The international general insurance and reinsurance company reported a net profit of $US1.28 billion for 2010, down from $US1.53bn a year ago and in line with the company’s own guidance.
“This was a very positive result given the difficult global economic conditions and the higher-than-normal frequency of catastrophe claims suffered by both QBE and the insurance industry generally in 2010,” said Chairman Belinda Hutchinson in a statement.
Australia’s largest insurer by market capitalisation is the latest of a run of insurers to be hit by unusually high levels of catastrophes. Last week,
Insurance Australia Group reported its profit for its first half ended December 30, halved to $161 million as natural disasters in Australia and New Zealand boosted claims costs and its UK insurance operations made a loss.
However, Ms Hutchinson said the outlook is positive thanks to recent acquisitions including QBE’s purchase of the Balboa insurance portfolio from Bank of America-Merrill Lynch (BAC) earlier this month.
With a market capitalisation of $19bn, QBE operates in 49 countries across the Asia Pacific, the Americas and Europe.
The company’s overall insurance profit margin, a widely watched underlying profitability measure, fell to 15 per cent from 17 per cent a year earlier.
The profit margin came in below the company’s 16 per cent – 18 per cent target range due partly to the unusually high incidence of extreme weather events. The margin was also crimped by low interest rates in the US, UK and Europe that hurt investment returns.
Net earned premium, the company’s key revenue measure, rose by 20 per cent, in line with the company’s target increase, to $US11.36bn from $US9.45bn the previous year.
“Our outlook is positive, with expected net earned premium growth of 22 per cent to 25 per cent in 2011 from acquisitions already announced and an expectation that insurance profit will grow by at least a similar percentage,” said Ms Hutchinson.
“We expect continuing low yields, albeit slightly improving, on fixed interest and cash investments, and general market uncertainty from time to time as economies emerge from the difficulties of recent years.”
The latest net earned premium growth guidance for 2011 allows more upside than the 22 per cent – 23 per cent forecast given by the company at its February 4 market update. The company confirmed that it expects an insurance profit margin of 15 per cent – 18 per cent for the current year.
The highly acquisitive QBE on February 4 announced it had bought the Balboa insurance portfolio from Bank of America-Merrill Lynch and entered into a 10-year distribution agreement for an upfront payment of $US700m.