That’s higher than the 10 percent guidance given in August, and the company stuck with that figure for the full year. “We expect the supportive premium rate environment to continue into 2023,” said QBE.
It warned that “heightened catastrophe activity has continued in the second half,” with claims of $880 million ($A1.32 billion) in the year to October. QBE now assumed it would end the year with nearly $1.06 billion in such claims, above previously budgeted expectations of $962 million.
QBE’s catastrophe category includes claims from man-made events, not just natural disasters as with some other insurers. The figure released Monday included $75 million that QBE has warned could accrue from covering losses from the invasion of Ukraine, including the cost of insured aircraft detained in Russia.
Other costs included crop damage, with QBE customers in North America affected by everything from drought to damage from Hurricane Ian, which risk modeling RMS has estimated could cost the entire industry $67 billion.
It meant that the crop combined operating ratio – a measure of the profitability of insurance operations – would be about 96 percent for crops.
That compares to QBE earlier this year, which said the combined business ratio of crops has typically improved by 94 percent in recent years. A ratio greater than 100 percent indicates that an insurer is losing money on underwriting.
QBE said the company-wide combined operating ratio would be “about 94 percent.” That’s worse than previous reports that the company was able to “improve” 94 percent.
That number also excludes QBE’s previously flagged $75 million cost, like other insurers, do not pass on discounts to customers in Australia.
QBE also said that returns on investments continued to increase. Those mark-to-mark investments negatively impact short-term earnings results, but the flip side is that they boost them in the long run.
Hunter Green analyst Mark Tomlins estimated that the increased damage to crops would add up to nearly $100 million in additional costs.
He noted that QBE and other insurers are still pushing interest rates, though historically that may not happen for longer term insurance products when yields are rising.
“The inflationary environment is keeping insurers disciplined on rates,” he said.
QBE shares fell 10¢ to $12.30 in trading on Monday.