QBE (ASX:QBE) sees catastrophe costs of AU$1,060 in FY22, flags outlook risk

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 QBE (ASX:QBE) sees catastrophe costs of AU$1,060 in FY22, flags outlook risk
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Highlights:

  • QBE warns of catastrophe costs in the insurance industry.
  • The company said that higher than expected catastrophe costs have introduced few risks to full year outlook.
  • The asset risk free rate impact was negative AU$461 million in the third quarter of financial year 2022.

Australian insurance company, QBE Insurance Group Limited (ASX:QBE) on Monday (21 November 2022) shared a performance update and pointed out that higher than expected catastrophe costs have introduced certain risks to its full year outlook. QBE highlighted that the insurance industry’s global catastrophe costs in 2022 are estimated to exceed US$100 billion. In the year to October, the total net costs of catastrophe claims were tracked at around AU$880 million.

For November and December, QBE’s catastrophe is approximately AU$180 million. Considering the experience to date, QBE said it assumes net catastrophe costs of circa AU$1,060 million in the financial year 2022 (FY22). It includes an AU$75 million charge for exposure to war in Russia/Ukraine.

At 1:23 PM AEDT, the shares of QBE were spotted trading 1.25% lower at AU$12.25 per share with a market capitalisation of AU$18.41 billion. Around the same time, around 3 million QBE’s share exchanged hands on the ASX.

Details of the performance update

During the third quarter of FY22, the company reported a 6% growth in gross written premiums over the previous year. Renewable rate increases averaged 8.4% during the quarter, and an ex-growth rate of 8% decreases in comparison to the first half of FY22.

Talking about the year to September performance, the company reported gross written premium growth of 12% over the previous period. During the stated period, the ex-rate growth was 11%.

How did QBE’s investment perform in 3QFY22?

In the third quarter of FY22 (3QFY22), the asset risk free rate impact was negative AU$461 million. It was driven by financial market volatility that continued during the second half and increased interest rates across QBE’s key markets.

Due to increased risk-free rates, the exit fixed income running yield of 3.7% during the 3QFY22 continued to build on the exit running yield of the first half of 2022.

Outlook

QBE shared via an ASX filing,

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