The QBE Insurance Group Ltd (ASX: QBE) share price is higher after giving its quarterly update.
QBE is one of the biggest insurers on the ASX, with operations across numerous markets, including North America and Asia Pacific.
September 2023 quarter update
QBE said that in the 2023 third quarter, its gross written premium (GWP) growth was 7% year on year. The group-wide renewal rate increased averaged 9.6% in the third quarter. In other words, it’s passing on strong price increases to customers. It also said that customer retention has remained “at favourable levels”.
In the year to September, GWP growth was 10% year on year.
Claims
QBE said that natural catastrophe activity continued over recent months, with multiple storm, flood and wildfire events in Europe and North America, with multiple hurricanes.
But, despite that, the company said catastrophe claims in the period have “trended favourably” related to its revised FY23 catastrophe cost assumption of approximately $1.3 billion. This is helpful for the QBE share price because good claims performance helps profitability.
The net cost of catastrophe claims in the four months to October is expected to be around $250 million, meaning catastrophe costs of around $950 million in the year to October.
Investment performance
QBE said strong fixed income returns have underpinned favourable investment performance in the third quarter of 2023.
It said that interest rates were relatively stable across its key markets, and the ‘core’ fixed income running yield exited the third quarter of 2023 at 5%, slightly higher to the exit running yield of 4.9% for the FY23 first half.
Total investment funds under management (FUM) was $28.2 billion at the end of the quarter, up from $27.4 billion at 30 June 2023. Risk assets were around 13% of the portfolio.
Outlook for the QBE share price
QBE said that it’s expecting a group constant currency GWP growth rate of around 10%, and it’s expecting the “supportive premium rate environment” to continue into 2024.
The FY23 group combined operating ratio is expected to be around 94.5%. QBE noted this guidance continues to exclude the upfront impact of the reserve transaction completed in the 2023 first half.
This does seem to be a promising time for the company, with both the investment side of the business and the insurance side benefiting from the current environment.
However, the QBE share price is up around 20% this year. The market is aware of what’s positively going on, so I’m not sure how much further it can rise.
