QBE bounces back to profit after cost cutting, unit sales
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QBE Insurance Group Ltd. swung back into profit in 2014 on lower revenues following a turnaround program that included cost cutting and the sale of various units.
Announcing its 2014 results Tuesday, the Sydney, Australia-based insurer said it is continuing its restructuring program with the sale of its workers compensation business in Argentina.
QBE posted a profit of $742 million for 2014 compared with a $254 million loss for 2013.
In 2013 its results were badly hit by a $580 million loss at its North America unit caused by higher than expected claims.
QBE said Tuesday that it posted an underwriting profit of $547 million for 2014, up 60% compared with 2013, and a combined operating ratio of 96.1% compared with 97.8% for 2013. The combined operating ratio is similar to a U.S. combined ratio and reflects claims, commissions and expenses.
QBE said gross written premium for 2014 totalled $16.33 billion, down 9% from 2013. Premiums were down in Australia, Europe and North America and up slightly in Asia Pacific and Latin America.
“Pleasingly, the 2014 result provides clear evidence the turnaround program is working, and 2015 should see earnings stability return,” Morningstar Inc., said in a note, Tuesday.
QBE said that for 2015 it predicted gross written premiums to be about $15.5 billion to $15.9 billion, its combined operating ratio to be between 94% and 95%, and an insurance profit margin of between 8.5% and 10%.
Also on Tuesday, QBE announced the sale of its workers comp business in Argentina to WST S.A., a company wholly owned by Buenos Aires-based Grupo Werthein, for $95 million.
“As previously announced, we conducted a strategic review of our operations in Latin America. This included a thorough evaluation of our Argentine workers' compensation business, the rapidly changing litigation landscape and the ongoing impact of economic liability,” John Neal, group CEO of QBE, said in a statement.
He added that, following the sale, QBE would be able to focus on building its remaining Argentine business, which largely is short-tail, property/casualty business, as well as in the Latin America region more broadly.
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CORRECTION: An earlier version of this article mistakenly reported that QBE Insurance Group Ltd. was selling Southern Insurance Underwriters Inc. In fact, QBE never owned Southern Insurance Underwriters Inc. and is selling a completely different company, Glendale, California-based SIU L.L.C., which does business as SIU Managers. Southern Insurance Underwriters Inc., which is owned and managed by members of the Duesenberg family, is not being sold. Business Insurance regrets this error.
