As forecast in last December’s shock downgrade, QBE Insurance (QBE) has turned in a loss of a quarter of a billion dollars for the year to December, sharply lower than the $US761 million earned in 2012.
The company told the ASX this morning the loss came on a 7% fall in revenue for the year to $US19.438 billion as premium income slowed or fell in some key markets.
Net loss after tax for 2013 was US$254 million ($A281 million), thanks to $US600 million in losses and other impairment charges revealed on December 9 in the wake of a review of the businesses key offshore markets in Europe and the US.
The dividend was slashed to 32 cents a share for the year (50 cents a share in 2012) with the payment of a final of 12c a share (up from the 10c a share final for 2012).
Cash profit for the year was $761 million, down 27% from $US1,042 million in 2012, largely due to a substantial fall in investment income as "material credit spread gains reported in 2012 did not recur," the company said in this morning’s statement.
The company said that investment come "despite exceeding expectations and delivering a solid 2.6% net yield," was $US415 million lower at $US801 million compared with $US1,216 million in 2012.
QBE’s insurance profit fell 33% to $US841 million, resulting in an insurance profit margin of 5.5% compared with 8.0% in 2012.
And gross written premium fell 2% to $US17,975 million, reflecting adverse foreign exchange movements.
"The current year loss was primarily driven by significant upgrades to prior accident year claims reserves and the write-down of intangibles and other assets in our North American Operations," director said.
"North American Operations faced the perfect storm in 2013.
"Reserve upgrades and asset write-downs coincided with a disappointing crop year, primarily due to the collapse in corn prices late in the year and the rapid and severe decline in lender-placed premium which caused substantial expense strain and the consequential need to restructure and right-size the FPS business."
QBE 1Y – QBE Confirms US Woes
QBE said its Australian & New Zealand Operations produced "a stellar result" despite the challenges associated with migration to the Group Shared Services Centre.
"Similarly, Asia Pacific Operations delivered a strong underwriting margin while achieving impressive premium growth," the company said this morning
"European Operations generated an underwriting profit, although below our target due to the higher than normal frequency of large individual risk claims and prior accident year central estimate claims development.
"Latin American Operations was adversely impacted by reserve upgrades largely associated with legislative changes impacting our Argentine workers’ compensation portfolio.
"Despite the adverse contribution from North American Operations, Equator Re (a reinsurance company) recorded an improved underwriting result reflecting higher divisional catastrophe retentions and relatively benign catastrophe experience," QBE said.
The latest result means QBE has missed its profit guidance since 2008, although you could argue that it met the guidance given after the shock announcement in December, which also saw long time chairman, Belinda Hutchinson announce her planned retirement.
Video – QBE Results Wrap – No (more) nasty surprises?
