In this very difficult year dominated by the COVID-19 pandemic and its varying impact we saw two very different updates yesterday from different parts of the insurance industry for the year or half-year to June 30.
QBE Group warned of a half a US$750 million loss ($A1 billion-plus) for the June half-year while Steadfast Group, a large local general insurance broker, said it was looking at a better than expected bet profit of more than $US215 million for the 12 months to June 30.
The much bigger insurer and reinsurer, QBE blamed its big loss on the combination of coronavirus, catastrophe claims, and market volatility hitting its investment returns.
QBE withdrew its financial targets and guidance on March 30 as the COVID-19 pandemic loomed.
QBE told the ASX on Wednesday that despite some positive long-term trends such as higher premiums, its June 30 interim results would be affected by a range of COVID-19 related claim costs.
That’s despite QBE revealing that “on a constant currency basis and adjusting for asset sales completed in 2019, gross written premium grew by around 10% during the half.”
QBE said that its closely watched combined operating ratio – which sets claims and other expenses to total premiums – would be about 104%. A ratio of above 100 percent indicates the underwriting activity is unprofitable.
QBE said its estimated total COVID-19 related costs would be about $US600 million, including higher claims on lenders’ mortgage insurance, landlord insurance, workers’ compensation, accident cover, and trade credit.
QBE said this total “reflects COVID-19 impacts of around $335M, adverse catastrophe experience of around $60M and adverse prior accident year claims development of around $120M.
“While QBE has separately identified obvious COVID-19 revenue and expense impacts, there will be other less significant impacts, both positive and negative, that are not readily identifiable or quantifiable.” (All US dollars).
QBE said its $US600 million figure includes ~$265M of potential further net claims that could emerge over the next 12-18 months, primarily in trade credit and LMI, but also in casualty (including D&O), A&H, landlords’ insurance, and other classes.”
It said excluding COVID-19 its combined operating ratio was a more reasonable 95% to 96%
CEO Pat Regan said in the statement to the AX: “Despite the impact of COVID-19, I am encouraged by the strong underlying trends evident in the result.”
“Notwithstanding significant uncertainty surrounding the enduring impact of the COVID-19 pandemic, our greatly strengthened capital base positions us well to capitalise on accelerating pricing momentum and emerging organic growth opportunities.”
There was no mention of the future of the interim dividend for the June half-year.
Meanwhile, in a short three-paragraph statement Steadfast Group confirmed strong June 2020 trading results and (now) “expects to deliver FY20 EBITA at the top end of the guidance range of $215m – $225m that was withdrawn due to the COVID-19 pandemic.”
“This announcement is based on the Group’s unaudited preliminary financial performance for the year ended 30 June 2020.”
Steadfast said it will release its 2019-20 results in late August, as will QBE.
QBE shares rose 1.6% to $9.83 in yesterday’s weak market while Steadfast shares also rose, up 1.1% to $3.53.
