QBE in first-half flourish
QBE has stunned the market with an unheralded 56% leap in half-year net profit helped along by benign claims, strong investment returns and the integration of US acquisitions.
Profit to June 30 rose to a record $921 million, eclipsing analyst consensus by nearly $100 million.
Analysts had forecast net profit of $856 million and an insurance margin of 19.2%. Instead, QBE’s insurance profit (the underwriting result plus investment income) increased to 22.2% from 18.7% in the previous corresponding half.
“I’m sure there are a few people around the room thinking that 22.2% is a very strong number,” CEO Frank O’Halloran told investors and analysts at the company’s presentation in Sydney yesterday.
The company’s result was bolstered by returns from Winterthur US and Praetorian, which more than doubled QBE’s American net earned premium to $1.2 billion.
Excluding the returns of QBE’s US additions, the company’s net earned premium in the Americas increased by 12% to $613 million.
QBE is banking on its American assets becoming a prime source of future earnings, with 40% of global premium income expected to come from the US by 2008. Mr O’Halloran also confirmed both purchases had no direct exposure to the sub-prime mortgage sector, which has crippled international credit markets and sent stock markets into free-fall.
QBE’s gross written premium rose 15% to $6.52 billion, and Mr O’Halloran concedes the company will need additional purchases to reach its target of $13 billion for 2007 and $14 billion in 2008. The company has about $1.5 billion to use towards future purchases, Mr O’Halloran said.
It recently made its 100th acquisition in the past 25 years after taking a small stake in an Indian insurance joint venture.
Describing the half-year result as “fantastic”, Mr O’Halloran said growth has come from acquisitions and higher customer retention but was partly offset by softening rates and exchange rate fluctuations.
The company’s European operations were particularly affected by falls in the greenback against sterling, with gross earned premiums down 4% to £1.29 billion ($3.22 billion). About 40% of QBE’s European business in written in US dollars.
“The significant increases in net profit and positive outlook for the rest of the year reflects the constant focus the QBE team has on all the key drivers that determine profitability in the insurance business,” Mr O’Halloran said.
“Premium rates is only one of those drivers.”
Rates fell by 3% across the group and 4% in Australia, where gross earned premiums rose 3% to $1.249 billion.
QBE has lifted its full year insurance result to between 18.5% and 20% of net earned premium, up from its previous forecast of 17.5% to 18.5%.
Profit to June 30 rose to a record $921 million, eclipsing analyst consensus by nearly $100 million.
Analysts had forecast net profit of $856 million and an insurance margin of 19.2%. Instead, QBE’s insurance profit (the underwriting result plus investment income) increased to 22.2% from 18.7% in the previous corresponding half.
“I’m sure there are a few people around the room thinking that 22.2% is a very strong number,” CEO Frank O’Halloran told investors and analysts at the company’s presentation in Sydney yesterday.
The company’s result was bolstered by returns from Winterthur US and Praetorian, which more than doubled QBE’s American net earned premium to $1.2 billion.
Excluding the returns of QBE’s US additions, the company’s net earned premium in the Americas increased by 12% to $613 million.
QBE is banking on its American assets becoming a prime source of future earnings, with 40% of global premium income expected to come from the US by 2008. Mr O’Halloran also confirmed both purchases had no direct exposure to the sub-prime mortgage sector, which has crippled international credit markets and sent stock markets into free-fall.
QBE’s gross written premium rose 15% to $6.52 billion, and Mr O’Halloran concedes the company will need additional purchases to reach its target of $13 billion for 2007 and $14 billion in 2008. The company has about $1.5 billion to use towards future purchases, Mr O’Halloran said.
It recently made its 100th acquisition in the past 25 years after taking a small stake in an Indian insurance joint venture.
Describing the half-year result as “fantastic”, Mr O’Halloran said growth has come from acquisitions and higher customer retention but was partly offset by softening rates and exchange rate fluctuations.
The company’s European operations were particularly affected by falls in the greenback against sterling, with gross earned premiums down 4% to £1.29 billion ($3.22 billion). About 40% of QBE’s European business in written in US dollars.
“The significant increases in net profit and positive outlook for the rest of the year reflects the constant focus the QBE team has on all the key drivers that determine profitability in the insurance business,” Mr O’Halloran said.
“Premium rates is only one of those drivers.”
Rates fell by 3% across the group and 4% in Australia, where gross earned premiums rose 3% to $1.249 billion.
QBE has lifted its full year insurance result to between 18.5% and 20% of net earned premium, up from its previous forecast of 17.5% to 18.5%.