QBE shares dropped to a near-decade low yesterday after it warned that full-year profit could plunge as much as 50 per cent due to difficult investment markets and a year of global catastrophes, that included floods, fires, earthquakes and riots.
The Australian insurer said its net profit for calendar 2011 would be 40-50 per cent below the previous year's $US1.28 billion. This follows a half-year profit announced in August of $US673 million, meaning the company may record a loss for the second half.
QBE's insurance profit margin is expected to end the year at between 7 and 7.5 per cent, down from a forecast 11 per cent, while the company will pay investors a final dividend of just 25¢ a share, down from 66¢ a share.
The news sent QBE shares plunging below $10 for the first time since 2003, with the stock - which traded as high as $35 five years ago - ending the day down $1.65, or 12.7 per cent, at $11.35.
In a briefing to analysts, chief executive Frank O'Halloran said the company had been hit by a record level of catastrophe claims, after floods in Thailand, Melbourne's Christmas Day hailstorm and the West Australian bushfires late in the year followed hurricane Irene in the US and riots and floods in Europe. QBE also had losses in its investment portfolio.
The result was ''extremely disappointing'', Mr O'Halloran said. But he insisted the outlook for 2012 was positive, with premiums increasing in most markets.
Analysts questioned whether QBE's positive outlook was justified. "What a disaster," said Prasad Patkar, from Platypus Asset Management. ''My sense is that their acquisitions in the US are of a lot lower quality than their core businesses were before.''
The profit warning follows speculation about succession plans at QBE, which Mr Halloran has led for 14 years. Mr O'Halloran has aggressively expanded the company overseas during his tenure, making 44 acquisitions at a cost of $US7.61 billion, more than half of which were of US companies.
In a note published last month, BBY noted that QBE's expansion in the US over the past five years coincided with a decline in its insurance margin, suggesting the company had gone from being ''in the right place at the right time to being at the wrong place at the wrong time''.
BBY senior analyst Brett Le Mesurier said the announcement seemed to point to a deterioration in QBE's underlying business. BBY, which had an ''underperform'' rating on the stock, had forecast a net profit of $1.4 billion for QBE.
But RBS Morgans investment adviser Todd Kerslake said QBE's stock plunge was a knee-jerk reaction after a once-in-a-generation year of difficulty.
With CHRIS ZAPPONE and BLOOMBERG
