On July 26, QBE Insurance warned that the group was facing a 40% fall in interim group earnings because of lower returns from markets, especially fixed interest securities such as bonds as well as cash.
Yesterday it delivered on that lowered guidance by revealing a 39% fall in half year profits in the interim earnings announcement to the ASX.
Net profit came in at the $US440 million mark forecast in the July guidance statement, against the $US720 million earned in the first six months of 2009.
(The company also started reporting in US dollars from this report, as revealed in the July guidance update.)
The shares rose over 2% to $17.35, probably more in relief that the insurance giant didn’t reveal any further fall in profits.
They finished off 19c at $17.11, a rise of 1.1% on the day.
Most of the result was outlined in the July guidance, with gross written premium income up 20% to $US6.86 billion.
The insurer declared an interim dividend of 62c per share, 9.3% franked.
That was unchanged on a year ago and a certain sign of the group’s caution about the rest of the year and 2011.
The lower profit came in cash and fixed interest assets yielding a return of 2.3%, or $US245 million in the half, rather than the 4%, or $US383 million earned in the same period of 2009.
"Investment market conditions for the first half of 2010 were volatile with significant movements in bond and equity indices.
"Whilst the first quarter provided encouraging signs of a return to stability, unfortunately, in the latter part of the half year, the European market crisis was a catalyst for the return of negative sentiment, caution and illiquidity in some markets," QBE explained yesterday.
"QBE’s diverse global investment portfolios were not immune to these conditions and, due to particularly difficult markets in late June 2010, our equity portfolio values fell significantly and credit spreads widened creating large unrealised losses at the end of June 2010.
"The global economic outlook is showing more positive signs although governments in the major economies continue to pursue monetary policies with low interest rates despite emerging inflationary pressures.
"We have taken advantage of recent widening credit spreads and have increased our exposure to high grade fixed and floating rate corporate bonds to around 40% of our cash and fixed interest investments."
The company also experience equity losses of $US228 million compared with $US102 million the year before.
QBE did report foreign exchange gains of $US228 million.
The company’s insurance profit rose 8% to $US822 million, with the insurance margin declining to 15.7% from 17.5% the previous year.
QBE said international insurance markets continued to be influenced by difficult economic conditions and increased competition.
The company added that the insurance industry had been hit by a higher than normal level of catastrophe claims.
But until the global and especially the US economy starts improving, with interest rates rising, QBE is going to face continuing pressure on its investment account.
ASX Ltd seems to have a slightly better second half profit experience, judging by the results released yesterday.
The company operates Asia’s third-largest listed stock exchange and reported a 4.6% rise in full-year net profit and a 6.1% rise in underlying net profit.
At the December 31 half year both measures were slightly negative.
ASX is rewarding shareholders, lifting the final dividend to 84c a shares, from 74.5c last year.
Full year payout is up 5% to $1.73 a share.
Earnings before interest, tax, depreciation and amortisation of $454.0 million, were up 13.5 %.
At the half way mark they were up 8.5%, so the exchange has had a stronger second half.
ASX said underlying net profit rose to $332.6 million in the year to June 30, in line with expectation market forecasts for earnings of $333 million.
The exchange said it is well placed for growth through the 2011 year and beyond.
Shares in ASX closed yesterday at $29.90, down 10c.
The shares are off around 14% so far this year against the 8% fall in the main ASX 200 index.
The ASX said highlights for the year were "Listings activity was dominated by robust secondary capital issuance of $65.1 billion (albeit down on the record $88.1 billion in FY09) and IPOs rebounded with 93 new listings (compared to 45 in FY09) as business confidence levels improved.
"Trade execution activity levels in both equities and derivatives markets recovered strongly in FY10 (up 24.0% and 17.7% respectively), particularly in the June quarter."
Shares in the AMP fell more than 4% yesterday in the wake of the wealth manager reporting a 17% rise in earnings for the six months to June.
The shares ended the day down 23c at $5.09, the lowest since early July.
Investors obviously are still
