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QBE Insurance posts net loss for FY'17 amid higher catastrophe claims costs

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QBE Insurance posts net loss for FY'17 amid higher catastrophe claims costs

Australia's QBE Insurance Group Ltd. posted a net loss for 2017 as it reported record cost of catastrophes in the second half of the year and a deterioration in its emerging markets businesses.

The insurance group posted net losses after tax of US$1.25 billion in the aggregate, or a loss of 91.5 cents per share, compared to a net profit after tax of US$844 million, or 60.8 cents per share, for 2016. The company said the results reflect record natural catastrophe claims, higher attritional claims and reduced favorable prior accident year claims development.

The S&P Capital IQ consensus normalized EPS estimate for 2017 was a loss of 24 Australian cents, while the consensus GAAP EPS estimate was a loss of 99 Australian cents.

Adjusted net loss for the full year totaled US$228 million, compared to an adjusted profit of US$833 million in the prior-year period. The adjusted results exclude the impact of a decision in the U.K. to reduce the personal injury discount rate, which increased the group's outstanding claims to about US$139 million, and a US$700 million noncash impairment charge and a US$230 million noncash write-down of deferred tax asset in its North American operations.

QBE's combined operating ratio increased to 104.1% from 93.7% in 2016, while its insurance profit margin climbed to 10.4% from 10.1% in the prior-year period.

Gross written premium fell to US$14.19 billion from US$14.40 billion, while gross earned premium increased to US$14.45 billion from US$14.28 billion in the year-ago period. Net earned premium climbed to US$12.04 billion from US$11.07 billion.

The group's underwriting and other expenses increased to US$1.96 billion from US$1.92 billion in 2016.

QBE said its North American operations were heavily impacted by second-half catastrophes including Hurricanes Harvey, Irma and Maria and the California wildfires, resulting in a combined operating ratio of 109.1% for 2017, up from 98.5% in the previous year. The business posted a net loss of US$236 million, compared to a net profit of US$155 million in the prior-year period.

Its Latin America operations recorded increased incidence of large individual risk and catastrophe claims and a deterioration in legacy portfolios, which contributed to a combined operating ratio of 113.1%. The operations posted a net loss of US$49 million, compared to a net profit of US$39 million in the year-ago period. The group has decided to exit the region as part of an initiative to simplify operations.

The Asia-Pacific operations reported an "unacceptable" combined operating ratio of 115.5%, and posted a net loss of US$93 million, compared to a net profit of US$34 million in the prior-year period. The group said the division's newly formed executive team has implemented plans to improve performance.

The group lowered its final dividend for 2017 to 4 Australian cents per share from 33 Australian cents per share in the previous year. Including an interim dividend of 22 Australian cents per share, the group's total dividend for 2017 is 26 Australian cents per share, down from a total dividend of 54 Australian cents per share in the prior-year period.

The final dividend will be paid April 20.