QBE share price surges 7% despite reporting first-half loss

The QBE share price has surged more than 7% in early trade, despite the insurer reporting a loss for the first-half of 2020.

The QBE Insurance Group Ltd (ASX: QBE) share price has surged more than 7% in early trade, despite the insurer reporting a loss for the first-half of 2020.

How did QBE perform for the first half of 2020?

Earlier today, QBE released its results for the half year ending 30 June 2020.

The company's interim result for 2020 saw QBE report a half-year loss of US$712 million, compared to a US$463 million profit in the prior corresponding period. QBE noted that the result was slightly better than previous estimates.

QBE also reported a 10% increase in gross written premiums for the first half of US$8.04 billion. The company also noted a hardening in premium rates, especially in the company's North American and international divisions.

The insurer recorded a US$335 million hit from the impacts of COVID-19 and other catastrophe claims. For the first-half, QBE recorded catastrophe claims of US$304 million, exceeding its allowance of US$252 million. The surge in claims was fuelled by widespread bushfires, hail and storm activity in Australia.

The increase in claims was reflected in QBE's combined operating ratio (COR). For the first-half, QBE reported a COR of 103.4%, indicating that the insurer is paying out more in claims than it is receiving in premiums. The company noted that excluding the impacts of the COVID-19 pandemic would result in a COR of 97.4% for the first half.

Despite reporting a loss in the first-half, QBE's management reiterated that the company remained well capitalised to endure the ongoing impacts of the COVID-19 pandemic. To reflect the board's confidence, QBE declared an interim dividend to shareholders of 4 cents per share.

The outlook for QBE

QBE is the second-largest insurer in Australia and operates in 3 segments, with insurance operations in 27 countries.

In its half-year report, the insurer acknowledged the uncertainty surrounding the impact of the COVID-19 pandemic. Despite the uncertainty, QBE expects to capitalise on accelerating pricing momentum and organic growth opportunities given its strong capital base.

In late April QBE completed a US$750 million capital raising in order to help the company withstand a range of economic and investment downside scenarios.

QBE expects total COVID-19-related costs to climb to US$600 million, including US$265 million of potential further net claims that could emerge over the next 12–18 months.

QBE also noted that the company is supporting customers through the crisis by offering premium refunds, premium deferrals, extending credit and counselling services.

Foolish takeaway

At the time of writing the QBE share price has surged more than 7% higher for the day at an intra-day high of $10.83.

Motley Fool contributor Nikhil Gangaram 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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