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QBE profit falls as US economy recovers

Insurer QBE has suffered a 37 per cent fall in half year profit as an American economic recovery proved to be more damaging than Australia’s summer of bushfires and floods.


QBE made a net profit of $US477 million ($A526.29 million) in the six months to June 30, down from $US760 million in the same period last year.

The value of insurance premiums written by QBE in the first half of 2013 fell by 16 per cent in North America to $US2.7 billion ($A2.98 billion), but rose in Australia and New Zealand by 1.5 cent to $US2.5 billion.

Chief executive John Neal said a fall in US mortgage defaults meant Bank of America had less need for QBE mortgage insurance.

“It’s a bit of a counter-cyclical product: as the economy improves fewer people find themselves in times of stress,” he told reporters on Tuesday.

“There is simply less placement of insurance.”

The insurer is forecasting a $US600 million ($A662 million) drop in the value of written premiums in North America for the full year.

In Australia, ex-tropical cyclone Oswald in central and south-east Queensland cost QBE $US72 million ($A79.44 million) in claims during the half year.

The summer of disasters also included bushfires in Tasmania and storms in northern Victoria and southern NSW but QBE, a small player in Australian home and car insurance, said the catastrophes were factored in.

“We allow for some flood, fire and bushfire activity and nothing we’ve seen this year is out of line what we’d expect in a normal year,” Mr Neal said.

Premiums for customers in Australia, New Zealand and the US are expected to rise by between four and five per cent, on average, over the remainder of 2013.

The insurer said lower investment yields and $US178 million ($A196.39 million) in adverse claims from the previous year, mainly in Europe, Latin America and North America, also detracted from its profit result.

The company still expects an 11 per cent rise in insurance margin in 2013.

“We’re confident that we’ll win some good new business in the second half of the year,” Mr Neal said.

QBE also cut its interim dividend, paying 20 cents per share, down from 40 cents at the same time last year.

The company’s shares were down by 93.5 cents, or 5.5 per cent, at $16.10 at 1541 AEST.

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