QBE lands $US1.36bn profit after pumping up premiums

Listed insurer QBE has delivered a significant profit after passing on price rises to customers, but the result received a lukewarm response from analysts.

QBE has hinted at plans to ratchet up premiums alongside further growth to new business lines, as the ASX-listed insurer handed down a $US1.36bn ($2.08bn) full-year cash profit.

Unveiling its full-year earnings on Friday, QBE said it had avoided the expense of feared bad weather while handing out premium price rises amid a pullback from unprofitable markets.

A cash profit surge by QBE, which has operations in Australia, America and Europe, almost doubled its $US587m full-year returns in the 2022 financial year, which came as premiums ticked up 9.7 per cent across the group.

QBE passed through its steepest premium increases to Australian customers, who faced a 12.5 per cent lift in their renewals in the year, compared with the insurer’s international clients, who only faced increases hitting an average of 7.8 per cent.

QBE passed on premium increases of 7.9 per cent in the 2022 financial year.

QBE chief executive Andrew Horton said the insurer was now “demonstrating greater consistency and resilience” after a run of poor years.

“We are pleased with the ongoing progress across our strategic priorities, and expect trading conditions to remain favourable in the year ahead,” he said.

Mr Horton said despite inflation pressures coming down across the global markets QBE operated, there were still challenges in individual portfolios.

Offering guidance for the year ahead QBE said it would aim to deliver gross written premium growth in the mid-single digits in the year ahead, noting premium rate increase were “expected to remain supportive”.

QBE’s outlook comes in below rivals Insurance Australia Group, which also reported on Friday and flagged plans to pass through low-double digit premium increases

Mr Horton said QBE was facing more competition across the world, noting its outlook reflected plans to continue a pullback from some areas.

“It’s some business in the US and some business in Australia, it wasn’t really achieving a good margin,” he said.

QBE chair Michael Wilkins and chief executive Andrew Horton. Picture: John Feder

Mr Horton said QBE was making “meaningful progress” across its business, with its North American exposures still a strategic priority for the sprawling insurer.

“We are tasked to build a business which delivers performance that is consistent with our Group targets,” he said.

“We have renewed our focus on building and strengthening relationships with our major trading partners, and are confident we can successfully manage our priorities for the division.”

QBE reported its natural catastrophe losses came in below 2022 levels, hitting only a 6.6 per claims ratio, compared to 7 per cent the year prior.

QBE said its improving book took its combined operating ratio to 95.2 per cent, or 94.6 per cent excluding the insurer’s $1.9bn reserve transaction which saw it pay Enstar to offload a number of old claims off its books.

Mr Horton said the insurer could look to further deals to offload a back-book of old policies, noting QBE’s chief financial officer Inder Singh was “looking at it”.

“The logic of it is sound and I think we would contemplate doing it again,” he said.

Mr Horton said he was pleased with QBE’s rollout of artificial intelligence systems across its new cyber insurance policy lines, noting the insurer was now looking at using it across its property and workers compensation lines.

“There’s no reason this can’t scale relatively quickly,” he said.

QBE declared a 48c final dividend, taking full year returns to 62c at 10 per cent franked.

UBS analyst Scott Russell said QBE’s results had been “on the disappointing side”, noting guidance for 2024 “looks soft”.

Shares in QBE were down 2.38 per cent by 3pm.