REPORTING SEASON: QBE Insurance (QBE)
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Figure 1: QBE Insurance 12 month chart
QBE Insurance (QBE) posted a rise in profit and continues with divestments
– QBE Insurance (QBE) posted a 24% rise in first half profit to US$488m for the six months ended 30 June. The result was below consensus and impacted by the sale of a number of non-core divisions to better focus on its core business.
– QBE completed the sale of its troubled Argentine workers compensation unit on 10 Aug 2015, which is expected to result in a US$73m loss. The disposal of the Mortgage & Lender Services business is expected to complete on 30 Sept 2015 and its exit from the US LPI (Loan Protection Insurance) business in the 2H of the year. Recent divestments have held back written premiums but should be positive for results going forward. Gross written premiums (payments made by customers for insurance policies) from its Australia & New Zealand business were a drag with a lack of growth in the division.
– Catastrophe claims fell US$138m over the half. Natural perils were relatively benign in the northern hemisphere (especially Europe) although rose closer to home. Catastrophe claims costs jumped due to a higher frequency of weather-related claims in Australia. Cyclone Pam, which stgastated Vanuatu in March cost US$85m (most significant cost), followed by the NSW east coast storms in April which cost US$61m and Sydney’s hailstorm in late April which cost US$39m.
– A fully franked $0.20/s interim dividend was declared, payable to investors on 2 Oct 2015. The insurer is targeting a higher payout ratio of its earnings to 65% (a 15% rise on previous ratio). Looking ahead, QBE has reiterated its margin guidance of between 8.5-10.0% and downgraded a number of earnings forecasts. QBE expects GWP for the year of between US$15.2bn and US$15.6bn (approximately 2% less than previous estimates). QBE shares are up 27% so far this calendar year.