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QBE exits challenging North America segment 

QBE says it will focus on its North America specialty, crop and commercial businesses after deciding to step away from a middle-market segment that has experienced challenges for several years.

The segment provided about $US500 million ($754 million) in gross written premium last year but is a relatively small part of the insurer’s overall operations in the region.

“The closure of middle market will serve to refocus North America’s strategy on those businesses which hold more meaningful market position, relevance and scale,” QBE said. 

The insurer will begin non-renewing middle market policies in accordance with state regulations. GWP will start reducing this year before falling more substantially next year. A restructuring charge of about $US100 million ($151 million) before tax will be recorded in the financial year results. 

QBE has provided “admitted middle market” property and casualty policies for mid-sized businesses across a group of industries such as manufacturing, consumer goods and services. “Admitted” insurers are licensed by the US states in which they operate and require regulatory approval around policy forms, rates and rules. 

Morningstar says the discontinued business represented 7% of North America premium last year and about 2% of group premium.

“We expect the impact on profit to be minimal given the reason for exiting is challenged performance for several years – the segment was under strategic review for sale or closure 10 years ago,” it says in a research note.

Since 2015 QBE has made divestments and exited underperforming lines where it lacked scaled and could not deliver acceptable returns, reversing a previous period of global expansion through acquisition.

In 2018 it sold its Latin America business and operations in Thailand, Indonesia and the Philippines, while it has also exited loss-making portfolios such as North American personal lines and Australian and New Zealand travel insurance, Morningstar says.

QBE also said in a market update last week that first-half group GWP is expected to be about $US13.1 billion ($19.7 billion), up about 3% on a constant currency basis, with net insurance revenue expected to be about $US8.4 billion ($12.7 billion). 

The company, which will release its half-year results on August 9, continues to expect full-year constant currency GWP growth in the mid single digits and a group combined operating ratio of about 93.5%.