The Australian and New Zealand operations of QBE
have delivered excellent results in a slowing economy characterised by low interest rates and heightened competitive pressure, says its regional CEO Colin Fagen.
“Low discount and interest rates is always challenging for our industry and the second half of 2014 reflected this as consumer confidence softened,” he said.
The region’s combined operating ratio was 87.0% with an insurance profit margin of 17.7% compared with 87.9% and 17.2% respectively.
“Although most classes were profitable, the property portfolio continued to experience pricing and profitability pressure.”
However, Fagen said: “Our longer tail portfolios including liability, CTP and lenders’ mortgage insurance continued to outperform expectations despite the low interest and discount rate environment.”
Gross written premium (GWP) declined by 9% to US$4,392 million compared with 2013 while net earned premium (NEP)fell to US$3,834 million, down 5% from 2013.
Fagen said this largely reflected the 7% depreciation of the Australian dollar against the US dollar.
“On a constant currency basis and allowing for a $32 million impact from the abolition of the fire service levy in Victoria, underlying grow written premium fell by only 2% reflecting the competitive landscape,” he said.
Premium rates increased by 0.1% on average in 2014; however, pricing trended downwards throughout the year.
Retention was stable at 81% on a policy count basis for renewable portfolios, however new business growth was strongest in the Australian CTP portfolio and across most lines of business in New Zealand.
Fagen also flagged other developments such as the introduction of the Group Shared Services Centre (GSSC), on which the region had led the Group, as improving the delivery of operational effectiveness.
“These intiatives, combined with strong and disciplined underwriting, will enable us to remain competitive through the softening market cycle,” he said.
“Operational transformation has enhanced the agility and change readiness of the business, attributes that will remain critical to our ongoing success.”
He said some issues had emerged during the transformation process which had been addressed but further areas of improvement had been identified.
Further work had been done on improving customer centricity and staff engagement scores, which had been particularly positive given the disruption caused by local downsizing and the level of change implemented in 2013.
Commenting specifically on the Australian and New Zealand business, QBE
Group CEO John Neal said: “Colin Fagen and team have again produced an excellent result.
“The team has embedded strong underwriting disciplines supported by strict expense management, and has delivered a result alongside a transformational change program which gives us a solid platform for future profitable growth.”
For 2015, QBE
Group has set its Australian and New Zealand business a US$4 billion GWP target with a target NEP of US3.3 billion.
Read more about the Group's overall figures here