QBE Insurance Half Year Result: QBE profit jumps but emerging markets underperform

QBE reported a statutory net profit after tax of US$345 million, an increase of 30% from US$265 million in the previous corresponding period (pcp). Cash profit after tax, also rose by 30% to US$374 million from $287 million in the pcp. Adjusted net profit after tax increased by 76% to US$464 million. On the same adjusted basis, QBE’s combined operating ratio increased slightly to 95.3%, from 94.5% in the prior corresponding period which was in line with a revised target for the interim and full year combined operating ratio t range of 94.5%-96.0%. 

 In late June 2017, QBE announced a downgrade in earnings expectation due to underperformance of its Emerging Markets operations. This was reflected in a disappointing combined operating ratio (COR) which measures claims as a proportion of premiums. Over 2017, the COR for emerging markets rose to 110.8% compared to 99.5% in the prior period. This reflects that claims expenses were running ahead of the premiums earnt by the business. This was particularly the case in the Asia Pacific operations. At the same time, Hong Kong was impacted by a workers compensation claim in the previous year and there were increased claims in Latin America. 

 After adjusting for currency movements, gross written premium increased by 3%, due to growth in Australia & New Zealand and Emerging Markets. Premium income was stable in the largest market segment, North America, and Europe. Europe saw only modest growth in gross written premium, rising by only 0.4%. QBE still considered this a good result given the competitive landscape it participates in. This saw premiums fall 1.1% during the half. 

 QBE declared an interim dividend A$0.22 per share, an increase of 5% over the pcp and represents a payout of $302 million or 61% of cash profit. The dividend will be 30% franked and is payable on 29 September 2017. 

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