QBE’s earnings surged in the first half on lower catastrophe costs and increased investment income, while the pace of premium rate increases is slowing.

“We have seen a positive start to the year, highlighted by further improvement in underwriting performance and strong return on equity,” group CEO Andrew Horton said on Friday.

Reported net profit doubled to $US802 million ($1.22 billion) from $US400 million ($609 million) while gross written premium increased 2% to $US13.05 billion ($19.88 billion) as rate increases were partly offset by portfolio exits.

QBE maintained guidance for a full-year combined operating ratio of about 93.5% but cut the GWP growth outlook to about 3% from “mid single digits” previously.

The change mainly reflects the insurer’s exit from the loss-making North America middle-market business, announced in June, and factors in lower than anticipated crop premium and increased competition in Australia.

Group-wide premium rate increases slowed to 6.7% in the half from 8.9% in the second six months of last year and 10.2% in first-half 2023. In Australia, rate increases eased to 9% in the second quarter from 11% in the first.

Mr Horton says more competition is being seen from Australian and London market participants, and QBE is focused on margin amid a danger that new short-term capital could push pricing down, in a return to soft market conditions.

“We’ve been in Australia a long time, we have very deep relationships with distribution partners, and this is when it becomes really important. We have a track record of showing consistency over 130 years,” he told insuranceNEWS.com.au.

The net cost of catastrophe claims fell to $US527 million ($802 million), or 6.2% of net insurance revenue, from $699 million ($1.06 billion) or 8.7% in the prior period. The first-half allowance was $US609 million ($927 million).

QBE says it has made transactions with RiverStone International and Enstar to protect against adverse reserve impacts from long-tail claims development, particularly from North American business it is exiting.

Mr Horton, who took the top role in September 2021, says a long period focused on remediating underperforming businesses is nearing a conclusion.

“It’s probably been a bit slower than I would have liked, but it’s easy to say with hindsight,” he said. “I think we’ve ultimately made the right decisions.”

The company is well placed to now spend most of its time planning for the future, rather than “addressing problems created in the past”, he says.

Analyst Morningstar says good progress has been made on improving operational efficiency and strengthening QBE’s balance sheet, consolidating the group into a more focused and profitable business after a “multi-decade acquisition binge”.

“We expect higher interest rates to benefit in the medium term, but the competitive landscape means some of this upside is eroded through competition via premium rates,” it said in a research note.

JP Morgan says while rate gains are easing, inflation should moderate faster, benefiting margins. QBE “appears very keen” to meet combined operating ratio guidance, it says.

“There are signs the cycle is slowing, but inflation is also dropping, and rate adequacy is very strong, with QBE still to benefit from the non-core run-off,” it said.