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Australia's QBE sees no big asset sales after shedding LatAm operations

QBE Insurance Group Ltd. said it will not undertake significant asset sales in the near term, after recently agreeing to sell its loss-making Latin American operations as part of a groupwide plan to become leaner and improve its bottom line.

The Australian insurer, which reported a net loss of US$1.25 billion for 2017, is aiming to improve the efficiency of its Asia-Pacific operations, which have been struggling in recent years, CEO Patrick Regan said in a press conference following its Feb. 26 earnings announcement. The company will also no longer sell unprofitable products, such as work injury compensation insurance in Hong Kong, Regan added.

The insurer posted disappointing 2017 results and announced its plan to sell its Latin American operations to Zurich Insurance Group AG for US$409 million. QBE will retain its Puerto Rico operations, which will become part of its North American business, the company said.

After years of expansion outside Australia, QBE has been trying to slim down or restructure its overseas businesses. It launched a strategic review of the Latin American operations in August 2017 "to simplify and reduce risks," after offloading its nonlife business in Chile in May 2017 for an undisclosed sum, as well as scaling back and restructuring its North American business over recent years. It is also selling its stake in a Thai unit to King Wai Group (Thailand) PCL for an initial purchase price of 815 million baht.

As for its latest results, QBE attributed its net loss in 2017 to record natural catastrophe claims and a deterioration in its emerging markets business. The Latin American operations posted a net loss of US$49 million and a relatively high combined operating ratio, which looks at claims and costs as a share of premiums, of 113.1%, indicating underwriting losses.

In Asia-Pacific, the combined ratio was 115.5%, which Regan described as "unacceptable." The figure was attributable in part to a marked rise in attritional claims activity, particularly for the Hong Kong workers compensation product, which accounted for half the Asia-Pacific division's US$100 million underwriting loss. The policy provides companies with financial protection against workplace injury liabilities.

In addition to quitting Hong Kong workers comp and exiting Thailand — a deal expected to close in the first half of 2018 — QBE plans to raise cost efficiency in Asia-Pacific by increasing rates, Regan said.

"It will take some time to fully fix Asia although I do think we will make significant progress in 2018," Regan said.

As of Feb. 23, US$1 was equivalent to 31.43 Thai baht.