Australian insurer QBE announced in its annual report that tough currency rates had hampered its European and Lloyd’s operations.

The report said gross written premium (GWP) for European operations was down 4% to $2.9bn (£1.17bn) compared to the previous year, and net earned premium fell 6% to $1.9bn.

But the combined ratio for its European business fell from 90.7% to 88.4%.

For the insurer’s world-wide operations gross GWP was up 15% to A$6.52bn and pre-tax profits up 50% to A$1.2bn.

The report said: “Premium growth was affected by reduced reinsurance business and the strengthening of sterling against the US dollar. About 40% of our business in Europe is written in US dollars.

“Growth was also affected by increased competition and overall weighted premium rate reductions of around 4.5%.”

The UK and Irish business, QIE, was particularly hit with GWP down 7% to A$1.3m due to increased competition as well as currency changes.

“New business is behind plan due to inadequate pricing for an increased number of risks,” the company said. QIE’s combined ratio went up from 91% to 92.3%.

QBE’s Lloyd’s interest, Limit, performed better especially on the strength of the firm’s new aviation syndicate. GWP was down 1% to A$1.66m but its combined ratio was slashed from 90.3% to 83.6%.

“Growth from the new aviation syndicate was offset by the strong appreciation of sterling against the US dollar and lower overall premium rates.

“The improvement in the results (combined ratio) was due to the profitable earn-out of the 2006 and prior underwriting years, the continued low frequency and severity of claims and higher investment yields on policyholders’ funds.”