QBE’s full-year earnings surged to $US1.36 billion ($2.1 billion) after investment income more than doubled and strong premium growth continued.

The net profit, which increased from $US587 million ($902 million) in the previous period, also benefited from catastrophe losses that fell below the group allowance.

“Financial performance improved significantly,” Group CEO Andrew Horton told a briefing today. “Our underwriting result continues to demonstrate more resilience and consistency and we expect good improvement in the year ahead.” 

Gross written premium increased 10% to $US21.7 billion ($33.4 billion). The group-wide average renewal rate gain of 9.7% included an increase of 12.5% in Australia Pacific. Increases were underscored by broad strength in property and general stability in casualty, while financial lines saw ongoing pressure.

The combined operating ratio of 95.2% was led by an improvement in the international division. In Australia Pacific it deteriorated to 93.6% from 92.8%, and in North America it deteriorated to 103.7% from 99.5%. 

Mr Horton says QBE has made the US business simpler and has terminated poorer-performing property relationships. 

Across the business, reducing volatility remains a focus, property catastrophe exposure has undergone a “dramatic recalibration”, and in Australia it has exited two third-party portfolios. 

Mr Horton told insuranceNEWS.com.au property will continue to be closely monitored, and the company could look at further third-party exits if arrangements do not provide sufficient margin. 

“We’ve got to continue to look at what margin we get,” he said. “One of the reasons, as a company, across the portfolio, we’ve been looking at property is that it hasn’t been a very high-margin business almost anywhere within the QBE world.” 

The company is expecting constant currency group gross written premium growth in the “mid single digits” this year, with a likely tapering of rate gains and inflation impacts. 

“We are expecting property rate increases to not be as great as they have been over the past year or two,” Mr Horton said. “That said, you may get pockets where we still have supply chain issues, and when there’s a large catastrophe you often see the cost of materials and tradesmen go up a lot.” 

QBE has raised its catastrophe allowance for this year to $US1.28 billion ($1.97 billion), compared with $US1.175 billion ($1.81 billion) last year, despite losses falling within the allowance for the first time in four years. Actual catastrophe losses were $1.092 billion ($1.68 billion).  

“We want to have resilience in our balance sheet and I think it’s better having a higher allowance that we’re more likely to meet, rather than having a low one that we’re stressed about going through,” Mr Horton said. “It gives us more resilience as we start 2024.” 

QBE completed its reinsurance renewal in January “largely as expected”, with a broadly stable retention resulting in a negligible prescribed capital impact. 

Reinsurers raised the level at which they were prepared to take on catastrophe risks at renewals a year earlier after being hit by persistent losses, and Mr Horton sees no imminent reversal in their approach. 

“Based on the experience they have had over the past few years, I can’t see that changing any time soon. They’re moving away from the action, pushing that onto the primary insurers. We can’t hedge out as easy as we used to, and that’s been one of the major drivers of why primary insurance rates have had to go up.” 

The company’s investment earnings increased as higher interest rates supported fixed-income returns, with income rising to $US1.37 billion ($2.1 billion) from $US570 million ($876 million). 

The group also reported that the adjusted cash return on equity increased to 16% from 8.3%. 

QBE expects a combined operating ratio of about 93.5% this year, with the company to provide a first-quarter update on May 10.