QBE exiting Indonesia, the Philippines and Puerto Rico

December 12 2018 by Andrew Tjaardstra

QBE is in the process of selling its insurance operations in Indonesia, the Philippines and Puerto Rico, according to a stock exchange announcement on December 11. Combined, the divisions are worth around US$100 million in gross written premiums annually.

The Indonesian operation, where QBE has a majority ownership, is being sold to Great Eastern for around US$28 million and all the deals are subject to regulatory approval. QBE currently owns 75% of QBE Seaboard in the Philippines where it has had a presence since 2013.

QBE, overseen by group chief executive Pat Regan, is also implementing a three-year operational efficiency programme targeting net reduction in expenses of US$130 million and an expense ratio of around 14% in 2021. The group is forecasting around US$95 million of restructuring costs between 2019 and 2020. The insurer recently announced a management restructure in Australia and has changed its divisional structure.

The insurance giant has also placed its 2019 reinsurance program which has been structured to “better suit” the group’s “simplified portfolio” and improving underwriting risk profile.

The insurer said the move demonstrates the extent to which its “exposure to more extreme catastrophic events has been reduced”. For example, its 1:20 and 1:200 year probable maximum loss for Australian cyclone events will fall by around 20% and 35% respectively, while its 1:20 and 1:200 year probability maximum loss for US hurricane activity will fall by around 20% and 25% respectively.

The 2019 programme is expected to save the insurer around US$125 million in reinsurance costs. However, QBE says this will be more than offset by an increase in the budgeted allowance for large individual risk and catastrophe claims to around US$1.4 billion, up from around $1.2 billion currently, given greater variability around reinsurance recoveries.

The insurer is expecting a profit headwind of around US$50 million to US$100 million for the year, but an improved combined operating ratio and higher overall profitability in 2019 compared with 2018. It is being helped by premium rate increases, continuing improvement in the group’s attritional claims ratio and the efficiency programme.

 

 

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