Profits might be down for QBE but the global insurer has cheered shareholders with a hefty hike in dividends.
QBE’s profit for 2015 slid seven per cent to $US687 million as a stronger US dollar and lower returns from its investments ate into its bottom line.
The insurer softened the blow for shareholders by lifting its full year dividend by 13 cents a share.
QBE’s shares surged by 88 cents, or 8.5 per cent, to $11.27.
The stock had been heavily sold off ahead of Tuesday’s result amid worries about QBE’s investment returns given global interest rates are stuck at record lows and the recent volatility on financial markets.
QBE’s investment income dropped by more than a fifth to $US402 million during the year.
Its local rivals IAG and Suncorp last week both reported lower first half investment returns and profits.
Insurers are also grappling with competition in terms of premiums, which has kept a lid on the prices they can charge policy holders.
QBE’s gross written premiums missed the insurer’s own forecasts, dropping by more than seven per cent to $US14.8 billion in 2015.
They are expected to fall further this year to between $14.2 billion and $14.6 billion.
QBE’s Australian, New Zealand and European businesses all managed to lift their premium income, but that was offset by falls in North America.
“Pricing remains challenged across the globe with rates down by around 1.3 per cent overall and forecast to fall by a similar amount in 2016,” QBE said.
Chief financial officer Pat Regan expects premiums to remain fairly flat in Australia during 2016.
He said while some insurers were seeing a bit of a tick up, QBE was more cautious.
“Whilst there are some green shoots there in pricing we probably see it as broadly flattish,” he told reporters.
Meanwhile, QBE expects losses resulting from claims linked to Cyclone Winston in Fiji at the weekend to be in the “low tens of millions”, far below the $US58 million in claims lodged by its policyholders for Cyclone Pam in Vanuatu last March.
“(Winston) seems to have done a fair bit of damage but it’s not hit the famous west coast, so it’s not really hit the resorts,” chief executive John Neal said.
CMC Markets chief market strategist Michael McCarthy said while QBE’s profits and premiums were lower, investors had taken comfort in the fact the results weren’t worse.
“Although the headline number was below consensus I suspect there were some who were bracing for worse,” he said.
“We saw a bit of support today but I don’t think it’s vastly improved the investment case for QBE.”
QBE DIVIDEND CHEERS SHAREHOLDERS
Gross written premiums down 7.6pct to $US15.1b
Net profit down seven pct to $US687m
Final dividend up eight Australian cents to 30 cents a share
Total dividend up 13 cents to 50 cents a share.
Source: Sky News