QBE recovers

QBE recovers

Australian insurer QBE saw its share price jump following the release of full-year results that seemed to hint that the company was on the right road after some turbulent times.

The share price was up 7.2% on Tuesday, bringing its gain this year to more than 10%.

Underwriting profit was up 60% year on year to US$547m. The combined ratio improved 1.7 percentage points to 96.1%. Insurance profit  was up 28% year on year to $1.07bn, and the Net profit after tax swung from a loss of $254m in 2013 to a gain of $742m in 2014. Gross written premiums were down 9% year on year to $16.33bn. The insurance profit margin was 7.6%. That was a slight disappointment, as last August QBE had set as its target a range of between 8% and 9%.

The company sais that its "remediation" process was now "largely completed". particularly in North America and in Europe. The attritional claims ratio was significantly reduced (47.5% in 2013 and 46.6% in 2014). Chief executive John Neal said that "an especially pleasing aspect of the result was the improved combined operating ratio of 96.1% and the absence of adverse prior year claims development". Indeed, QBE reported positive prior year claims development for the second half of 2014.

As a result of restructuring and sales, the debt-to-equity ratio was reduced to 32.5%, from 44.1% a year ago. The operational transformation programme has delivered $250m in run-rate savings, with an additional $90m savings in claims-related procurement activities.

The dividend was raised 16% to 37Aus¢ a share. The company said that it would target "strong growth" in payouts".

The outlook for 2015 is currently GWP of $15.5bn to $15.9bn, with net earned premiums of $12.6bn to $13.0bn. The target combined ratio is between 94% and 95%, while the target insurance profit margin is between 8.5% and 10.0%. However, many analysts felt that QBE was erring on the side of caution, not wanting to over-promise and under-deliver.

Finally (see separate story), QBE has announced a further sell-off – in this case its Argentine workers' comp unit, raising $95m.

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