QBE has posted a turnaround in first-half earnings, as the insurer achieved an adjusted cash profit after-tax of $US463 million ($628 million) following a $US666 million loss ($904 million) from a year earlier.

Analysts see a number of positives from the results but they also cautioned the business may be in for a weaker second-half, citing risks from a number of directions such as higher North America crop claims from a severe heatwave in the US Midwest region.

“We don’t think the second-half result will be as strong as the first-half,” Morningstar said in a research note.

Morningstar says while first-half crop premiums rose 48%, the line has not been a happy hunting ground historically.

“Recent price increases may still not be enough to prevent underwriting losses over time,” it said,

Last week QBE reported its earnings for the six months to June 30, crediting the improved results to a number of factors including rate gains across many key portfolios.

The group achieved average rate renewal increases of 9.7%, up from 8.7% a year earlier. In the Australia Pacific market, rates rose 7.7% from 5.5%, in North America the figure grew to 10.2% from 9.5% and in the International market it went up to 10.5% from 10.1%.

Statutory net profit reached $US441 million ($598 million), compared with last year’s $US712 million ($966 million) loss while underwriting profit improved to $US642 million ($871 million) from the $US524 million ($711 million) deficit last year.

Interim Group CEO Richard Pryce says the adjusted combined ratio of 93.3% achieved for the period is the best in almost a decade. Last year the combined ratio blew out to 103.4%.

“Pricing remains strong across all regions and in almost every product line,” Mr Pryce said in an earnings call from London. “The trend in premium rate increases is impressive, particularly the step-up in 2020, and then again in the recent half.”

Allan Gray Australia Chief Investment Officer Simon Mawhinney says QBE has produced a “good result” for the June half. Allan Gray, an investment management firm, has about 7% of its portfolio invested in QBE stock.

“I would say the positives have been reasonably widespread through their results,” Mr Mawhinney told insuranceNEWS.com.au.

“The strengthening premium rate cycle, which has been spoken about a lot, that has definitely been coming through in the results.”

JP Morgan says it thinks the business is capable of achieving very strong underlying margin expansion over the second-half and the 2022 financial year due to the strong rate environment, which is in excess of claims inflation.

“Trends in the cycle are currently improving, and there could be further upside from premium rates, providing a tailwind for earnings growth with investment yields a headwind,” JP Morgan said.