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QBE’s profit plunges 45%

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QBE Insurance Group’s annual net profit plunged 45 per cent during what it described as one of the worst years for catastrophic events.

QBE on Tuesday reported a statutory net profit of $US704 million ($A655 million) for the 12 months to December 31, 2011, down from $US1.278 billion ($A1.19 billion) a year earlier.

Revenue increased 37 per cent to $US20.19 billion, driven partially by a 34 per cent lift in gross written premium to $US18.3 billion.

Shareholders would receive a final dividend of 25 cents, with 6.25 cents of that being franked, QBE said in a statement.

The final dividend payment brings total dividends for 2011 to 87 cents, down 32 per cent from 128 cents per share a year earlier.

Earnings per share almost halved during 2011, finishing at 64.7 cents, or 47 per cent lower than the 2010 result.

In a statement to the market, QBE described 2011 as one of the worst years on record for catastrophic events.

“In addition, QBE’s profits were affected by lower risk-free interest rates used to discount outstanding claims and widening credit spreads on quality corporate bonds,” the insurer said.

There would be more premium rate rises in 2012 to cover the increased cost of reinsurance and more catastrophes, QBE said.

Retiring chief executive Frank O’Halloran said QBE expected 2012 to be a year of lower growth than seen in the past five years as it consolidated its existing businesses and identified smaller, bolt-on acquisitions.

QBE’s target gross and net written premium would depend on acquisitions in 2012, he said.

Top line revenue growth in 2012 should be in the low single digits, QBE said.

Net earned premium was expected to increase slightly due to the forecast premium rate increases and acquisitions.

QBE said it expected a combined operating ratio of less than 90 per cent, and an insurance profit margin of at least 13 per cent.

But these targets were subject to big individual risk and catastrophic claims not exceeding the 10 to 11 per cent allowance in the insurer’s business plans.

QBE had purchased $US565 million ($A526.81 million) of cover for a frequency of big individual risk and catastrophe claims in 2012, Mr O’Halloran said.

“We have had a positive start to 2012 with catastrophe claims substantially lower than this time last year, credit spreads reducing, a slight rise in risk-free rates and premium rate increases higher than anticipated, particularly in the US and Australia.”