QBE issues profit warning on emerging markets claims

Australia’s QBE Insurance Group has said on June 21 that “significantly higher than expected claims activity during the first five months of the year in emerging markets” will hit its interim and full year results.

The emerging markets division is expected to report a first half combined ratio of around 110 percent. The heightened claims activity in emerging markets is due to a combination of increased frequency of medium-sized risk claims in Asia, weather related claims in Latin America and adverse experience in legacy portfolios in Latin America. This is likely to add around 1 percent to the group’s interim and full year 2017 combined operating ratio, resulting in an expected interim and 2017 combined operating ratio of 94.5 percent to 96.0 percent.

"We estimate it is about a 6 percent profit downgrade," Shaw and Partners analyst David Spotswood said, according to a June 21 Reuters report.

QBE stressed that the group’s three large operating divisions are currently on track to report results in line with budget.

QBE’s group CEO, John Neal, said: “We are encouraged by the improvement in the combined operating ratio in Australia & New Zealand as well as North America while Europe continues to perform well.”

Premium income is consistent with previously advised targets and in line with expectations, according to the company.

The interim investment return is currently above expectations thereby increasing the likelihood that the full year 2017 investment return will be at the top end of the group’s previously advised 2.5 percent to 3.0 percent target range.

Reflecting the above, the interim insurance profit margin is expected to be 8.5 percent to 9.5 percent, according to the company statement.

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