Storms lift insurer bill to $1b, yet QBE preserves guidance

afr.com:

Insurer QBE has taken an additional battering from US storms and tornadoes, but its natural perils loss was offset by premium growth holding up and investment yields improving.

Despite the catastrophe damage bill in the past six months increasing to $US700 million ($1.03 billion), beyond internal forecasts, QBE on Thursday still stuck by full-year earnings predictions.

Wild weather hit the US in the past six months, such as storms in Mississippi, and squeezed QBE’s earnings.  AP

The update was a relief for QBE bulls after a series of surprise earnings shocks in the past decade.

Even so, there was more bad news on Thursday for QBE; an additional $US40 million in costs has crept up for old crop damage. That followed a surprise $US140 million blowout in previous-year disaster claims emerging in May.

The insurer also stuck with its guidance that this calendar year’s combined operating ratio – comparing claims and expenses to premiums – would be about 94.5 per cent. Higher interest rates also boosted returns on some assets with running yields at the end of June improving to 4.9 per cent, above the 4.2 per cent recorded in March.

Shares in QBE were up 38¢ to $15.62 on Thursday.

Atlas Funds Management chief investment officer Hugh Dive, whose firm holds shares in QBE, said the extra losses were on the small side compared to some blowouts in the past and also not “out of left field”.

That compares to shocks such as in 2014, when QBE suddenly unveiled that higher Argentinian workers’ compensation claims contributed to an extra $US170 million that had to be set aside.

Mr Dive said factors supporting QBE included improving investment returns and the insurance industry being in a “hardening” cycle, meaning premiums were rising. “The