(Bloomberg) — QBE Insurance Group Ltd. reported a return to full-year profit on an improved North American business even as it flagged falls in premium income due to a strengthening U.S. currency.
Net income in the year ended Dec. 31 was $742 million compared with a loss of $254 million a year earlier, when it wrote down its North American operations, the Sydney-based insurer said in a regulatory statement. That compared with the $826.2 million mean estimate of 11 analysts surveyed by Bloomberg. QBE expects its gross written premium for 2015 to be in the range of $15.5 billion to $15.9 billion compared with $16.3 billion in 2014.
Chief Executive Officer John Neal has embarked on a turnaround strategy for the insurer, which has struggled with writedowns in North America and higher claims in Latin America. He sold shares last year, as well as businesses in the U.S. and Australia, to shore up capital after QBE reported in 2013 its first annual loss in 12 years.
"QBE has missed expectations in key metrics such as insurance margin and premium income," David Ellis, a Sydney- based analyst at Morningstar Inc. said by phone. "Though there is a lot of evidence the turnaround story is showing signs of working, there is still a long way to go. It may take another year before the problems of the past have been remediated."
Insurance Margin
QBE's 2014 insurance profit margin was 7.6 percent compared with its own expectations in August for a spread of 8 percent to 9 percent. Gross written premium was below the lower end of its guidance range of $16.6 billion to $17 billion.
The insurer announced a final dividend of 22 Australian cents and said it will target "strong growth" in dividends as its focuses on increasing profits.
Net claims expenses fell to $8.9 billion from $9.9 billion a year earlier while underwriting and other expenses dropped 10.6 percent, it said. The insurers north American business posted an insurance profit before income tax of $8 million compared with a $535 million loss, according to filings.
Neal has added more than $1.5 billion in capital in the last 12 months and sold businesses to shore up capital. QBE's cost cuts program has delivered a $250 million in annual savings, it said. In January, the company agreed to sell its U.S. agency business to Alliant Insurance Services Inc. for about $300 million. QBE said this month it will divest a similar business in Australia for A$290 million in cash, with further payment based on the unit's performance. It said Tuesday it has agreed to sell its Argentine workers compensation business for $95 million.
QBE shares have risen 3.6 percent this year compared with a 9.2 percent increase for the benchmark S&P/ASX 200 Index.
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