Big Ogden hit takes QBE into underwriting loss

QBE has taken a hit of around $62m (£51m) from the change in the Ogden discount rate.

The Australian insurer had been reserving at an assumed Ogden rate of 0.25% since February 2018, drawing warnings from financial analysts.

In July the rate changed to -0.25%, to the dismay of many insurers that had been predicting a rate of at least zero.

The change contributed to the group reporting an underwriting loss for H1 2019 of $24m.

The group reported a combined operating ratio (COR) of 100.4%, with the Ogden change adding 1.1 percentage points to the figure. The group had previously reported an underwriting profit of $260m for the half year point of 2018 – a COR of 95.4%.

Other factors given by QBE as negatively impacting the underwriting result was a change in risk-free rates used to discount net outstanding claims liabilities, and a deal to reinsure Hong Kong construction workers’ compensation liabilities.

QBE said: “Excluding the impacts of changes in risk-free rates in both periods, the Ogden decision in the current period and the reinsurance transaction in the prior period, the combined operating ratio was 95.2% compared with 95.8% for the prior period.”

UK performance

The international business, which includes the UK division, reported an underwriting loss of $62m, including the Ogden impact.

In the UK, QBE said commercial motor and financial lines attracted the highest rate increases, with double-digit increases in the latter. It said more opportunities were being seen in the London market, as a result of an increased discipline on pricing.

Gross written premium was broadly flat in the international division at $2.9bn, but on a constant currency basis, it said this reflected 4% growth.

As a group, gross written premium fell 3% to $7.6bn from $7.9bn at H1 2018, but in constant currency QBE said premiums actually rose 1%.