US crop insurance claims caused by unusual cold and wet weather will cause QBE’s underwriting profitability to fall short of expectations this year.

The combined operating ratio of the North American crop insurance business is expected to blow out to up to 109% on net earned premium of nearly $US1.2 billion ($1.7 billion), the company said in a statement today.

Adverse weather in the US, which will also have a small impact on some North American property portfolio loss ratios, has offset a relatively benign first half for catastrophes and improved pricing for the group overall.

“We expect the group’s combined ratio could now be very slightly above the top end of our previously advised 2019 target range of 94.5-96.5%,” CEO Pat Regan told analysts this morning.

A particularly wet North American spring delayed corn and soybean sowing in many states, leaving crops vulnerable when more adverse weather later swept into key regions.

“The back end of the growing season included a significant amount of unusually early unseasonal cold weather, including very early bouts of sleet, frost and snow, which has contributed to a now material fall in the crop yield,” Mr Regan said.

“Just to top things off, crop yields were also further impacted by significant amounts of hail damage particularly in the later part of the harvest season.”

The North American crop business had a combined operating ratio of 98% in the first half and has a 10-year historical average of around 90%.

More broadly, QBE says the group net investment return will be towards the upper end of its target range of 3-3.5% this year, while premium pricing momentum has accelerated in the second half.

“I continue to be very pleased with the direction of the business, including the levels of premium rate increases we are seeing right across the group and our outlook for underwriting margins,” Mr Regan said.

The group achieved an average standalone premium rate increase of 7.5% in the third quarter, up from 4.7% in the first half, bringing the year-to-date gain to 5.5%.

“Strong rate momentum has continued so far in Q4,” he told analysts.

QBE expects a combined operating ratio target of 93.5-95.5% next year, but the net investment return target will likely decline to 2.5-3% amid low global interest rates.

Mr Regan also said today that the company has acted ahead of its global peers in finalising placement of its 2020 reinsurance, with the structure remaining similar to the current year.

QBE will report its full-year results on February 17.