Blue skies ahead The Big Three have slimmed down to retain pole position as the market turns in their favour at last By Bernice Han AUSTRALIA’S THREE BIGGEST insurers – IAG, Suncorp and QBE – have the tide firmly in their favour at last. The patchy recovery that began more than a year ago is gaining visible pace, igniting hopes that the next few years, at least, will be positive for the industry. What the Big Three have going for them right now is a sustained upswing in the pricing cycle. That is one of the key takeaways from the just-concluded earnings season. After many false starts, the market has definitely bottomed out, paving the way 22
for the market leaders to confidently push through with rate rises. Additionally, they have also adopted a “lean and fit” mantra. Their business models have been pruned, with money-losing foreign adventures dumped and non-core businesses that took up way too many resources ditched. The fine-tuning is most pronounced at QBE, which is back with a renewed vigour. The insurer turned in by far the most impressive results in the latest season. After-tax net profit jumped 4% to $US358 million for the half-year to June 30, a far cry from the gloom that engulfed QBE when it announced last year it had lost $US1.2 billion. As Group Chief Executive Pat Regan puts it, the “simplification agenda” was necessary as he embarked on the task of trimming the excess layers since taking on the job in January. “Since the start of the year, we have progressed four major work streams that contribute to the simplification agenda,” he says. insuranceNEWS
October/November 2018
“Our objective is to simplify the business so that QBE operates only in markets and products where we have a competitive advantage and can deliver attractive returns and profitable growth.” First on the chopping block was the troubled Latin American arm, which was sold to Zurich for $US409 million in February. In the months since, Mr Regan has moved to cull other businesses, including the Hong Kong operations and a travel subsidiary in Australia to Nib. It also expects to exit the North American personal lines market by the end of the year. “Travel insurance is very much a scale and high claims frequency logistics business. A review of our offering identified that we did not have a strong position in this market and without significant investment would not be able to generate an acceptable return,” Mr Regan says. On the pricing front, QBE enjoyed an average premium rate increase of 4.6%, building further on the 1% gain from a year earlier.
