QBE foreshadows $US750m 1H20 loss

QBE expects to report a 1H20 net statutory loss after tax of about $US750m ($A1.05bn), reflecting the impact of covid-19, catastrophe experience and prior accident year claims development combined with a net investment loss of about $US125m because of extreme investment market volatility.

In a profit warning today ahead of its interim result release scheduled for August 13, QBE foreshadowed a 1H20 combined operating ratio (COR) of about 104.5%.

The group said the pandemic had, or was expected to, adversely affect several business lines, including property, ie business interruption; reinsurance; workers’ compensation; casualty, including directors and officers (D&O); accident & health (A&H); trade credit; lenders’ mortgage insurance (LMI); and landlords’ insurance, while the benefit of reduced personal motor claims frequency was returned to customers through premium refunds.

The insurer told ASX it estimated total covid-19 related costs at about $US600m pre-tax. That included about $US265m of potential further net claims that could emerge over the next 12-18 months, mainly in trade credit and LMI but also in casualty, including D&O; A&H; landlords’ insurance; and other classes.

Excluding covid-19, the current accident year COR was expected at about 95.1%, one percentage point up on 1H19.

A material improvement in the attritional claims ratio and reduction in big individual risk claims offset an increase in catastrophe claims to around $US310m – up from $180.3m, which exceeded the group’s $US250m allowance.

The figures reflected Australia’s “devastating and widespread bushfires” and significant Aust east coast hail and storm activity. Catastrophe costs were broadly in line with plan across the rest of the group.

QBE said its capital position remained strong when measured against regulatory and rating agency capital requirements. Group head office liquidity at June 30 was expected at about $US1.5bn, giving the group “considerable further flexibility” for its capital structure.

QBE group CEO Pat Regan said: “Despite the impact of covid-19, I am encouraged by the strong underlying trends evident in the result.

“Notwithstanding significant uncertainty surrounding the enduring impact of the covid-19 pandemic, our greatly strengthened capital base positions us well to capitalise on accelerating pricing momentum and emerging organic growth opportunities.”