QBE has announced a strong set of results which saw its interim profit after tax increase by 24% thanks to an “improvement in underwriting profitability.”
With challenging conditions gripping the global insurance market, QBE saw a 21% improvement in underwriting profitability which saw profits hit US$488 million compared to US$392 million in the same period last year.
GWP across the international business increased by 3% to US$8.6 billion, compared to US$8.3 billion last time out, as the company will “look to build our business off a solid base,” QBE Group CEO
John Neal said in a letter to investors.
Neal took the opportunity of the results to look forward to a strong period of growth for the company as he believes the best is yet to come.
“QBE’s 2015 interim result demonstrates improvement in all key metrics despite more challenging market conditions, increased catastrophe activity and substantial foreign exchange headwinds,” Neal said.
“With remediation initiatives largely behind us, it is time to turn our attention to growth. Following recent executive appointments, we now have the platform, strategy, resources, leadership and cost management discipline required to drive profitable growth.”
In Australia and New Zealand, GWP dropped 15% compared with last term thanks to a weaker Australian dollar, the company said.
The storms that hit the east coast of Australia also impacted the result of the region but Colin Fagen, CEO of Australian and New Zealand operations
who is set to embark on a new role within the Group, said the result was pleasing in a challenging environment.
“The first half combined operating ratio of 90.8% is an extremely pleasing result considering the severe eastern seaboard storm activity and the heightened competitive landscape,” Fagen told investors in an overview of the local business.
“This has been achieved while delivering significant change programs and maintaining focus on strengthening our underwriting controls, claims and expense management. Our core intermediated portfolios saw modest underlying growth with stronger growth expected during the second half.”
QBE stressed that while the competitive local market remains and is increasing in certain commercial markets, some flattening can be seen in the market which could help drive business in the future.
“The commercial insurance market in Australia and New Zealand remains competitive although there are some early signs of potential price flattening,” the business noted.
“Retention remains the key focus of all of our traditional intermediated markets. The large corporate segment of the market, which is a small proportion of QBE’s portfolio, is experiencing heightened interest from international insurers, particularly the American underwriters.”
The company advised that it has lowered its FY2015 target for GWP and net earned premium for the Group including a 5% dip in the expected GWP for the region.
“Despite expected slowing of the Australian and New Zealand economies, we anticipate solid premium growth in the second half of 2015 and throughout 2016, assisted by the finalisation of a number of large new business opportunities in both the small and personal lines markets which we had expected to complete in the previous 12 months.
“Nevertheless, we have revised our FY15 gross written premium expectations down by around 5% or US$200 million.
“This is due to the delayed inception of the aforementioned new business opportunities, an industry wide downturn in lenders’ mortgage insurance new business volumes, a slightly more competitive pricing landscape and a currency impact of close to US$100 million due to the weaker Australian dollar.”
