QBE H1 Net up 56% to $740 Million

Australia’s QBE Insurance Group reported a hefty 56 percent increase in after tax net profit for the half year to June 30, 2007 to a record A$921 million (US$740 million), compared to A$591 million (US$475 million) in H1 2006.

“The significant improvement in net profit was mainly due to a continued low frequency and severity of claims, higher investment yields on our quality investment portfolio and recent acquisitions,” said the announcement. “The results and premium income were adversely affected by an overall reduction in premium rates of around 3 percent and the stronger Australian dollar, particularly against the US dollar.

Other earnings highlights for the period included the following:
— Gross written premium up 15 percent to A$6.52 billion (US$5.24 billion)
— Net earned premium increased by 19 percent to A$4.75 billion (US$3.81 billion).
— Combined operating ratio lowered to 86.2 percent compared with 87.9 percent for the same period last year.
— Insurance profit, which is the underwriting result plus investment income on funds set aside to meet future obligations to policyholders, was well ahead of target at 22.2 percent compared with 18.7 percent for the same period last year.
— All insurance divisions increased insurance profits and the substantial majority of the 45 countries in which QBE has operations produced underwriting profits.

Following the strong results, QBE said it has “upgraded its full year insurance profit forecast to 18.5 percent to 20.0 percent of net earned premium, subject to the usual caveats, such as large risk and catastrophe claims not exceeding the substantial allowances in business plans. The previous insurance profit target was 17.5 percent to 18.5 percent.”

In a sign of the times, The Group also said it has “no direct exposure to US sub-prime mortgage, collateralized debt or loan obligations or other similar products; however, there is the potential of a small indirect exposure to these type of securities via deposits and other investments in highly rated major commercial banks.”

CEO Frank O’Halloran commented: “The significant increase in net profit and positive outlook for the rest of the year reflects the constant focus the QBE team has on all the key drivers that determine profitability in the insurance business. Premium rates is only one of those drivers.”

He also indicated: “The recent US acquisitions [QBE closed the acquisition of Praetorian Financial Group from Hannover Re and Winterthur US from AXA earlier this year (See IJ web site June 4)] should enable us to achieve growth in gross written premium for 2007 and 2008, at this year’s average exchange rates, of around 25 percent and 10 percent respectively. The integration plans for these acquisitions are well advanced and we are on target to achieve the previously announced synergies and profit.”

The full report can be obtained on the Group’s web site at: www.qbe.com.

Source: QBE

Topics USA Profit Loss