Insurer QBE lifted its dividend for the June half-year after its results saw a sharp recovery to a first half net profit of $US441 million from the loss of $US712 million in the June 2020 half year.
The news saw the shares jump more than 8% to $A12.51, the highest close for the year so far. They also hit a 2021 high of $A12.65 in the session.
The board declared an interim dividend of 11 cents a share, up from 4 cents for the previous corresponding six months.
Despite that sharp rise, the board made it clear it would be taking cautious view for the rest of the year.
“While recognising QBE’s improving profitability and earnings resilience, the board has also had regard to typically higher catastrophe incidence and Crop (US) result variability in the second half as well as our stated intention to retain capital to support our growth ambitions and facilitate the gradual normalisation of our investment asset risk profile,” QBE said.
The company revealed higher premiums and a better underwriting and cost performance in the latest half which also saw the impact of Covid lessen compared to a year earlier.
On a constant currency basis, gross written premium grew by 20% to $US10.2 billion reflecting the strong premium rate environment as well as improved customer retention and new business growth across all regions, the insurer said.
QBE said pricing momentum in Australia-Pacific benefited from the end of pandemic-related pricing relief initiatives in place in 2020.
Catastrophe claims for the half were $US462 million or 7% of net earned premium, up materially from $US308 million or 5.5% in the prior period and 1.6% above the Group’s increased allowance.
Catastrophe costs were dominated by winter storm Uri in Texas, widespread flooding on the east coast of Australia and Cyclone Seroja in Western Australia.
“Notwithstanding the heightened level of catastrophes during the half which remain a major issue for the industry, I am very pleased with the improvement in the underwriting result and the strong but targeted premium growth,” Interim QBE chief executive, Richard Pryce, said in the statement.
The Group reported a first combined operating ratio of 93.3% compared with 103.4%3 in the prior period “which was significantly impacted by COVID-19 claims and adverse prior accident year claims development.” (a 100% operating ratio is either a small profit or loss).
The result included favourable prior accident year claims development of $US71 million or 1.1% of net earned premium compared with $US120 million and 2.2% of adverse development in the June 2020 half.
Net investment income rebounded to $US58 million from a loss of $US90 million in the prior period.
“A modestly short tactical duration stance, coupled with narrower credit spreads and healthy returns on growth assets, more than offset the negative mark-to-market impact of higher risk-free rates on our fixed income portfolio,” QBE explained.
Interim QBE Group CEO, Richard Pryce, said in the release that “Notwithstanding the heightened level of catastrophes during the half which remain a major issue for the industry, I am very pleased with the improvement in the underwriting result and the strong but targeted premium growth.
“While we continue to benefit from meaningful compound premium rate increases in all our geographies, there are signs that pricing momentum is moderating, particularly in International Markets.
“Regardless, we will remain vigilant in balancing premium growth and pricing adequacy for an appropriate risk adjusted return on capital, with claims inflation and catastrophe costs key areas of ongoing focus,” he said.
