The management of QBE Insurance Group (ASX: QBE), in the UBS Australian Conference, stated that the company’s performance in Q3 2018, which ended on September 2018, was as expected in regard to all the divisions. They also stated that at the end of Q3 2018, the company is in the sound position to deliver the combined operating ratio target range which is 95%-97%. In regard to the large risk and CAT claims, the numerous international insurers threw some light on the profit warnings from either CAT activities or/and large individual risk claims. QBE Insurance Group reflected an optimistic view of these parameters.
The management stated that high-risk claims frequency of QBE Insurance Group is witnessing downward trend as well as catastrophe claims on the YTD basis are within the allowances. They also reflected positive views on the improving investment yield. The company is well-positioned to reap the benefits of the increasing interest rate environment because of its short asset duration. In the conference, the company also highlighted the movements in the investment markets and stated that the global markets witnessed heightened volatility recently. They reflected positive views on the upward trend in the risk-free rates which was led by the US treasuries.
The company has maintained is focus on the simplification process, and the top management is positive on the changes that have been brought in. They have initiated numerous decisions of exiting or selling the complex or/and underperforming businesses. The management also announced that sale agreement with respect to the remaining of the North American personal lines’ operations would be announced soon. It would not be wrong to say that the company’s simplification program is largely complete if this news is coupled with other transactions the company has initiated. The company is witnessing a favourable momentum, and it can grow moving forward.
Performance in 1H 2018
QBE Insurance Group’s North American Operations generated gross written premium amounted to $2.89 billion in 1H 2018 which reflects a marginal rise of 3.2% on YoY (year-over-year) basis. In 1H 2017, gross written premium was $2.80 billion. The North American Operations also witnessed an improvement in the net claims ratio on the YoY basis as in 1H 2018 it was 63.5% while in 1H 2017 it was 66.8%. In these operations, an improvement was also witnessed in the combined operating ratio (ex-discount rate). This improvement was the result of repositioning activities as well as remediation.
In 1H 2018, the expense ratio of the European operations also witnessed an improvement because of the growth was seen in the net earned premium as well as strict cost control.
On November 12, 2018, the stock price of QBE Insurance Group ended the day by advancing 0.218% which implies that it increased A$0.025 per share and settled at A$11.515 per share. It currently has a market capitalization of $15.38 billion while its annual dividend yield stood at 2.26%. The company’s stock price is trading in the higher range. Over the past six months, the stock has delivered the return of 12.65%.
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