Reporting Season

QBE slides on earnings miss, expects premiums and margins to increase

Fri 18 Feb 22, 11:06am (AEDT)

Key Points

  • QBE earnings came in well below Bloomberg, Morgans and Bell Potter estimates
  • QBE returned to profitability after a horrid -US$863m loss last year
  • Management expect premiums to improve and tightens dividends to retain more cash

QBE Insurance (ASX: QBE) has turned a new leaf amid a “material turnaround in underwriting profitability”, reporting a net profit of US$805 for the year ended 31 December 2021 compared to the -US$863m loss a year ago. 

Top-line growth remained intact as gross written premiums (GWP) grew 22% to US$18.5bn. This reflected a strong insurance premium environment in addition to improved customer retention and organic growth across all regions. 

The US$805m profit spells an encouraging turnaround narrative for the insurer but came short of analyst expectations. 

Morgans had forecast net profits of US$836m, Bell Potter was expecting US$896m while Bloomberg estimates were US$833m. The bottom-line miss is perhaps why QBE shares tumbled -8.2% as the market opened. 

Reining in the dividends

QBE declared a final dividend of 19 cents per share, bringing its full-year payout to 30 cents, which represents 41% of its adjust profit.

The Board opted to tighten its dividend payouts to allow the company to retain capital to support growth initiatives and facilitate "the gradual normalisation of our investment asset risk profile".

The payout ratio will now sit between 40-60% of annual adjusted profits, down from the previous "up to 65%" policy.

Uncertainty weighs 

“Following another year of elevated natural catastrophe claims costs alongside rising inflationary signals and continued low interest rates, the industry operating environment remains highly uncertain. Because of this, the premium pricing environment is likely to remain positive in 2022,” CEO Andrew Horton said. 

Eyes on growth

Despite the earnings miss, management reiterated the near-growth growth expected across GWP and margins.

“In light of this [uncertainty], we expect gross written premium growth to be in the high single digits in 2022... the Group is capable of consistently delivering a low to mid-90’s combined operating ratio.”

Any operating ratio figure above 100 means the company is losing money on its insurance plans.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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