Insurer QBE has posted an interim (half year) net profit of $345 million, up 30% from the same time last year and broadly in line with expectations.
Despite the increase, a disappointing performance from it’s emerging markets division (which it initially flagged in June) appears to have weighed on the share price.
A short time ago, QBE shares were down 3.74% to $11.57.
Underlying cash earnings excluding once-off items also rose by 30% to $374 million, after earnings dipped sharply last year with interest rates at historic lows and price competition for insurance premiums.
The global insurer’s underlying profit for the six months to June 2017 was $US154 million, up significantly from $US54 million last year. Revenue for the period climbed by 5% to $US8.25 billion.
Net operating cash flow turned negative in the period, falling to -$US402 million from $US216 million on lower premium income and a rise in acquisition and other underwriting costs.
The group cited improved underwriting performance in its North American and Australia & New Zealand operations, but said that the result from its emerging markets division was “disappointing”.
The combined operating ratio (COR) for the emerging markets division rose to 110.8% from 99.5%. If a COR is over 100 it means the division is unprofitable.
In the wake of the poor result, CEO John Neal announced a shakeup of the troubled division.
“The restructure of our Emerging Markets business into two operating divisions in Asia Pacific and Latin America sees Jason Brown (previously Group Chief Risk Officer) and Carola Fratini (previously CEO of Argentina) respectively assume the role of CEO for these two divisions,” Neal said.
David Fried, the current head of emerging markets, will step down in 2018.
Neal forecast steady growth for the insurer amid a challenging global environment for QBE, which sources about 75% of its income from overseas.
“Our three largest underwriting divisions are more streamlined and focused than ever before, and are responding to the challenges of their markets with precise strategy execution and a commitment to customer-centricity,” Neal said.
The company announced an interim dividend of 22 cents per share, up 5% from the same time last year.