QBE officially announced a net loss of $ 1.5 billion for 2020 late last week, confirming a figure the Australia-based insurance group announced in advance in late mid-December.
The result represents a downward movement of nearly $ 1 billion from net profit of $ 522 million reported in 2019.
Multiple issues, including high catastrophe losses and social inflation pressures in North America coupled with COVID-related costs, brought the group's combined ratio to 104.2.
Excluding a COVID impact of $ 655 million, adding 5.6 points to the combined ratio, the 2020 combined ratio would have been 98.6, less than one point from the 2019 figure of 97.5.
But catastrophe losses were also higher in 2020 than in 2019, with wildfires in the US and Australia and record levels of Atlantic hurricanes adding 2.2 points more to QBE & # 39; s combined ratio for 2020 than natural disasters in 2019.
A larger difference from year to year was due to the strengthening of the loss reserves from previous years. The combined ratio impact of an increase of $ 366 million in losses from last year was 3.1 points in 2020. In 2019, QBE recorded just $ 22 million for increasing last year's reserves, which translates to just 0. 2 combined ratio points.
Reservation costs mainly reflected the development in North America, QBE said, noting that QBE NA reserves were boosted by $ 100 million in the second half of 2020, "largely to address systemic risks, including social inflation. and higher severity trends in accident lines ", not in response to a specifically observed underlying development. Additionally, development in QBE NA last year included $ 71 million related to an E&S runoff portfolio, $ 60 million for a single aviation claim and $ 33 million for Hurricane Irma losses, QBE noted in its annual report.
Last year's development added 9.0 points to the combined ratio of QBE NA, which for 2020 was 112.7. In contrast, the combined ratio for the Australia Pacific operations was 92.8 and for other international operations 91.3.
Taken together, the impact of disasters and the development of the previous year and COVID across all regions contributed to a total of $ 869 million in underwriting losses for 2020, compared to just $ 2 million in 2019.
Lower investment profits and the costs of IT modernization also drove lower results in 2020 than in 2019.
Net investment income fell to $ 226 million in 2020, compared to more than $ 1 billion in 2019.
In light of the significant statutory loss for 2020, the board has chosen not to declare a final dividend. However, if global economic conditions do not deteriorate materially, the board expects to resume dividend payments in conjunction with the 2021 interim result.
Commenting on the results, Richard Pryce, CEO of Interim QBE Group, said in a statement: “While the premium momentum was obviously very disappointed with the overall loss, it accelerated in 2020 and continued into 2021. Coupled with the improved positioning of the underlying business, we are going this year with confidence and optimism. "
"While obviously very disappointed with the overall loss, premium momentum accelerated in 2020 and continued into 2021. Coupled with the improved positioning of the underlying businesses, we are entering this year with confidence and optimism," added Pryce.
Overall, gross written premiums increased by 8.9%, according to the figures in the annual report, and 10% at constant exchange rates. For the group in general, the premium renewal rate averaged 9.8% – 10.2% in North America, 5.4% in Australia-Pacific regions and 12.8% elsewhere.
"I look forward to leading the business in 2021," Pryce continued in a statement released with the earnings report. "My primary focus remains performance improvement, including the fact that the group takes full advantage of the currently favorable market conditions by maximizing premium increases while driving targeted growth in portfolios and regions that offer the most profitable new business opportunities" , he said.
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