QBE has forecast its first-half insurance profit margin to hit the lower end of its earlier 16-18% target range due to lower investment yields and a higher exposure to large claims.

Divisional CEOs joined Group CEO Frank O’Halloran for an investor presentation in London last week, where the insurer revealed its continued resilience despite challenging market conditions.

The insurer has forecast full-year premium income to exceed initial target growth of 3%, while gross written premium (GWP) is expected to rise 7% to $15.4 billion.

Mr O’Halloran says QBE has achieved across-the-board premium rate increases of 2-3% on renewal, although new business remains “competitive with signs of a stabilising rate environment”.

QBE has had to withstand higher large risk and catastrophe claims this year, with claims reaching $555 million as at May 31 compared with $458 million at the same point last year.

Storms in Perth ($108 million) and Melbourne ($76 million) have been major contributors, alongside the Chilean earthquake ($91 million) and BP oil spill ($29 million).

Though it has maintained its previously disclosed profit margin guidance of 16-18%, QBE says insurance margins have felt the weight of difficult market conditions.

Mr O’Halloran says this year is “likely to be a tough year for the insurance market”, with competition, low interest yields and high losses combining to take a toll on the industry.

He says external exposures are exacerbated by the “continued competitive environment driven by aggressive competition for market share rather than pursuit of underwriting profit”.

Despite the challenges, Mr O’Halloran says distribution and acquisition opportunities for QBE continue to present themselves.

In Australia, where QBE is chasing forecast GWP of $4.2 billion for the year, the insurer has revealed it is actively pursuing suitable opportunities in the agency sector.

First-quarter premium rate increases around 6% “are tracking above previous guidance although markets remain competitive,” COO and interim Australian Operations CEO Vince McLenaghan told the briefing.

While local investment yields and higher catastrophe losses are expected to reduce first-half insurance profit, the bottom line is expected to bounce back by the end of the year.

Also see ANALYSIS.