QBE Insurance Group Ltd (ASX: QBE) shares are suffering on Friday despite the company reporting an outwardly prosperous March quarter.
However, the market might be balking at the insurer's first-half catastrophe allowance, which was nearly drained as of April, my Fool colleague James reported earlier.
QBE chair Mike Wilkins told those attending the company's annual general meeting (AGM) today that catastrophe events unfolding in late 2022 and early 2023 would have an "adverse impact on QBE in 2023".
Right now, the QBE share price is $14.66, 3.33% lower than its previous close.
Let's take a closer look at today's news from the S&P/ASX 200 Index (ASX: XJO) insurance giant.
QBE shares slump as natural catastrophes take a heavy toll
The QBE share price is sliding, with market watchers potentially fixated on the insurer's depleting natural catastrophe allowance.
The company budgeted US$535 million for catastrophes in the first half. Nearly 90% of that had been spent by the time last month rolled around.
It was dried up on the back of Cyclone Gabrielle and flooding events in New Zealand's North Island, as well as a series of storms in Australia and North America.
QBE also flagged US$130 million of adverse development on natural catastrophe events occurring late last year.
For reasons related to timing and complexity, few claims related to events occurring in Australia and North America late last financial year, such as winter storm Elliot, were received and assessed prior to the company's full-year reporting.
That, along with an assessment of the company's underwriting performance to date, saw it revise its expected combined operating ratio for this fiscal year to 94.5%. That's up from prior expectations of 93.5%.
But not all was dire
On a more positive note, QBE's gross written premium jumped 11% last quarter. That likely led the company to boost its constant currency gross written premium outlook. It now expects full-year growth of around 10%.
Commenting on the quarter, CEO Andrew Horton told QBE's AGM:
After what felt like another volatile quarter, we delivered a solid investment result for the quarter, underpinned by supportive interest rates.
Our fixed income running yield improved, exiting the first quarter at 4.2%, while our risk asset performance was also sound, with no direct impacts to note from recent turmoil in the Northern Hemisphere banking sector.
Further, Wilkins assured the company's balance sheet was still "conservatively structured", with its capital position strong. It remained at the upper end of its target range of 1.6 to 1.8 times the regulatory minimum at the end of 2022.
Broker reactions
Citi was among those disappointed by the company's quarterly result. Its analysts said, courtesy of Reuters:
While this mostly relates to particular events rather than underlying operating performance, this is nonetheless disappointing especially as industry loss estimates for some of these events seem to have been stable.
QBE share price snapshot
Today's drop hasn't proven enough to drag the QBE share price back into the longer-term red.
The stock is still 11% higher than it was at the start of 2023. It has also gained 19% since this time last year.
Meanwhile, the ASX 200 has gained 4% both year to date and over the last 12 months.
