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QBE delivers US$550 million profit but cuts its final dividend

The QBE Insurance Group Ltd (ASX: QBE) share price will be one to watch this morning following the release of its full year results.

How did QBE perform in FY 2019?

For the 12 months ended December 31, the insurance giant reported a 2% increase in gross written premium to US$13,442 million.

Due largely to adverse weather conditions which severely impacted its US Crop insurance business, QBE reported a combined operating ratio of 97.5%. This is up from 95.7% a year earlier.

This ratio is a measure of general insurance underwriting profitability. Unlike many other ratios, the lower the better for this one. If the ratio is above 100%, it means the underwriting is unprofitable.

One metric heading in the right direction was its expense ratio. This ratio improved to 14.6% from 15.2% in the prior year. Management advised that this primarily reflects the early benefits from its three-year operational efficiency program.

Another positive was its net investment return. That increased from 2.2% in FY 2018 to 4.6% in FY 2019. This was the result of strong returns across most asset classes.

On the bottom line, QBE reported a full year statutory net profit after tax of US$550 million and an adjusted net cash profit after tax of US$733 million. This was up 41% and 6%, respectively, on the FY 2018’s result.

The QBE board declared a final dividend of 27 Australian cents per share, down 1 cent from a year earlier. This reflects the board’s confidence in its balance sheet and outlook. It brought its total FY 2019 dividend to 52 Australian cents per share, which is up 4% year on year. Combined with the A$295 million of shares repurchased, this brings its total payout to A$976 million in FY 2019.

QBE Group CEO, Pat Regan, said: “Despite the impact of adverse weather conditions on our North American Crop business, the underlying fundamentals of our business remain strong and we continue to see improvement in both the quality and resilience of our earnings.”

Outlook.

Next year management expects its combined operating ratio to be in the range of 93.5% to 95.5%.

It is also targeting a net investment return in the range of 2.5% to 3%.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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