Australia's QBE profit hit by high claims, cuts dividend

SYDNEY: QBE Insurance, Australia's biggest insurer, posted a lower-than-expected 8 percent rise in full-year net profit due to high claims for accidents and adverse US weather, prompting it to slash its dividend and sending its shares tumbling.

QBE has been grappling with hefty claims for the past two years, with a severe US drought and Superstorm Sandy, which pounded the US East Coast last November, weighing on earnings in the year to Dec. 31.

The company, which has completed more than 75 acquisitions in the past 10 years, reported an annual net profit of $761 million, compared with $704 million a year earlier and its forecast for a net profit of more than $820 million.

Australia's largest insurer by premium income said its annual cash profit was $1.04 billion and its insurance profit margin was 8 percent, in line with guidance in November.

QBE shares fell as much as 7.5 percent to a three-week low and last traded down 6 percent at A$12.25.

The stock has risen 13 percent in the past year, compared with an 18 percent rise in the benchmark S&P/ASX 200 Index.

QBE said its underwriting result was hit by significant prior accident year claims, the severe US drought, Sandy and lower risk-free rates.

The company will pay a final dividend of 10 Australian cents per share, down from 25 Australian cents a year ago, and said it would adopt a policy payout ratio of up to 50 percent of cash profit this year.

It forecast an underlying insurance profit margin of 11 percent for 2013.

QBE said it was replacing its chief financial officer and the heads of its operations in North America and Europe, in addition to its recent appointment of a new Asia-Pacific head, and would embark on a new strategy and cost-cutting initiatives aimed at saving more than $250 million a year by 2015.