QBE Margins Crash Due to Disasters

After warning of cuts to its already lowered profit targets, QBE Insurance (ASX:QBE) shares plummeted yesterday to a six month low. The company cited continuing catastrophic events--the worst in 35 years--negatively affecting its bottom line.

Insurance profit margin for 2011 could be under its target of between 15 to 18 percent, but analysts said that the value could be 13 percent.

QBE's shares dropped 3.6 percent or 63 cents to $16.65 and over $600 million was deducted from the insurer's market value. Although the company said that interim dividend would be pegged at 62 cents a share, market value was downgraded from $18.8 billion to $18.2 billion as investors took a step back.

A bucket of catastrophes from the Japan tsunami to hurricanes in Australia and the earthquake in New Zealand caused QBE's claims bill to increase to $775 million over five months, higher than the previous years' bill.

The hurricane season in the US is still on for five months, and QBE is left with US$70 million to cover the remaining large risk claims from now to December 31.

The disasters were the worst he had experienced in 35 years, said chief executive Frank O'Halloran in a Tuesday briefing.