QBE boss ‘disappointed’ as adverse conditions pummel its books

QBE did not update its $600 million provision for COVID-19 claims, but noted $100 million in additional claims across trade credit, lenders mortgage insurance (LMI) and business interruption claims.

Mr Singh said the impact of the economic downturn on the Australian property market had been less severe than initially anticipated, however it was too early to “declare victory” over LMI risk.

“We will recognise pre-emptive LMI charge to reflect expected increase in delinquencies over the next 12-24 months as mortgage holidays come to an end and as we reach inevitable fiscal cliffs,” he said.

Morningstar analyst Nathan Zaia said the size of QBE’s expected loss was “a lot larger” than he was expecting. “It just goes to show how hard it is to forecast these CAT [catastrophic weather] losses with the frequency of smaller events and then those large events as well.

“It’s proving impossible to have adequate allowances and reinsurance for them at the moment.”

QBE has also suffered lower investment returns due to the historically low interest rate environment that Mr Pryce described as contributing to “almost non-existent investment yields”.

Mr Zaia said the investment environment is almost unprecedented for insurers, and while QBE had been proactive in managing its expenses “it all comes to nothing in the end when you have these blowouts”.

Despite the challenges, Mr Pryce said he “did not have a crystal ball” but felt confident in the group’s fundamentals and would not authorise a change in strategy next year.