Australian insurance group QBE has warned the market that it anticipated a loss in its Emerging Markets unit, due to the impact of “significantly higher than expected claims activity during the first five months of the year.”
QBE said that it now expects its Emerging Markets division will report a combined ratio of around 110% for the first-half of the year, signaling a fall from profitability.
The insurers said that the losses were due to an increased frequency of medium sized risk claims in Asia, weather related claims in the Latin American region and also adverse development across legacy portfolios in Latin America.
These factors could affect other insurers with global operations in those regions and the adverse development on legacy LatAm business could be something to watch out for during the coming results season.
QBE said that the Emerging Market loss would add around 1% to its interim and FY17 combined ratio, so it now forecasts a combined ratio in a range from 94.5% – 96.0%.
Helpfully though, QBE also forecasts that its investment return will be at the top end of the range of expectations, at around 2.5% to 3%, so it expects to report profits in a range from 8.5% to 9.5%.
QBE’s Group Chief Executive Officer, John Neal, commented; “We are encouraged by the improvement in the combined operating ratio in Australia & New Zealand as well as North America while Europe continues to perform well. Nonetheless, heightened claims activity in our Emerging Markets division will increase the Group’s interim and FY17 combined operating ratio by around 1%.”