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QBE lifts HY profit 30% despite EM woes

 

Insurance giant QBE has lifted first-half profit 30.2 per cent to $US345 million ($A435 million) after a strong performance in Australia, New Zealand and the US helped offset a claims blowout in its emerging markets business.

QBE on Thursday confirmed it plans to activate its previously announced $A1 billion buyback during the second half, but will split its poorly performing emerging markets unit into two separate divisions focused on Latin America and the Asia Pacific.

The company, whose shares dropped more than 10 per cent when it flagged the problem back in June, said emerging markets chief David Fried will not lead either of the new units.

Chief risk officer Jason Brown will lead Asia Pacific, and Argentina chief executive Carola Fratini will lead Latin America.

Group chief executive John Neal said QBE was working to ensure there would be no repeat of the problems.

"A detailed review has been undertaken to determine the remediation activities required to improve underwriting performance in the second half of 2017 and beyond," Mr Neal said.

"In addition to the tightening of underwriting controls and discipline, improved pricing models are being introduced, enhanced reinsurance protections considered and cost reduction plans implemented."

QBE in June flagged an increase in medium-sized risk claims in Asia, along with weather-related claims and the impact of legacy portfolios in Latin America.

On Thursday, it confirmed that emerging markets' combined operating ratio - which measures expense, commission and claims ratios - was 110.8 per cent compared to 99.5 per cent a year ago.

That compares to 95.3 per cent overall and a full-year group-wide target of 94.5 to 96.0 per cent, with the outcome expected at the upper end of that range.

Nonetheless, QBE raised its full-year gross written premium target from relatively stable to "modest growth".

The company declared a partially franked interim dividend of 22 cents, compared to a fully franked 21 cents a year ago.

Investors were unimpressed, pushing QBE shares down 49 cents, or 4.1 per cent, to $11.53 by 1100 AEST.

QBE'S FIRST-HALF PROFIT

* Net profit up 30.1pct to $US345m

* Gross written premium down 0.9pct to $US8.04b

* Partially franked interim dividend of 22 cents vs fully franked 21 cents in 2016