UPDATE 2-Australia's QBE flags loss due to U.S. claims, shares dive

Sun Dec 8, 2013 8:57pm EST

* QBE expects net loss around $250 mln, NPAT cash profit about $850 mln

* Losses include $300 mln claims increase, $330 mln goodwill writedown

* Sees insurance margin around 6 pct vs 11 pct previous guidance

* Chairman Hutchinson to go in March 2014

* Shares dive 20 pct lowest since late 2012

By Maggie Lu Yueyang

SYDNEY, Dec 9 (Reuters) - QBE Insurance Group Ltd said it expects to post a $250 million net loss this year due to writedowns and unexpectedly large claims after weak crop prices hit its U.S. operations, sending shares in Australia's biggest insurer down 20 percent.

The profit warning was the latest in a string of earnings disappointments from QBE, which has completed more than 75 acquisitions in the past 10 years to expand to 50 countries and grappled with hefty claims from at least one major market for each of the past few years.

The warning and resulting sell-off drew comparisons to gold miner Newcrest Mining, which similarly suffered a slew of profit warnings after writedowns on previous deals.

"It's a horrible situation, it's akin to what we have seen from Newcrest over the years," said Chris Weston, an analyst at IG based in Melbourne.

"If you are an investor, you are looking at consistent disappointment from the management level."

QBE said it was putting aside more money for claims made a year earlier from things such as workers compensation and construction defect risks, while its North American crop insurance business had also suffered.

"The record crop yield projected by the U.S. Federal Government has not materialised, increasing QBE's exposure to revenue claims as a result of the collapse in crop prices (particularly for corn) after early season preventive planting claims eroded the Federal Crop Insurance Corporation reinsurance deductible," QBE said.

Corn futures fell to a three-year low in November as a bumper U.S. crop and a proposal to lower the use of corn-based ethanol in the United States dragged on prices.

QBE, which posted a net profit of $761 million a year earlier, said on Monday it expected a net loss of around $250 million for 2013. It forecast a cash net profit after tax of around $850 million for 2013. This is down from $1.04 billion the year before, and about 28 percent below analysts' forecasts, according to Thomson Reuters data.

QBE, which generates about 30 percent of its revenue from North America, said it had already put in place a new executive team for the region.

The insurer separately announced that Belinda Hutchinson, a director for 16 years, would step down as chairman in March 2014 and be replaced by board member Marty Becker.

The downgrade followed a review of QBE's North American operations that prompted it to increase its provision for prior accident year claims and write down goodwill, intangibles and other assets.

The revision was largely due to a $300 million claims increase and $330 million in write-offs of identifiable intangibles associated with QBE's financial partner services business in North America, it said.

QBE also cut its an insurance profit margin to around 6 percent for 2013, from a previous guidance of 11 percent.

Shares in the insurer, which were placed on a trading halt last Friday, were trading down 19 percent at A$12.50 at 0130 GMT, after earlier hitting A$12.25.

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