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Fitch forecasts QBE financial performance will stabilise

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Fitch Ratings says expectations of a stabilisation in QBE’s earnings status has prompted it to revise its outlook for the Australian insurer to stable from negative.

The change in outlook rating applies to QBE’s subsidiaries as well.

“The revision of the outlook… reflects the agency’s expectation for the non-life group’s financial performance to stabilise and remain within rating tolerance over the medium term,” Fitch Ratings said.

“We expect QBE’s ongoing underwriting efforts to support its medium-term performance outlook.”

The insurer reported a net profit of $US444 million ($619million) in the June half, reversing a year-earlier loss of $US710 million ($990 million).

Fitch says the turnaround was driven by improved underwriting and investment results, along with favourable prior-year reserve development and better commission and expense ratios.

“The group continued to post solid premium rate increases across all segments, as well as strong customer retention and new business growth,” the rating agency said.

“At the same time, management is continuing to improve the group’s operational efficiency via several projects.

“However, offsetting these gains are high catastrophe losses, which have exceeded QBE’s internal allowances in recent periods due to the rising frequency and severity of extreme weather activity.”

Fitch says the impact of COVID-19 on QBE’s capital position should be manageable, citing the $US1.3 billion ($1.8 billion) of equity and additional Tier 1 capital raised last year in anticipation of pandemic-related claims and investment losses.

“QBE has demonstrated a strong ability to access both debt and equity capital markets, with institutional and retail investors supporting its various capital initiatives.,” the rating agency said.

“Fitch believes sustained robust operational performance will help underpin financial flexibility.”