QBE Insurance : 2017 AGM – Chairman’s and CEO’s Addresses

QBE Insurance Group Limited ABN 28 008 485 014

Level 27, 8 Chiney Square,SYDNEY NSW 2000 Australia GPO Box 82,Sydney NSW 2001

telephone + 612 9375 4444 • facsimile + 612 9231 6104 www.qbe .com

3 May 2017

The Manager

Markets Announcements Office ASX Limited

Level 4

Exchange Centre 20 Bridge Street

SYDNEY NSW 2000

Dear Sir/Madam,

2017 Annual General Meeting of Shareholders - addresses

Please find attached:

1. Chairman's address; and

2. Chief Executive Officer's address. Yours faithfully,

Carolyn Scobie

Attachments

I am pleased to be with you for this morning's QBE Annual General Meeting. In addition to myself, you will hear from Group Chief Executive Officer John Neal as we discuss QBE's performance and achievements over the past year and our strategy and plans for the future.

In 2016 your company recorded a net profit after tax of $844 million and an adjusted combined operating ratio of 93%. This result was at the better end of our target range and an important milestone in our journey to delivering steady increases in QBE's fundamental value.

Notably, this was QBE's best financial performance since 2010 and a direct reflection of the significant improvement in QBE's underwriting, the quality of our balance sheet, our strengthened talent pool and our reset cost base.

In May 2016 we provided an update to investors to illustrate how we believe we can further improve underwriting performance and return on equity. As we continue this journey I can assure you we are always striving to find ways to improve the performance of our business and to deliver improved results for shareholders.

It is important in considering this annual result, and our expectations for the future, to make reference to market conditions and trends in the insurance

industry. I will share some thoughts on the market before highlighting the achievements of our operating divisions during the year. Finally, I will provide insights into the Board's priorities for 2017 and our role in guiding QBE's strategy before John Neal provides a more detailed overview of operational performance and the strategies that underpin our confidence in the outlook for QBE.

The external conditions that insurers have been grappling with for several years were maintained in 2016, with the market continuing to be characterised by surplus capital which in turn placed downward pressure on pricing across most of the globe, particularly in commercial lines. These trends have been able to persist for an extended period as industry underwriting profits have generally been maintained by relatively low catastrophe claims and declining reinsurance costs coupled with continued prior accident year claims releases and cost efficiencies.

We expect pricing in 2017 to be more stable, with the near-term pricing outlook broadly flat in most territories other than Australia, where insurance market pricing started to improve in mid-2016 following a period of unsustainable price declines coupled with claims inflation.

This means that as we execute our plans for the current year and beyond, we will be doing so in a market where generating underwriting profits remains

challenging but is nonetheless essential to our ability to continue to improve our operating performance. As a consequence, we will be maintaining our focus on high quality underwriting, efficiency and cost reduction.

The outlook is a little brighter in relation to investment returns. The language of central bankers across the major western economies has changed in recent months, signalling the early stages of the transition from extraordinary monetary stimulus to policy normalisation in the form of higher interest rates. We have seen the US Federal Reserve increase interest rates this year, while language coming from the European Central Bank and the Bank of England increasingly recognises that inflation will place upward pressure on interest rates.

Intertwined with these inflationary pressures is the increased anti-globalisation sentiment and concerns over immigration that contributed to the Brexit vote and that is credited with playing a part in the presidential election in the USA.

We continue to monitor all of these dynamics closely for their impact on our business, from both an underwriting and investment perspective.

While the impact of Brexit on the economy of the United Kingdom will take some time to become clear, with Article 50 now having been triggered the two year period for the UK to formalise its exit is now underway. We need to