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QBE blames Brexit as profits nearly cut in half

QBE blames Brexit as profits nearly cut in half | Insurance Business

QBE blames Brexit as profits nearly cut in half
It’s been another day of insurance earnings reports and after Admiral enjoyed a significant jump in its profits (see article), QBE has endured a more difficult day.

The Australian insurance group, which has operations throughout the UK, saw its first half profits slip back by 46% prompting shares to drop by as much as 11% this morning.

At the heart of its fall has been its need to set aside US$283 million for claims liabilities which it blames on falling bond yields prompted by the UK’s decision to leave the EU and the subsequent global turmoil. Currently, the insurer earns around one third of its revenue from Europe.

Quoted in The Financial Times, QBE chief executive John Neal commented that “it is conceivable we will see a further substantial downward step in global interest rates.”

Its net profit for the first half of 2016 stood at $265 million – 46% down on the same period last year. According to Neal, a further drop in global interest rates, in the region of 0.5%, could see a further $200 million-$250 million taken off the company’s net profit. It expects global pricing pressure to remain and has consequently cut full-year targets for gross written premiums down to $13.7 billion-$14.1 billion, having previously been set at $14.2 billion-$14.6 billion.

In addition, results in Australia and New Zealand also disappointed the insurer with declines in pricing.