Insurance Articles
Major Insurers Flag Rise in Insurance Premiums
Posted by admin - 09/04/09 at 05:04:11 pmQBE Insurance among other major insurers has flagged a 4 per cent increase in overall premiums to compensate for the number of weather catastrophes and the global financial crisis that has hit the insurer hard
It joins competitors Suncorp, IAG and Allianz in spruiking premium increases, according to KPMG Partner Brian Greig, amid “enormous pressure from weather-related claims and from the financial markets”.
You Might Note: No mention of price rises from 1300 Insurance
1300 Insurance Home and Content insurance premiums are now likely to be as competitive as ever.
“It’s clear that any repricing (of risk) will trend upwards, particularly given the recent losses from the storms and bushfires which will be included in the full-year reporting,” Mr Greig said.
The insurer’s full-year profit fell 3 per cent last year to $1.86 billion, which was also attributed to the fall in equity markets and lower interest rates.
Last year, QBE received claims for 29 weather-related catastrophes, costing $424 million, compared to $317 million in 2007 from 21 catastrophes.
However, chief executive Frank O’Halloran yesterday assured shareholders that the company’s balance sheet was in “great shape”, with surplus capital of $3.3 billion, and said he expected gross written premium and net earned premium to be up by 20-25 per cent this year.
Mr O’Halloran said the company would retain a low-risk investment portfolio, with only 5 per cent equities exposure and 99 per cent liquidity, and would be targeting a gross yield of 3 per cent this year.
“The substantially lower interest rates and need to match our currency liabilities with investments of the same currency, as well as our focus on quality, means we need to be patient until economic conditions improve,” he said at QBE’s annual general meeting in Sydney yesterday.
He forecast QBE’s combined operating ratio to be less than 88 per cent this year, which when combined with the expected increase in gross written premium and net earned premium “will likely mean a significant increase in underwriting profit by close to 30 per cent in 2009″. However, Mr O’Halloran said lower interest yields on QBE’s cash and fixed interest portfolios would offset a large part of the projected increase in underwriting profitability, bringing the insurance profit margin to a range of between 16 per cent and 18 per cent of net earned premium.
Mr O’Halloran said the majority of QBE’s businesses, spread across 45 countries, were outperforming their peers.
“The substantial majority of our products and businesses around the world are producing returns above our 15 per cent minimum return on equity requirements,” he said.
After completing 11 acquisitions last year, QBE chair John Cloney raised the possibility of further purchases this year, but ruled out scooping up any of the beleaguered American International Group “at this stage”.
“In relation to AIG’s carcasses, we haven’t seen anything that we think comes with an attractive profile and comes at a reasonable price,” he said.
QBE shares closed 2.85 per cent lower yesterday at $18.41.
Reference: The Australian 09 April 2009
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