QBE Net Profits up 30% to US$1.786 Billion

February 26, 2008

Australia’s QBE Insurance Group announced that operating profit after tax for the year ended 31 December 2007 was up 30 percent to a record A$1.925 billion ($US1.786 billion).

Other key highlights for the year were listed as follows:
— Gross written premium up 20 percent to A$12.406 billion (US$11.51 billion);
— Net earned premium up 25 percent to A$10.210 billion (US$9.472 billion);
— Insurance profit up 27 percent to A$2.262 billion (US$2.098 billion);
— Investment income, net of borrowing costs and investment expenses, up 38 percent to A$1.132 billion (US$1.05 billion);
— Cash flow from operations up 16 percent to A$2.374 billion (US$2.2 billion);
— Diluted earnings per share up 25 percent to A$2.173 (US$2.016);
— Combined operating ratio (i.e. ratio of claims, commission and expenses to net earned premium) of 85.9 percent, compared with 85.3 percent;
— Insurance profit to net earned premium of 22.2 percent, compared with 21.9 percent; and
— Return on average shareholders’ funds of 26.1 percent, unchanged from last year.

Despite the strong increases and the announcment of a dividend increase, QBE’s shares fell on the announcement, which was slightly under analysts’ estimates.

The profits were boosted by QBE’s acquisition of Wintherthur U.S. Holdings from France’s AXA Group and Praetorian Financial from Hannover Re.

Group CEO Frank O’Halloran, commented: “Our excellent underwriting, investment and operating results were ahead of our targets. This was despite the substantial appreciation of the Australian dollar, lower overall average premium rates, claims from twenty one insured natural catastrophes around the world compared with five last year and volatile investment markets.

“The substantial majority of the 45 countries in which we operate produced strong profits. The two US acquisitions completed in 2007 are on track to meet expectations in terms of underwriting profitability and we now expect to realise synergies of $100 million after tax compared with our preliminary estimates of $50 million after tax.”

O’Halloran wento on to explain: “The further appreciation of the Australian dollar against the US dollar and sterling has had an adverse impact on our previously anticipated growth for 2008. Excluding any new acquisitions, we now expect net earned premium to grow by close to 10 percent and our insurance profit to be around 19 percent – 20 percent of net earned premium.

“These targets are subject to the usual caveats, particularly foreign exchange rates, equity markets, interest rates and large individual risk and catastrophe claims not exceeding the substantial allowance in our targets. We continue to investigate a number of acquisition opportunities for growth in 2008 and beyond.”

For further information go to the Group’s web site at – www.qbe.com or phone +61 2 9375 4636 or email: investor.relations@qbe.com.

Source: QBE

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