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QBE expects to report $US1.5 billion full-year loss

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QBE expects to report a net loss of about $US1.5 billion ($1.9 billion) for this year, with the result hit by COVID-19, catastrophes and a writedown of North American goodwill.

“While I am disappointed with the headline statutory loss, I am increasingly confident about the pricing cycle, particularly in the northern hemisphere, and the outlook for the underlying business,” QBE Interim Group CEO Richard Pryce said today.

The insurer expects a full-year adjusted net cash loss after tax of about $US780 million ($1 billion), including pre-tax impacts of $US470 million ($609 million) due to COVID-19. It confirmed its ultimate estimated cost from the virus remains unchanged at $US600 million ($788 million)

The anticipated result includes about $US130 million ($168 million) of elevated catastrophe costs following a record-setting Atlantic hurricane season and with adverse conditions including wildfires affecting the North American crop business.

About $US360 million ($466 million) for prior accident year claims development is also factored into the estimated net cash loss, reflecting creep from prior year catastrophes and “social inflation trends” which are affecting long-tail lines.

Write-downs flagged involve $US520 million ($680 million) for North America goodwill and deferred tax assets and about $US100 million ($132 million) of IT and real estate related writedowns.

Mr Pryce said the reinsurance renewals are running behind schedule this year given catastrophe activity and complexities associated with COVID-19, with the complex elements of the QBE program to be finalised in coming weeks amid expectations for tougher terms.

“Given the frequency of cat losses in 2020, aggregate treaties are proving to be challenging to place for primary insurers at or near expiring terms,” he told a briefing today.

Mr Pryce says the outlook for premium rate gains remains positive for the industry through next year, given factors such as the lasting impact of the previous deep, soft market, reserve strengthening, more mid-sized losses, claims inflation, higher reinsurance rates and weak investment results.

“The industry is facing a combination of adverse factors that it has not experienced for decades and that’s even before you consider the impact of COVID-19,” he said.

“Whilst I don’t have a crystal ball, I am increasingly confident about the outlook for rates, which I expect will continue to increase in most products and most geographies for at least ’21 and in some areas into 2022.”

For QBE third quarter year-to date rate increases have been particularly strong in each division in some key areas.

North American property programs have gained 18% and professional lines 19%, UK and International property are also performing strongly, while the region’s financial lines have seen gains of 27%. In Australia, commercial property and aviation have gained 12%.

QBE will report its full-year result on February 19.