Business SummaryQBE Insurance Group (QBE) is an international general insurance andreinsurance group underwriting commercial and personal lines of businessthrough operations in 38 countries.

North America: North American Operations writes general insurance andreinsurance business in the US.

Europe: European Operations writes general insurance business principallyin the UK and throughout mainland Europe, both general insurance andreinsurance business through Lloyd's of London, and reinsurance business inIreland and mainland Europe.

Australia & New Zealand: Australian & New Zealand Operations primarilyunderwrites general insurance risks throughout Australia and New Zealand,providing all lines of insurance for personal and commercial risks.

Emerging Markets: This segment is involved in writing general insurancebusiness in North, Central and South America and provides personal,commercial and specialist general insurance covers throughout the AsiaPacific region.

Equator Re: The division is based in Bermuda and provides reinsuranceprotection to related entities. All inward premium received by Equator Re iscurrently derived from the Group and is eliminated on consolidation.

Latest ResearchEnslaved to the transitory

QBE reported a net loss of US$1,249m in 2017 (cash loss US$258m)compared with NPAT of US$844m in 2016 (cash NPAT US$898m). Theresult was always going to be messy and the losses invariably impacted oncapital adequacy (end result was a decline in the final dividend to A$0.04(30% franked) that paralleled the ~US$600m

reduction in surplus capital, although PCA was within the 1.6-1.8x target).All else being equal, we should really not see a repeat of the 2017earnings and capital headwinds given the one-off nature of some of theextraordinary items – and capital

should build up again in our view based on a combination of rate rises,productivity and efficiency gains and ongoing remediation of non-coreoperations.

These initiatives would underpin QBE’s confidence in reaffirming itscommitment to the three-year share buyback program (up to US$1bnthrough to 2020 including what we understand to be ~US$330m in 2018)as well as a dividend payout target of up to 65%

of cash NPAT. QBE’s 2017 result is largely academic now and 2018 isshaping up to be another transition year with lots of business remediationto be done. At least QBE is now free of the Latin American millstone andwe think more asset sales will be

forthcoming, given the use of words such as “Reposition” and “Remediate”in the result announcement. The focus on core markets, simplificationinitiatives and back-to-basics

underwriting (including risk pricing and claims streamlining) also gives uscause to be optimistic in the year ahead as QBE in its current form remainsa very complex organisation with resources and capabilities likely stretched

GICS - Insurance

QBE Insurance Group Limited

ASX Code: QBE Price: $10.11 12 Mth Target Price: $10.45 Rating: Hold

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

26 April 2018$13,746m1,359.6m$13.62$9.41

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Hold$10.455.2%7.2%12.5%

Investment FundamentalsFYE 31 Dec 2017A 2018F 2019F 2020F

Profit $m -303.5 868.1 1,068.0 1,237.7Profit (norm)* $m -303.5 868.1 1,068.0 1,237.7

EPS* ¢ -22.3 64.3 81.3 97.1EPS Growth % 0.0 0.0 26.4 19.5P/E* x 0.0 15.4 12.2 10.2P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 30.6 61.8 65.2 77.8Yield % 3.1 6.2 6.6 7.8Franking % 30.0 30.0 30.0 30.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

too thin across the globe.

For more information see research 27 Feb 2018.

GICS - Insurance

QBE Insurance Group Limited

ASX Code: QBE Price: $10.11 12 Mth Target Price: $10.45 Rating: Hold

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

26 April 2018$13,746m1,359.6m$13.62$9.41

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Hold$10.455.2%7.2%12.5%

Investment FundamentalsFYE 31 Dec 2017A 2018F 2019F 2020F

Profit $m -303.5 868.1 1,068.0 1,237.7Profit (norm)* $m -303.5 868.1 1,068.0 1,237.7

EPS* ¢ -22.3 64.3 81.3 97.1EPS Growth % 0.0 0.0 26.4 19.5P/E* x 0.0 15.4 12.2 10.2P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 30.6 61.8 65.2 77.8Yield % 3.1 6.2 6.6 7.8Franking % 30.0 30.0 30.0 30.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A

Net Earned Premiums -- -- -- 15,293 154,372Claims Expense -10,763 -10,511 -9,663 -8,362 -10,206Underwriting Profit -16,825 -16,505 -15,994 963 138,509Investment Income 781 874 798 1,064 1,068Unrealised Gains 48 4 -- -- --Profit Before Tax -501 1,135 1,371 1,486 -145Income Tax 228 -222 -356 -315 -254Outside Equity Int. -11 -9 -8 -- 5Profit after Tax -284 905 1,007 1,171 -394Significant Items after Tax -- -- -67 -4 -1,208Reported Profit after Tax -284 905 940 1,166 -1,601Preference Dividends -- -- -- -- --

Cash Flow ($M)2013A 2014A 2015A 2016A 2017A

Premiums Received 19,963 20,180 20,728 20,645 18,673Outward Reinsurance Paid -3,117 -2,509 -3,646 -3,850 -3,301Claims Paid -13,253 -13,111 -12,880 -12,463 -11,685Reinsurance Received 3,129 1,946 2,139 2,150 1,944Net Operating Cashflow 950 405 -22 773 221Acquisitions & Investments -3,210 -1,562 -1,800 -3,829 -3,347Sale of Invest. & Subsid. 1,775 1,100 2,354 4,552 3,928Net Investing Cashflow -1,576 -563 346 218 381Proceeds from Issues -- 951 3 -- --Dividends Paid -260 -263 -491 -683 -688Net Financing Cashflow -133 -173 -531 -767 -924Net Increase Cash -759 -332 -207 224 -323Cash at Beginning 2,263 1,509 1,166 915 1,086Exchange Rate Adjust. -121 -38 -53 51 -26Cash at End 1,384 1,039 906 1,171 733

Ratios and Substantial Shareholders2013A 2014A 2015A 2016A 2017A

Profitability RatiosClaims Ratio % -- -- -- 54.68 6.61Expense Ratio % -- -- -- 39.02 3.66Combined Ratio % -- -- -- 93.70 10.28Return on Equity % -2.44 6.70 6.97 8.20 -3.45

Safety RatiosSolvency Ratio % -- -- -- 92.48 7.32

Top 5 Substantial ShareholdersBlackRock Group 5.0%

Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A

Cash & Equivalent 1,384 1,039 906 1,171 733Receivables 7,076 7,492 7,998 9,504 9,756Investments 15,950 16,041 14,292 9,602 7,629Other Current Assets 2,602 3,742 328 2,870 3,078Current Assets 27,012 28,314 23,525 23,147 21,197Receivables 2,512 2,520 3,163 3,447 4,624Investments 16,900 17,786 21,376 24,140 25,190PP&E 456 441 360 355 354Other (inc Intangibles) 5,949 5,803 9,305 6,378 4,868Non-Current Assets 25,817 26,551 34,203 34,320 35,036Total Assets 52,829 54,865 57,728 57,467 56,233Trade Creditors 1,648 1,420 2,814 2,787 2,619Unearned Premiums 8,012 8,013 8,700 8,534 8,155Outstanding Claims 10,041 -- -- -- 12,209Borrowings 557 1,476 63 316 229Provisions 312 267 163 101 205Other -- -- -- -- --Total Liabilities 20,570 11,177 11,740 11,739 23,418Unearned Premiums 1,134 968 890 813 674Outstanding Claims 14,175 24,887 25,435 25,319 15,456Borrowings 4,574 3,797 4,815 4,787 4,627Provisions 504 306 241 242 205Other (inc Creditors) 245 219 153 286 441Non-Current Liabilities 20,633 30,177 31,534 31,447 21,404Net Assets 11,626 13,511 14,454 14,281 11,412

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Carolyn ScobieMr Peter Smiles

Directors

Mr Michael (Mike) John Wilkins(Non-Executive Director)Ms Jann Skinner(Non-Executive Director)Mr John M Green(Non-Executive Deputy Chairman,Non-ExecutiveDirector)Mr Stephen Fitzgerald(Non-Executive Director)Mr William Marston (Marty) Becker(Non-ExecutiveDirector,Non-Executive Chairman)Sir Brian Pomeroy(Non-Executive Director)Mr Patrick (Pat) Regan(Executive Director,Chief Executive Officer)Mr Rolf Tolle(Non-Executive Director)Ms Kathryn (Kathy) Lisson(Non-Executive Director)

To access further Research or for information regarding our recommendations and ratings please seewww.bellpotter.com.au

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QBE Insurance Group Limited

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