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Australia's QBE off to 'superb' start in first quarter


SYDNEY (Reuters)—Australia's QBE Insurance Group Ltd. said business was off to a "superb" start in 2012 with a steep drop in catastrophe claims and premiums set rise of more than 7% in the wake of last year's unprecedented level of disaster-related claims.

"We have had a superb first quarter, driven by some tailwinds for a change, primarily the fact that our large risk and catastrophe claims are around 1% of our targeted full-year net earned premium," outgoing QBE CEO Frank O'Halloran told shareholders at the company's annual meeting.

Australia's most valuable insurer said catastrophe claims were down $700 million in the first quarter vs. a year ago and reiterated its profit margin target of 13% or better, sending its shares up more than 4%.

"Its obviously good news, they are confirming that things are going all right," said Angus Gluskie, a portfolio manager at White Funds Management.

In February, QBE posted a 45% drop in full-year net profit after a series of natural disasters in 2011—including Australian floods and cyclones, earthquakes in New Zealand, Thai floods and U.S. hurricanes and tornados—sent claims soaring.

"Our industry often needs a year like 2011 to remind us all of the need to adequately price for the risks that we underwrite," Mr. O'Halloran said. "The industry has responded to the events of 2011 by increasing pricing and changing terms and conditions and deductibles where appropriate," he added.

QBE said it would raise premiums in excess of 7%, which is more than double Australia's inflation rate at around 3%.

Mr. O'Halloran said prices still had a way to go, as reinsurance costs were still placing pressure on the insurer.

Shares in QBE rose 4.2% compared with the benchmark index slipping 0.3%.

QBE, Australia's No.1 insurer by premiums, has completed more than 75 deals in 10 years under the supervision of Mr. O'Halloran.

Mr. O'Halloran retires in August after 14 years at the helm and will be replaced by John Neal, currently CEO of QBE's global underwriting operations.

Overnight, the company announced that it had reached a deal to buy the renewal rights for the U.K. regional operations currently underwritten by Brit Insurance Ltd., with a gross premium of £500 million ($799 million).

That follows a deal last month to acquire the general insurance businesses of HSBC Argentina holdings S.A. and Hang Seng Bank Ltd., both indirectly owned units of HSBC Holdings, for $420 million.

QBE said its capital adequacy ratio at March 31 was estimated at 1.55 times the minimum requirement.

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