The QBE Insurance Group Ltd (ASX: QBE) share price is falling after the insurer revealed its HY24 performance and the review of the North American market.
QBE is one of the largest insurers in Australia, with a global presence as well.
North American closure
After doing an extensive strategic review, QBE has decided it will start closing its North American middle-market segment.
This segment represented a gross written premium of around $500 million in FY23, and it has experienced performance challenges over several years.
QBE said it’s closing this segment to refocus North America’s strategy on businesses that hold a more meaningful market position, relevance and scale.
The insurer noted there will be no incremental impact on the appetite or strategy for North America’s three ‘core’ businesses – specialty, crop and commercial.
QBE said it will begin “non-renewing middle-market policies in accordance with applicable state regulations, with gross written premium expected to begin reducing in FY24, before falling more substantially in FY25.”
The company said a restructuring charge of around $100 million before tax will be recorded in the FY24 result to account for costs associated with the business closure.
This closure is expected to have “limited impact” on its combined operating ratio.
HY24 update
QBE released some information about its performance in the first half of its FY24.
The insurer said its HY24 gross written premium is expected to be around $13.1 billion, representing constant currency growth of around 3% on the prior corresponding period, with net insurance revenue expected to be approximately $8.4 billion.
QBE’s catastrophe costs in the five months to May 2024 are estimated at around $500 million, compared to its HY24 catastrophe budget of around $609 million. Recent events have included US convective storms, the Dubai floods and an initial estimate of between $175 million to $225 million to account for QBE’s net exposure to the ongoing civil unrest in New Caledonia.
After recently completing the HY24 reserve review, QBE continues to expect a modest level of adverse prior year development.
QBE said total investment income in the five months to May 2024 was $643 million, which improved from $406 million in the first quarter of 2024. The insurer disclosed the result included a favourable credit spread impact of $76 million, and a risk asset result of $104 million. To May 2024, QBE said the net impact from asset-liability management activities remained neutral.
Based on the current understanding of the FY24 first half result, QBE expects the FY24 group constant currency gross written premium growth, in constant currency terms, in the mid-single digits. The FY24 group combined operating ratio of around 93.5%.
I’m not an expert on insurers, and they can be quite volatile. The QBE share price seems to be on the rise after the last few years as performance improves, but I’m not sure how much further it could rise. There are other ASX dividend shares I’d rather look at.
