1 HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION HC2091 Business Finance 2018 Group assignment (Case study) Due date: Week 10, Friday 17:00 Weighting: 20% Minimum words limit: 3500 words Max group...

Financial Analysis – OBE Insurance and Suncorp Group
Course Name
Course Date
Student’s Name
Financial Analysis – OBE Insurance and Suncorp Group
Table of Contents
Contents
Introduction    3
Company overview    3
Company overview – QBE Insurance    3
Company overview – SunCorp    4
Financial Analysis    4
Comparative Analysis and common size statement – Income Statement    4
Comparative Analysis and common size statement – Balance sheet    8
Ratio analysis    13
Liquidity ratios    13
Financial leverage ratios    14
Asset utilization ratios    15
Profitability ratios    16
Market value ratios    18
Conclusion    19
Reference    20
Introduction
This paper analysis the financials and the financial performance of the two major insurance companies of Australia. This paper analysis the financial position of both the companies using different financial ratios as well as comparative statements of the companies. The main aim of the paper is to analyze different aspects of the ratio analysis and financial tools to analyse the performance of the company. The two major companies that has been taken for analysis in this paper includes QBE insurance group and Suncorp group. Both the companies are the biggest insurance providers of Australia.
In this report different ratios has been used to analyse the performance of the companies which includes liquidity ratio, profitability ratios, solvency ratio, market value ratios and financial leverage ratios.
After the analysis of the companies it was seen that Suncorp is performing better than QBE company.
Company overview
Company overview – QBE Insurance
QBE Insurance group limited is one of the biggest insurance companies of Australia which provides a range of non-life insurance solutions to the individuals as well as the companies. There are different kinds of insurances that are provided by the company which includes transport operators policy, boat insurance, caravan, workers compensation insurance, home insurance, surety, builder’s warranty, and property insurance and commercial packages. The company also provides accident and health insurance, aviation insurance, farm insurance, motor and motor casualty insurance, crop insurance, specialty insurance, marine insurance, professional liability insurance and travel business insurance. The company is having its operations in different countries of the globe which includes Australia, Singapore, New Zealand, Bermuda, Malaysia, Hong Kong, the UK, Ireland, the US, Puerto Rico, Brazil, Switzerland, Fiji, Ecuador and Colombia, among others. (Annual Report, 2017)
The company has diverse geographic presence across the globe which helps in mitigating the risks on different aspects of the region. Apart from its diverse geographic presence the company also has strong financial performance with the annual growth of revenues over 1.2% from the year 2015. Apart from this the company also have wide offering of the products and insurance which helps the target customers to select different products to mitigate their risks.
Company overview – SunCorp
SunCorp group is one of the biggest financial services and solution provider which carries out different general insurance and other financial activities and solutions toots target customers. The company has a group of non-life insurance which it provides to its target customers which includes home and contents insurance, boat insurance, travel insurance, motor insurance, special risks insurance, public liability and professional indemnity insurance, workers’ compensation insurance and compulsory third party insurance, directors’ and officers’ liability insurance, rural insurance, and construction and engineering insurance. Apart from this the company also provides wide range of life insurance products as well as other financial planning tools as well as superannuation and financial services, home loans, savings accounts, personal loans and business loans. The group is not just classified as the insurance company but also a banking, life insurance, retail and corporate customers. (Annual Report, 2017)
Financial Analysis
Financial analysis is one of the most important tools which are used by the organizations to analyse the performance of the companies. (Ball, R & Kothari, SP., 2014). There are different analytical tools which are used by the company to analyse their performances.
Comparative Analysis and common size statement – Income Statement
Analysis of SunCorp
The comparative analysis helps in comparing the current performance of the company from its past performance. It helps in calculating the change in different variables of the financial statements.
Considering the comparative analysis of SunCorp, we can see that The company’s insurance revenues has increased by 4.5% while the overall revenue of the company increased by 12.32% in 2017 as compared to 2016. With the major increase of 102% in reinsurance revenue while the total expenses of the company increased by 12.93% in 2017 as compared to the previous year. The overall increase in the net income as compared to the previous year was 3.83%.
Considering the common size statement, we can see that the insurance premium revenue forms as the 59.47% of the total revenue generated by the company while reinsurance revenue accounts ro be 19% of the total revenue of the company. The claim expenses of the company are reported to be 53.03% and the total expenses account of 90.76% of the total revenue of the company.
    Income Statement
    
    2017
    2016
    Comparative
    2017
    2016
    Revenue
    
    
    
    
    
    Insurance premium income
    10344
    9899
    4.50%
    59.47%
    63.92%
    Reinsurance and other recoveries income
    3280
    1621
    102.34%
    18.86%
    10.47%
    Interest income on
    
    
    
    0.00%
    0.00%
    financial assets not at fair value through profit or loss
    2464
    2622
    -6.03%
    14.16%
    16.93%
    financial assets at fair value through profit or loss
    591
    606
    -2.48%
    3.40%
    3.91%
    Net gains on financial assets and liabilities at fair value through profit or loss
    91
    
    
    0.52%
    0.00%
    Dividend and trust distribution income
    74
    171
    -56.73%
    0.43%
    1.10%
    Fees and other income
    551
    568
    -2.99%
    3.17%
    3.67%
    Total revenue
    17395
    15487
    12.32%
    100.00%
    100.00%
    
    
    
    
    0.00%
    0.00%
    Expenses
    
    
    
    0.00%
    0.00%
    Claims expense and movement in policyowner liabilities
    9228
    7561
    22.05%
    53.05%
    48.82%
    Outwards reinsurance premium expense
    1445
    1220
    18.44%
    8.31%
    7.88%
    Underwriting and policy maintenance expenses
    2387
    2334
    2.27%
    13.72%
    15.07%
    Interest expense on
    
    
    
    0.00%
    0.00%
    financial liabilities not at fair value through profit or loss
    1369
    1493
    -8.31%
    7.87%
    9.64%
    financial liabilities at fair value through profit or loss
    73
    94
    -22.34%
    0.42%
    0.61%
    Net losses on financial assets and liabilities at fair value through profit or loss
    160
    -100.00%
    0.00%
    1.03%
    Impairment loss on loans and advances
    7
    16
    -56.25%
    0.04%
    0.10%
    Amortisation and depreciation expense
    168
    165
    1.82%
    0.97%
    1.07%
    Fees, overheads and other expenses
    933
    913
    2.19%
    5.36%
    5.90%
    Outside beneficial interests in managed funds
    177
    24
    637.50%
    1.02%
    0.15%
    Total expenses
    15787
    13980
    12.93%
    90.76%
    90.27%
    
    
    
    
    0.00%
    0.00%
    Profit before income tax
    1608
    1507
    6.70%
    9.24%
    9.73%
    Income tax expense
    523
    462
    13.20%
    3.01%
    2.98%
    Profit for the financial year
    1085
    1045
    3.83%
    6.24%
    6.75%
    
    
    
    
    0.00%
    0.00%
    Earnings per share
    
    
    
    0.00%
    0.00%
    Basic earnings per share
    83.84
    81.19
    3.26%
    0.48%
    0.52%
Analysis of QBE:
Looking at the income statement of the company, we can see that the company’s revenue has increased by 8.815 in the year 2017 as compared to 2016 whereas the company has had high expenses which includes the net claim expenses which increased by 32.5% in 2017 as compared to the previous year. In the year 2017, the company incurred the losses of $1253million which was a decrease of 248.46% as compared to the previous year. Thus it can be seen that the company’s performance decreased in 2017 as compared to 2016.
Looking at the common size statement, we can see that the gross written premium holds the highest share in the revenues generated by the company and the gross claim expenses amount to 94.83% of the net revenues of the company. The gross claim expenses increased immensely in 2017 as compared to the previous year.
    
    2017
    2016
    Comparative
    2017
    2016
    Gross written premium
    14191
    14395
    -0.0142
    117.86%
    130.08%
    Unearned premium movement
    255
    -119
    -3.1429
    2.12%
    -1.08%
    Gross earned premium revenue
    14446
    14276
    0.01191
    119.97%
    129.01%
    Outward reinsurance premium
    2615
    2653
    -0.0143
    21.72%
    23.97%
    Deferred reinsurance premium movement
    210
    -557
    -1.377
    1.74%
    -5.03%
    Outward reinsurance premium...