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Nicholas Grove is a Morningstar journalist.

Shares of QBE Insurance Group (QBE) lost nearly 20 per cent of their value in early afternoon trade on Thursday, after the company said it expects its 2011 profit to be down around 40 to 50 per cent on the previous year.

At 1340 AEDT, shares of the insurer were down $2.46 or 18.9 per cent at $10.54.

"QBE advises that its minimum insurance profit margin estimate for 2011 has been reduced to reflect its share of the record level of catastrophe claims experienced by the insurance industry and unrealised losses from the impact of difficult investment markets," the company said in a statement.

"We have only recently been able to assess the impact on our results of a number of the catastrophes. These events will mean that our profit after tax will be down by 40 per cent to 50 per cent compared with last year."

QBE's projected insurance profit margin for 2011, advised back in August 2011, was for a minimum 11 per cent, based on an expected US$15 billion of net earned premium. This is now expected to be between 7.0 and 7.5 per cent, the company said.

QBE also flagged a reduction in the final 2011 dividend as a result of the record level of catastrophes, from 66 cents a share last year to 25 cents a share. This would bring the full-year dividend down from 128 cents in 2010 to 87 cents.

It also said its reinsurance expense for 2011 is estimated to be approximately 13 per cent of gross earned premium, or around 1 per cent higher than previously anticipated.

QBE group chief executive Frank O'Halloran said while catastrophes in the second half of 2011 attracted fewer headlines than those earlier in the year, the frequency of events continued at an unprecedented level.

"In the United States, this included Hurricane Irene and further tornadoes, wildfires, hail, flood, wind and snow storms. In other parts of the world, catastrophe claims included bushfires in Western Australia, storms in Melbourne, floods and riots in Europe and the extreme floods in Thailand," O'Halloran said.

"We thought that our initial allowance at the beginning of the year for large individual risk and catastrophe claims of 9 per cent of net earned premium was conservative given the past seven years averaged 8.1 per cent.

"However, events during 2011 have proven otherwise."