Australian insurer QBE suffered a 37% drop in gross written premiums during the first half of 2013, according to the company’s half-year results. The fall took QBE’s total GWP down to $477m – a $283m drop from the same period last year.
QBE chief executive John Neal said the U.S. housing market’s continuing recovery has led to a decreased need for the insurer’s mortgage services.
“It’s a bit of a counter-cyclical product,” Neal said of mortgage insurance. “As the economy improves, fewer people find themselves in times of stress. There is simply less placement of insurance.”
Bank of America, once a large QBE client, was instrumental in the insurer’s drop in profit. The bank’s decision to sell a large portion of its lender-placed insurance book meant Bank of America had significantly less need of mortgage insurance provided by QBE.
As a result, QBE is forecasting a $600m drop in the value of its written premiums in North America for 2013. This forecast follows general industry wisdom that the second half of the year more fully reflects downward trends than the first.
Nevertheless, Neal assured investors that QBE is on track to meet its target of a 92% combined operating ratio and an 11% insurance profit margin for the year. He attributes this to an expected growth in QBE’s client base.
“As we go through the second half, we’re very confident that we can win new banking clients,” Neal said.
As it is, QBE’s combined operating ratio in the first half of 2013 was 92.8%, while its insurance profit margin ended at 10.8%.
QBE, Australia’s largest insurer, originally took over Bank of America’s business insuring foreclosed homes in a $700m deal in 2010.