QBE has announced its full year results for 2014 with a profit after tax of US$742 million – a US$1 billion improvement on the prior year and an insurance profit margin of 7.6%.
Chairman W Marston Becker thanked shareholders for their patience during the period of remediation, reserve strengthening and right-sizing of the business, saying: “We are confident that much of the heavy lifting is now complete.”
He added: “We believe we can now focus our attention more firmly on achieving profitable growth going forward.”
Group CEO John Neal said the huge progress made during 2014 was encouraging and the company could now look to the future with confidence and optimism in what are proving to be increasingly competitive conditions.
“Twelve months ago, QBE announced 2013 results that fell well short of expectations, with a loss of US$254 million after tax largely driven by a number of issues in our North American operations,” he said.
“This disappointing result prompted us to carry out a thorough review of our businesses worldwide that led to a general strengthening of our underwriting management processes in a number of areas.
“This year I am pleased to announce significant successes in a number of key areas. In short, we have increased profitability, strengthened the balance sheet and built a strong management team to lead us forward.”
Neal listed a relatively benign catastrophe year plus a number of internal and external market challenges among the headwinds challenging the business.
These challenges included strengthening claims reserves in Latin America by nearly US$170 million, IT and operations investments; and a sharp fall in global risk-free rates which adversely impacted the 2014 result by US$324 million.
However, a number of initiatives were also introduced which added to financial strength and flexibility, including a US$780 million capital raising, the sale of the US agencies for US$217 million, and the sale of the Australian agencies for between AU$232 -348 million.
The company also announced this morning the sale of the workers’ compensation business in Argentina, subject to local regulatory approval.
Total potential sale consideration for that was ARS$760 million or US$95 million (as of exchange rate at 31 December 2014), which represents around 1.7x book value.
Commenting on this Neal said: “The sale to a well-known local operator with the requisite infrastructure and scale means QBE can now focus on building our remaining, largely short-tail, P&C business in Argentina and in the Latin American region more broadly.”
The company also announced its outlook for 2015 as follows:
- Gross written premium - $15.5 – 15.9 billion ($16.4-16.8 billion on a constant currency basis)
- Net earned premium – US$12.6 – 13.0 billion ($13.4-13.8 billion on a constant currency basis)
- Combined operating ratio – 94-95%
- Insurance profit margin – 8.5-10%
