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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

‘Good pricing momentum’ lifts QBE’s half-year profit

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QBE today reported a 29% rise in first-half net profit to $US463 million ($683 million) as hardening prices and strong investment returns combined to offset challenging conditions in its North American crop business.

In a separate statement, the insurer announced today that CEO North America Russ Johnston is leaving and will be replaced in October by Todd Jones, who was most recently Willis Towers Watson head of global corporate risk and broking.

QBE says the June-half results mean the business is on track to achieve a combined operating ratio of 94.5-96.5% and net investment return of 3-3.5% as previously flagged.

“The group’s half-year financial performance reflected a further significant improvement in attritional claims experience across all divisions, coupled with materially stronger investment returns,” CEO Pat Regan said.

“With a strong first half now behind us, good pricing momentum and our full year targets unchanged, we will continue to build on the good progress we have made against our priorities in the second-half of [the year].”

Average group-wide premium rates grew 4.7%, up from 4.6% in the first-half of last year.

Net earned premium increased to $US5.67 billion ($8.4 billion) from $US5.65 billion ($8.3 billion). The adjusted combined operating ratio strengthened to 95.2% from 95.8%.

Net cash profit after-tax rose to $US520 million ($766 million) from $US385 million ($568 million).

Gross written premium (GWP) increased 1% on a constant currency basis despite falling 3% to $7.64 billion ($11.3 billion) in absolute terms.

In the Australia Pacific market, GWP increased 2% on a constant currency basis and rates went up 6.8% compared to 6.4% a year earlier.

Commercial lines achieved price rises of 7.5% on average, up from 7%, underpinned by a 17% jump in commercial property rates, 10% in strata, 8% in commercial motor and 6% in commercial packages.

The net cost of catastrophe claims went up to $US116 million ($171 million) or 6.5% of net earned premium, compared with $US42 million ($62 million) or 2.2% a year earlier.

The Townsville floods, Queensland storms and bushfires in NSW and Tasmania were significant events in the June half.

In the key North American business, the pricing environment remained strong with rates up 4.1% on average compared with 3.1% a year earlier.

A particularly wet spring pushed the accident year combined ratio to weaken to 97.7% from 92.6%.