UK retail improvement helped produce ‘excellent’ underwriting result
QBE European Operations made an insurance profit – underwriting result plus investment returns – of $278m (£178m) in the first half of 2015, up 184% on the $98m it reported in the same period last year.
The boost followed what European Operations chief executive Richard Pryce described as an “excellent underwriting result”, which was helped by a big improvement in the UK retail division.
Underwriting profit doubled to $236m (H1 2014: $117m) and the combined operating ratio (COR) improved by 8.4 percentage points to 85.8% (H1 2014: 94.2%).
Pryce said that low catastrophe losses, continued prior-year reserve releases and significant improvements in the attritional loss ratio, which measures the level of non-catastrophic claims, contributed to the positive result.
Gross written premium (GWP) fell by 1.7% to $2.66bn (H1 2014: $2.71bn), which the company said reflected the weakness of sterling against the US dollar.
Stripping out this effect, GWP would have grown by 7%.
Pryce said: “European Operations delivered a strong performance with an excellent underwriting result buoyed by benign catastrophe experience, continued favourable prior accident year reserve development and a significantly improved attritional claims ratio.”
QBE said that while all divisions of European Operations reported improved profit margins, the most significant improvement in overall underwriting performance occurred in the retail division, particularly the UK.
QBE expects European Operations to produce GWP of $4.5bn and net earned premium of $3.4bn in the full 2015 year despite intensifying competition.
“We anticipate that market conditions will become more competitive in the second half of the year,” the company said.
“If the relatively benign claims environment persists competition may well intensify, especially in short tail and natural resources classes. We will continue to make the correct underwriting decisions to preserve our margins.”
The company added that it was expecting brokers to push for higher commissions.
“Pressure on commissions is expected to continue as brokers exploit the competitive market and seek to preserve and improve their margins,” it said.
The commission ratio at QBE European Operations remained static at 18.8% in the first half of 2015, despite expected reductions because of a change in business mix.