QBE Insurance Flags Hefty Hit From One-Offs, Claims

By FeaturesDow Jones Newswires

MELBOURNE, Australia--QBE Insurance Group Ltd. (QBE.AU) has forecast a sharp swing to a loss after absorbing one-off hits to its North American operation and the cost of California wildfires and December storms in Australia.

The Australian company, one of the world's largest general insurance and reinsurance companies, said Tuesday it anticipates an after-tax loss of about US$1.2 billion for 2017, after booking a US$230 million hit to the carrying value of deferred tax assets due to the reduction in the U.S. corporate tax rate and a US$700 million impairment charge on revised assumptions of the value of North American goodwill.

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The insurer's profit rose by 23% in 2016 to US$844 million, partly due to a rise in investment income.

Patrick Regan, who took over as chief executive from January, said he had spent the last few months conducting a detailed review of operations, adding that while some businesses have a strong market position and are performing well others are underperforming. A strategic review of the operations in Latin America is underway as the company seeks to simplify its business and reduce risk, he said.

"This has been a challenging year for QBE, reflecting an unprecedented cost of catastrophes as well as the particularly disappointing deterioration in our emerging markets businesses," said Mr. Regan, the former head of QBE's Australian and New Zealand operations and previously chief financial officer.

A rise in natural disasters in the final quarter of last year added about US$130 million to costs, QBE said. The company said it has strengthened claims provisions by about US$110 million, primarily in North America and the Asia-Pacific region, where it had previously forecast a modest second-half release of funding.

The significant catastrophe claims in Equator Re and QBE's North American operations has distorted the overall effective tax rate, and the company said it will recognize a material tax expense despite expectations of a loss.

The insurer said its board will consider the scale of the final dividend and expectations for share buybacks when it finalizes the 2017 results, due to be released Feb. 26.

For the six months through June, QBE's net profit was up 30% to US$345 million but it cautioned in October that its earnings would be dented by what was likely to be the costliest year in the history of the global insurance industry after earthquakes in Mexico and Atlantic hurricanes. At that time, it increased its 2017 allowance for individual and disaster claims to US$1.75 billion, which it expected would affect pretax earnings by about US$600 million.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 22, 2018 17:42 ET (22:42 GMT)

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