QBE is taking a hit from its US exposures, with claims from Hurricane Sandy likely to cost it $350-$450 million and crop losses caused by the US drought expected to be $355 million for the full year.

In a statement to the Australian Securities Exchange today issued prior to an investor briefing, Group CEO John Neal says QBE’s full-year profit is likely to come in at just over $1 billion – up 30% on last year but with the insurance profit margin likely to fall from the 12% predicted in August to 8% for the full year.

“Superstorm Sandy will prove to have been one of the most devastating storms in recent US history and the recorded loss of life is incredibly distressing,” Mr Neal said.

“We support the analysis that suggests the insured losses from this storm could exceed $20 billion.

“A combination of comprehensive reinsurance arrangements and catastrophe claims allowances ensures that our businesses are well protected against these types of events.”

He says the industry is “weeks or months away” from determining the full cost of damage from the hurricane.

He says it is “frustrating to be reporting disappointing news at a time when the vast majority of our ongoing businesses are performing in line with, or better than, expectations”.

The run-off of claims in the reorganised North American business has seen an increased claims provision of $180 million, which boosts prior-year claims provisions to $380 million or 2.4% of full-year projected net earned premium.

Claims on large individual risks have also blown out and are expected to total $606 million for the full year.

The figure for the first half was $161 million, to which has been added $263 million for the period to October and expected further claims of $107 million for November and December.

Mr Neal says the blowouts in all areas mean the company is likely to face a total of $1.86 billion in large individual risk and catastrophe claims, compared to the $592 million experienced in the first half.

As a result of the claims blowout QBE has boosted its reserves by $125 million and will issue $500 million in subordinated debt to boost its capital position.

The US business accounts for more than one-third of QBE’s earnings, and the local stockmarket didn’t like today’s news, pushing QBE shares down in early trading.