QBE Insurance Group (QBE) SNAPSHOT
Profile: QBE Insurance Group (QBE) is a global insurance and reinsurance company headquartered in Australia. It writes both commercial and personal insurance products, ranging from speciality insurance products offered in the United States to home, motor and compulsory third party insurance in Australia.
History: In October 1886, the North Queensland Insurance Company Limited (QI) was established. In 1921, the Bankers’ and Traders’ Insurance Company (B&T) was established. In 1959, both QI and B&T purchased 40% of The Equitable Probate and General Insurance Company. In 1973, QI and B&T merged to form QBE Insurance. In February 2019, QBE completed the sale of its Colombian operations. In May, it completed the sale of its operations in Indonesia and the Philippines as well as the Australian and NZ travel insurance business. It finalised the sale of its Puerto Rico operations and the North American Farmers Union in August 2019.
Earnings composition: $US420m (51%) of the FY18 insurance profit was generated by Australian & New Zealand Operations. European Operations reported $US311m (38%), North American Operations produced $US221m (27%) and Equator Re delivered $US85m (10%). Asia Pacific Operations reported a loss of $US47m (-6%) and the Corporate and Other segment reported a loss of $US164m (-20%).
Most recent result – 1H19: Adjusted insurance profit increased 3.8% on the prior corresponding period (pcp) to $US495m. Adjusted profit after tax rose 35% to US$531m. This was primarily driven by significantly stronger investment returns. Premium rates excluding CTP changes increased 4.7%. The adjusted combined operating ratio (which measures the expenses and claims costs relative to premiums earned during the period) improved to 95.2%, from 95.8% in the pcp (a lower rate is better). This was aided by improved attritional claims (claims that are less than $US2.5m in size) performance, offset by performance in Crop and Lenders Mortgage Insurance. QBE’s insurance margin (which is the insurance profit as a percentage of net earned premium) increased to 8.7%, from 8.2% in the pcp. A dividend of A$0.25 was declared, up 14% on the pcp.
Company outlook: QBE is continuing to dispose of renewal rights in relation to its North American personal lines business. QBE is targeting a combined operating ratio of 94.5-96.5% in FY19. It also has an investment return target of 3-3.5%.
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