QBE Axes Dividend, Exits Latin America
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QBE has slashed its interim dividend to 4.0 cents a share from 33 cents as the company confirmed a year of big losses, due to the impact of three hurricanes and fires in the US, earthquakes in Mexico and cyclone Debbie in Australia
That took the full year’s payout to 26 cents a share, more than half the 54 cents paid for 2016. The company took a $US632 million second half loss because of the fires, the hurricanes and the quakes.
QBE said it earned a full-year loss of $US1.25 billion ($A1.6 billion) loss after absorbing the $US1.23 billion costs of a series of those catastrophic weather events and taking a one-off hit to its North American operations.
In 2016 the insurer/reinsurer posted a profit of $US844 million.
As a first step in the mooted revamp of the company by new CEO, Pat Regan, the company will sell most of its troubled Latin American business to Swiss giant Zurich Insurance for a profit of around $US100 million.
Zurich will pay an expected price of $US409 million for QBE’s assets in Argentina, Brazil, Colombia, Ecuador and Mexico. “The decision to exit Latin America is consistent with our focus on simplifying the group, reducing risk and improving the consistency of our results,Mr Regan said yesterday.
QBE said it would retain the Puerto Rico unit to facilitate claims resulting from Hurricane Maria - Puerto Rico will now become part of QBE’s North American operations.
The shares fell nearly 5% to $12.01 before they recovered to end the day off 3% at $12.41.
QBE reported its group combined operating ratio (COR) for 2017 had increased to 104.1% from 93.7%, slightly above guidance and primarily due to those catastrophe events in the second half.
The COR denotes the percentage of claims payouts against premium income. The higher the figure, the greater the payouts versus premium income, and the bigger the burden on the insurer. A ratio above 100% signals underwriting losses.
A reduction in the US corporate tax rate to 21% also pushed the profit lower ,said QBE.
This gave rise to a $US230 million write-down of the value of deferred tax assets in its North American Operations There was a further $US700 million impairment charge on an increase in the long-term combined ratio assumption for North America.
Revenue for the 2017 calendar year rose 2 per cent to $US17.693 billion, while gross written premiums in 2017 fell to $US14.19 billion from $US14.4 billion after QBE warned in August that it expected only modest growth in business
QBE has not yet indicated when it would restart its up to $A1 billion buyback.
“Whilst we remain committed to the share buyback, we intend to adopt a considered approach, especially in the first half of 2018,” directors said yesterday. QBE is aiming at a COR for 2018 of 95.0% - 97.5% and investment returns 2.5% - 3.0% for its float.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.