QBE shares fall sharply after profits and dividends miss expectations

QBE’s profits have fallen short of market expectations, sparking sharp share price falls, as the insurer also lifted its allowance for natural disasters and adopted a more conservative stance dividend payouts.

The insurer’s profits for the full-year recovered to $US750 million ($1.04 billion) after a COVID-affected loss last year, but the result delivered by new chief executive Andrew Horton was weaker than markets expected.

QBE’s catastrophe claims for the year were up sharply on the prior year to $US905 million, due to disasters including winter storms in the US and widespread storm and flooding damage in Australia.CREDIT:GETTY IMAGES

In early trading QBE shares had dropped 8.3 per cent to $11.60, as brokers said the headline result had been dented by reserve top-ups, and its guidance appeared cautious.

Mr Horton on Friday said improving market conditions in the year had helped the insurer to a better statutory result for 2021, compared with the previous year’s after-tax loss of $US1.5 billion.

The company said rising premiums were a key tailwind, with gross written premium rising by 18 per cent, and citing “ongoing” premium rate increases, which accelerated in the second half of the year.

The insurer will pay a final dividend of 19 Australian cents a share, taking dividends for the full year to 30c a share, up from 4c last year.

Barrenjoey analyst said Andrew Adams said he supported QBE’s move to lift its catastrophe allowance for 2022 and lower its dividend payout target, which would make earnings more sustainable, but the share price would be affected by “overly aggressive consensus expectations.“

Citi analyst Nigel Pittaway said it was a “messy” result, and with a “significant miss” on the profit and dividend, though the company’s guidance and reserve top-ups appeared conservative.

QBE’s combined operating ratio - which compares claims and other expenses to total premiums, and is a key measure of profitability - was 93.7 per cent, an improvement from 104.2 per cent in the COVID affected year of 2020. A ratio above 100 per cent indicates the underwriting activity is unprofitable. It had flagged the improvement in premiums and performance in an upbeat outlook at its half-year results last year.