Insurance giant QBE Insurance Group Ltd
(ASX: QBE) shares are up almost 6% after the company reported its interim 2020 result.
FY20 report
QBE announced that its gross written premiums (GWP) grew by 10% to $8 billion. Its net earned premium increase 4% to $5.56 billion.
GWP was able to grow so much largely due to an average group-wide renewal premium rate increase of 8.7%. However, QBE did say that there was $115 million of COVID-19 related risk margins and a COVID-19 underwriting impact of $335 million. Net catastrophe claims amounted to $308 million due to the bushfires, east coast hail and storm activity.
Thankfully, QBE’s expense ratio improved to 14.3%, down from 14.8% last year. That shows that the company is becoming more efficient.
But the bottom line was a statutory net loss after tax of $712 million. The result includes a pre-tax investment loss of $90 million compared to a $755 million gain last year. Lower risk-free rates used to discount net outstanding claims impacted the underwriting result by $335 million.
QBE Dividend
Despite the tough result, QBE’s board decided to declare an interim dividend of 4 cents per share.
Summary
Insurance is a really tough industry. Insurance is now kind of like a commodity product and every time there’s a recession or a bad natural disaster the profit gets hit.
I don’t think I’d want to invest in QBE. There are plenty of other ASX dividend shares that are more attractive to me with better long term growth potential.
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