Insurer QBE expects to post a $250 million loss this year due to write-downs and increased claims associated with its North American business.
The insurer on Monday said that excluding one-off items and write-downs, it expects a cash profit of $850 million for the 2013 calendar year.
QBE also announced chairman Belinda Hutchinson will step down in March to be replaced by Marty Becker, who is currently on the company’s board.
QBE said the 2013 result would be affected by $600 million in goodwill write-downs, primarily relating to the North American business.
The North American business experienced an increase in prior accident claims provisions of around $300 million and the company was also exposed to higher claims due to weaker-than-expected US crop yields and prices.
QBE said it expected its insurance profit margin to fall from eight per cent to six per cent.
Chief executive John Neal on Monday said the write-downs came as a result of a strategic review of the North American business.
“Regrettably, these charges and provisions increase our target combined operating ratio and reduce our expected insurance profit margin and reported profit for 2013,” he said.
“As painful as these decisions are, we are confident that our business in North America will trade profitably in 2014.”
The company announced Hutchinson would leave the company in March, after three years as chairman and 16 years on the QBE board.
Hutchinson said the performance of the North American business was deeply disappointing but was confident the company could turn around its performance.
“I am confident that the board and management have developed the appropriate strategy and plans to rebuild the North American business so it can deliver the same market-leading insurance results that are being achieved by QBE’s businesses elsewhere,” she said.
Becker, who has been appointed deputy chairman as he prepares to take over the reins from Hutchinson, said she had done a “terrific job” of driving renewal across QBE’s management and board.
“It’s clear to me that since becoming Chairman Belinda has led a determined effort to address the issues that underlie the losses that we are recognising today.”
“I’m confident that these are now largely resolved and I look forward to providing leadership and guidance to the board, John Neal and the executive teams across the group to create value for QBE shareholders.”
Shares in QBE dropped almost 20 per cent in early trade today.
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