QBE has forecast gross written premium (GWP) growth will slow this year to “mid-single-digit” gains, while the company expects an improved combined operating ratio.

Net profit last year surged to $US1.36 billion ($2.1 billion) from $US587 million ($902 million), with investment returns more than doubling and GWP rising 10%.

“We expect trading conditions to remain favourable in the year ahead,” Group CEO Andrew Horton said in the annual report released on Friday. “Challenges associated with inflation, geopolitics and climate should encourage further discipline, and we expect premium rates should remain supportive.”

The company expects a group combined operating ratio of about 93.5%, compared with 95.2% last year.

Premium renewal rates have been supported by broad strength in property, which is expected to taper, and stability in casualty, while financial lines have seen ongoing pressure.

“We are expecting property rate increases to not be as great as they have been over the past year or two,” Mr Horton told insuranceNEWS.com.au. “That said, you may get pockets where we still have supply chain issues, and when there’s a large catastrophe you often see the cost of materials and tradesmen go up a lot.”

QBE has raised its catastrophe allowance for this year to $US1.28 billion ($1.97 billion), compared with $US1.175 billion ($1.81 billion) last year, despite losses falling within the allowance for the first time in four years. Actual catastrophe losses were $1.092 billion ($1.68 billion). 

“We want to have resilience in our balance sheet and I think it’s better having a higher allowance that we’re more likely to meet, rather than having a low one that we’re stressed about going through,” Mr Horton said. “It gives us more resilience as we start 2024.”  

The company is focused on improving the performance of its North American division, which reported a combined operating ratio of 103.7%. QBE has simplified the business and ended poorer-performing property relationships. 

In Australia Pacific, renewal rates grew 12.5% while the combined operating ratio deteriorated to 93.6% from 92.8%, which reflected short-tail inflation and elevated catastrophe costs in the first half. A higher expense ratio predominantly reflected increased investment in modernisation initiatives, CFO Inder Singh says. 

The company exited two third-party property arrangements in Australia as it continues to look closely at margins in that area. 

Mr Horton says the group is focused on reducing volatility and improving consistency, and his preference is for organic growth that builds on existing culture rather than looking to integrate acquisitions. 

“You don’t run the risk of paying a premium for something you find out later wasn’t worth it,” he told insuranceNEWS.com.au. “That doesn’t mean we wouldn’t look at them, and we obviously get bankers who come along saying this company is for sale or that company’s potentially for sale, so we do look at it, but I’d rather go for organic growth.”