Catastrophes continue to hit QBE’s bottom line, with first-half claims now $US340 million ($321 million) higher than the first half of last year.

In an investor update, the company is now estimating catastrophe claims will be $US830 million ($783 million) for the 2011 financial year.

This will be offset by stronger investment income of $US560 million ($528 million) for the five months ending May.

This compares to $US109 million ($102 million) for the first half of 2010.

CEO Frank O’Halloran says QBE’s reinsurance arrangements and its diversified operations have helped to reduce the impact on losses from the catastrophes.

“The unprecedented frequency and severity of catastrophes in the first five months have materially impacted a large number of insurers and reinsurers, with many announcing significant underwriting losses,” he said.

“However, our diversification and comprehensive reinsurance protections will enable us to outperform the majority of our peers in the first half.”

The insurer has locked in pricing for 80% of its external worldwide primary catastrophe and risk protection for 2012 and 2013 at this year’s pricing.

Reinsurance for the Balboa portfolio has been bought separately and is within the original estimated cost.

Balboa reinsurance for the first catastrophe is $US150 million ($141 million) compared to $US200 million ($188 million). For a second catastrophe, it is $US50 million ($47 million) compared to $US200 million ($188 million). 

In addition, stop loss reinsurance protection has been purchased for the US crop business and additional retrocessional cover has been purchased for its captive, Equator Re, the insurer confirmed.

QBE is estimating both gross and net earned premiums for the full year will be in excess of 27% and 30% respectively.

Mr O’Halloran says after-tax profit for the first six months of this financial year is expected to be 50-60% higher than the $US440 million ($415 million) reported in the six months ending June 2010.

But if there are any more significant natural catastrophes, QBE’s full-year result will be hit, he says. 

“Substantial premium rate increases on catastrophe-affected portfolios will assist the second half, but large individual risk and catastrophe claims for the next seven months will need to be less than approximately $US770 million ($726 million) for us to deliver a combined operating ratio less than 90% for the seventh year in succession,” Mr O’Halloran said.

“The second six months of 2010 produced $US590 million ($556 million) of large claims.”