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QBE to hike premiums as claims costs rise

AAP logoAAP 16/08/2016 Stuart Condie

QBE will increase property insurance premiums and excesses after the rising cost of claims in its core Australian and New Zealand markets cost the head of those operations his job.

Tim Plant has left QBE with immediate effect and will be replaced on an interim basis by chief financial officer Pat Regan, after the insurer called out a "disappointing and unacceptable" deterioration across lines including household, motor and commercial property.

QBE blamed competition, rising repair costs, tightening trade credit and increasing claims from the NSW compulsory third-party motor insurance scheme.

"You've got genuine claims inflation in Australia partly driven by a weaker Australian dollar and that does mean prices need to go up," chief executive John Neal said.

"And they have not. They have been flat or they have been falling."

Mr Neal said QBE had already raised NSW CTP premiums in the first half of 2016, and will now look at other products.

"It's more on the property lines, so home owner insurance and commercial property where prices are yet to go up but in our opinion do need to," Mr Neal said.

"You're talking about single digit price increases, certainly not double digits."

QBE is now looking for what Mr Neal called "a different type of leadership" in Australia and New Zealand after Mr Plant's yearlong tenure ended.

"Tim's got great qualities in terms of expanding a business, developing a business, growing multichannel distribution capabilities ... but a lot changed in the last 13 months in terms of market conditions and it's just a tougher place to be," Mr Neal said.

Those changing market conditions resulted in QBE taking a $US283 million ($A369 million) hit from what it called an "adverse discount rate adjustment", with the company setting aside more claims reserve to offset the impact of lower global interest rates.

"Ten years ago, an insurer made two thirds of its money from its investment returns and a third from underwriting," Mr Neal said.

"That metric is reversed now. We can still make a return, it's just a lot less than it used to be."

The insurer's net profit for the six months to June 30 dropped 46 per cent to $US265 million ($A345 million), although its underlying performance was still strong enough for it to raise its interim dividend.

QBE shares dropped as much as 11.5 per cent when the market opened on Wednesday, and by the close of trade were down 93 cents, or 8.3 per cent, at $10.24.

QBE'S HALF YEAR FIGURES

* Net profit down 45.7pct to $US265m

* Gross written premium down 6.7pct to $US8.1b

* Interim dividend up 1 cent to 21 cents, 50 per cent franked

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