Is this QBE’s calm after the storm in Asia?

February 19 2019 by Andrew Tjaardstra

Sydney-headquartered QBE has seen a head-spinning flurry of senior personnel and divisional restructures in the region over the past few years. So much has happened, the insurer’s leaders are no doubt hoping for a period of relative calm.

“The work that we’ve undertaken to remediate our Asian operations over at least the last 12 months has been a key part of QBE’s strategic agenda,” chief executive for Asia, Jason Hammond, told InsuranceAsia News this week. “Our Asian business is now a more focused operation.”

He added: “The decision to streamline the company into three divisions, with Asia joining our European operations in the international division, means we can align the strong capability of our European underwriting function with the business we write in Asia, where we continue to see opportunities.”

The origins of the company’s present structure date back to June 2014, when it combined its Asia-Pacific offices with Latin America to create the emerging markets division which was overseen by former Asia-Pacific chief executive David Fried. The division stretched from Argentina to Fiji, Hong Kong to Indonesia. Several key staff were swiftly promoted to oversee emerging markets, often travelling between Hong Kong and Miami.

However, the division was hit by a series of natural catastrophe losses in the Pacific and had to exit employee compensation in Argentina in 2015 after several key regulatory changes. Latin America was problematic for the insurer as a result of a lack of scale and high inflation, which hurts long-tail business.

In Asia, one of the biggest losses was as a result of the employee compensation construction portfolio in Hong Kong. The US$200 million gross written premium portfolio recorded a US$53 million underwriting loss in 2017 alone.

To help regroup, QBE’s group chief risk officer Jason Brown moved to Singapore in August 2017 to become chief executive of Asia Pacific, while in 2018 Hammond, an experienced employee compensation operator in Australia, became temporary chief executive of Hong Kong. Hammond replaced Mark Walker, who left the business at the end of last year after a brief stint as head of affinity, SME and digital Asia Pacific.

The employee compensation book is now on the verge of being transferred to Swiss Re Corporate Solutions, who will look to clean it up and keep the best performing parts.

Hammond relocated to Singapore at the beginning of January as the Asia business moved into the international division alongside Europe. He has been replaced in the special administrative region by former Marsh Hong Kong chief executive Lei Yu.

The introduction of group chief executive Pat Regan, following the departure of John Neal, has led to a radical shake-up at the group. Announcing a record group loss, Regan called the Asia-Pacific combined operating ratio “completely unacceptable” in January 2018 and launched a group-wide “brilliant basics” campaign.

After stepping down in August 2017, Fried stayed on in an advisory role until mid-2018 to help the company unpick the emerging markets operation. QBE’s Latin America operation was sold to Zurich for a pre-tax profit of US$100 million and most recently the Pacific nations were brought into the same group as Australia and New Zealand under the leadership of Vivek Bhatia. The division is now called Australia Pacific.

London-based Richard Pryce, chief executive of QBE Europe, is now head of international, which includes Europe and Asia.

In addition to the employee compensation move in Hong Kong, the firm has announced the decision to essentially close its Lloyd’s business in Singapore. QBE’s Lloyd’s Asia portfolio, known as QBE International Markets or QIMS, will move under QBE’s wider business over the course of the year to “simplify” it.

The insurer has also sold its 75% stake in QBE Seaboard in the Philippines and divested its Indonesian operations to Great Eastern for around US$28 million.

Meanwhile, Brown has moved from chief executive for Asia Pacific to become group chief underwriting officer. He will have responsibility for underwriting, pricing and reinsurance placement globally.

Later this month, QBE will announce its 2018 annual results. Analysts will be watching closely to see if there are any more announcements concerning Asia, but most are expecting a period of relative calm.

 

 

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