Australian re/insurer QBE has recorded a “disappointing” underwriting loss of US $869 million for 2020, mainly due to the COVID-19 pandemic and elevated catastrophe losses, as well as adverse prior year claims development.
Having warned the market back in December, the company also confirmed that its net loss after tax amounted to $1.517 billion, while its combined ratio deteriorated to 104.2%.
QBE’s North America operations were hit particularly hard last year, incurring an underwriting loss of $521 million and a combined ratio of 112.7%.
The group’s results compare with a net profit after tax of $550 million in 2019 and an overall underwriting loss of $2 million.
Catastrophe claims in 2020 came to $688 million or 5.8% of net earned premium, up from $426 million in the prior year and $134 million above its allowance.
The high level of claims reflected particularly adverse experience in Australia due to widespread bushfires and significant east coast hail and storm claims, coupled with US wildfires and a record number of Atlantic hurricanes.
The result also included adverse prior accident year claims development of $366 million or 3.1% of net earned premium, up significantly from $22 million in 2019.
This primarily reflected development in North America including a significant additional allowance to address systemic risks including social inflation and higher severity trends in casualty lines.
COVID-19 is estimated to have impacted QBE’s results by $655 million, comprising $260 million in claims, $95 million in premium and expenses, and $300 million in risk margin. The group also expects to incur a further $130 million of COVID costs in 2021, bringing its total projected loss estimate from the pandemic to $785 million.
Although QBE was affected by the recent business interruption ruling in the UK, it again confirmed that additional costs resulting from the verdict will be absorbed by its reinsurance program, with losses capped at $70 million.
For its International business, QBE also assured that it had taken no event cancellation losses and that exposure was limited by quota share, non-peak cat XOL and cat aggregate reinsurance coverage.
Similar reinsurance agreements are in place across Australia Pacific and in North America, where the company’s business interruption policies require physical damage and have explicit virus exclusions.
Net investment and other income was $226 million in 2020 compared with $1,036 million last year, due to significant market volatility.
On a more positive note, QBE benefitted from underlying gross written premium growth of 10% last year and average rate increases of 9.8% across its business, including rate increases of 12.6% in Q4.
“While obviously very disappointed with the headline loss, premium momentum accelerated across 2020 and has continued into 2021,” said Interim QBE Group CEO, Richard Pryce.
“Coupled with the improved positioning of the underlying business, we enter this year with confidence and optimism. I look forward to leading the business in 2021; my primary focus remains performance improvement including that the Group takes full advantage of currently favourable market conditions by maximising premium rate increases while driving targeted growth in portfolios and regions offering the most profitable new business opportunities.”