QBE expects 40% profit drop

QBE CEO Frank O'Halloran said the insurance group expected to be down 40 per cent from last year.

QBE Insurance Group Ltd says first-half profit is expected to be down 40 per cent from the same period last year as net investment income took a hit.

Shares in QBE slumped 97 cents, or 5.4 per cent to $17.00 by 1106 AEST. That is the lowest since the stock closed at $16.87 on March 13, 2009.

Australia's largest insurer by market value released preliminary results for the year to June 30 on Monday as it also said it would be reporting its financial results in US dollars from this year.

Substantially lower net investment income on shareholders funds is expected to see net profit for the six months to June 30 drop 40 per cent from the previous corresponding period, QBE said.

First half net profit in 2009 was $859 million.

Risk margins in insurance liabilities will be lower than as at 31 December 2009 due to lower risk-free interest rates currently prevailing.

"The continued excellent underwriting results have been more than offset by significantly lower investment income from reduced interest yields, the fall in equity markets and one off gains in the first half of 2009," chief executive Frank O'Halloran said in a statement.

The first half dividend was expected to be maintained at 62 cents per share, as cash flow remained strong, QBE said.

The insurer remained on target to achieve operating cash flow of more than $US2 billion ($A2.23 billion) for the full year, it said.

The adoption of US dollars as a presentation currency was more relevant for QBE given about 75 per cent of its business was now written in 48 countries, and over half of its premium income was made in US dollars, the group said.

When expressed in the US dollars, QBE expects a 20 per cent rise in first half pross written premium, to $US6.9 billion.

Australian operations are expected to deliver the strongest growth in premium income, up 26 per cent when expressed in Australian dollars.

Asia Pacific is expected to deliver 15 per cent growth, the Americas 13 per cent, and European operations five per cent.