North American Operations business review
“North American Operations turned a corner in 2015, posting an underwriting profit for the first time since 2011. With portfolio remediation largely behind us, the development of an operating model to support profitable growth and “go to market” capabilities is progressing.”David Duclos
Chief Executive Officer • North American Operations
QBE North America combined clinical expertise with flexible policy terms that made it possible for a national electric supply company to continue a self-funded medical insurance program.
Our Accident & Health team of underwriters, claims professionals and registered nurses helped uncover and identify unique medical conditions that would have put a client’s self-funded medical program at risk. The high cost of care associated with these identified medical treatments would have placed a significant financial burden on our client, thus impacting the terms of the policy that insulated the policyholder from large catastrophic claims. The client was very much in need of a creative solution to maintain the viability of their health insurance program. The team focused on the client’s needs; researched care options, treatment costs and innovative ideas for plan provisions. QBE underwriters delivered a solution which tailored the policy terms and provided appropriate care and cost containment provisions that delivered the essential medical coverage for the company’s employees and their families.
Improvements in underlying business trends demonstrate that transformation of North American Operations is on the right path. Following the sale of the M&LS business, we anticipate further improvement in underwriting profitability in 2016 on the back of cost efficiencies and our renewed focus on Specialty Lines.
At this stage of the transformation it is critically important that we stabilise the portfolio while increasing the quality of business that we write. Our focus remains on achieving modest premium growth goals while maintaining underwriting discipline, both of which will drive a slightly lower claims ratio and a more sustainable expense ratio.
Although market conditions remain challenging, we are on track to steadily improve underwriting profitability over the medium term.
Following the sale of the Mortgage & Lender Services (M&LS) business, North American Operations has been reset as a specialist insurer and reinsurer with four key business units: Standard Lines, Specialty, Crop and Assumed Reinsurance, with the latter a component of QBE’s global reinsurance business headquartered in London.
Competition has increased across all product lines (especially property) in 2015, reflecting an abundance of capacity coupled with a period of relatively low catastrophe losses (although convective and winter storms have emerged as a new “norm” for weather related losses). Premium rate increases were modest for the second consecutive year, up 0.4% on average across all business lines (excluding Crop), down from 1% in 2014.
Industry profitability remains challenged by price competition, slowing premium growth and historically low investment income, necessitating a heightened focus on cost reduction and the provision of superior service across multiple customer segments.
Numerous initiatives are underway to further improve the North American business and ensure more predictable and better quality underwriting results. Expansion of our Specialty Lines platform continues with the addition of new lines of business. Following the recent introduction of Surety, Cyber Liability, Inland Marine and Transactional Liability, we plan to launch a number of other products to be announced later in 2016.
During 2015, a key focus has been the ongoing development of our underwriting support system including the build-out of a field operations platform in order to be responsive to the needs of the rapidly evolving marketplace. This underscores our commitment to improving producer relationships, driving profitable growth through a product-centric and customer-focused approach and providing customers with direct access to the products and services they need. Through a sharp focus on technical underwriting, we have driven strong business performance and, in turn, stability in our underwriting appetite. Additionally, the transformation of our claims practice has focused on claims capabilities, differentiation, outcomes and analytics.
Transformation initiatives continue with a focus on creating the right environment and tools to deliver sustainable profitable growth as well as high quality and predictable results. In 2015, we executed on a technology and operations roadmap to improve our systems and support scalability and new business growth. Moreover, when complete, the build-out of our data and analytics capability will further enhance both our risk selection and pricing capabilities.
The QBE Foundation - In the community
Getting back home
Supporting our communities in the places where our employees live and work is central to QBE’s mission. Last year nearly 100 New York staff (about a third of our NYC office), including CEO Dave Duclos and other executives, helped to rebuild the Yin family’s home, which flooded during Hurricane Sandy in 2012. The family, including 5-year-old twins, had been living with relatives since then, while trying to restore their home to a livable condition. Employees used their QBE volunteer day to construct walls, install dry wall, and lay flooring. The QBE Foundation also donated $75,000 to help with the cost of repairs. The Yin family was onsite for many days, helping with construction, and the team enjoyed getting to know them while helping to get them back home as quickly as possible.