QBE’s full-year profit increased 31% to $US1.779 billion ($2.8 billion), supported by lower catastrophe costs and strong investment returns.

Group CEO Andrew Horton says portfolio improvements and a push for greater consistency improved performance in a transition year for the company.

“As we enter the new year, we feel our underwriting portfolio is in great health and balance,” he told a briefing. “With the vast majority of our business performing well, we should be able to spend more of our time planning for the future rather than addressing problems created in the past.”

Gross written premium rose 3% to $US22.395 billion ($35.1 billion), with portfolio exits that have reduced volatility curbing top-line gains. The average renewal rate across the North America, international and Australia-Pacific divisions was 5.5%.

Investment income increased to $US1.488 billion ($2.27 billion) from $US1.37 billion ($2.15 billion) the previous year.

Markets remained favourable and the company is monitoring global tariff talks and economic impacts on inflation and interest rates.

“Inflation may come back this year because of certain geopolitical issues and that will have an impact on holding up interest rates for longer, which means our investment portfolio will have a higher yield for longer,” Mr Horton told insuranceNEWS.com.au.

“If we go back two years, people thought interest rates by now will be lower than they are, and people thought interest rates by the end of this year will be lower than they are now predicted to be, so inflation is keeping rates up for longer.”

The combined operating ratio improved to 93.1% from 95.2%, with North America returning to profitable territory despite difficulties in the crop business.

Catastrophe claim net costs fell to $US1.048 billion ($1.64 billion) from $US1.092 billion ($1.71 billion) and were $US232 million ($364 million) below the allowance amid another active year for natural disasters.  

QBE says its exposures to US hurricanes Milton and Helene were substantially lower than for similar events in the past because of recent portfolio exits and portfolio optimisation.

Mr Horton, when asked about Australian politics and potential action aimed at the cost of living, urged mitigation responses such as resilient building and land use planning.

“We want people to continue to buy insurance, we don’t want people to be uninsured, but if the risk rises, the price naturally rises. The conclusion of that, of course, is to mitigate the risk. That must be the solution to the insurance problem.

“I think more regulation on us is not a great solution. It’s already a very closely regulated industry, and regulation generally costs more and we’re trying to mitigate the affordability of insurance.”  

Mr Horton says the company wants to grow its commercial and consumer businesses in Australia and is modernising technology as it looks to expand in each of its three global divisions.

Australia-Pacific premium rate increases eased to 8.4% from 12.5% the previous year, reflecting moderation in certain liability lines, commercial property and strata, which more than offset “materially higher rate increases” in consumer home and motor.

QBE expects about a $US200 million ($314 million) exposure from the Los Angeles wildfires last month.

Mr Horton says the magnitude of that disaster could cause insurers worldwide to look at their exposures, but it is still early days for assessing wider impacts.

“Whenever you get a loss that size, people start looking at their portfolios and wonder, can that happen somewhere else, have we understated the risk of fire in other parts of the world?” he said.

“We may see the modelling agencies update their models, which could have an impact on us, but that will be down the track.

“At the moment, nothing’s happening on that. We’re very much focused on LA as being an event in California and the impact on premiums there.”

QBE has forecast constant currency GWP growth in the mid single digits for this year and a combined operating ratio of about 92.5%.

From the latest Insurance News magazine: Remarkable aerial images show the devastation inflicted on LA's suburbs by the January wildfires. Could the same fate befall Australian cities?