QBE profit climbs on Australian price rises
QBE’s first-half profit grew 4% to $US358 million ($495 million) as it pushed through price rises and quit underperforming areas. Gross written premium (GWP) increased 4% to $US7.9 billion ($10.9 billion), while the combined operating ratio for continuing operations improved to 95.4% from 96.8%. QBE has agreed to sell the North American personal lines portfolio to Liberty Mutual, continuing an exit from businesses that generated an underwriting loss of more than $US200 million ($276.7 million) last calendar year. CEO Pat Regan, who took over in January, says further benefits will flow as QBE improves underwriting and risk selection, and continues its detailed “cell” performance reviews. The US personal lines deal marks the last significant flagged divestment, and the company is delivering on its program outlined in February, he says. “Profitability wise, we did what we said we would do,” he told insuranceNEWS.com.au. “We have improved in most of our divisions, we have hit the targets for the half-year, so it is a good step forward and we are going to keep doing that.” Across the group, premium rates increased 4.6%, compared with gains of 1% in the corresponding period last year. Increases were strongest in the Australian and New Zealand division, up 6.6% overall excluding compulsory third party, and with no decline in the retention rate. The Australia and New Zealand combined operating ratio was little changed at 92.6%. Underwriting performance improved in all portfolios with the exception of farm and commercial motor, where high claims inflation continues to affect the industry. “It is a work in progress when it comes to commercial motor, and things we are focused on [include] making sure we get the right rate, but more importantly writing the right business as well,” Australia and New Zealand CEO Vivek Bhatia said. Workers’ compensation, commercial property and strata underwriting are other areas where remediation is needed to drive returns to “more acceptable levels”. In other regions, European premium rates grew 4.8%, while North America achieved gains of 3.1% and Asia turned slightly positive. Mr Regan says the new Brussels-based subsidiary, established after the UK’s Brexit decision, is on track to start writing European business from January. QBE has targeted a full-year combined operating ratio of 95-97% and an investment return of 2.25-2.75%, excluding the divested Latin American operations.