BX3011 Company Accounting: QBE Insurance’s Financial Statement

Introduction

The report aims to assess the QBE insurance’s financial statement. Some of the main discourse of the study will comprise of the discussion on the activities performed by the company. The various sections of the discussions will further evaluate the composition of equity for QBE insurance. The third section of the study has been discussed with the various types of the factors which are associated to the share price for the company’s ordinary shares for the last day of the financial year. This section is followed with the various types of the discussions pertaining to the company’s shares one calendar month after the end of financial year. The important discussions on this aspect has been conducive in suggesting the difference in one month for this period. The fifth section of the study has emphasized on the debt structure of the company associated to the sourcing of the external debt. Some of the other section of the discussions of the report has been able to consider the discussions associated to the discussions in the key elements in the fixed assets categories. The last section has evaluated the policy for impairment of the intangible assets made by the company (Titman, Keown & Martin, 2017). 

Nature of the Company’s Activities

QBE Insurance headquartered in Sydney is recognised considered Australia’s one of the largest insurer which provides the services across wide range of the countries including “Australia, America, Europe and Asia Pacific region” (Martin, 2016). Originally QBE insurance was better known as “North Queensland Insurance Co,” in 1886 situated in “Townsville, in northern Queensland, Australia”. The company is seen to employ 14500 staff across 37 countries worldwide. The total market capitalization of the company is discerned with A$ 17.81 billion however the after-tax loss of the company has been reported as $ 1249 million in 2017. The presentation currency of the company has been further depicted as AUD as the main accounting framework is based AASB reporting standards (Renz & Herman, 2016).

Composition of The Company’s Equity

In the capital structure of the company equity comprises of the common preferred stock along with the retained earnings which is considered as the total of shareholders equity (Finkler et al., 2016).   The main accounts for the QBE Insurance in the equity evaluation has been depicted with “share capital, treasury shares held in trust, reserves and retained profits”. In addition to this, due to the presence of the noncontrolling interest amount of 42 million in 2017 and 50 million in 2016 the total equity of the company has been seen to be amounted to $ 8901 million in 2017 and $ 10334 in 2016. The total of the retained earnings figure of the company is identified as $ 1763 million in 2017 and $ 3588 in 2016 (Barr, 2018). The depictions of the values of the equity for the company has been depicted in the report as follows:

Figure: Equity amount of QBE insurance in 2017 and 2016

(Source: QBE.COM, 2018)

The different types of the reserves of the company has been observed with the owner-occupied property values, share based payments and “Premium on purchase of non-controlling interests”. The depictions of reserves for the company has been depicted in the report as follows:

Figure: Reserves of QBE insurance in 2017 and 2016

(Source: QBE.COM, 2018)

Share price for the company’s ordinary shares for the last day of the financial year

The total share price of the company at the last day of the financial year has been depicted as $ 12.42. During this year it is seen that the total shareholder return is 5.3%. in addition to this, the depictions as per the various types the financial performance measurements has been able to evaluate the value of shareholders average return to be 8.1% (Pauw et al., 2015).

Figure: Share Price and share value relationship of QBE insurance in 2017 and 2016

(Source: QBE.COM, 2018)

Share price for the company’s ordinary shares one calendar month after the end of financial year

The share price one calendar month after the end of financial year is identified to be $ 10.68. The main observations made in this year has been stated with a falling total shareholder return, which is evident with $ 10.68. Some of the important assessment of the statutory return has been seen with a decrease of 13%. Some of the other factors associated to the decrease in these values are identified in terms of the decisions relating to the incentive purposes. It needs to be understood that in the 2017 the remuneration committee of the board decided to higher portion of the share capital toward the staff incentives .in addition this, it needs to be also considered that the important consideration related to the dividend per share was also low in nature (Zietlow et al., 2018). 

Debt structure and the source of external financing

The debt structure of the company has been seen to be comprised of the accounts subheads which are based on the “Derivative financial instruments, Trade and other payables, Current tax liabilities, Liabilities held for sale, Unearned premium, Outstanding claims, Provisions, Defined benefit plan deficits and Deferred tax liabilities and borrowings”. The total amount of the debt observed in 2017 has been reported as $ 34961 million in 2017 and $ 31249 million in 2016. The main types of the debt of QBE Insurance has been seen to be depicted in terms of short term, medium term and long-term borrowings (Zietlow et al., 2018). The main accounts included in the short-term borrowings of the company includes the accounts such as “Trade and other payables and Current tax liabilities, Liabilities held for sale,”. The main accounts included in the medium-term borrowings comprises of “Derivative financial instruments, Unearned premium, Outstanding claims, Provisions, Defined benefit plan deficits and Deferred tax liabilities”. The long-term debt comprises of the long-term borrowings which is seen as $ 3616 million in 2017 and 3474 million in 2016 (Barr, 2018).

The depictions made on the debt equity ratio has been able to show that the debt equity ratio of the company have increased from 3.02 in 2016 to 3.93 in 2017. The main interpretations based on these figures shows that company has a high amount of debt relative to the available equity company is aggressive in financing its growth with the debt. However, such a high debt equity positions the company with high amount of risk.

Provision for income tax figure, deferred tax assets/liabilities

Based on the financial statement analysis it has been seen that the Current tax liability of the company is depicted as $ 160 million in 2017 and $ 73 million in 2016. In addition to this, the balance of the deferred tax liability balance comprises of the $ 56 million in 2017 and $ 106 million in 2016 (Brooks, 2015). Furthermore, the current tax assets balance shows $ 22 million in 2017 and $ 51 million in 2016. The value of deferred tax asset in 2017 was depicted as $ 514 million in 2017 and $ 778 million in 2016. The income tax expense in 2017 is evaluated as $ 428 million in 2017 and $ 228 million in 2016 (McKinney, 2015).

Key elements in the fixed assets categories

The fixed assets as per the balanced sheet has been discerned as the items such as Property, plant and equipment with an amount of $ 276 million in 2017 and 257 in 2016. The depreciation, impairment of the property, plant and equipment are depicted in terms of the $ 49 million and $ 53 million.

The measurement of the assets is seen to be based on the various types of the polices which are seen to be considered as per the written down value method. Based on the depiction of the financial statements the fixed assets have increased from 2016 to 2017.

Policy for recognising the impairment of intangible assets asset

The overview of the intangible asset disclosure of the company are seen to be included with the “Lloyds syndicate capacity, Customer relationships, Brand names, Insurance licences, Software and Goodwill”. The carrying value of the intangibles have been seen as $ 3079 million down from $ 3627 million at 31^st December 2016. The carrying value during the year has been depicted as reduction by $ 548 million (Moutinho & Vargas-Sanchez, 2018). This was primarily done as $ 700 written down value method. The impairment testing of the intangible assets of the company is done based on the “assets recoverable value is the greater of its value in use and its fair value less cost to sell”.

Summary of company’s financial operations during the financial year

The total of the retained earnings figure of the company is identified as $ 1763 million in 2017 and $ 3588 in 2016. In compared to the previous year figure the retained earning has been depicted with a decreasing trend. The dividend policy of the company is discerned to reward the shareholders with the relative cash profit and maintain a sufficient level of capital for future investment. The dividend of the company is franked and payable on 20 April 2018 (Petty et al., 2015). 

Conclusion

The main understanding on the composition of the company’s equity is discerned with the main accounts for the QBE Insurance in the equity evaluation has been depicted with “share capital, treasury shares held in trust, reserves and retained profits”. In addition to this, due to the presence of the noncontrolling interest amount of 42 million in 2017 and 50 million in 2016 the total equity of the company has been seen to be amounted to $ 8901 million in 2017 and $ 10334 in 2016.Share price for the company’s ordinary shares for the last day of the financial year is 5.3%.and depicted with a positive aspect to the shareholders. on the other hand, share price for the company’s ordinary shares one calendar month after the end of financial year is evident with $ 10.68.Debt structure and the source of external financing total amount of the debt of $ 34961 million in 2017 and $ 31249 million in 2016. The depictions made on the debt equity ratio has been able to show that the debt equity ratio of the company have increased from 3.02 in 2016 to 3.93 in 2017. This shows the depictions made on the debt equity ratio has been able to show that the debt equity ratio of the company have increased from 3.02 in 2016 to 3.93 in 2017.

References

Barr, M. J. (2018). Budgets and financial management in higher education. John Wiley & Sons.

Barr, M. J. (2018). Budgets and financial management in higher education. John Wiley & Sons.

Brooks, R. (2015). Financial management: core concepts. Pearson

Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management for public, health, and not-for-profit organizations. CQ Press.

Martin, L. L. (2016). Financial management for human service administrators. Waveland Press.

McKinney, J. B. (2015). Effective financial management in public and nonprofit agencies. ABC-CLIO.

Moutinho, L., & Vargas-Sanchez, A. (Eds.). (2018). Strategic Management in Tourism, CABI Tourism Texts. Cabi.

Pauw, J. C., Van der Linde, G. J. A., Fourie, D. J., & Visser, C. B. (2015). Managing public money. Pearson Holdings Southern Africa.

Petty, J. W., Titman, S., Keown, A. J., Martin, P., Martin, J. D., & Burrow, M. (2015). Financial management: Principles and applications. Pearson Higher Education AU.

QBE.COM.  (2018). 2017 Annual Report.  Retrieved 11 May 2018, from https://www.group.qbe.com/reportpresentation/2017-annual-report

Renz, D. O., & Herman, R. D. (Eds.). (2016). The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.

Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and applications. Pearson.

Zietlow, J., Hankin, J. A., Seidner, A., & O'Brien, T. (2018). Financial management for nonprofit organizations: Policies and practices. John Wiley & Sons.