SYDNEY: QBE Insurance, Australia’s top insurer by premium, yesterday flagged a 40% fall in first-half net profit on equity losses and a lack of one-off gains, disappointing investors who knocked its shares down 6.5%.
QBE, which has made more than 75 acquisitions in 10 years to spread to 48 countries, said equity losses more than doubled to US$228mil, while the year-ago period had one-off gains of about US$220mil.
Analysts on average were expecting a 35% fall in net profit from the A$1.02bil reported last year. The downbeat outlook sent the stock to its lowest since March 2009.
QBE’s woes are not different from its global peers, which are facing weak stock markets and lower bond yields. Last month, smaller rival Insurance Australia Group cut its 2010 forecast for the third time in as many months.
“It seems like investors predicted a turnaround sooner,” Angus Gluskie, chief investment officer at White Funds Management said. “QBE is at a soft point in the insurance cycle. But all ingredients are in place for a turnaround in the coming years.”
Fund managers said analysts would adjust their short-term forecast after QBE’s warning but expected them to leave the 2011 and 2012 forecast largely unchanged.
“The continued excellent underwriting results have been more than offset by significantly lower investment income from reduced interest yields, the fall in equity markets…,” QBE chief executive Frank O’Halloran said in a statement.
The MSCI’s world equity index has lost more than 10% since April and is down more than 7% in the first six months of 2010. The global index recorded its worst quarter since the final three months of 2008 when Lehman Brothers collapsed.
QBE said it expected its insurance profit margin for the first half to be 15.7%, below its 16%–18% forecast range, hit by lower yields and record levels of catastrophes in the first half.
However, O’Halloran said he still expected to end the year in the target range. The insurer also said it expected to maintain its interim dividend of 62 Australian cents.
QBE is scheduled to report half-year earnings on Aug 19. — Reuters
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