QBE Europe’s profit falls despite better underwriting

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Combined ratio improves to 90.5%

Australian insurer QBE’s European operations made an insurance profit before tax of US$376m (£233m) for 2010, down 6% from the US$399m it made in 2009.

The dip comes despite an increase in gross written premium to US$4.2bn in 2010 from US$4bn in 2009, and a lower combined ratio for the year of 90.5 versus 91.3%. Underwriting profit increased to US$246m (2009: US$219m) and net incurred claims fell to US$1.5bn (2009: US$1.6bn).

The underwriting improvement and lower claims came despite claims from the Chilean earthquake and Deepwater Horizon oil rig explosion. The cost of large individual risk and catastrophe claims was US$90m higher in 2010 than 2009.

QBE said the reduction in its claims ratio to 57.7% from 61.6% was due to the re-engineering of its property, trade credit and aviation accounts and a reduction in claims relating to the global financial crisis. The company added that The net claims ratio also benefited from savings in prior accident year claims provisions.

Offsetting the better underwriting result was a 24% increase in expenses to US$412m in 2010 (2009: US$331m) and a 4% growth in commissions paid to US$437m (2009: US$421m). QBE said the insurance profit was also hit by lower investment yields.

QBE Europe 2010 highlights in US$m (compared with 2009)