Building momentum

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QBE was founded in 1886 in Townsville, Queensland. I’m not sure that anyone then could have imagined the kind of world we live in today, particularly the level of unpredictability facing business and society at large.

Pat Regan

In 2019, we saw low economic growth across most major economies but we also saw generally low unemployment and stock markets at record highs. Politically we saw trade tensions and protectionist policies, however we ended the year with a series of trade agreements signed, or in discussion. We also saw central banks maintain interest rates at record lows to try to stimulate growth – albeit at this stage with mixed success.

This had implications for QBE and for our customers who represent almost every facet of the global economy – from big business to local stores and from skyscrapers to first homes – and who face new risks and opportunities every day.

Among these is the disruptive influence of technology, which is changing almost every aspect of our lives and revolutionising traditional business models. Machine learning, artificial intelligence and the extraordinary growth in internet enabled devices are leading to the creation of whole new industries.

Just as our customers are exploring ways to integrate these tools and technologies into their businesses and lives, we too are exploring the enormous opportunities for our industry. I have described some of our work in this area in 2019, and our ambition for QBE for the future, below.

What we perhaps feel most profoundly though, is the challenge that climate change presents to our customers and indeed the whole economy. Globally, the economic costs from natural disasters have now exceeded the 30‑year average for seven of the last 10 years, while the number of extreme weather events globally has tripled since the 1980s. In 2019 alone, we saw examples of this.

As I write this, Australia is yet again experiencing severe weather, floods and storms. This includes the recent Australian summer which was marked by severe weather and unprecedented bushfires that had a devastating effect on many of our customers and the communities in which they live. I want to take this opportunity to personally acknowledge the hard work and bravery of the firefighters who were at the front line of these fires, risking their lives to protect others. I am proud to say this incredible group of people included some QBE employees.

The obvious link between these events and the changing climate brings into sharp focus how climate-related risks are now the new normal for our industry. We must take action to address these risks in our own operations, at the same time as supporting our customers to mitigate their exposure to climate risks and support the transition to a lower carbon economy.

You will find a summary of QBE’s work in the Climate change – our approach to risks and opportunities section of the Annual Report (pdf link).

Our year in review

Despite the economic challenges described above, QBE made strong underlying progress in 2019.

Through cell reviews and the Brilliant Basics program we have built on the significant work undertaken over the last two years to simplify the portfolio, modernise our business and systematically overhaul our underwriting capability and culture.

This has enabled us to deliver meaningful improvement in our operating metrics and a solid set of results in 2019. This includes a further improvement in the Group’s attritional claims ratio, positive premium rate momentum and very strong divisional performances in our Australia Pacific and International businesses. This gives us good momentum heading into 2020.

Severe weather in parts of the US, including an unusually wet spring, created difficult planting conditions for many of our Crop customers and this was compounded by frost and hail during the growing season. This resulted in a Crop combined operating ratio of 107.5%, materially higher than the 10-year historical average of around 90%, and contributed to a net combined operating ratio for the Group of 97.5% 1,2,3 – outside our targeted range. However, with many of our North American casualty portfolios already subject to portfolio de-risking initiatives since 2017, the underlying fundamentals of our North American business, and the entire Group, are strong and we are well placed for further improvement.

Operational highlights

Cell reviews remain core to the Group’s strategy and in 2019 they helped contribute to a further improvement in the quality and consistency of our earnings. We continue to evolve cell reviews as we take advantage of improved data and insights now available to us through data science, third party data and artificial intelligence (AI) tools being deployed across the Group.

At the same time, the Brilliant Basics program continues to grow in influence and sophistication as it maintains its strong momentum throughout the Group. In 2019, we established the Office of the Group Chief Underwriter, further strengthened our underwriting governance, embedded global pricing standards and made significant improvements to our claims handling processes.

Cell reviews and Brilliant Basics underpinned a further 2.7% 4 improvement in the Group’s attritional claims ratio in 2019. This means that the Group’s attritional claims ratio has improved by almost 7% 4, since the second half of 2017 and we believe there is further improvement to come.

In Australia Pacific, a further 4.2% 5 improvement in the attritional claims ratio helped underpin a very strong result for the division, which recorded a combined operating ratio of 90.0% 1. This compares with 90.3% 1 in 2018 and is despite the 2.6% higher costs of catastrophes. Similarly, in International, a further 3.0% improvement in the attritional claims ratio contributed to an improved divisional combined operating ratio of 95.4% 1.

We also achieved positive rate momentum, with an average renewal rate increase of 8.3% 6 in the second half of 2019 contributing to a full year Group outcome of 6.3% 6. This positions us well moving forward.

Importantly, despite the sluggish global economic conditions I described earlier, our investment returns were above the top end of our target range in 2019 and we also delivered our cost commitment targets, with meaningful efficiency initiatives underway across the Group.

Performance against our 2019 priorities

The rollout of our global customer commitment program, coupled with our focus on replicating best practice customer programs across the Group, underpinned further improvements in our customer experience metrics in 2019. These metrics are also now routinely integrated into our cell review conversations, reflecting the importance of customer outcomes in our overall performance assessment.

At the same time, our investments in technology are also helping deliver better customer outcomes, such as our robotic claims processes in UK motor and digital travel claims in Hong Kong.

We are also deploying initiatives to support financial wellbeing and enhance the accessibility of our products and services, for example by simplifying our product disclosures. In June, our Australian business also joined the Financial Inclusion Action Plan (FIAP) program – an initiative that promotes economic wellbeing, resilience and inclusion.

We made further investments to strengthen our talent, leadership and capabilities in risk in 2019, with a heavy focus on conduct, risk management and governance. Our RISKsight program will underpin a stronger risk and compliance capability and culture. The rollout of this program has already led to the development of strengthened risk appetite statements and a refresh of our risk policies for all risk categories. Risk management is embedded in our day‑to‑day operations and our recent QBE Voice employee survey showed that 88% of our employees believe that managing risk is prioritised and valued across the business.

With technology so critical to the future of our business, we made further progress on our technology roadmap. We increased the stability of our existing technology environment, automated our global infrastructure, upgraded and decommissioned end-of-life applications and provided the critical foundations for enhanced digital enablement. We have also made substantial investments in our cyber security capabilities, including the establishment of a Global Cyber Security Operations Centre.

We are streamlining our engagement process with start-ups to create ‘faster paths to partnership’, to make QBE a partner of choice as we look to create new opportunities, while continuing to leverage our existing Ventures and other strategic partnerships.

As we seek to work in faster and more agile ways, we are also creating opportunities for our people to develop and build the capabilities we will need for the future.

We continue to support a host of flexibility, diversity and inclusion initiatives across our global operations, including the launch of Share the Care in Australia and New Zealand, which gives both men and women equal opportunity to access parenting leave to balance their careers with taking care of a family. Across the Group, we have made a range of improvements in the available tools and benefits for our people to support them with a healthy mind whether they are at work or at home.

Our efforts to improve the diversity of our workforce were again recognised with QBE’s inclusion in the 2020 Bloomberg Gender Equality Index. Pleasingly, we have made good progress towards our target of 35% women in senior management by 2020, with a further increase of 2% to 34% in 2019.

Finally, I am also pleased to report further significant progress in our efforts to manage climate related risk and reduce our environmental footprint in 2019. We have maintained carbon neutrality and we are committed to using 100% renewable electricity across our global operations by the end of 2025. We are already more than 60% of the way towards our goal.


In closing, I would like to thank all of our employees around the world for their hard work in 2019, as we continue to evolve and grow our business and lay the foundations for our long-term sustainable growth.

I would also like to acknowledge Marty Becker’s decision to retire from the QBE Board and to express my sincere thanks for his wise counsel and friendship during our time working together. He has made an enormous contribution to QBE in his time as Chairman. I wish Marty every success for the future and I look forward to working with our new Chairman, Mike Wilkins, as we continue to build the QBE of the future.

Finally, thank you to our customers, brokers and shareholders for your ongoing support for our great company.

Pat Regan
Group Chief Executive Officer

  1. Excludes the impact of changes in risk‑free rates used to discount net outstanding claims.
  2. Excludes on-off impact of the Ogden decision in the UK.
  3. Continuing operations basis.
  4. Excludes Crop and LMI.
  5. Excludes LMI.
  6. Excludes premium rate changes relating to CTP.

Looking ahead

With good progress against our seven priorities in 2019, and with a stronger culture and risk management now firmly embedded in our day-to-day operations, we are more resilient and better equipped to respond to a changing regulatory environment.

For 2020, we have developed a new set of priorities that will further concentrate our efforts on our key differentiators, helping us build a reputation for value, service, claims payment and performance.

We are evolving our business at the same time as technological disruption continues to reshape the global economy and revolutionise entire industries. We are determined to stay ahead by building best in class AI, data and digital capabilities that will enable us to better support our customers in assessing and mitigating risk, while delivering every-day brilliance in underwriting, pricing and claims.

That work is well underway with a number of projects, including those identified above, leveraging these enhanced capabilities and already delivering results. For example, we piloted a water monitoring technology with various housing associations in the UK, to reduce the number of water leak incidents they experience across an extensive property portfolio. In North America, we have partnered with Roost, a technology company based in Sunnyvale California, to offer our customers industry-leading smart home products that offer innovative ways to monitor their home smoke detector and water systems.

Wherever possible, we will replicate best practice and apply lessons learned as we refine and test new customer-focused ideas for the future.

Above all else, in 2020, we will continue to deliver for our customers and maintain our rigorous focus on performance through cell reviews, Brilliant Basics and our operational efficiency drive, to harness the momentum we have built and continue creating value for our shareholders.

2020 targets

  1. Assumes risk-free rates as at 31 December 2019.
  2. Excludes $30 million one-off regulatory and other costs and the remaining $52 million of restructuring charges.