QBE boss John Neal has flagged higher dividends and solid growth in the insurance giant’s operations as he looks to draw a line under its turbulent recent history.
QBE lifted its first half profit 24 per cent to $US488 million ($A661.74 million), putting it on track for its best full year result in five years.
It also lifted its interim dividend five cents to 20 cents per share and increased its payout ratio for next year from 50 per cent to 65 per cent, meaning greater returns to shareholders.
The result was a welcome change of pace for Mr Neal, whose first two years in the job were marred by a string of profit downgrades linked to underperforming businesses in the US and South America.
But those businesses have now been sold and the company is on track to have stripped out more than $US350 million in costs by the end of year, with another $100 million in savings expected to come next year.
Mr Neal is confident the turnaround is complete and says the insurer is now in a position to grow its gross written premium, the revenue it receives from customers’ insurance policies, by around three per cent a year over the longer term.
“We really have baselined our business,” he said. “In the last three years we have taken just north of $2 billion out of our top line – that’s a lot.
“But we have positioned our businesses to the point from where they can grow.”
Mr Neal said the first half result was also impacted by a $150 million increase in the cost of claims in Australia linked to what he said was the worst year for weather-related issues since 2011 – a year that included the Brisbane floods and Cyclone Yasi in north Queensland.
Rival insurer Suncorp took a more than $1 billion hit due to Australian weather events during the 2014/15 financial year.
Analysts expect QBE to post a full year profit of around $US900 million or higher for 2015, which would be its best result since 2010.
Meanwhile, returns from the company’s sizeable investment portfolio are expected to improve once the US Federal Reserve finally starts lifting interest rates – a move that could come as soon as September.
But Mr Neal has also warned the company faces a tough competitive environment in Australia and overseas, which is limiting its ability to lift premiums.
QBE shares climbed five cents to $14.02, which IG Market Strategist Evan Lucas said reflected relief among investors that there were no negative surprises from the insurer this year.
“They tend to over-promise and under deliver so this is an OK result,” he said.
QBE LIFTS PROFIT, INCREASES DIVIDEND
* Net profit up 24pct to $US488m
* Gross written premium up 3pct to $8.5b
* Interim dividend up five cents to 20 cents