QBE Europe profit drops 40% as a result of catastrophe claims and competition

Australian insurer QBE’s European operations made an insurance profit of $105m (£67m) in the first half of 2013, down 40% on the $175m it made in the same period last year.

The underwriting profit fell 4% to $74m (H1 2012: $77m) and the combined operating ratio (COR) increased by 0.7 points to 95.7% (H1 2012: 95%).

However, gross written premium rose 13% to $3.1bn (H1 2012: $2.7bn). The company said this largely reflected the acquisition of the renewal rights to Brit’s UK regional business in 2012, which added $193m of gross written premium in the period.

Premium achievement

Chief executive of QBE European operations Steven Burns (pictured) said: “The first half of 2013 saw challenging market conditions, with negligible premium rate increases and stiff competition, although good premium growth was achieved, supported by our 2012 acquisitions.

“Strong underwriting discipline enabled us to deliver a creditable underwriting profit, despite the late flurry of catastrophe claims and a higher frequency of large property losses.”

Rate increases

QBE said rate increases across its European operations averaged 2% in the first half of 2013.

In a statement, the company said: “Pricing remains suppressed due to a continued surplus of capacity across all areas of our portfolio and the ongoing depressed economic environment.”

The company’s reinsurance business achieved only modest rate rises, while UK and international liability rates remained flat in reaction to “aggressive competition in both local and London markets”.

‘Behind plan’

QBE described its European COR of 95.7% as “behind plan”. This is because the benefit from the remediation work on certain underperforming portfolios,  including onshore energy, aviation, UK employers’ liability and British marine, is materialising slower than expected.

The company said: “We will continue to closely monitor the underlying performance of each portfolio over the remainder of 2013, and will take any necessary further underwriting actions prior to the 2014 renewal season.”

Group performance

Group-wide, QBE’s profit after tax fell 37% to $477m (H1 2012: $760m). The drop was caused by lower investment returns and an increase in amortisation charges relating to its US lender-placed business.

The group COR remained almost unchanged at 92.8% (H1 2012: 92.9%), which the company said was in line with expectations and seasonal factors.