QBE Insurance, Australia's biggest insurer, reported a net profit after income tax of US$1,278 million, down from US$1,532 million last year. The company said this reflected the lower investment yields on policyholders’ and shareholders’ funds, reduced foreign exchange and other gains and an unusually high number of catastrophic events in the countries where QBE conducts its business.

QBE’s underwriting profit, however, was up 19 per cent to US$1,168 million from US$981 million last year. “This was a very positive result given the difficult global economic conditions and the higher than normal frequency of catastrophe claims suffered by both QBE and the insurance industry generally in 2010,” said Chairman Belinda Hutchinson in a statement.

QBE said 2010 was a challenging year for the entire insurance industry due to soft pricing conditions in most sectors, an increased frequency of weather-related and earthquake claims and continued low yields on cash and fixed interest investments.

“QBE’s diversified global portfolios, strict underwriting discipline and focus on profitability enabled the Group to again produce a solid underwriting result. QBE’s combined operating ratio was 89.7 per cent, outperforming the great majority of QBE’s competitors,” said Hutchinson.

“In recognition of the sound underlying performance of the group and as a sign of our confidence in the future, the directors have declared a final dividend of 66.0 Australian cents per share, unchanged from 66.0 Australian cents last year. The final dividend will be franked at a rate of 10 per cent.”

The total dividend for the year is 128.0 Australian cents per share consistent with last year. The total dividend payout is A$1,336 million, up 2 per cent from A$1,306 million last year. The number of shares issued to the Australian Securities Exchange (ASX) increased by 27 million to 1,052 million, mainly as a result of the dividend reinvestment plans which continue to receive strong support.

Despite continued strong growth in underwriting profit, it has been a disappointing year in terms of QBE’s share price performance.

The company’s share price underperformed the market. Including reinvestment of dividends, QBE shares recorded a decrease in value for the year of 24.3 per cent compared with the Australian All Ordinaries Accumulation Index which recorded an increase in 2010 of 3.3 per cent.

Over the longer term, QBE shares have outperformed the index with a compound annual average growth rate of 11.2 per cent over 10 years and 16.1 per cent over 20 years compared with 8.7 per cent and 11.2 per cent respectively for the index.