QBE European Operations plc

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QBE European Operations plc Annual report 2011 32 Financial management continued Borrowings maturity £000 1500 1200 900 325 644 Credit rating of reinsurance recoverables As at 31 December 2011 ● AAA 0.1% ● AA 23.5% ● A 19.1% ● Other 4.3% ● Other QBE companies 53.0% 600 300 565 308 354 0 2012 2013 2014 2015 2016 2017 ■ Replacement of SPV subordinated notes (GBP) ■ Replacement of SPV subordinated notes (USD) ■ Replacement of perpetual securities (GBP) ■ Replacement of perpetual securities (USD) ■ Conversion of convertible securities • Complete enterprise information solutions providing powerful analytics • A technology platform that supports future merger and acquisition We depreciate fixed assets over the estimated useful life of the underlying assets – between three and five years. The useful life for the depreciation of Project Springboard assets is reviewed on an asset-by-asset basis. Estimate of claims reserve The estimate of QBE EO’s reserves to pay for reported claims and for claims incurred but not reported, necessarily requires the application of judgement and is, therefore, an important part of financial management because the level of reserves can have a significant impact on profitability. Our reserving committee, which is chaired by our Chief Risk Officer, monitors reserves on a quarterly basis. Claims estimates are set by experienced claims technicians. The ultimate costs of outstanding claims, including claims incurred but not reported, is estimated by our actuaries, who apply recognised actuarial techniques. A best estimate of our reserves is produced and reviewed by internal and external actuaries and is assessed by management with input from underwriting and claims experts. More than 95% of our outstanding claims provision is reviewed annually by independent external actuaries. Debt management On 24 May 2011 QBE EO issued US$1,000 million and £325 million of fixed-rate reset subordinated call notes, due in 2041. The securities may not be called for redemption by the investors. Interest payments are deferrable and no payments are due unless QBE EO satisfies certain solvency conditions. QBE EO’s first call date is May 2016. In addition, QBE EO has existing external convertible debt securities, with a first call date in 2013 and two perpetual securities which have no fixed redemption date and may not be called for redemption or conversion by investors. Distributions are deferrable and not cumulative, but if we do not pay a distribution or principal amount, the capital securities are to be redeemed for QBE preference shares. QBE EO’s letter of credit facilities of £909 million, which principally support FAL, are reviewed at least annually. In addition, QIEL has letters of credit, totalling £66 million, to support its US (re)insurance business. Reinsurance protection Reinsurance is an important part of our risk management strategy for our insurance operations. We have put in place various reinsurance programmes, such as whole account quota share, facultative and treaty reinsurance and participation in the QBE’s catastrophe losses cover. Further detail is in the risk management report on pages 20 to 22.
QBE European Operations plc Annual report 2011 33 Empowers a collaborative “can do” spirit across the business and with all business partners At every stage of relationship QBE EO encourages a “can do” spirit, which means everyone benefits from quicker decision making and faster solutions. QBE EO emphasises the importance of co-operation across all departments and this, in turn, enables a bespoke service and excellent customer relations management programme to clients. Case study: road safety QBE EO has been insuring commercial motorists in the UK for more than 80 years and is dedicated to improving road safety for all road users and pedestrians. To help raise the importance of responsible driving – and to reduce incidents and claims – we have been working with Brake, the road safety charity, since 2007. In 2011, for the second year running, we were headline sponsor of Brake’s Road Safety Week. The theme, Too young to die, highlighted the particular need to improve safety awareness among young drivers. The campaign, which was also aimed at older drivers, parents, the wider community and government policymakers, focused on what can be done to reduce the number of deaths on the UK’s roads. Now in its 15th year, Road Safety Week creates an opportunity for communities and organisations to take action on road safety. During the week organisations, including emergency services, local authorities, schools, colleges, youth and community groups, ran road safety promotions and media campaigns, held talks, workshops and demonstrations and displayed posters. As part of our sponsorship, in the months running up to Road Safety Week, Brake surveyed 8,000 young people on their experiences as passengers with young drivers. The results were covered extensively by national and local newspapers, radio and TV stations. 2011’s Road Safety Week generated more than £535,000 worth of media value, which helped Brake in its campaign to make our roads safer. As headline sponsor we were associated with Road Safety Week through: • 6,062 schools, organisations and communities that registered to take part in the week; • 227 community groups and volunteers and 758 companies that registered for information and to take part in events. Of the companies – 419 planned to promote road safety to staff or to train/educate company drivers; – 412 intended to set up a road safety display; – 230 promoted road safety messages to customers or partners; – 229 worked with schools/colleges; – 181 promoted road safety in their local communities; and – 84 launched a road safety initiative or campaign. • 111,123 promotional emails sent by Brake; • 18,804 unique visitors to the Road Safety Week website during September, October and November. In addition to sponsoring Road Safety Week, we also supported Brake’s Fleet Safety Forum. This provided an opportunity for us to raise awareness of QBE as an insurer of commercial vehicles (including buses, coaches and emergency vehicles) while, at the same time, campaigning for improved driving standards. Since one third of accidents involve vehicles being driven for work, the importance of safe driving by those drivers has never been higher. Martians Explorer Scouts “Showed some of your videos and those made by students. Then we gave out fact sheets and made our own videos. It went fabulously. They learned lots about the impact of mobiles, drink and speed. I was surprised and scared how ignorant they were before we did this! I’m so glad we did it!” Lordship Farm School “It was a successful week, looking at road safety and personal safety. We had classes go out into the local area with our road safety team and assemblies from the fire department and police. We also had afternoon work dedicated to road safety and we ran workshops for different classes. On the final day we had a bright day.” St Bernadette’s Pre-school “We incorporated Road Safety Week into our daily activities, including a visit from Wigan road safety department, a safety walk to the village using our yellow jackets. We used the pedestrian crossing and explained to the children how we use the button to wait for the green man before crossing. Our local ‘lollipop’ lady was invited in to talk to the children. We feel this event was very successful.” Financial review • 20 press releases to national, regional and trade media;
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