QBE expects US$750m first half loss

July 23 2020 by Andrew Tjaardstra

QBE expects a first half loss of US$750 million including Covid-19 pandemic and nat cat impacts and has warned on continuing virus-related claims.

According to a statement issued to the Australian Securities Exchange on July 22, the pandemic has impacted lines including property, reinsurance, workers’ compensation, D&O, A&H, trade credit, mortgage insurance and landlords’ insurance.

While noting the “landscape remains highly uncertain”, QBE is estimating total Covid-19 related costs to be around US$600 million pre-tax.

That figure includes about US$265 million of potential further net claims, such as in the UK, that could emerge over the next 12 to 18 months, mainly in trade credit and mortgage insurance. It also expects an investment loss of around US$125 million due to market volatility.

The six-month combined operating ratio will be around 104%, while excluding coronavirus effects the ratio is around 98%.

The Covid-19 first-half underwriting impacts of US$335 million comprise US$150 million of net incurred claims, US$115 million of extra risk margin, US$50 million in premium concessions and reinsurance reinstatement costs and US$20 million of expenses – including motor premium refunds.

Catastrophe claims increased to US$310 million from US$180 million a year earlier, and exceeded the firm’s US$250 million allowance.

Meanwhile, renewal rates increased by an average of 8.7%, compared with 4.7% in the year before, and gross written premium climbed around 10%.

QBE says its capital position remains strong – especially after a US$825 million equity raise earlier in the year.

“Despite the impact of Covid-19, I’m encouraged by the strong underlying trends evident in the result,” QBE’s global chief executive Pat Regan said.

Sydney-based Regan (pictured) added: “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.”

QBE, which agreed to sell its stake in Indian firm Raheja QBE earlier this month, will provide full details on its half-year financial results on August 13.

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