Yesterday was the day QBE looked like impressing the market than providing one of its now usual disappointments.
The insurer revealed a 30% increase in interim net profit to $US345 million ($A435 million), despite the anticipated poor performance in its emerging markets business.
And the company said its adjusted net profit after tax increased by 76% to $464 million on a one-off pretax charge.
Cash profit for the half year to June 30 was also up by 30% to $374 million from $287 million for the 2016 half.
QBE also confirmed it plans to activate its previously announced $1 billion buyback during the second half. Interim dividend was lifted to a partly franked 22 cents a share from 21 cents.
And said it would tackle the problems in the emerging markets business by splitting it into two separate divisions focused on Latin America and the Asia Pacific.
QBE also reported adjusted results due to the UK government’s controversial change to a key discount rate which is used in determining personal injury damages awards in the UK.
So in terms of the result it was better than expected, the buyback and higher dividend should have been welcomed, but were ignored and investors gave it the thumbs down, sending the shares down more than 7% to $11.17.
Ouch!
QBE it seems can’t take a trick so far as convincing investors than it’s not trouble-prone.
The group’s combined operating ratio (COR) increased slightly to 95.3%, from 94.5% in the prior year, consistent with revised guidance provided to the market in June (and including the change to the key UK discount rate). A COR over 100 indicates an underwriting business is unprofitable. It would seem that the company’s sin was to remind investors of the problems in the emerging markets business. When QBE warned of these problems back in June, the shares tumbled 10% as the market worried the blowout in claims would not be controlled.
The insurer, which generates almost three-quarters of its premiums from offshore (as a global re-insurer and insurer should) said it expected the market to remain challenging in 2017 though there were indications of a modest improvement.
So far as investors are concerned the modest improvement is not enough to offset those no ingrained fears that there is mow bad news round the corner.
