QBE Reports Record $375 Million 1st Half Profit

August 17, 2005

Australia’s QBE Insurance Group announced a record profit after tax of A$491 million (US$375 million) for the half year to 30 June 2005, an increase of 43 percent on the profit after tax of A$343 million (US$262 million) for the same period last year. Profit before tax was up 57 percent to A$675 million (US$515 million).

QBE said that “in view of the excellent results, the directors have increased the interim dividend from A24.0 cents (US18.3 cents) per share to A33.0 cents (US25.1 cents) per share, 50 percent franked.”

The earnings announcement said: “The significant improvement in profit arose from a 13 percent increase in net earned premium income to A$3.5 billion [US$2.67 billion], higher insurance profit margins and improved equity markets. Group insurance profit before tax was up 30 percent to A$553 million [US$422 million] and was 15.8 percent of net earned premium compared with 13.6 percent for the same period last year. Australia, Pacific, Asia, Central Europe, Lloyd’s, European company and the Americas operations all improved their insurance profit to net earned premium ratios. The combined operating ratio (i.e. the ratio of claims, commission and expenses to net earned premium) was 90.3 percent compared with 90.5 percent for the same period last year.”

CEO Frank O’Halloran commented: “We are ahead of all our key profit targets at the half year. This gives us confidence that, subject to unforeseen circumstances, the insurance profit to net earned premium ratio will be in the range of 15 percent-16 percent for the full year, well above the target of 12.5 percent-13.5 percent announced at our Annual General Meeting in April.

“Premium rates on average for the Group have decreased by slightly less than 4 percent, compared with our planned overall reduction of just over 3 percent. Premium rates for liability business in Australia have fallen by around 10 percent on average, in line with our expectations, reflecting the positive impact on claims of tort reforms, higher deductibles and improved policy terms and conditions,” he continued. “Importantly, our retention of customers has increased and current premium rates are adequate for us to meet our insurance profit targets.”

QBE has made a number of acquisitions over the past year and a half, and it’s still in the market. In July it signed an agreement to acquire 100 percent of the Colorado-based U.S. insurer National Farmers Union Property and Casualty Company, and its wholly owned subsidiary, United Security Insurance Company (See IJ Website July 26, 2005.) O’Halloran told a press briefing that QBE was looking at around 15 possible acquisition candidates – most of them small and medium-sized insurance companies.

The full earnings report and additional comments can be obtained on the company’s Website at: http://www.qbe.com.au.

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