SYDNEY (Reuters) - Australia's biggest insurer QBE Insurance Group <QBE.AX> revealed on Tuesday a $600 million earnings hit on its business from hurricanes in the Atlantic and earthquakes in Mexico, sending its shares down by more than 5 percent.
QBE said it had increased its allowance for large individual risk and catastrophe claims to $1.75 billion for 2017 and flagged it expected its combined operating ratio, a percentage of claims payouts against premium income, could rise to 102 percent.
"It's a massive hit," Shaw and Partners analyst David Spotswood said. "It's a 77 percent downgrade to 2017 earnings, on the back of these."
It was now unlikely the company had the capital to complete a A$1 billion ($782.80 million) buyback announced earlier in 2017, he said.
"The issue is, is this a one-off or does it flow through to 2018 and 2019, and it looks like there is some flow-through on these numbers," Spotswood said.
QBE expects a pre-tax impact of about $600 million to its 2017 earnings from a period of extreme global catastrophes this year, the company said in a statement.
The company's shares fell more than 5 percent to A$9.67 following the announcement while the broader market was flat. The stock was the largest drag on the Australian benchmark index <.AXJO>.
Insurers and reinsurers in 2017 faced a large spike in claims following a slew of devastating natural disasters, ranging from Cyclone Debbie earlier in the year to Hurricane Maria in September.
Fitch Ratings said the probability of ratings downgrades for global insurers and reinsurers was mounting as the industry faced more than $100 billion in 2017 catastrophe losses.
QBE Chief Executive John Neal said QBE had reinsurance locked in for 2018 but that it was too early to speculate how much reinsurance and primary insurance prices would rise as a result of recent disasters.
(Reporting by Paulina Duran in Sydney; Additional reporting by Ambar Warrick in Bengaluru; Editing by Stephen Coates)
