QBE’s First Half Results Show Gains

Australia’s QBE Insurance Group’s financial report for the six months ended June 30, 2008 showed increases in most areas, compared to 2007. QBE cited the following figures:
– Insurance profit was up 6 percent to a record A$1.116 billion (US$967 million), compared to A$1.053 billion (US$913 million) in H1 2007;
– Profit after tax, before net realized and unrealized capital losses on equities, was up 7 percent to A$920 million (US$801.5 million) – 2007 = A$860 million (US$ 749 million);
– Cash flow from operations was up 7 percent to A$839 million (US$731 million) – 2007 = A$785 million (US$ 683 million);
– Net realized and unrealized capital losses after tax from equities were A$61 million (US$53 million), the same as in 2007:
– However, QBE’s profit after tax, including net realized and unrealized capital losses on equities, decreased by 7 percent to A$859 million (US$748 million) from A$921 million (US$802 million) in 2007;
– Profit after tax was adversely impacted by A$74 million (US$64.4 million) due to the strengthening of the Australian dollar.

QBE said that nonetheless it would increase its interim dividend to 61 cents in “view of the strong insurance profit and allowing for the volatility in equity markets.”

QBE also noted that its net earned premium for the half year was up 8 percent to A$5.108 billion (US$4.46 billion) and, “for comparative purposes, using constant exchange rates, was up 18 percent. This is slightly behind target because of lower than expected new business in the US and UK due to inadequate pricing, offset partly by a higher customer retention, less than expected premium rate reductions and lower external reinsurance costs.

“The combined operating ratio, being the ratio of claims, commissions and expenses incurred as a percentage of net earned premium, was an excellent 85.8 percent (2007: 86.2 percent) and the insurance profit margin was 21.8 percent (2007: 22.2 percent). The strong insurance profitability was achieved even though there was an increase in large individual risk and catastrophe claims. These included a number of weather related catastrophes in Australia and Asia and a record level of storms in the US for the first half.

CEO Frank O’Halloran commented: “We are extremely pleased with the strength and quality of our insurance profit given market conditions and increased catastrophe activity in the first half. Our focus is on maintaining our quality customers and profitability at this time in the cycle. We are only prepared to write new business at prices that meet our profit requirements and this has meant that we are under budget on the top line. We are also very pleased with the quality of our businesses around the world, with the large majority of both our products and the 45 countries in which we operate producing underwriting profits.”

He added: “We have reached agreement on eight acquisitions this year to date which are expected to contribute net written premium income and incremental profit after tax of $550 million and $160 million respectively in the first full year. We also have a pipeline of acquisitions and this, together with the strength of our balance sheet, will enable us to convert further opportunities for the benefit of our shareholders.”

Source: QBE – www.qbe.com