QBE expects USD 1.2 billion loss in 2017 due to last quarter's NatCat activity

QBE announced it expects to report FY2017 combined operating ratio (COR) of around 104%, above the targeteted COR range of 100-102% outlined in October 2017, due the catastrophe activity in the fourth-quarter.

More than that, the significant catastrophe activity in the fourth-quarter of 2017 combined with two, one-off non-cash items have contributed to an expected FY2017 after tax loss of around USD 1.2 billion.

According to the statement, the Californian wildfires and December storms in Australia, coupled with some adverse development of Hurricane Maria, added around USD 130 million to the net cost of catastrophes, "increasing the FY2017 COR by just over 1% relative to previous expectations".

The insurer said that ithas now strengthened claims provisions by around USD 110 million, primarily in North America and Asia Pacific. "This compares with previous expectations of a "modest 2H17 release" and added around 1% to the FY2017 COR".

At the same time, "we have increased the Group's reserving probability of adequacy (PoA) to 90.0% at 31 December 2017, from 89.5% previously".

Weather-related attritional claims in North America, and second half deterioration in Asia Pacific and a slightly higher expense ratio, contributed approximately 0.5% to the COR relative to previous expectations.

Thus, combined with "two significant one-off, non-cash items have contributed to an expected FY2017 after tax loss of around USD 1.2 billion".

By divisions, QBE expects FY2017 COR as follows:

  • North American Operations - 109%.
  • European Operations - 95%.
  • Australian & New Zealand Operations - 92%.
  • Asia Pacific Operations - 115%.
  • Latin American Operations - 114%.
  • Equator Re - 141%.

For 2018, QBE has announced a COR range of 95% - 97.5%, and a targeted net investment return of around 2.5-3.0%.

QBE's Group CEO, Pat REGAN said: "This has been a challenging year for QBE, reflecting an unprecedented cost of catastrophes as well as the particularly disappointing deterioration in our emerging markets businesses. Over the last few months, I have been conducting a detailed review of our operations. We have some businesses with strong market positions that are performing well but we also have businesses that are underperforming. We have commenced a comprehensive program of work to improve both the level and consistency of performance. At the same time, we are conducting a strategic review of our Latin American Operations as we look to simplify the Group and reduce risk".

The press release is available here.

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