QBE Insurance reported a statutory 2017 net loss after tax of US$1.249 billion, compared to a net profit after tax of US$844 million in the prior year. This included the significant non-cash impairment of goodwill --US$700 million-- and write down of the deferred tax asset following the reduction in the US corporate tax rate--US$230 million--in our North American Operations. The Board remains committed to the three-year share buyback of up to A$1 billion; however, intends to take a considered approach in the near term.Separately, Zurich Insurance Group said that it has entered into an agreement to acquire the operations of Australian insurer QBE Insurance Group Limited (QBE) in Latin America for a total aggregate price of US$409 million subject to closing adjustments. The acquired operations had combined gross written premiums of about US$790 million in 2017, with a highly diversified product offering and strong distribution.
Zurich expects to achieve an overall return on investment comfortably in excess of the Group's indicated hurdle rate of 10% within the first full year post completion of the transaction. The acquisition is expected to be completed by the end of 2018 and is expected to be funded from internal resources.
QBE confirmed that it has entered into agreements with Zurich Insurance Group for the sale of its operations in Argentina, Brazil, Colombia, Ecuador and Mexico. QBE Puerto Rico will be retained by QBE to facilitate the servicing of claims resulting from Hurricane Maria and will become part of QBE's North American Operations. The estimated aggregate consideration is US$409 million subject to closing adjustments. Profit on sale before tax is estimated at around US$100 million .
QBE noted that the sale will positively impact the Group's APRA PCA multiple and S&P capital position due to the profit on sale, lower risk charges and the disposal of approximately US$42 million of goodwill and intangible assets.
QBE's cash loss after tax for 2017 was US$258 million compared to cash profit of US$898 million last year. Net earned premium were up 7%, assisted by reinsurance cost savings.
QBE noted that the final dividend for 2017 will be four Australian cents per share, franked at 30%, and compares with the 2016 final dividend of 33 Australian cents per share, franked at 50%. The reduced dividend reflects the very significant impact of catastrophe claims that contributed to a US$632 million after tax loss on a cash basis during the second half of the year. Including A$139 million of funds used to buy back and cancel QBE shares, the payout for the 2017 full year is A$495 million, down 33% from A$741 million in 2016.
QBE's targets for 2018 are Combined operating ratio 95.0% - 97.5%, investment return 2.5% - 3.0%.