Significant catastrophe activity in the fourth-quarter of 2017 combined with two, one-off non-cash items has seen QBE report an expected full-year 2017 loss of roughly $1.2 billion.
For the year, QBE now expects to report a combined operating ratio (COR) of approximately 104%, which is above the target range of 100% – 102%, and which is in part a result of catastrophe activity in the fourth-quarter.
According to QBE, the California wildfires as well as December storms in Australia, combined with some adverse development of Hurricane Maria, adding a further $130 million to the net cost of catastrophes. Relative to previous expectations, the $130 million increased the firm’s full-year 2017 COR by just over 1%.
QBE explains that it has now strengthened claims provisions by roughly $110 million, primarily in North America and Asia Pacific, after reviewing year-end claims reserves, which also added roughly 1% to the full-year 2017 COR.
Weather-related attritional claims in North America, and further second-half deterioration in Asia Pacific, coupled with a higher expense ratio, added a further 0.5% to the full-year 2017 COR, when compared with previous expectations.
All of the above, combined with “two significant one-off, non-cash items”, has resulted in QBE reporting an expected after-tax loss of $1.2 billion for 2017.
Broken down by divisions, QBE’s expected full-year 2017 CORs are 109% for North American operations, 95% for European operations, 92% for Australia & New Zealand operations, 115% for Asia Pacific operations, 114% for Latin American operations, and 141% for Equator Re.
QBE’s Group Chief Executive Officer (CEO), Pat Regan, said; “This has been a challenging year for QBE, reflecting an unprecedented cost of catastrophes as well as the particularly disappointing deterioration in our emerging markets businesses. Over the last few months, I have been conducting a detailed review of our operations. We have some businesses with strong market positions that are performing well but we also have businesses that are underperforming. We have commenced a comprehensive program of work to improve both the level and consistency of performance.
“At the same time, we are conducting a strategic review of our Latin American Operations as we look to simplify the Group and reduce risk. I will give you more detail on these plans in conjunction with the release of our FY17 result detail on 26 February 2018.”
For 2018, the firm has announced a COR range of 95% – 97.5%, and is targeting a net investment return of roughly 2.5% – 3%.
