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QBE Insurance is back in the hunt for acquisitions and expects to benefit
from more premium rate increases as it recovers from last year's $250 million in
net losses from September 11 claims.
In a much more benign environment for claims but overshadowed by tough
investment markets, QBE's net profit fell 6 per cent to $115 million in the June
half.
Weak markets resulted in unrealised losses of $71 million on the $1 billion
QBE has invested in equities, which analysts said showed a surprising level of
vulnerability.
The conservative investment policy, with only 10 per cent of the portfolio
in equities and the rest mostly in fixed interest or cash, would be maintained,
chief executive Frank O'Halloran said.
``We take enough risk on the insurance side of the portfolio without taking
risk on the investment side," he said.
The group is still expecting double-digit growth in premiums, with gross
written premiums expected to reach $7.4 billion for the full year and a better
second half profit overall.
``We do expect further premium rate increases to come through, particularly
in commercial lines, albeit at a much lower rate," Mr O'Halloran said.
Showing the poor state of HIH's business, only 40 per cent of the its old
commercial insurance portfolio, of which QBE bought the renewal rights last
year, had been renewed as unprofitable policies were overlooked.
Mr O'Halloran said the group was looking at acquisitions, including in
Australia, but they could be pursued without raising extra capital.
The underlying insurance result, up 27 per cent to a record $160 million, was
ahead of expectations and represented an insurance margin of 6 per cent, at the
lower end of QBE's full-year expectation of 6 to 6.5 per cent.
QBE's shares fell 15c to $7.25.
Negatives cited by analysts included a poor equities performance and a
relatively modest fall in overall claims despite the lack of major catastrophes
in the period.
Mr O'Halloran said QBE did not have to raise more capital and had included in
its liabilities ``substantial allowances" for second half claims relating to
the recent European floods.
``Our exposure to the European floods is well within the provisions at the
30th of June," he said.
Mr O'Halloran stood by the $252 million provision for September 11 losses but
told analysts later that about 160 more claims had come in since April.
Interim dividend is steady at 16.5, franked to 12 per cent and payable
October 3.
The Lloyd's division, which was subject to the most scrutiny after September
11, saw an 18 per cent rise in gross earned premiums.
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