The QBE Insurance Group Ltd (ASX: QBE) share price has dropped this morning after a company update on expected results for the 2020 financial year (FY20).
QBE will report its confirmed FY20 results to the market on 19 February 2021. At the time of writing, the QBE share price has dropped 9.35% to $9.02.
The $1.5 billion reason why QBE share price is sinking
In this morning's update on QBE's 2020 financial year expectations, the insurance giant advised it expected a full FY20 adjusted net cash loss after tax of approximately $780 million.
It listed pre-tax impacts of $470 million from COVID-19 costs. There included additional claims from trade credit, lenders' mortgage insurance, casualty classes and business interruption.
QBE also reported a $130 million impact from elevated catastrophe costs. It expects total catastrophe costs to be around $680 million. That's $130 million above its $550 million annual allowance. QBE said this figure is now well into the its catastrophe aggregate reinsurance program.
Atop this, the company expects to take a hit of $360 million from prior accident year claims development, up from $120 million as at 30 June.
Add in a $520 million impact from the non-cash writedowns of its North American goodwill and deferred tax assets, plus another $100 million of real estate and IT writedowns, and QBE now forecasts an expected statutory net loss after tax of around $1.5 billion.
Addressing the company's reported expectations, QBE interim group CEO Richard Pryce said:
While I am very 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. Premium rate momentum accelerated in North America and International during 3Q20 and the FY20 attritional claims ratio is expected to improve further from 45.5% reported in 1H20.
As we move into 2021, my focus remains on ensuring the group takes full advantage of currently favourable market conditions by locking in margin expansion while driving targeted growth in portfolios and regions offering the most profitable new business opportunities. Our balance sheet remains strong and able to fund expected growth.
QBE share price snapshot on 2020
QBE started the year strongly, with the share price gaining 17% by 21 February. It was then hit hard by the COVID-19 market panic, with shares falling 52% from that 2020 high through to the 23 March low.
Year-t0-date, the QBE share price is down 23%. By comparison the S&P/ASX 200 Index (ASX: XJO) is up 1%.
