If QBE Insurance Group CEO Frank O’Halloran doesn’t spot another bargain buy somewhere in the world then shareholders in the country’s biggest and most international of insurers can expect a quiet time over the next few months.
Like Leighton Holdings in contracting and civil engineering, QBE has had a brilliant 12 months or so, with the share price reaching record levels as the company’s earnings and outlook improves by the day, or so it seems.
The shares closed up more than 50c at $43.52, around $1.40 under the all time high of $33.90.
QBE has expanded quickly into the North American market after building a base in the UK while its business in Australia has moved from strong growth to intense competition.
Mr O’Halloran told shareholders at the AGM in Sydney yesterday that in the short term, because the local market was seeing premium rates fall, growth would need to be on the back of acquisition.
“We do not contemplate any further major acquisitions in the US for at least the next 18 months,” Mr O’Halloran said. “However, we do have a number of small acquisitions in other countries that we are investigating and our teams around the world are busily looking for new opportunities.”
QBE has recently spent $2.5 billion on two acquisitions in the United States, including the purchase of Praetorian Financial Group and Winterthur US.
“The large US acquisitions in late 2006 and early 2007 will mean that, when completed, QBE has well over 80% of is business emanating from our offshore operations with more than 90% in commercial lines insurance,” Mr O’Halloran told shareholders.
“We continue to set prices, terms and conditions as a market leader in the majority of our products that we underwrite. We also put great effort into making sure that QBE’s culture of leadership, business acumen and integrity is embedded into each of our operations around the world and implemented quickly into new acquisitions.”
QBE said it was on track to meet its insurance profit margin target.
“We remain confident of increasing profit after tax by 20 per cent and diluted earnings per share by 15 per cent in 2007,” QBE chairman John Cloney told the AGM.
Mr Cloney said the guidance given originally at the release of the insurer’s annual results in February was subject to the usual caveats, including large losses and catastrophes not exceeding the significant allowance in the company’s business plans.
“I am pleased to report that we are on track to meet our targeted, full year insurance profit margin of 17.5 per cent to 18.5 per cent, together with an increase of close to 30 per cent in gross written premium and 40 per cent in net earned premium,” he said, in relation to the company’s first quarter performance.
“However, any unforeseen regulatory delays in completing the recent US acquisitions would impact on premium and profit growth in 2007,” he said.
QBE had a 36 per cent rise in annual profit to a record $1.483 billion in the year to December, 2006.
That better than the company’s forecast of a 30 per cent increase.
