QBE Insurance (ASX:QBE) - CEO, Andrew Horton
CEO, Andrew Horton
Source: QBE
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  • Shares in QBE Insurance (QBE) are taking a beating as full-year profits fall short of market expectations and the company adopts a more conservative approach to dividends
  • The company tabled US$750 million (A$1.39 billion) in profit over 2021, but the result was weaker than analyst forecasts
  • Against a backdrop of ongoing natural disasters and US$924 million (A$1.28 billion) in catastrophe costs over 2021, QBE has lifted its natural catastrophe allowance for 2022
  • Further, while QBE has declared a 19-cent final dividend, it has also revised its dividend target payout ratio to between 40 and 60 per cent of annual adjusted cash profit
  • QBE shares are down 9.33 per cent to $11.47 each at 1:02 pm AEDT

Shares in QBE Insurance (QBE) have taken a beating today as full-year profits fell short of market expectations and the company adopted a more conservative approach to dividends.

While the ASX 200-listed insurer managed to reverse a deep COVID-induced 2020 loss to a US$750 million (A$1.39 billion) profit in 2021, the full-year result was weaker than analyst forecasts.

QBE’s international division delivered a relatively strong result, but its Australia/Pacific division was weaker than expected. Meanwhile, its North American business posted another annual loss.

New CEO Andrew Horton, who took the lead role at the company in September 2021, said ongoing natural disasters over the year caused headwinds for the business, with QBE facing some US$924 million (A$1.28 billion) in catastrophe costs over the year.

“Not surprisingly given this backdrop, catastrophe costs of US$924 million materially exceeded our planned allowance for the year,” Mr Horton said.

In response, QBE lifted its natural disasters allowance for 2022.

At the same time, QBE revised its dividend target payout ratio to between 40 and 60 per cent of annual adjusted cash profit, down from the previous target of up to 65 per cent.

The insurance company declared a 19-cent-per-share final dividend for 2021, taking its payout over the full year to 30 cents per share. While this is significantly higher than the four cents paid over the year before, the 2021 final dividend still falls below analyst expectations.

Nevertheless, the company’s 2022 profit was largely driven by a neat 22 per cent increase in gross written premiums to US$18.46 billion (A$25.64 billion) on a constant currency basis. Net earned premium topped US$13.4 billion (A$18.6 billion) for the year, up 10 per cent on the year before.

Mr Horton said this premium growth was a key tailwind for the company, with QBE’s economic outlook into 2022 “encouraging” despite ongoing global uncertainty around supply chain disruptions, withdrawn COVID fiscal support and inflationary pressures.

“QBE delivered a strong result in 2021, with notable momentum across many of the key value drivers for the business,” he said.

“Our new strategic priorities will build on these strong foundations in 2022, where we are increasingly confident in our ability to drive sustained improvement across the organisation and expect this should result in a consistent low to mid-90’s combined operating ratio for the business.”

Importantly, Mr Horton said QBE expected to see continued growth in gross written premiums on a constant currency basis in 2022.

Mr Horton was appointed chief executive of QBE following former CEO Pat Regan’s abrupt departure from the business in 2020.

A 30-year British veteran in the industry, Mr Horton was hired to bring consistency and stability to the insurer.

QBE shares were down 9.33 per cent to $11.47 each at 1:02 pm AEDT. The company has a $16.9 billion market cap.

QBE by the numbers
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