing Interim Group Chief Executive Officer, Richard Pryce. Andrew will commence with QBE on the 1st of September of this year, and he'll be based in Sydney. Andrew was most recently the Chief Executive Officer of Beazley plc, and he brings to QBE more than 30 years' experience across insurance and banking with extensive experience across international markets. Importantly, he's an inclusive and collaborative executive who has a passion for developing talent, which will further support the Board's focus on succession planning and talent development. Furthermore, he's got a deep understanding of the insurance landscape and the opportunities and challenges across each of our markets, which see him well placed to build QBE for the future. Upon Andrew's commencement, Interim Group Chief Executive Officer, Richard Pryce, will move to an advisory capacity, providing a 3-month leadership transition before retiring from QBE in December of this year. And I'd like to thank Richard, who stepped in to lead QBE with focus and clarity at what was a very critical time for the group. On behalf of the Board and all of our shareholders, we thank him for his commitment and service to our company over many years. Throughout 2020, we made good progress around our strategic priorities. Our focus for 2021 intentionally remains consistent with our activities anchored around 4 key pillars: performance, customer focus, modernization, and talent and culture. Underpinning our focus on performance are our cell review and Brilliant Basics programs, both of which are now fully embedded into the fabric of QBE. Recognizing that there's always more work we can do to improve performance, we've reinvigorated the cell review process during the first quarter with a greater focus on more regular reporting metrics, including [ return on risk-adjusted capital. ] We also remain focused on delivering against our sustainability and climate commitments, which are a key element of our nonfinancial performance metrics. Central to our overall strategy is an imperative to ensure that we're closely aligned with our customers and that we understand their particular industries and how they're evolving. To support this, we officially launched Customer@QBE in the latter part of 2020. Customer@QBE is our global approach to delivering value for our customers in a responsible and accountable way. We remain focused on creating a customer-centric business that's more digitally enabled and supported by a modern technology infrastructure to better support the evolving needs of our customers, our people and our business. We continue also to make good progress with our talent and leadership strategy, building and developing our future talent pipeline. We'll focus on enhancing our culture and reinforcing a positive risk culture through the Culture Accelerator, and the Board is also committed to ensuring that we continue to invest in our leaders with succession planning a key area. Board renewal is also an important part of setting QBE up for the future. And as such, we are pleased to welcome Tan Le and Eric Smith, who both joined our Board in September of last year, supporting our digital agenda and broadening our skills in the North American insurance market, respectively. I'd now like to address the resolution that was requisitioned by a small number of shareholders that you've been asked to consider today. This refers to resolution 4 in the notice of meeting, and the substantive part of this resolution, part 4(b), can only be formally considered if shareholders vote in favor of resolution 4(a), which seeks to amend the QBE constitution. I'd like to summarize the Board's position in relation to this resolution. Make no mistake, the Board acknowledges that climate change is a material risk for QBE. We're proud of our commitment towards addressing this and the progress that we've made. We support the Paris Agreement and its objectives to limit global temperature rises to well below 2 degrees Celsius to mitigate against the impacts of climate change. Throughout 2020, we continued to expand our analysis of physical, transition and liability risks, including the identification of opportunities and material exposures. As a result, we're developing appropriate responses, and the output of this work is detailed in our 2020 Annual Report, including our progress and performance against our Climate Change Action Plan. In 2020, we performed scenario analysis to understand the impact of the transition to a low-carbon economy on our business, and we're committed to achieving net-zero emissions by 2050 in our investment portfolio, becoming the first Australian-headquartered insurance business to join the UN-convened Net-Zero Asset Owner Alliance. We continue the orderly transition of our business in line with the Paris Agreement, and we've delivered on our commitment to set metrics and targets to measure and monitor climate-related risks and opportunities. Our new environmental and social risk framework outlines our updated positions on a range of issues, including energy across underwriting and investment. This framework also includes the setting of targets that relate to coal, oil and gas. As of 1st of January 2022, for existing companies with 30% or more revenue from oil sands and Arctic drilling, QBE will only provide insurance where the company is on a pathway consistent with achieving the Paris Agreement. As of 1st of January 2030, for companies with 60% or more revenue from oil and gas extraction, QBE will assess whether the company is on a pathway consistent with achieving the Paris Agreement and will decline to provide insurance where that's not the case. This threshold will be reduced to 30% from the 1st January 2040. In the period leading up to these target dates, we'll continue to work with our oil and gas customers as they transition in accordance with the Paris Agreement. In addition to working with our energy customers, we increased our appetite for exposure to renewable energy. In 2020, we increased gross written premium from renewable energy by approximately 50%. QBE has got no direct investment in oil sands and Arctic drilling projects. We do have a small existing exposure to oil and gas companies in our direct investments, and we'll seek to reduce this exposure and the associated emissions in line with our commitment to net-zero emissions from our investment portfolio by 2050. We'll continue to enhance our approach to managing and disclosing climate risks and opportunities in line with the Task Force on Climate-Related Financial Disclosure recommendations. In 2020, we made strong progress on our climate and environment-related commitments, which are outlined in our sustainability report. We're proud of the external recognition of our progress with our CDP score moving from a B to an A- in 2020, putting us in the leadership band. The Board believes that it's essential that we continue to work through our analysis and strategic decisions in a methodical and coordinated way. And in light of the significant progress that we've made in recent years and our strong analytical foundations for future strategic decision-making, the Board recommends that shareholders vote against this resolution. Ladies and gentlemen, in conclusion, I'm proud of QBE and I'm proud of the people who work every day to support our customers. We've got a hardworking and talented team, a sound balance sheet and a program of work that allows us to better serve our customers, our shareholders and our communities. We continue to work with governments and regulators to better prepare for and to respond to low-probability, high-impact events like the COVID-19 pandemic. This has prompted a broad discussion within the industry as to how we provide appropriate support to our customers during this challenging time. Once again, I'd like to thank our 11,000 people around the world for their focus and dedication, and I also thank my fellow directors for their ongoing support and counsel, and I welcome our new directors. I'm exceedingly proud to be the Chair of QBE, and I thank all of our shareholders for your ongoing commitment to our great company. We'll now move to shareholder questions. Ladies and gentlemen, this is a shareholders' meeting. And therefore, only shareholders and 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, aren't appropriate for the AGM, but they can be answered outside of the meeting. This year, we again asked shareholders to submit questions prior to the meeting. And while we've not provided individual responses, the key themes within the questions have been answered through my address. We thank shareholders for taking the time to submit questions as we certainly value your views. Before we open the meeting to questions, I'd like to present a video of your directors speaking to their elections and reelections, as outlined in resolution 3 of the notice of meeting. This has been prerecorded due to the time zone differences of the directors who are currently overseas. As Jann Skinner is here with me today, she will speak to her reelection in person.

I'm pleased to submit myself for reelection to the QBE Board. I joined your Board in October 2014. I'm based in London. I serve as the Chair of the Investment Committee, Deputy Chair of People and Remuneration Committee, and a member of the Risk and Capital Committee and the Governance and Nomination Committee. I've had a 25-year-plus career in investment management, which has encompassed roles with Goldman Sachs in London, Tokyo, Hong Kong and Sydney. I was Chair at Goldman Sachs, Australia and New Zealand when I retired in 2012. I'm currently the Managing Partner of Affirmative Investment Management in London and serve on the Board of the Great Barrier Reef Foundation in Australia and the Champions of Change Coalition in Australia. I'm also a member of the Investment Committee of the British Museum here in London. And in Europe, I serve on the Board of Lombard Odier Investment Management. I had previously served as a member of the Board of Guardians of the Future Fund in Australia. I'm honored to have had the opportunity to serve on the Board and look forward to working with our Chair, Mike Wilkins; our incoming CEO, Andrew Horton; and the wider management team to assist QBE to maximize our potential and serve the interest of our customers, our shareholders, our people and community. And I would greatly appreciate your support for me to continue to serve on your Board.

Good morning, ladies and gentlemen. I'm very pleased to submit myself for reelection to the Board of QBE. I'm based in London, and I joined your Board in June 2014 after serving as an Independent Nonexecutive Director and as a Chairman on QBE's U.K.-regulated insurance boards for 9 years. I'm the Deputy Chair of the Audit Committee and a member of the Investment Risk and Capital and the Governance and Nomination Committees. I've held nonexecutive positions in the insurance industry for over 30 years. I previously served as a Nominated Member of the Council of Lloyd's of London. That's the insurance market. I was also Chair of the Independent Commission on Equitable Life Payments. I'm a former nonexecutive member of the Board of the Financial Conduct Authority in the U.K. That's our conduct regulator, where I served as a senior independent director. I also chaired the United Kingdom Treasury's Financial Inclusion Taskforce, the Payments Council and the Gambling Commission. And until 1999, I was the Senior Partner of Deloitte Consulting in the U.K. And after that, I took up a number of public, private and voluntary sector appointments. So I'm very grateful to have had the opportunity to serve on your Board, and I very much look forward to working with our Chair, Michael Wilkins; our Interim CEO, Richard Pryce; and of course, with Andrew Horton, who is the incoming CEO; together, of course, with the senior management team, to help continue to improve the performance of the QBE Group and to realize QBE's potential to be a highly successful global insurer and reinsurer. I would greatly appreciate your support to me to continue to serve on your Board. Thank you.

I am pleased to submit myself for election to the Board of QBE. I joined your Board in September last year and have very much enjoyed working with such an experienced and dynamic team. I'm based in the United States, and I'm a member of the Audit, Operations and Technology, and Governance and Nomination Committees. I am the founder and CEO of EMOTIV, a leading global neuroinformatics company advancing understanding of the human brain. We are pioneers in the commercial application of neurotechnology and have been at the forefront of developments in the creation of mind-machine interfaces, enabling computing applications to be controlled by thoughts. We've created technologies that can enhance employee well-being and productivity in the workplace and are developing new insights into brain health and cognitive performance. My entrepreneurial experience with machine learning, large-scale data analytics and emerging technologies will hopefully assist QBE in navigating its way through a fast-changing and disruptive technological and commercial environment. I have also been a contributor at the World Economic Forum and previously served on the forum's Global Future Council and on the forum's Board of Stewards on Shaping the Future of Information & Entertainment. I am honored to have the opportunity to serve on your Board, and I look forward to working with our Chairman, Mike Wilkins; our incoming CEO, Andrew Horton; and the wider management team to assist QBE to maximize its potential and serve the interests of our customers, our shareholders, our people and the community. I would greatly appreciate your support for me to serve on your Board.

I am pleased to submit myself for election to the Board of QBE. I joined your Board in September last year and I'm based in the United States. I'm a member of the Risk and Capital, Operations and Technology, and Governance and Nomination Committees. I have 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 when I retired. I have held a number of executive roles in my career, including President of USAA Life Insurance Company and President of Allstate Financial Services. I've also held various roles in property and casualty insurance with Country Financial over a 20-year period. I am honored to have the opportunity to serve on your Board, and I look forward to working with our Chairman, Mike Wilkins; our incoming CEO, Andrew Horton; and the wider management team to assist QBE to maximize its potential and serve the interest of our customers, our shareholders, our people and the community. I would greatly appreciate your support for me to serve on your Board. Thank you.

I'll now call on Jann Skinner to speak to her reelection.

Thanks, Mike, and good morning, everyone. As Mike said, it's very good to be able to be here in person although I'm not used to wearing a suit. I'm very pleased to present myself for reelection to the Board of QBE. I joined your Board in October 2014 after serving for 4 years as an Independent Nonexecutive Director on QBE's Australian-regulated insurance boards. I now serve as Chair of the Audit Committee and Deputy Chair of the Risk and Capital Committee and as a member of the People and Remuneration, and Governance and Nomination Committees. I have over 30 years of professional experience in audit and accounting with a focus on financial services, particularly insurance. I was an audit partner for 17 years with PricewaterhouseCoopers before retiring in 2004. Since then, I've been appointed to a number of nonexecutive director roles mainly in financial services. I'm a Director of Telix Pharmaceuticals Limited, HSBC Bank Australia Limited and Create Foundation, which works with children and young people in out-of-home care. I'd be very honored to continue to serve on your Board. And like my fellow directors, I look forward to working with Mike, with Andrew Horton and the wider QBE management team. Just on a personal note, I enjoy the theater, chamber orchestra and bird-watching although this was fairly curtailed during COVID. The last year has been a difficult year for everyone, and I extend my sympathy to those people around the globe who have been significantly impacted by COVID-19. I'd greatly appreciate your support for me to continue on the QBE Board. Thank you.

Thank you to all of our directors. I'm now opening up the meeting to questions from all shareholders. 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 questions 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 also ask that you choose one platform to ask your question rather than submitting the same question through multiple platforms. I refer you again to the instructional slides on how to ask questions on your screen and behind me. In terms of questions, we'll take questions from those who are physically in the room in Sydney first, followed by those who are joining us online, and then we will take questions from those who are joining us via the teleconference. So ladies and gentlemen, I now call for questions.

The first question, I think, is from [ Mr. Sapotre ]. I hope I got that pronunciation correct.

It's all right, Chairman. Thank you. In QBE's environmental and social risk framework, we have set revenue thresholds for oil and gas producers beyond which insurance will be refused if QBE decides the company is not on a "pathway consistent with achieving the Paris Agreement," as you mentioned in your address. According to this risk framework, the first of these assessments apply from 1 January 2022, for companies involved in tar sands and Arctic oil drilling. My question is, how will QBE carry out that assessment? And what will the criteria be?

I can go. I think I've got the gist of your question. As I mentioned during my address, we'll work with our customers as we lead up to those various states. The 1 January 2022, is rapidly coming upon us, and we've been very clear with those customers. Although I've got to say that, that exposure is very, very, very minimal for us. In the lead up to the 1 January 2030, we will continue to work with our customers, as I said, during my presentation. So it's not like there is a cliff that we fall off at the 30th of -- at the 1 January 2030. We'll work with those customers, many of whom are already in train to move to be in accord with the Paris Agreement, and many of whom are actually transitioning their own activities to recognize the needs that they have. A lot of them are actually reporting, or intent to report under TCFD. We'll be monitoring that. But importantly, and I mentioned Customer@QBE, we will know more about our customers, and we'll continue to apply all of those things in our determination of whether they actually are on that path. And as I said, if they are not, we won't offer them insurance. But if they are, we believe it's the responsible thing to help them to transition to meet the Paris Agreement in 2050.

I absolutely agree with that. And my question was, how will you assess whether they're compliant with Paris or not? Because it's just a question of transparency and accountability. I was just wondering if you're going to publish these assessments and what criterias are you going to use to determine the results of these assessments.

As I said, we will actually work with those customers, and each of them are somewhat different, looking at the targets that they are setting. And I think it will be inappropriate for us to indicate individual customer targets. What we will do, though, is continue to report through our annual report and through our sustainability report around the progress that we are making on that, but it will be in the broad rather than specific. Hopefully, that answers your question.

So you're saying that these assessments are going to be secret?

As I said, we will assess those as -- on a customer-by-customer basis, continuing to work with those customers as we move towards that 2030 date. And with respect, I think I have answered your question. I'll now move to the next question. We have a question from [ Mr. Carl Anderson ].

Mr. Chair, I'm [ Carl Anderson ], a shareholder and customer [Audio Gap] I wonder what your policy -- I wonder what the QBE's policy is on totally unearned premiums and whether directors and auditors are comfortable with these arrangements.

Sorry, if I understood your question, you're asking about unearned premiums and the...

The unearned premiums, I refer to the premiums paid in advance, pertaining to the period after there's nothing left to insure and particularly after you even refused to pay claims.

I think if I understand your question, you're asking, are we satisfied with the quantum of unearned premium that we have booked at this stage? We earn our premiums usually over a 12-month period, in line with the risk exposures that we are taking. If a claim is made during that 12-month period, then we will consider the claim, and QBE, like most insurers, pays the vast majority of all claims. If a claim comes in that relates to the period after the period of insurance, then obviously we're -- unless that reinsurance has been renewed, we are not on claim. We, certainly, as a Board of Directors, and I'm sure our auditors do as well, consider the unearned premiums that are on our balance sheet to satisfy ourselves that they are appropriate. We also satisfy ourselves, is there sufficient premium for the risk that we're being asked to take, and there's a particular test that our actuaries have to undertake against that, which the Board also monitors. So yes, we believe that the unearned premiums are appropriate for the risk that we're taking. I hope that...

I would like to ask a question. How did you manage to avoid the Royal Commission? I mean, charging the paper, life insurance premium since you monetary in comparison?

Well, I think like all organizations, QBE was very well aware of the Royal Commission, which occurred in 2018. We do not offer life insurance in any of our operations. But we also have learned from some of the outcomes at the Royal Commission and have adjusted our business practices accordingly.

So are you telling me you have changed your policy on unearned premiums?

We have not changed our policy on unearned premiums. It's an accounting policy. Those premiums are earned over the course of a 12-month period because people usually pay in advance, and we recognize the risk and match the earning of the revenue with the duration of the risk that we're being asked to take.

Unsatisfactory.

Next question is from [ Mr. Simon Bradshaw ].

Thank you, Chairman. I'm [ Dr. Simon Bradshaw ], and I'm the Head of Research at the Climate Council of Australia. We're fortunate to have some of Australia's most eminent climate scientists among our members as well as economists and some former fossil fuel executives. Mike, I wanted to ask you to say a bit -- sorry, is my voice clear? Yes. Excuse me, let's try this one. Chairman, Mike, I'd like to ask you to say a bit more about QBE's new position on oil and gas, which, as you've explained, would allow QBE to continue underwriting most new oil and gas projects until at least 2030. And the climate science here with which you'll no doubt familiar with, is pretty straightforward in that global emissions will need to be at least halved over this decade. And that does mean a swift and managed phase out of all fossil fuels. You've taken a fairly strong position on coal already, which is very welcome. But we do see a significant and worrying disconnect between this new position on oil and gas and what the climate science is going to demand of all of us. Just to put that another way, the actions we take this decade, through the 2020s, again, it'll be hugely consequential in terms of our ability to meet the long-term goals of the Paris Agreement and to avoid sliding into a full blown climate catastrophe. So could you explain how QBE's position on oil and gas is consistent with what is a clearly stated strong support for the Paris Agreement?

Thank you for your question on that. We believe that we actually have set out in our new environmental and social risk framework the approach that we are taking to that. You're implying with your question, I think, that we are going to actively go out and seek to write the entire market in terms of new oil and gas exposures, which is not the case. What I was referring to is our current clients, and we will be working with those clients to actually see that they are on the path to the Paris Agreement by 2030. We think that's the responsible thing to do with that rather than actually cutting people off prior to that time, particularly as a number of those customers are making their own way to where they need to be, and we think that they should be encouraged to do that. A lot of them are actually transitioning to renewables. And I mentioned during my address, our significant appetite to ensure renewables. And in fact, in our annual report and in our sustainability report, you might notice that we spoke specifically about the Dogger Bank Wind Farm, where we have taken a lead role in that. So we will work with our customers to actually address their transition over that particular period of time. So hopefully, that answers your question.

Thank you. Look, I didn't mean to imply -- I don't think it was implied that you would be actively seeking to underwrite more such projects. What we would strongly encourage then is that policy be tightened up to actively exclude any new underwriting of coal and gas -- sorry, oil and gas projects over that period, recognizing just how critical decisions through this decade are going to be.

Well, we also said in our environmental policy that we apply a climate and environmental lens in terms of taking on any new customers. And I think you have to be satisfied with where that is rather than us making blanket statements because you sometimes live to regret those particular blanket statements. Next question is from [ Ms. Angela McAllis ].

Thank you for the opportunity. It relates to putting an actual figure on the greenhouse gas emissions that are underwritten by the company because it seems that there's currently no way for shareholders like ourselves to assess QBE's underwriting exposure to climate risk or to track that exposure -- to track -- could I have a mic? Thanks. Sorry about that. It's hard for us to track that exposure over time. I mean, it's great to hear that it might be reducing. But I believe that investors need emissions information about the projects and clients that we underwrite, not on an individual basis. But would QBE commit to disclose to investors the sort of information about the underwritten emissions in some form? For example, could we have a figure for underwritten carbon emissions, including scope 3 emission oil and gas?

Well, we provide a very comprehensive sustainability report, which we think covers all of the appropriate issues. And certainly, we report in line with the TCFD recommendations. We'll continue to refine that reporting. So I'll take that one on board. But at this stage, we believe that the reporting that we do do and the disclosures that we make through our sustainability report and through our annual report are leading edge in terms of TCFD and other companies.

Well, we look forward to increased refinement of the reporting to really give us that information as it's so vital.

Thank you. The next question is from [ Brett Morgan ].

Mr. Chairman, my question relates to the liability risks that you mentioned in your opening address when discussing the Board's position on item 4 on the agenda. So last week, the third in a series of company director liabilities relating to climate change was released. This opinion was backed by the Australian Institute of Company Directors and the Business Council of Australia. The opinion states that the Boards might be liable for "misleading or deceptive conduct. For selectively disclosing exposures to climate change or declaring green goals while lacking credible plans to achieve them." QBE has declared its support for the goals of the Paris Agreement on climate change, but it will not even assess its oil and gas underwriting against the Paris Climate goals until after 2030. And even then, it will only be a proportion of the company's exposure to these sectors. Is the Board concerned it could soon face legal action for claiming support for the Paris goals, but failing to ensure its exposure to the oil and gas industries is aligned with those goals?

[ Mr. Morgan ], thank you for your question. I'm aware of the opinion of Mr. Hutley on that. The Board is very comfortable with the disclosures that we make. And as I've now said, I think 3 times in answer to questions, it is not a cliff that we have in 2030. We are working with our customers as we get to 2030. But certainly, I respect Mr. Hutley, I respect his opinion, but the Board is not concerned because we believe that the approach that we are taking is the right one. And we are living to the values that we have set for ourselves and for the organization and that I set out during my presentation. Thank you.

Thanks, Mr. Chairman. I hope that other shareholders are concerned about this.

Next question is from Mr. Ian Graves.

Thank you, Mr. Chairman. I'm Ian Graves from the Australian Shareholders' Association, and we have proxies for 233 people. My question to you is regarding the accounts and the attritional claims and the results are highlighted as reducing which, to the reader, would indicate that the portfolios are improving. Although attritional claims in the glossary are defined as all claims under $2.5 million, with the increasing number of catastrophe and large losses, will the Board consider increasing the amount for the definition as it would appear to represent -- that they represent an increasing proportion of losses, and the statement about attritional losses may be misleading. Could you please comment on that?

Well, Mr. Graves, I don't believe it's misleading. We're clear in the definition of attritional losses. That's the way in which we actually run and manage the business, is looking at attritional losses, large losses and catastrophe losses. As I called out during my presentation earlier today, the catastrophe losses that we incurred in 2020 were quite significant, and we've been explicit around the cost of those. But likewise, the attritional losses have improved, and that's really down to the focus that we've had as an organization on looking at that on the underwriting criteria that we're applying. And I mentioned the cell review process and the Brilliant Basics, as I was giving my presentation. So I think that we're very confident that the attritional loss ratio continues to improve, and that's down to the focus that we have as an organization on that. Richard Pryce is on the line. Richard, I don't know whether you want to add anything to that.

Thank you, Mike, and good morning, everybody. I think as a management team, we give equal attention to the attritional, the large and the catastrophe losses. And we manage each component of those as do our underwriting teams. And like Mike, I feel comfortable that the level that we manage attritional up to $2.5 million is reflective of our portfolios and the activities that are going on. But I can assure everybody that we give equal attention to the large losses and the catastrophe losses. And the improvement in the attritional loss ratio, which we talk a lot about, is largely reflecting the rate increases and the portfolio shifts which have been driven by our cell review process over the last 3 or 4 years.

Thanks, Richard.

Thanks, Mr. Chairman. My second question is with the -- relating to the turnover in the senior management staff, with 200% turnover over the last 5 years, with the CEO being dismissed for conduct unbecoming, and a senior executive employed in 2020 while attending a parliamentary inquiry into issues relating to his formal role at IKEA. What does the Board consider as a reason for this? Is it poor culture or poor employment practices?

Well, Mr. Graves, as I mentioned to you when we had our discussion, I don't believe that it's either. We have seen turnover in the executive ranks for a variety of reasons, some we actually initiated and I discussed during my presentation; others are circumstantial. Some leaving to take other positions, some actually wanting to return to their normal homes. So one was resident in Australia and wanted to return to the U.K. So a lot of the turnover that has occurred has been circumstantial rather than anything other than that.

Thank you. The next question is from [ Suzanne Gold ]. I think we're giving up on...

Thank you, Mr. Chairman. And hopefully, this is better. I saw that on Monday, the federal government announced that it's creating a $10 billion taxpayer funded reinsurance pool to deal with the skyrocketing insurance premiums in Northern Australia caused by worsening and more unpredictable extreme weather. Does QBE believe that distorting the insurance market in this way is good use of public funds? Is it fair that all Australians pay to lower the cost of insurance in these tropical areas -- in those tropical areas? And won't it just encourage people to stay in harm's ways?

Thank you for your question. I don't have a lot of detail on that proposed reinsurance pool. However, I'll make a couple of comments. An insurance premium is purely a signal of risk. The higher the premium usually, the higher the risk that is being undertaken. And unfortunately, in far North Queensland and in Northern Australia, more generally, we are prone to cyclones and other significant events. I believe that it's important that we try to find a balance in all of this. And whilst I welcome the government's decision around a reinsurance pool, my understanding is it will be a government guarantee rather than anything more substantial. But as I said, I don't have the full details. We will work with the government on that. But the other thing that I think that is important, and I don't want to have lost from this discussion, and certainly, the Insurance Council is aligned with that, is the importance of preemptive mitigation and mitigation around the risks and the understanding of the risks that people are taking. So from QBE's perspective, but also, I think from the insurance industry's perspective, we'll be supportive of the reinsurance pool, but we will also be advocating for further mitigation and further understanding of the risk.

So is QBE's solution to global warming, making insurance unaffordable in growing parts of Australia and the world just to rely on bails out from the public purse?

I don't think I said that. What I said was, it was important that people were aware of the risks that they were taking and that mitigation be undertaken as proactively as possible with that. Thank you. Next question is from [ Rosemary Lister ].

Thank you, Mr. Chairman. I'm the Professor of Climate and Environmental Law at the University of Sydney Law School, and I specialize in climate disaster law. So I would like to address the question of QBE's stated commitments to the sustainable development goals. My understanding is that QBE has prioritized 5 goals. These include no poverty, decent work and economic growth, reduced inequalities, sustainable cities and communities and climate action. And yet all around the world, communities, including in Australia, are devastated by climate-induced disasters attributed to fossil fuel emissions. Now courts, including the U.S. Supreme Court, around the world, have stated that every tonne of greenhouse gas emitted contributes to climate change and to its impacts. Millions of people around the world are being displaced as a result of climate disasters. The World Bank has recently stated that climate change is pushing millions of people into poverty every single year. So specifically, how does QBE reconcile its continued underwriting of fossil fuels with its commitment to the sustainable development goals because climate-induced disasters are wiping away the achievements of sustainable development over the past decades. Thank you.

[ Ms. Lister ], thank you for your question. With respect, I think I've actually answered that question a number of times. However, I will make the statement that QBE has set out our objectives. We are working with our customers to ensure that they are online to be in accordance with the Paris Agreement. And we are actually looking at our own activities to make sure that we continue to meet our objectives to be in line with the Paris Agreement as well. But I think that I'd be redundant in terms of restating everything that I've now stated a number of times in respect of the question that you asked.

Thank you very much. My question isn't with regard to meeting the Paris climate goals, necessarily. Of course, it's implied. But my question is around the sustainable development goals, in particular.

And we have indicated in our sustainability report, the progress that we're making on all of those. They were consciously chosen because we think that we can make a difference with all of that, including coming back to your question around greenhouse gas emissions, including our approach to what we do with oil and gas, which I think was the subject of your question. Next question is from [ Mr. Stuart Palmer ].

Thank you, Chair. I'm from Australian Ethical Investment. We're one of the cofilers of resolution for the climate-related resolutions. And my question -- well, firstly, a question in relation to the comment you made about increasing premiums for renewable energy. Obviously, good to hear. I wonder, as context just to understand that, are you able to give an indication of how the premium which QBE earns from new renewables development compares with the premium it earns from new oil and gas infrastructure development?

I think the premium that we earn from new renewables is a multiple of what we might earn from new oil and gas. We are not underwriting significant new oil and gas projects. We do have existing customers. And as I said earlier, we're working with those customers to see that they are on the path to meet the Paris Accord. Whereas the renewable energy is a new line of business activity for us, and it is something that is ramping up. And as I indicated during my presentation, we increased our gross written premium from that by about 50% during 2020. So renewables are well within our appetite. We continue to have more appetite for that, and they will become a greater part of our overall premium pool as we move towards that 2030 and 2050 date.

Okay. I mean, as a number of questions have raised, increased transparency around QBE's exposure to these different sectors and different areas of infrastructure would be very helpful. So whilst it's great to see some statistics provided about renewables, equally seeing the statistics around the oil and gas business would be [ helpful ]. My other question relates to the work that you've told us this morning, QBE is doing with its oil and gas customers as they transition. Australian Ethical participates in the Climate Action 100 Plus program of engagement, involves investors managing over $50 trillion worth of assets. They produced a great piece of research this year, which reviewed the progress of companies aligning -- how companies were doing aligning their businesses with the transition needed to fulfill the objectives of the Paris Agreement. And probably the key call out from the research was concerns about the transition of the oil and gas sector. It showed that the world's 30 largest oil and gas companies, including QBE's customers, are all planning capital expenditure, which is not aligned with the Paris Agreement with that pathway to limit warming to 2 degrees and 1.5 degrees. Not everything, not all that new CapEx, but for the overwhelming majority of companies, it was over 50% of their new CapEx. So we're talking about new infrastructure -- new oil and gas infrastructure. At the same time, as companies are doing this, we're seeing increased government commitments, most notably, and I think most relevantly to QBE, the U.S. has just announced a target of 50% reduction in their carbon emissions by 2030. So you've said this morning, you're working with your customers. I guess research is showing us that customers aren't transitioning. I'm just trying to understand, there does seem to be a disconnect. Your risk framework, I guess, is sending a pretty clear signal that you're not going to refuse to underwrite companies or new infrastructure until 2030. And indeed, until 2040 for diversified companies which have up to 30% and of their revenue from oil and gas. So I wonder if you -- yes, you've referenced the environmental statement and you've done that at previous AGMs indicating that, that's an additional lens. I guess, we rely on the public statements and commitments and indication signals that the company gives. And the risk framework looks to us, and we suspect to the oil and gas sector, like you get a free pass until 2030 and 2040.

[ Mr. Palmer ], as I've mentioned, it's not a cliff at 2030. We will work with our customers. If we find that our customers are not on the path and we don't believe that they are on the path as we work with them to that 2030 period, we will actually be talking to them about that. We may choose not to underwrite them ahead of that time. What we are saying is there is a line in the sand at 2030, but it's not, we set and forget until 2030, we will work with our customers to satisfy ourselves that they are on that path almost from this day forward. Next question is from [ Mr. Andrew Fraser ].

Thank you, Mr. Chairman. My question is in regard to QBE's willingness to ensure extreme oil and gas in Australia in relation to opposition from traditional owners and farmers in respect of high profile, very specific projects, such as fracking in the Northern Territory, other coal seam gas projects, such as Narrabri project undertaken by Santos in the Pilliga Forest and the Woodside Burrup Hub proposal, which could become Australia's most polluting fossil fuel project ever developed. Is QBE open to underwriting these projects? Could you maybe focus on these projects and give us some indication of QBE's willingness to insure such projects?

I'm not sure, [ Mr. Fraser ], that we have any appetite for those projects, nor do I have any details of any of those companies that you mentioned being clients of QBE.

But -- so you would not be opposed, in principle, to insuring such projects? Would that be fair to say?

I commented earlier, that we will look at our current customers and look at how they are transitioning. We don't have great appetite for new customers in this space nor new projects. So I don't think that I can deal any more than that with a hypothetical that you put forward.

These are very well-known projects and of high profile. Surely, QBE could have some policy profile on these projects and give us some indication of what your attitude to insuring them is. When you read the sustainability statements, they -- with respect seem to be motherhood statements, and when we come to making hard and fast decisions about whether shareholders' concerns are being addressed in given circumstances, we'd like a few specific answers, at least in respect of the really high-profile projects. I noticed you gave -- to your credit, you withdrew from the Adani project. But would it be possible to take on board, giving us some more specific indication of these high-profile projects?

If I can correct you, we never had any exposure to Adani. So we didn't actually withdraw from it. We never had any exposure. And that decision was in line with our environmental and sustainability policies, which all the other policies that I've talked about today are also in line with that environmental and sustainability framework, which we've published.

But I don't feel like you've answered my question. Has QBE got some exposure to the specific projects that I enumerated? I don't really feel I've come away with a satisfactory answer.

As I think I said in my first response to you, I'm not aware of us having any exposure to those projects. We have [ Mr. Pablo Brait ], who is next. And ladies and gentlemen, I know that resolution 4 is passionate in the minds of the number of people. But this is a meeting of shareholders, and I would like to be able to take other questions rather than those that relate to item 4 as well. So we'll hear from [ Mr. Brait ], but then we have 1 further question. But if that is in relation to resolution 4, I would ask that you withdraw that so that we can go to questions that people have submitted online and then to those on the telephone.

Sure. I'll be very quick. So I know we've belabored this point quite a bit. So just to really clarify then, based on what you've said to a couple of the question askers before. It's QBE's intention not to grow its oil and gas underwriting business and/or not take on new customers. Is that correct? Is that how we should interpret your comments just before?

I don't think I've said we are not going to look to grow our business. What I've said is we don't have a great appetite for new customers in that. And what we want to do is work with our existing customers to make sure that they're on a path to the Paris Agreement. We'll work with them up until 2030. When if they still have 60% of their revenue coming from oil and gas, we will need to make sure, in our minds, that they are on the right path. Otherwise, we'll refuse to insure them, and that 60% drops to 30% on 1 January 2040. There's 1 further question, which is from [ Mr. Walgin ].

Thank you, Mr. Chairman. I came along. I didn't -- normally would get this report by the -- by mail. So I didn't get information out of this until I just saw it. I noticed we have an interim Chairman and he will be retiring at the end of next year. I was going to ask what you were going to do, get a new Chairman on a full-time basis. But I now discover, he will be retiring as at the end of next year -- at the end of this year. My question was, what were you going to do about that? Now it looks as we're going to get -- we have a new Chairman. I've forgotten his name, I apologize to him and yourself. Would you like to comment on that, please?

I think, well, unless the Board have got something to tell to me, I think we've got a full-time Chairman. But I think you're referring to our interim Group Chief Executive Officer, and we're very grateful for Richard Pryce actually stepping into that role. However, in early March, 3rd of March, I think we announced that Andrew Horton would be joining us from the 1st of September of this year, and we're very excited to have Andrew joining us. We believe that the combination of his experience as well as the values that he brings to the organization will see QBE go to the next stage. Richard actually delayed his retirement for us. And as I said, we're very grateful to him for doing that. And we're very grateful to the drive and the focus that he's brought to the organization as interim Chief Executive. We might now move to those people who've got questions online.

We have a question online from [ Mr. Bohler ]. Dear Chairman, it is very good to note the focus on advanced technology, especially data analytics at Board level with appointments like Ms. Tan Le. It gives a good sense of direction that QBE is taking. Could you provide an idea of how QBE intends to leverage areas like AI, especially to elevate experience for our customers in a post-pandemic environment and keep a focus on cost management?

Well, [ Mr. Bohler ], thank you. And we're certainly very happy to have Tan join us as a director. But one of the key strategic priorities for us is technology and our technology modernization. We feel that it's important that we do that to better support the evolving needs of our customers and our business. And at the same time, we're also looking to make selective insurtech investments, and some of those have actually been written up in the press in recent days. As we become more digitized and there is greater use of artificial intelligence, we'll look to actually be -- use that to be efficient as an organization, but also to help our customers understand the risks that they are taking, which goes back to my earlier comment around premiums being a signal of risk. So we're excited about the opportunity, and we are continuing to actually make investment on that front.

There are no further questions online or on the phone.

Thank you. Are there any further questions in the room? No. As there is no further business, I'll shortly be closing the poll for all items of business. I now ask that any shareholders who haven't submitted their votes do so now. I refer you again to the instructional slides on how to vote now on your screen and behind me. We'll give people another 30 seconds or so to finalize their vote. [Voting]

I now close the poll, and I also declare the meeting closed. Ladies and gentlemen, thank you for voting. Thank you for your attendance today. The results of each item will be announced to the ASX shortly. As I said, thank you for attending our meeting. I declare the meeting closed, and wish you a good day.