QBE, 1H2018: focus on redefining its international presence and maximizing ROE
Adjusted net profit after tax fell 18% to USD 380 million from USD 464 million in the prior period, reflecting a reduced level of positive prior accident year claims development and significantly lower investment returns.
Gross written premium increased 4% to USD 7,887 million from USD 7,596 million in the prior period. Currency movements favorably impacted GWP by USD 205 million y-o-y. GWP increased 1% on a constant currency basis.
European Operations' GWP was up only 3% on a constant currency basis. Improved pricing conditions gave rise to an average premium rate increase of 4.8% compared with a reduction of 1.1% in the prior period. Premium rate increases were partially offset by the non-renewal of unprofitable accounts and a targeted reduction in new business volumes in underperforming and/or underpriced classes.
The Group's adjusted combined operating ratio increased to 95.8% 1,3,4 from 94.5% 2,3,4 in the prior period, with an improvement in the attritional claims ratio more than offset by a reduced level of positive prior accident year claims development.
During 2018, QBE has undertaken a series of transactions to reduce complexity and simplify the portfolio including, aiming to redefine itself as an "international" player, as distinct from a "global" one, with meaningful operations in major insurance market hubs. To achieve this goal, QBE has started divesting some of its businesses, reducing its geographical footprint, and refining its approach to capital allocation to ensure that individual cells are delivering acceptable risk-adjusted returns to maximize return on equity.
The main changes - finalized or still ongoing - are:
- Sale of operations in Argentina and Brazil, for a total consideration of USD 244 million
- Sale of operations in Colombia, Ecuador and Mexico - to be completed by year end (anticipated total consideration of USD 385 million)
- sale of Australian & New Zealand travel insurance business to nib
- operations in Puerto Rico held for sale
- planning the Group's exit from North American personal lines - to be completed by year end
- reinsuring 100% of the Group's ongoing exposure to Hong Kong construction workers' compensation including USD 166 million of potentially volatile claims liabilities, to reduce Asia Pacific Operations' risk profile