Global insurer QBE was another to withdrew guidance yesterday, citing “extraordinarily difficult times for all stakeholders”.
The company’s share fell early and then rebounded in the afternoon rally to close up 6% at $8.60.
In its 2019 results released in February, QBE said its targets for 2020 were for a combined insurance operating ratio of 93.5% – 95.5% (remember a ratio of 100% or above means breakeven or rising losses) and net investment return 2.5% – 3.0%.
The slamming of markets, especially bonds in March has undermined this estimate and it is likely QBE is wearing paper losses on the expansion of buy-sell spreads for bonds, just as IAG revealed yesterday it was now wearing a loss of around $100 million on paper.
QBE’s Group CEO, Pat Regan said: “These are extraordinarily difficult times for all of our stakeholders: our customers, our broker partners, our staff, our shareholders and the community at large. Despite the obvious and extreme disruption to normal business practices, our priority is to maintain the health and wellbeing of our staff and continue to support our customers in this time of need”.
“Premium rate momentum in 1Q20 has continued in accordance with the strong trends reported in the second half of 2019. The Group’s capital position and liquidity are strong. We continue to implement our business continuity plans to ensure our services remain available to our business partners and customers.
“The Group’s Annual General Meeting will be held virtually on 7 May 2020 at which a further update will be provided,” the statement said.
And IAG shares surged more than 10% yesterday after the country’s biggest general insurer left its 2019-20 guidance in place.
The announcement was something of a surprise given QBE’s decision to withdraw its guidance yesterday.
IAG said it had left guidance unchanged as overall year-to-date profitability is expected to absorb higher net natural peril claim costs and severe investment market movements.
The shares rose nearly 11% to $6.40.
IAG said it expected gross written premium growth in the low single digits and a reported margin between 12.5% and 14.5%.
“IAG’s underlying business performance has remained strong, although overall year-to-date profitability has absorbed substantial adverse impacts from net natural peril claim costs and, more recently, severe investment market movements,” the company said.
IAG, which announced a relief package for customers last Friday, said it had incurred an unrealised loss on its technical reserves and investment income of $100 million (mostly in March), due to widening credit spreads, but expected that to be made good by holding the securities to maturity.
