US$600M impact on earnings
03 Oct 2017
QBE today warned that hurricanes and earthquakes which have devastated parts of the US, the Caribbean and Mexico since late August will affect the company’s earnings this year.
The insurer says the cost impact of the events is still uncertain, but the group has increased its allowance for large individual risk and catastrophe claims to $US1.75 billion ($2.23 billion), including allowances for the fourth quarter.
“There is therefore a pre-tax impact to earnings of approximately $US600 million ($766 million),” QBE says in a statement to the Australian Securities Exchange this morning.
Its combined operating ratio target range has also deteriorated to 100-102%.
“Cyclone Debbie in Australia earlier this year, Hurricanes Harvey, Irma and Maria, which have impacted the Gulf of Mexico, the Caribbean and Florida, as well as the earthquakes in Mexico, have all impacted QBE’s business,” the company says.
Given catastrophe losses to date, 2017 will likely prove to be the costliest year in the history of the global insurance industry, QBE says.
At the half-year results presentation in August, QBE forecast a combined operating ratio towards the upper end of 94.5-96%.
“While it is too early to speculate how much reinsurance and primary insurance pricing will rise as a result of recent catastrophe experience, QBE is well placed to benefit from price rises, with much of our reinsurance programs already purchased for 2018,” CEO John Neal said.