QBE half-year net profit declined 66% as investment market volatility hit the bottom line, while the company benefitted from a surge in gross written premium (GWP) underpinned by rate increases.

Group CEO Andrew Horton said the period featured geopolitical instability, rising inflation and a “remarkable recalibration” in global interest rates. The six months also included the flooding catastrophe in Australia.

“Despite the challenging operating backdrop, QBE demonstrated resilience in the period, with ongoing positive momentum across the business,” Mr Horton said today. “We have made good early progress against our new strategic priorities, and our outlook for the remainder of the year remains positive.”

Net profit dropped to $US151 million ($215 million) from $US441 million ($628 million) including the investment portfolio impacts and a cost related to US operations. The company recorded a previously announced $US75 million ($106.8 million) charge for remediation for Australian pricing promises not fully delivered.

GWP rose 18% on an adjusted constant currency basis to $US11.609 billion ($16.53 billion), buoyed by the US crop business. Excluding the crops impact the gain was 13%. The company raised its outlook for full-year GWP growth to around 10%.

QBE said its adjusted combined operating ratio improved to 92.9% in the half from 93.3%.

Mr Horton, who took over the top job last year, has highlighted portfolio optimisation and reducing earnings volatility as a strategic focus, with action taken in North America during the half.

“What we are trying to do is look at what risks we are taking in the portfolio and determining whether it is in good balance,” Mr Horton told insuranceNEWS.com.au. “We have reduced our catastrophe exposure in the US because we thought we had too much exposure in certain lines of business.”

Mr Horton says the company is comfortable with its catastrophe exposure in Australia and the group has the benefit of diversity across its Australia Pacific, North America and International divisions.

First-half catastrophe losses for the company overall were broadly in line with the allowance, after taking into account a $US75 million ($106.8 million) impact included for the Russia Ukraine war. The allowance was previously increased for this calendar year to $US962 million ($1.37 billion)

“We feel comfortable that our natural catastrophe allowance as we set for 2022 is looking pretty robust for the second half,” Mr Horton said.

QBE is focusing on improving the performance of the North American business, which accounts for about a third of premium but which has underperformed in delivering underwriting earnings, while in Australia the group is looking to harness technology to improve the way in which it transacts business.

“We are going to go on a relatively high investment spend modernising our systems which will give both our brokers, because most of our business comes through brokers, and our customers an even more rapid service than we have historically given,” Mr Horton said.

QBE says, looking across global markets, that pricing has eased in areas such as directors’ and officers’ and US workers’ compensation, but short-tail lines, where inflation and supply chain bottlenecks are a factor, are seeing premium increases.

“In some of the liability lines across our portfolio we are seeing rates stall and even decrease,” Mr Horton said. “The property side is being driven by inflation at this point, so as the cost of repairing properties has gone up, and it’s not purely an Australian issue it’s everywhere, it is maintaining rate.”