QBE makes £150m profit in Europe after restructure

Australian insurer QBE’s European operation has improved underwriting profitability in 2010 by restructuring its property, trade credit and aviation accounts.

The division, which includes the insurer’s UK and Lloyd’s books, made an underwriting profit of US$246m (£153m) for the year to 31 December 2010, up 12% on the $219m in 2009. This resulted in a combined ratio of 90.5% for 2010, compared with 91.3%.

The improved underwriting result was driven by better claims experience. Net incurred claims fell to $1.5bn in 2010 from $1.6bn in 2009, and the claims ratio reduced to 57.7% from 51.6%.

QBE attributed the improvement to the re-engineering of its property, trade credit and aviation accounts. It also saw a reduction in claims relating to the global financial crisis. This offset large individual risk and catastrophe claims experienced during the year, which cost the insurer $90m more in 2010 than in 2009.

Despite the improvement in underwriting result, QBE Europe’s insurance profit fell 6% to $376m in 2010 from $399m in 2009. Part of the reason was a 24% increase in expenses to $412m in 2010 from $331m in 2009, and a 4% growth in commissions paid to $437m from $421m.The insurance profit was also eroded by lower investment yields.

QBE attributed the increase in commissions and expenses in part to its acquisition of Belgian reinsurer Secura in the second half of 2010. The company also saw increased expenses from IT projects and higher charges from Lloyd’s.