Australia's QBE Insurance hits reset with new CEOReprints
(Reuters) — Australia's QBE Insurance Group Ltd. on Tuesday said its CEO would stand down, capping a tumultuous period for the global insurer that frustrated investors with cost blowouts, profit downgrades and declining shares.
But analysts said investors should not expect a quick turnaround under a new boss, citing challenges including claims from natural disasters in North America.
Australia's biggest insurer said CEO John Neal would stay on until the end of the year, when he would hand control of the AU$14.4 billion ($11.5 billion) company to its head of Australia and New Zealand operations, Patrick Regan.
"It will likely be interpreted as a fresh beginning, a new start for QBE on the hopeful road to recovery," Credit Suisse A.G. analysts wrote to clients.
"However, we caution the expectation of any quick turnaround in QBE's earnings."
QBE shares rose as much as 3.3% after the announcement on Tuesday morning, while the broader market was up 0.5%. The shares are still down more than a fifth since a June profit warning.
Mr. Neal's exit after five years in the job draws a line under a period in which QBE has stumbled through an offshore expansion, particularly in emerging markets, amid higher-than-expected claims payouts.
The company earned rebukes from shareholders for issuing a profit downgrade in June just weeks after reaffirming its guidance. It was one of at least four downgrades on Mr. Neal's watch going back to 2013.
In August, it said its CEO of emerging markets would step down following a "major disappointment" in that unit's performance — even as it reported a first-half net profit that jumped 30%.
QBE did not give a reason for Mr. Neal's departure except to say it was part of a succession planning process.
Mr. Regan, the new CEO, joined QBE in 2014 as chief financial officer before becoming head of its Australia and New Zealand unit in August last year.
Credit Suisse warned that under a new CEO, QBE might cut its financial targets for fiscal 2018 given its wide exposure to North America, which has experienced a string of major natural disasters.
"While outside of management's control, there remains a lot of uncertainty around QBE's exposure to the recent industry natural peril events which we expect QBE to provide an update on in coming months," they wrote.
Earlier this year, QBE cut Mr. Neal's annual bonus by AU$553,000 because of "personal decisions" which were "inconsistent with the board's expectations." Mr. Neal said he was being punished for having an affair with an assistant.