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QBE restructure is a ‘first step’ in wider shake-up

QBE’s carve-up of its Asia-Pacific division is the first stage in a larger “cost-out” announcement to be made next month, analysts say.

As reported in a Breaking News bulletin last week, from January 1 Australia and New Zealand operations will incorporate the Pacific and India, with Australia and New Zealand Operations CEO Vivek Bhatia taking on the role of CEO Australia Pacific.

European operations will merge with Asia to make a new International division, with CEO European Operations Richard Pryce becoming CEO International.

A new senior leader for Asia, who will report to Mr Pryce, will be appointed.

Former CEO Asia-Pacific Jason Brown has been appointed Group Chief Underwriting Officer.

Macquarie Group Insurance Equities Analyst Andrew Buncombe told the announcement has been well received by investors.

“It makes a lot of sense, but it is just the first step in terms of the wider cost-out announcement,” he said.

He says Mr Pryce is well respected, and adding Asia to his remit has gone down well, but QBE “will look to wind down some of those smaller countries in Asia”.

He says that while putting India with the Pacific and Australia business is “strange” and he is yet to receive an explanation from QBE, investors are “comfortable.

 “They understand that as the business is rationalised, there will be a focus on cost.”

QBE says its “group-wide cost-out agenda” will be announced early next month.

A spokesman told last week’s announcement has been welcomed by brokers.

While the changes will contribute to the group’s “efficiency agenda”, the spokesman says Australian and New Zealand operations will not be downgraded.

“While we have an eye on cost, this restructure is not about reducing our presence in the region,” he said.

“This announcement is about simplifying our structure to create a stronger, simpler QBE to enhance our customer proposition and build a platform for long-term, sustainable and profitable growth.”

The Asia-Pacific division was created in August last year. Following a poor performance, the previous Emerging Markets division was split into Asia-Pacific and Latin America.

A detailed review was also undertaken to determine remediation activities required to improve underwriting performance.

QBE said underwriting remediation in Asia is “largely complete”.