Australian insurer
QBE has revealed plans to create a joint venture structure for two of its Australian agency businesses, divest its US agency business, and finalise the sale of its Central and Eastern European operations.
The names of the Australian agency businesses have not yet been made available.
Insurance Business will disclose further information when it is released.
In a release to the market on the insurer’s half year results, QBE said the decision to divest its businesses and create a joint venture structure for the two Australian agency businesses “reflects a strong belief that these high quality distribution businesses will have enhanced revenue growth prospects under specialist and more focused external distribution ownership”.
QBE will enter into long term agreements to retain the underwriting businesses provided by the agencies. The decisions are a result of a strategic asset review, which began in 2012.
QBE group CEO
John Neal said: “A prerequisite to the proposed agency transactions is that we retain the underwriting rights over the long term which will continue to positively contribute to both our results and our growth ambitions; however, it is evident that ownership of these agencies by specialist distribution partners will enhance their opportunity for growth and accordingly drive real benefits for our customers and our shareholders.”
Reporting its results for the half year ended 30 June 2014, QBE Group reported an 18% drop in net profit after tax to AUD$420m (USD$392m), down from AUD$511.5m (USD$477m) due to prior accident year claims reserve strengthening of AUD$181.2m (USD$169m) in Latin America. QBE also puts the drastic fall to higher than expected large individual risk claims which contributed to a large individual risk and catastrophe claims charge of around 10% if net earned premium and an adverse discount rate impact of $126m (USD$118m), excluding the impact of increased discount rates in Argentina.
Cash profit also fell from AUD$632m (USD$590m) in the 1H13 to AUD$446m (USD$416m). Underwriting profit dropped from AUD$568m (USD$530m) to $261m (USD$244m); insurance profit fell from AUD$847m (USD$790m) to AUD$568.4m (USD$530m), and the combined operation ratio deteriorated from 92.8% to 96.5%.
Turning to the Australian and New Zealand operations, gross written premium fell 10% to AUD$2.5bn (USD $2.3bn), net earned premium also fell 10% to AUD$1.9bn (USD$1.8bn) and the insurance profit fell 3% to AUD$373m (USD$348m); whereas the underwriting result jumped 17% to AUD$262m (USD$245m).
When allowing for an AUD$24m impact from the abolition of fire service levy in Victoria, underlying gross written premium grew by 1%. QBE said this reflected the generally weaker Australian dollar and the FSL impact. Net earned premium increased 2%, allowing for the impact of the FSL but in US dollars, it fell by 10% to USD$1.9bn. The combined operating ratio improved from 89.9% in 2013 to 86.9% in the first half of 2014. The policy retention rate stood at 81.9%. Rate increases were just below 2%.
QBE forecasts 2014 full year GWP of AUD$5bn (USD$4.7bn) for the Australian and New Zealand operations and premium growth of 2% to 3%.
QBE said: “Virtually all major lines of business [in the Australian and New Zealand operations] are profitable and delivered results in line with expectations, despite lower discount rates, particularly for long tail portfolios.”
It went on to say that it remains focused on “retaining high quality business at profitable rates” and that during the first half of the year, it developed “new and targeted sales initiatives designed to maximise retention and deliver profitable new business across various products and sectors”.
“These initiatives are already delivering new and promising business opportunities, and will continue to be developed and implemented in the second half.”
QBE said the global shared services centre (GSSC) in the Philippines is “meeting expectations in the delivery of both efficiency gains and improved service, with further incremental benefits expected as the GSSC matures”.
The figures were converted from US dollars to Australian dollars using XE.com on 19 August 2014.
