QBE Insurance has recorded a record operating net profit of $820 million – a massive jump of 43% on the corresponding period – for the year ended December 31.

It’s been an impressive couple of years for the group, which under CEO Frank O’Halloran has grown enormously through astute management and an acquisition policy requiring intelligence and patience.

Pre-tax profit was up 41% to $1.08 billion and the return on average shareholders’ funds was 21.2%. That’s a big leap from last year’s 18.3%.

The insurance profit before tax increased 45% to $908 million, despite an increase in large catastrophe claims to $320 million. Gross earned premium was up 10% to $8.5 billion and net earned premium increased 12% to $6.7 billion.

“The impact of the stronger Australian dollar on premium growth was significant,” the company said in a statement. “Using 2003 rates of exchange, gross and net earned premium would have increased 16% and 17% respectively.”

Mr O’Halloran says QBE has “exceeded our main financial targets, achieving a record operating profit, improving underwriting profits and insurance margins in all our insurance divisions and outperforming our overall investment strategy”.

Unlike his competitors, Mr O’Halloran isn’t shy to admit he’d like to use some of the company’s good fortune for future acquisitions. “A number of opportunities are being investigated in the overseas market,” he said, naming Asia, central and western Europe and Latin America as targets.

Acquisitions during 2004 added more than $1.5 billion in annual gross premium, of which $700 million was written in 2004.

He says even though overall premium rates were slightly less than expectations for the major renewals season, he is confident that “subject to the usual caveats” QBE can increase its profit by more than 10% in 2005.

Despite all the good news, QBE’s share price dropped by 30 cents to $14.55 last week. Analysts suggest the drop was a result of consumer concern that the cycle has peaked and profits will become more fragile.