by Michael Mata
Following the release of its half year results,
QBE Europe stated that it has made “considerable effort” to resist growing demands from brokers for more commission. The global insurer saw a 58% slump in insurance profit for the first six months of 2016, peaking at $81 million from $197 million at the start of 2015.
Gross written premium also took a 6% plunge to $2.51 billion during the same period, along with a combined operating ratio of 88.3% (H1 2015: 88%). QBE blamed the recent EU referendum for the drop in profits, as the uncertainty surrounding Britain’s exit from the EU had sparked a drop in bond yields.
On the plus side, net commission ratio improved 17.9% in the same period from 18% in 2015. Richard Pryce, CEO of QBE’s European operations, said brokers took the opportunity to ask for more commission when supply exceeded demand.
"Across the board you will see commission creep in, in different shapes and forms - some of it may be justified, some of it may not," noted Pryce. "What we do with our individual underwriters is say they have to be fully aware of what the overall performance of the business is and therefore they can assess the merits of any commission creep.”
Due to falling profit margins, QBE ousted its Australia and New Zealand CEO, Tim Plant, after just one year on the job. Under Plant’s watch, insurance margins in the regional business fell from 14.8% in the first half of 2015 to 8.9% in the first half of 2016.
John Neal, QBE’s group chief executive officer, said the company was taking decisive action to remediate the local business. QBE’s interim profit had almost halved over the six months ending in June 2016, down 46% to just $265 million.
QBE was forced to increase the value of its claims liabilities by $283 million in response to lower bond yields and declining interest rates following Brexit.
