The QBE Insurance Group Ltd (ASX: QBE) share price has come under pressure this morning.
At the time of writing, the insurance giant's shares are down 1% to $8.63.
This means the QBE share price is now down 42% since this time last year.
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Why is the QBE share price trading lower?
The QBE share price has fallen today following the release of its FY 2020 results.
For the 12 months ended 31 December, on a constant currency basis and adjusting for disposals, QBE reported a 10% increase in gross written premiums (GWP) to US$14,643 million.
Management advised that this reflects premium rate momentum, improved premium retention across all divisions, and strong new business growth in North America and International.
However, as it previously warned, this GWP growth could not stop the company from posting an enormous loss in FY 2020. QBE reported a loss after tax of US$1,517 million for the 12 months. This compares to a net profit after tax of US$550 million in FY 2019.
This loss includes a disappointing underwriting result, a significant reduction in investment income, impairment of goodwill and deferred tax assets in North America, and charges related to rationalisation of legacy IT platforms and its real estate footprint.
Also weighing on the QBE share price was its adjusted result. Excluding all the one-offs, on an adjusted basis, QBE's recorded a net cash loss after tax of US$863 million. This compares to an adjusted net cash profit after tax of US$733 million a year earlier.
Unsurprisingly, given its significant loss, the QBE board has not declared a final dividend for FY 2020.
Management commentary
QBE's Interim CEO, Richard Pryce, was disappointed with the company's performance in FY 2020, but appears positive about the year ahead.
He commented: "While obviously very disappointed with the headline loss, premium momentum accelerated across 2020 and has continued into 2021. Coupled with the improved positioning of the underlying business, we enter this year with confidence and optimism."
"I look forward to leading the business in 2021; my primary focus remains performance improvement including that the Group takes full advantage of currently favourable market conditions by maximising premium rate increases while driving targeted growth in portfolios and regions offering the most profitable new business opportunities," Mr Pryce added.
Outlook
Not even QBE's outlook for FY 2021 could help drive the QBE share price higher today.
Based on several factors, such as assuming a normal crop result, QBE believes it exited FY 2020 with a combined operating ratio of ~95%. This compares to FY 2020's actual combined operating ratio of 104.2%. (Anything below 100% is profit, whereas above is a loss.)
In light of this, at this stage, QBE is expecting margin expansion in FY 2021.
Also failing to give the QBE share price a boost today was news that dividend payments are likely to return this year.
The QBE board advised that, subject to global economic conditions not deteriorating materially, it expects to resume dividend payments of up to 65% of adjusted cash profits in FY 2021.
