ID :
188525
Tue, 06/14/2011 - 14:08
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http://m.oananews.org//node/188525
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QBE profit to rise, insurance margin down
SYDNEY (AAP) - June 14 - QBE Insurance Group Ltd says its first half profit will rise by as much as 60 per cent after its investment performance improved significantly from the previous year.
Insurance profit margins will be lower than the previous first half, however, due to the unprecedented level of catastrophe claims, and the company has downgraded its full year insurance margin forecast.
QBE says its first half profit will be 50 to 60 per cent higher than in the previous corresponding period, inferring a profit as high as $US704 million ($A666 million) for the six months to June 30.
In an update after market trading closed on Tuesday, QBE said it had recorded a strong performance in investment income, including foreign exchange gains.
Net investment income was $US560 million for the five months to May, compared with $US109 million for the whole first half of 2010.
Operational foreign exchange gains were $US120 million for the year so far.
The first half insurance profit margin would be lower than the previous corresponding period's 15.7 per cent, but QBE did not say by how much.
The fall is due to the unprecedented level of catastrophe claims in the six months to June 30, which to the end of May are estimated to total $US830 million.
That is $US340 million higher than the first half of last year and compares with $US1.08 billion in 2010.
Chief executive Frank O'Halloran said QBE would no longer be able to achieve a full year insurance profit margin near the top of its targeted range of 15 to 18 per cent.
"We're not changing our target range at the moment, but I have to say a figure close to 18 per cent is not possible, unless we actually see a significant increase in the risk free rates that we use to discount claims," he told analysts.
The lower end of the targeted range included QBE's full allowance for large risk and catastrophe claims, net of reinsurance recoveries, of around $US1.6 billion, he said.
A significant hurricane season in the United States would put the company at risk of missing the lower end of the range, with $US770 million remaining in catastrophe allowance.
"If we have one large hurricane and no more, then we're okay. But if we have two, then the numbers come under a bit of pressure," Mr O'Halloran said.
"So that's really where we sit. I wish I could guarantee shareholders that we're not going to have a major hurricane season."
He said QBE had significant reinsurance protections remaining for the balance of 2011, and had locked in its pricing for 80 per cent of risk protections for 2012 and 2013 at 2011 prices plus an amount equal to the growth in premium income.
The costs of reinsurance are expected to rise in coming years as a result of the high number of natural disasters this financial year.
Price increases were being achieved on primary and reinsurance portfolios, and that would be reflected in the second half and 2012 profits, QBE said.
The half year dividend is expected to be maintained at 62 cents per share.
QBE shares gained 10 cents to $17.28 on Tuesday.
Insurance profit margins will be lower than the previous first half, however, due to the unprecedented level of catastrophe claims, and the company has downgraded its full year insurance margin forecast.
QBE says its first half profit will be 50 to 60 per cent higher than in the previous corresponding period, inferring a profit as high as $US704 million ($A666 million) for the six months to June 30.
In an update after market trading closed on Tuesday, QBE said it had recorded a strong performance in investment income, including foreign exchange gains.
Net investment income was $US560 million for the five months to May, compared with $US109 million for the whole first half of 2010.
Operational foreign exchange gains were $US120 million for the year so far.
The first half insurance profit margin would be lower than the previous corresponding period's 15.7 per cent, but QBE did not say by how much.
The fall is due to the unprecedented level of catastrophe claims in the six months to June 30, which to the end of May are estimated to total $US830 million.
That is $US340 million higher than the first half of last year and compares with $US1.08 billion in 2010.
Chief executive Frank O'Halloran said QBE would no longer be able to achieve a full year insurance profit margin near the top of its targeted range of 15 to 18 per cent.
"We're not changing our target range at the moment, but I have to say a figure close to 18 per cent is not possible, unless we actually see a significant increase in the risk free rates that we use to discount claims," he told analysts.
The lower end of the targeted range included QBE's full allowance for large risk and catastrophe claims, net of reinsurance recoveries, of around $US1.6 billion, he said.
A significant hurricane season in the United States would put the company at risk of missing the lower end of the range, with $US770 million remaining in catastrophe allowance.
"If we have one large hurricane and no more, then we're okay. But if we have two, then the numbers come under a bit of pressure," Mr O'Halloran said.
"So that's really where we sit. I wish I could guarantee shareholders that we're not going to have a major hurricane season."
He said QBE had significant reinsurance protections remaining for the balance of 2011, and had locked in its pricing for 80 per cent of risk protections for 2012 and 2013 at 2011 prices plus an amount equal to the growth in premium income.
The costs of reinsurance are expected to rise in coming years as a result of the high number of natural disasters this financial year.
Price increases were being achieved on primary and reinsurance portfolios, and that would be reflected in the second half and 2012 profits, QBE said.
The half year dividend is expected to be maintained at 62 cents per share.
QBE shares gained 10 cents to $17.28 on Tuesday.
