Another result from QBE, the global insurer that hasn’t been impacted by problems somewhere in its far-flung operations.
The company yesterday revealed a 35% jump in interim cash profit to $520 million, helped by lower claim costs, better investment returns, and rising insurance premiums.
The insurer reaffirmed its full-year profit guidance on Thursday and revealed a 14% lift in interim dividend to 25c a share. The dividend will be franked at 60 percent and paid on October 4.
First half statutory net profit after tax was $463 million, up 29% from $358 million in the first half of 2018. The cash profit return on equity was 13.4%, up from 9.6% in the prior period.
QBE shares rose to a day’s high of $12.44 before being dragged down in the afternoon slide on the ASX to close at $11.95, down 1%.
QBE Group CEO, Pat Regan, said in the release yesterday: ‘The Group’s half-year financial performance reflected a further significant improvement in attritional claims experience across all divisions coupled with materially stronger investment returns. These were partly offset by an anticipated increase in the net cost of large individual risk and catastrophe claims following the successful renegotiation of the Group’s reinsurance program.
“We began 2019 with positive momentum and a clear strategy to drive further performance improvement across the business and deliver greater shareholder value. We have made good progress through the first half, with the interim combined operating ratio comfortably within our full-year target range and the Group generating a double-digit return on equity.”
The Group reported a first-half combined operating ratio of 95.2%. Mr. Regan said that was “better than the mid-point of our FY19 target range of 94.5%-96.5% and an improvement from 95.8% reported in 1H18.”
“The uplift in underwriting profitability was underpinned by a further material reduction in the attritional claims ratio to 47.7% from 51.3% in the prior period. Group-wide premium rate increases averaged 4.7% compared with 4.6% in the prior period”, the CEO said.
QBE said its underwriting result includes a reduced contribution from the North American Crop insurance business where challenging planting conditions following a particularly wet spring contributed to a current accident year combined operating ratio of 97.7% compared with 92.6% in the prior period.
“The result was also adversely impacted by normalisation in our Australian lenders’ mortgage insurance (LMI) business where the combined operating ratio increased to 58.5% from 50.6% in the prior period.
“The strong result is all the more pleasing in light of the Crop and LMI results which added around 1.0% to the Group’s combined operating ratio relative to the prior period and demonstrates improved earnings resilience,” directors told the ASX.
QBE said that with the $A174 million of shares repurchased through the on-market buyback, the significantly increased interim dividend brings total shareholder returns in the first half of 2019 to $A503 million, up 27% from $A397 million in the prior period.
Mr. Regan said: “With a strong first half result now behind us and our 2019 full-year guidance unchanged, through the second half of 2019 we will continue to build on the good progress we have made against our priorities.”