QBE Insurance Group, Australia's top insurer by premium income, reported a higher-than-expected first-half profit on U.S. acquisitions, and upgraded its insurance profit forecast.
QBE reported a net profit of A$921 million (US$737 million) for six months ended June, up from A$591 million a year ago. Five analysts on average had projected first-half profit at A$808 million. Estimates ranged from A$742-A$856 million.
QBE, which earns about 80% of its premiums from overseas, said it had no direct exposure to U.S. subprime mortgages, collateralised debt or loan obligations. "However, there is the potential of a small indirect exposure to these type of securities via deposits and other investments in highly rated major commercial banks," the company said in a statement.
QBE raised its insurance profit forecast to 18.55% to 20% from 17.5% to 18.5%. QBE shares jumped as much as 9% in the morning session.
"The significant increase in net profit and positive outlook for the rest of the year reflects the constant focus the QBE team has on all the key drivers that determine profitability in the insurance business," QBE Chairman Frank O'Halloran said on the statement.
QBE, which spent US$2 billion to buy Wintherthur U.S. Holdings and Praetorian Financial last year, said it was still looking at a number of acquisition opportunities.
"It is possible that some bolt-on acquisitions may be converted in the second half. We expect to have sufficient capital by year end to finance up to A$1.5 billion of additional net written premium," the company said.
But QBE said premium rates continue to fall due to lower level of catastrophes and higher profits earned by insurance companies.
"The major renewal season of 30 June saw further pressure on premium rates and we now expect overall reductions of close to 4% for the full year," it said.
The appreciation of Australian dollar, particularly against the U.S. dollar and sterling is also having a negative impact on gross written premium and net earned premiums, QBE said.
QBE had forecast its profit after tax to rise by more than 20% in 2007.