QBE records healthy first half result after horror pandemic year

QBE has bounced back to a profit thanks to high premiums and new business.

QBE is confident Covid claims will come in below the $130m ceiling set by the insurer.

QBE has bounced back to a profit thanks to high premiums and new business and as the insurer reaped the benefits of a booming crop market and a slackening of the impact of the pandemic.

The insurer delivered a $441m profit for the first half, compared to a net loss of $712m in the prior corresponding period. Adjusted cash profit was $463m.

QBE declared an interim dividend of 11c per share, up from 4c.

It said the rebound came on the back of a turnaround in both underwriting and investment returns. Critically, QBE paid out less than it brought in.

The group’s operating ratio of 93.3 per cent compared favourably with the 103.4 per cent in the prior period.

Moves to set aside funds to cover potential Covid and adverse prior accident claims impacted QBE in the period.

Gross written premium also surged across the business, up 20 per cent, as the insurer wrote new business and added coverage to existing customers.

Increases in QBE’s crop line business were particularly strong, up 48 per cent, due to a significant rise in corn and soybean prices.

But even excluding the crop line gross written premium was up 14 per cent.

Premium rates are also up markedly, rising 9.7 per cent compared to the first half, when prices rose 8.7 per cent.

QBE also noted the end of its “pandemic-related pricing relief initiatives” put in place in 2020.

Catastrophe claims for the half came in at $462m or 7 per cent of net earned premium, a significant jump from $308m or 5.5 per cent of net earned premiums in the prior period. Catastrophe costs were driven by winter storms that hit Texas, as well as wild weather and flooding in Australia.

QBE fared better than fellow listed insurer IAG, which delivered a $427m loss for the year, with $742m in natural peril claims dragging the insurer down.

The company is also facing potential payouts for Covid-19 claims, but QBE interim CEO Richard Pryce said he was confident claims would come in below the $130m ceiling set by the insurer.

“Importantly we have already received some Covid reinsurance BI-related recovery,” he said.

QBE is still awaiting the outcome of court action in Australia which may see the company forced to pay insured customers seeking to make claims for interruption caused by the pandemic.

Mr Pryce will retire from QBE at the end of this year in favour of incoming CEO Andrew Horton, who is set to assume the job in September. This comes after the abrupt departure of QBE’s previous CEO Pat Regan in September last year.

Mr Pryce said the company was looking to upgrade QBE’s technology systems, transferring functions to the cloud and rationalising its real estate to fit a post-Covid world.

The company has already vacated some office space in New York City and Atlanta.

QBE said it expected to incur a $150m restructuring charge over the next three years as part of the reshaping of the company, of which $29m was booked in the half. The insurer said it was targeting an expense ration of 13 per cent by 2023, compared with 13.7 per cent currently.