Group to raise £448m of equity and partially float lenders mortgage insurance business
QBE Europe made a profit before tax of US$104m (£62m) in the first half of 2014, up 10.6% on the £94m it made in last year’s first half.
Insurance profit – a combination of investment and underwriting results, was up 2.7% to £111m H1 2013: £108m).
The improvement came despite a US$142m (£85m) claims bill from the UK storms in January and February, and a 13% drop in gross written premium to US$2.7bn (H1 2013: US$3.1bn).
QBE Europe’s combined operating ratio (COR) was static at 95.6%. Although catastrophe experience was higher than the company expected because of the UK storms, there were fewer claims from large individual risks.
The claims ratio was 61.4% for the first half of 2014, compared with 63% in the same period last year.
The company added: “Ongoing active remediation of poorer performing portfolios contributed to a relatively stable attritional claims ratio.”
The insurer attributed the 13% drop in gross written premium to “intense” competition and exiting underperforming lines of business, including aviation and bloodstock in the UK.
QBE European Operations chief executive Richard Pryce said: “Despite difficult trading conditions in most areas, our underwriting result is very similar to last year and the insurance profit has improved slightly.
“Our commitment to maintaining underwriting discipline and profitability has impacted gross written premium, particularly with respect to QBE Re and international markets where market conditions are more challenging than expected.”
Group capital raising
As a group, QBE reported an 18% drop in profit after tax to US$392m (H1 2013: $477m). The decline was caused by the need to strengthen reserves for its Argentine workers’ compensation business.
The COR rose by 3.7 percentage points to 96.5% (H1 2013: 92.8%).
Along with the results QBE announced a number of measures to shore up its capital base. These includes raising U$750m (£448m) of fresh equity through an issue of shares, and a partial flotation of its Australian lenders mortgage insurer, QBE LMI.