“QBE continues to expect FY22 group constant currency GWP (gross written premiums) growth of around 10%, and we expect the favorable premium rate environment to continue into 2023.”
The company continued: “Based on our assessment of underwriting performance to date, we now expect the group’s consolidated operating ratio to be approximately 94% in FY22. Including the impact of the Australian Pricing Commitment Review.”
QBE, based in Sydney, was referring to its survey of pricing practices in Australia, which found instances where policy pricing promises were not fully met, meaning millions of dollars in customer remediation.
From a GWP perspective, the insurance group reported: “Gross written premium growth remained strong in 3Q22 (Q3), up 6% year-on-year and 13% in constant currency.
“Renewal rates across the group in 3Q22 increased by an average of 8.4%, while the 8% growth rate was down from 1H22. This decrease was in line with the planned termination of the North American program and substantial growth in 1H22 Underwriting premiums in key areas are skewed towards post-occupancy.Retention rates have remained at favorable levels.
“For the year ended September,” it continued, “group gross written premiums increased 12% year-on-year, 16% at constant exchange rates and 11% ex-ex. Written premiums were up 12% and exchange rates were up 6%.”
QBE’s operations are organized into North America, International and Australia Pacific. All three regions posted growth rates. Premium rate changes exclude North American crops and/or Australian mandatory third-party cars, while premium growth rates are quoted on a constant currency basis.
In terms of underwriting performance, QBE highlighted the impact of catastrophes and inflation.
“Catastrophe activity continued to increase in the second half of the year, and global catastrophe costs to the insurance industry could again exceed $100 billion in 2022,” the insurer said. “As of October, the net cost of catastrophe claims in the second half of the year was approximately $430 million , the total net cost of catastrophe claims was approximately $880 million for the year ended October.
“QBE’s November and December catastrophe benefits are approximately $180 million. In addition to experience to date, QBE now assumes net catastrophe costs of approximately $1.06 billion for FY22, including costs arising from the Russia/Ukraine conflict $75 million in costs and exceeds the FY22 catastrophe benefit of $962 million.”
At the same time, risks related to persistent inflation remain high, according to QBE, which expects to strengthen its long-tail reserves in the second half of the year to strengthen its resilience against a longer-term inflationary environment. However, this impact will be broadly offset by the release of the COVID risk margin as the residual risk associated with business interruption claims decreases.
In terms of investment performance, QBE said risk assets and credit continued to perform well.
“Interest rates in our key markets continued to rise, leading to a negative impact on asset risk-free rates of $461 million in 3Q22, which was more than offset by a benefit claim liability discount impact of $413 million,” Global Business said.
“3Q22 exit fixed income run yielded 3.7% due to higher risk-free rates, continuing to build on 1H22 exit run yield of 2.5%. 3Q22 total investment FUM (funds under management) was $26.3bn, lower than 1H22 of $26.7 billion.”
The figures were released amid continued volatility in financial markets.