this presentation has been prepared for the 2016 general ... · this presentation has been prepared...

This presentation has been prepared for the 2016 General Insurance Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute and the Council is not responsible for those opinions.


Keep DiggingGetting the most out of

publicly available information

David Wilheim and Luke CassarFinity Consulting

This presentation has been prepared for the 2016 General Insurance Seminar.The Institute Council wishes it to be understood that opinions put forward herein are not necessarily

those of the Institute and the Council is not responsible for those opinions.


Excavation plan

The information universe

Why is it important?

A case study on premium

A case study on claims

Concluding remarks


The information universe

ABS

APRA

Statistics

Listed

company

reports

Analyst

reports

RBA

Industry

commentary

ICA

Lloyd’s


What’s available in APRA stats?

Quarterly

General

Insurance

Performance

Statistics

General

Insurance

Institution-

level

Statistics

Intermediated

General

Insurance

Statistics

National

Claims

and

Policies

Database


Raise of hands


What do we use it for?

Understand industry

performance

Benchmark internal

portfolios

Considering new products

Strategicplanning


UNDERSTANDING THE

STORY BEHIND THE NUMBERS

Why is it

important?


$3.7b$4.0b

$1.5b

$1.8b

$1.1b

$0.4b

($3.4b)

($0.8b)

($0.3b)

0

1

2

3

4

5

6

Ne

t P

rofi

t B

efo

re T

ax (

$ b

illio

ns)

Higher outward

reinsurance

Higher reinsurance recoveries

Higher non-

recurring items

Higher claims

Lower total

expenses

Lower investment

income

NPBT 2015

NPBT 2016

COMPONENTS OF THE CHANGE

Gross premium growth

What happened in FY16?


What happened in FY16?

$3.7b$4.0b

$1.5b$0.5b

$0.1b

$0.6b

($0.8b)

($0.9b) ($0.3b)($0.2b)

0

1

2

3

4

5

6

Ne

t P

rofi

t B

efo

re T

ax (

$ b

illio

ns)

Higher outward

reinsuranceHigher reserve releases

Lower natural perils events

Higher attritional

current period claims

Lower discount

rateimpact

Higher total

expensesLower

investment income

NPBT 2015

NPBT 2016



1

23

4

really¶

$3.7b$4.0b

$1.5b

$1.8b

$1.1b

$0.4b

($3.4b)

($0.8b)

($0.3b)

0

1

2

3

4

5

6

Ne

t P

rofi

t B

efo

re T

ax (

$ b

illio

ns)

Higher outward

reinsurance

Higher reinsurance recoveries

Higher non-

recurring items

Higher claims

Lower total

expenses

(UW , Op )

Lower investment

income

NPBT 2015

NPBT 2016




PREMIUM

A case study with

Fire & ISR


What is in APRA's Quarterly General Insurance Performance Statistics?

14 classes of business

Personal Lines Commercial Lines

→ Short Tail

→ Long Tail

Inwards reinsurance

Other

+

+ +

+

Direct insurers

Direct business

Reinsurers

Direct business

Direct insurers

Inwards reinsurance

Reinsurers

Inwards reinsurance

Direct insurers

Reinsurers

Total industry

Total industry

CASE STUDY


Raw Data

7%

14%

9% -2%

-6% 0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

J2011 J2012 J2013 J2014 J2015 J2016

$ b

illi

on

GEP - Fire & ISR

Growth:

CASE STUDY


0%

2%

4%

6%

8%

10%

12%

14%

0

2

4

6

8

10

12

14

J2011 J2012 J2013 J2014 J2015 J2016

$ b

illi

on

Fire & ISR GEP Householders GEP FSL %

Fire Services Levy

The Victorian Government abolished Fire Services Levy from 1 July 2013.

CASE STUDY


Adjusted for FSL

5%-4%

-2%-6%

-10%

-5%

0%

5%

10%

15%

20%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

J2011 J2012 J2013 J2014 J2015 J2016

$ b

illi

on

GEP - Fire & ISR

GEP GEP ex FSL

CASE STUDY


20%5% -3% -8%

14%-1%

-3% 1%

8%5% -4% 0%

10%4% -4% -1%

-10%

-5%

0%

5%

10%

15%

20%

25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

J2012 J2013 J2014 J2015 J2016$ b

illi

on

GEP - Fire & ISR

APRA Authorised Lloyds UFI

Lloyds and UFIs

• APRA’s quarterly statistics contains data submitted by APRA regulated insurers

• APRA’s intermediated dataset gives GWP by class for unauthorised foreign insurers

• Lloyd’s Market Intelligence publication gives GWP by class of business

• Discretionary Mutual Funds (DMFs) are not included Sources:

APRA Quarterly General Insurance Performance Statistics; APRA Intermediated Statistics;Lloyd’s Market Intelligence - Australia

CASE STUDY


Outwards Reinsurance Premium

• Raw data

would suggest

an increase in

reinsurance in

201640%

45%

50%

55%

60%

65%

J2011 J2012 J2013 J2014 J2015 J2016

% o

f G

EP

Outwards RI - Fire & ISR

Outwards RI %

CASE STUDY


IAG Berkshire-Hathaway Deal

• 20% Quota Share across all

classes

• $11.4 billion GEP for IAG in

2015/16 suggests $2.3 billion in

outwards RI to BH – bigger than

the fifth largest insurer in

Australia

• Adjusting for this change

reveals continuation of a

decreasing trend in “business-

as-usual” reinsurance

40%

45%

50%

55%

60%

65%

J2011 J2012 J2013 J2014 J2015 J2016

% o

f G

EP

Outwards RI - Fire & ISR

Outwards RI % Outwards RI % - Adjusted

CASE STUDY


CLAIMS

A case study with

Public and

Product Liability


Net loss ratio

-40%

-20%

0%

20%

40%

60%

80%

100%

J2011 J2012 J2013 J2014 J2015 J2016

Net loss ratio

CASE STUDY


Net loss ratio

-40%

-20%

0%

20%

40%

60%

80%

100%

J2011 J2012 J2013 J2014 J2015 J2016

Net loss ratio - non-recurring items Net loss ratio - current period

CASE STUDY


What are non-recurring items?

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

J2011 J2012 J2013 J2014 J2015 J2016

Net loss ratio - non-recurring items

CASE STUDY


Yield curve impacts

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

J2011 J2012 J2013 J2014 J2015 J2016

Yield curve impacts Net loss ratio - non-recurring items

0%

1%

2%

3%

4%

5%

6%

0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5

Jun-11

Jun-12

0%

1%

2%

3%

4%

5%

6%

0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5

Jun-14

Jun-15

Jun-16

CASE STUDY

1


Reserve movements

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

J2011 J2012 J2013 J2014 J2015 J2016

Yield curve impacts Reserve movements Net loss ratio - non-recurring items

Motor (CTP)

Professional indemnity

Public and product liability

Employers' liability

Short Tail

All others

CASE STUDY

2


“The Buffett Effect”

20% whole-of-account quota share arrangement with Berkshire Hathaway

“Innovative package of reinsurance transactions with Berkshire Hathaway”

CASE STUDY


Current period net claims

0

50

100

150

200

250

300

350

Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun

2011 2012 2013 2014 2015 2016

$ m

illio

ns

Claims Incurred - Net - Current period

CASE STUDY


0

50

100

150

200

250

300

350

400

450

500


2011 2012 2013 2014 2015 2016

$ m

illio

ns

NEP

Net earned premiumCASE STUDY


Reinsurance spend

0

50

100

150

200

250

300

350

400

450

500


2011 2012 2013 2014 2015 2016

$ m

illio

ns

Outward RI

CASE STUDY


Reserve movements

-500

-400

-300

-200

-100

0

100


2011 2012 2013 2014 2015 2016

$ m

illio

ns

Reserve movements

CASE STUDY


Bottom line

-200

-150

-100

-50

0

50

100

150

200


2011 2012 2013 2014 2015 2016

$ m

illio

ns

Underwriting result

CASE STUDY


Net loss ratio

-40%

-20%

0%

20%

40%

60%

80%

100%

J2011 J2012 J2013 J2014 J2015 J2016


in the data…CASE STUDY


Net loss ratio

-40%

-20%

0%

20%

40%

60%

80%

100%

J2011 J2012 J2013 J2014 J2015 J2016


“Buffett Effect”CASE STUDY


Net loss ratio

-40%

-20%

0%

20%

40%

60%

80%

100%

J2011 J2012 J2013 J2014 J2015 J2016


CASE STUDY


CONCLUDING REMARKS

Why is all this

important?


Concluding remarks

Don’t take the data at face value

Understand the story behind the numbers

Consider and allow for systemic changes

Draw from other publicly available information


Remember there’s always a distribution

0

2

4

6

8

10

12

14

25%+

20%to

25%

15%to

20%

10%to

15%

5%to

10%

0%to

5%

0%to

5%

5%to

10%

10%to

15%

15%to

20%

20%to

25%

25%to

30%

30%to

35%

35%to

40%

40%to

45%

45%to

50%

50%to

55%

55%to

60%

60%+

Nu

mb

er

of

co

mp

an

ies

ProfitLoss

Industry


-

2

4

6

8

10

12

14

16

25%+

20%to

25%

15%to

20%

10%to

15%

5%to

10%

0%to

5%

0%to

5%

5%to

10%

10%to

15%

15%to

20%

20%to

25%

25%to

30%

30%to

35%

35%+

GEP (% change)

Industry

0

5

10

15

20

25

0%to

10%

10%to

20%

20%to

30%

30%to

40%

40%to

50%

50%to

60%

60%to

70%

70%to

80%

80%to

90%

Outwards Reinsurance (% of GEP)

Industry

0

2

4

6

8

10

12

14

16

18

<10%

10%to

20%

20%to

30%

30%to

40%

40%to

50%

50%to

60%

60%to

70%

70%to

80%

80%to

90%

90%+

Total Expense Ratio

Industry

0

5

10

15

20

25

0%to

20%

20%to

40%

40%to

60%

60%to

80%

80%to

100%

100%to

120%

120%to

140%

GLR

Industry

0

5

10

15

20

25

0%to

20%

20%to

40%

40%to

60%

60%to

80%

80%to

100%

100%to

120%

120%to

140%

140%to

160%

COR

Industry

0

2

4

6

8

10

12

14

16

18

20

1.00to

1.50

1.50to

2.00

2.00to

2.50

2.50to

3.00

3.00to

3.50

3.50to

4.00

4.00to

4.50

4.50to

5.00

5+

CAM

Industry

GEP (% change)

Combined Operating Ratio Capital Adequacy Multiple

Outwards Reinsurance (%GEP)

Gross Loss Ratio

Total Expense Ratio


Proposed changes to APRA stats

More detailed breakdown for some metrics

More detailed class of business

splits

Segmentation of industry-level

statistics

Increased frequency of

institution-level statistics

New claims development

statistics

New data dissemination

tool


Any questions?

this presentation has been prepared for the 2016 general ... · this presentation has been prepared...

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