QBE Surprises With Small Dividend Despite Earnings Slide




Insurer, QBE Group will defy an interim loss and give shareholders a surprise (but small) dividend for the six months to June 30.

The global insurer revealed a US$712 million ($A993.6 million) net loss for the June half, slightly better than the $US750 million estimate in a late July update.

The payout is a tokenistic 4 cents a share, down 84% from the first half of 2019 payout of 25 cents a share. The final for 2019 paid earlier this year was 72 cents a share.

Analysts and some big shareholders had not expected a payout, given the company made a loss, and regulators (APRA) have urged insurers to limit payouts.

QBE paid the 27 cents a share earlier this year, a couple of days after APRA told banks and insurers to conserve cash by limiting payouts. QBE went ahead regardless.

QBE said insurance premium price rises were accelerating, increasing by double digits in the latest quarter, but catastrophe claims had climbed sharply as a result of last summer's bushfires and storms, and the company had exceeded its allowance for such payouts by $US56 million.

Costs from prior year claims also rose by $US120 million, while QBE made a loss of $US90 million on its investments because of the sharp widening of spreads mid half when the pandemic was at its strongest.

QBE justified the small payout on the basis that rising insurance prices would help improve its profitability this year and next.

QBE said that on average, its premiums had risen by 10.2% in the latest quarter, and the trend was occurring in all regions.
CEO Pat Regan said on Thursday he was encouraged by “strong underlying trends” in the business and the company was entering a period of clear improvement in insurance market conditions.

“Notwithstanding 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,” Mr Regan said in a statement to the ASX.

QBE said its combined operating ratio — which compares claims and other expenses to total premiums — stood at 103.4%. A ratio of above 100% indicates the underwriting activity is unprofitable.

For QBE to return to making money the combined ratio will have to fall substantially below 100% because yields on bonds and other solid investments are low and the return on its ‘float’ will not generate much in the way of returns for the rest of this year and into 2021.

The big unknown is the extent of insurance claims linked to COVID-19 for business lines (loss of profits, continuity claims) and TPD (disability) insurance policies.

QBE shares jumped more than 6% yesterday to end at $10.74