Monday 24 August 2015 by Justin McCarthy Company updates

QBE reports solid 1H15 results

Net profit after tax up 24% on 1H14, despite a USD150m increase in the gross cost of catastrophe claims driven by the worst series of weather events in Australia since 2011

On 18 August, QBE Insurance Group Ltd reported a solid 1H15 net profit after tax of USD488m, up 24% on 1H14. This was despite an USD150m increase in the gross cost of catastrophe claims driven by the worst series of weather events in Australia since 2011. 

Highlights of the results were as follows: 

  • Cash profit after tax was up 13% to USD471m
  • Debt to equity was stable at 32.8% and within the revised benchmark range of 25% − 35%
  • Pro forma APRA prescribed capital amount (PCA) multiple was 1.72x after factoring in recent asset sales that will settle after 30 June. This figure compares to 1.67x as at 31 December 2014
  • Interim dividend was up 33% to AUD0.20 per share and the company announced an increase in its payout ratio for 2016 onwards, as detailed below:

    “The Group’s current dividend policy is to payout up to 50% of annual cash profit by way of dividends to shareholders. Following the completion of our capital initiatives and in light of significantly improved earnings quality, capital is now above our target minimum requirement and provides the opportunity to increase the future dividend payout ratio whilst remaining comfortably within target capital levels. As a result, the Board has increased the maximum dividend payout ratio to 65% of cash profits, up from the current maximum of 50%, commencing with the 2016 interim dividend.”

  • An increase in dividend payout ratio is a slight negative for debt investors however we note that the decision to increase the payout ratio was on the back of improved capital levels and stronger earnings
  • The company also downgraded its outlook but only to reflect the negative impact of the rising USD:
    • Gross written premium USD15.2bn – USD15.6bn (Previous target range USD15.5bn − USD15.9bn)
    • Net earned premium USD12.3bn – USD12.7bn (Previous target range $12.6bn − $13.0bn)

For further details on the half year report see the full reportExternal link - opens in a new window on QBE’s websiteExternal link - opens in a new window.

QBE subordinated debt and Tier 1 securities in USD and GBP continue to offer value given the stable debt, capital and profitability metrics over the past 12 months. Please contact your FIIG representative for more information.