Analysts remain confident that QBE is a “buy” investment prospect despite its first-half profit forecast being lowered by 18% last week.

Group CEO John Neal says the slide is due to increased workers’ compensation claims in Argentina.

The insurer last week forecast first-half net profit of about $US390 million ($417 million), with the bottom line mainly hit by a claims reserve strengthening of about $US170 million ($182 million) in Latin America.

Legislative changes and deteriorating economic conditions contributed to increased Argentinean workers’ compensation claims.

But analysts have generally supported the insurer as a good investment prospect – particularly following the sharp share price fall experienced last week after the downgrade in profit was announced.

But the fall will not affect QBE’s credit rating, with Standard & Poor’s saying the revised earnings “are slightly credit negative”, but “can be accommodated at the current rating and do not represent a downgrade trigger event under our existing negative outlook”. 

QBE posted a loss of $US254 million ($271 million) last year, including writedowns on the North American operations, which it flagged in December.

Its shares plunged 11% to $10.25 after the latest announcement, their lowest since December, and were trading this morning at $10.76.

The group has forecast a first-half combined operating ratio of 96-97%, compared with expectations of about 93%, and warns the insurance profit margin is likely to be 7-8%, compared with expectations of about 10%.

Gross written premium is set to be about $US8.5 billion ($9.1 billion), down from $US9.4 billion ($10 billion) in the corresponding period last year and below the $US8.9 billion ($9.5 billion) QBE predicted.

The insurer says global market conditions are more competitive than previously anticipated, while reinsurance markets are also weaker.

Large individual risk and catastrophe claims are expected to total about 10% of net earned premium, with floods in the UK over 10 weeks and hail and wind in Europe and the US more than offsetting benign conditions in Australia.

QBE says Australia and New Zealand should report a strong operating result, and the company is encouraged by progress in its North American business.

“Notwithstanding the more challenging market conditions that many have commented on [this year], our global businesses are performing in line with expectations,” CEO John Neal told a conference call last week.

“We continue to expect to deliver solid levels of profitability across the group in 2014.”

The insurer’s interim results will be released on August 19.