QBE chief lifts the lid on financial results and Enstar transaction

“So, although Hurricane Ian was a massive event and there were others during 2022, they didn’t impact as much as they could have done. The crop business had an OK year… and then we’ve got this mid-market business, which is continuing to grow.”

He went on to highlight: “The opportunity for the US to do a lot better than 98.9% [adjusted combined operating ratio] is really good, so I hope this is the first step – first step into where the US should be, which is under 95% combined ratio like the rest of the group.”

QBE’s adjusted COR in FY22 stood at 93.7% – an improvement from 95% previously. The international and Australia Pacific divisions posted adjusted CORs of 92.5% and 90.1%, respectively. If they could get the North America division’s COR down to below 95%, Horton said the impact on the group would be massive.

“It’s a third of our business previously performing over 100%,” noted the CEO. “The stability in North America has been a big focus of mine and the rest of the organisation.”

Cleaning the slate

Another move that is poised to help QBE in achieving its goals is securing a loss portfolio transfer deal with Enstar. While not a critical thing to do, Horton said entering the reinsurance transaction will allow him to think about QBE’s future more than worrying about what’s going to hurt them from the past.

“The good thing it does is it looks at some of our historic reserves from underwriting years between 2010 and 2018 and reinsures any volatility in those reserves out,” he told Insurance Business. “One of the problems QBE has had is being hit by negative prior year reserve development.

“Now we just don’t need to worry about them – it’s taking a whole chunk, US$1.9 billion of reserves, which historically had not performed well for us… We have to pay US$100 million for the benefit of doing that, to Enstar. I think it’s a good thing to do, because then we don’t keep worrying about the things of the past.”

Horton added: “It cleans the slate a bit, of history, just like we did in the small loss portfolio transfer of the excess & surplus lines business in the US, which had been a terrible portfolio for the company… So, it’s good, because it means we won’t keep looking back over our shoulder [due to reserve deterioration].”

Moving forward, the group boss is confident about QBE’s new strategy and the consistency that comes with it.

“I think we’re in pretty good shape for the future,” declared Horton. “You spend the whole time worrying about the next [set of results], so it’s quite nice to pause and celebrate that the results are good. And then see if we can improve upon them in 2023, so a lot of things around the purpose, vision, and priorities will continue…

“The thing I’m most proud about is the stability of leadership – giving people a vision and clear direction… We tested what we’re coming up with, with the new purpose around resilience and a vision around being more consistent and innovative, and our key six priorities. It just resonates with the rest of the organisation, and this gives us a consistent path to follow, which will enhance value for the people within the company, our stakeholders, and, ultimately, financial results.”

In FY22, QBE’s net profit after income tax grew from US$750 million to US$770 million.