QBE confirmed Monday that it is undertaking a strategic review of its U.S.-based middle market business.
As Carrier Management reported in February, QBE Chief Executive Officer John Neal previously indicated intentions to review the middle market book for a possible sale, most recently in conjunction with the report of year-end results in February.
“We are well advanced in implementing remediation work that will allow QBE’s North American business to return to profit. As part of this process, we continue to assess options for various components of the U.S. business, including the U.S. middle market business,” Neal said in today’s announcement.
“The review will include a continuing focus on improving the profitability of the middle market business, consideration of opportunities to increase scale and support for our business partners, refining the business strategy and operating model, and exploring options for a potential sale of all or part of the middle market business.”
The U.S. middle market business represents around $900 million of gross written premium, mainly property/casualty business written through a number of agencies across the United States.
“Consistent with our strategic objectives to return the North American business to profit and to deliver on our performance targets, the time is right to consider our longer term plans to maximize shareholder value,” Neal added.
Speaking during an earnings conference in February, Neal assessed the situation this way: “If you look at our construct as a commercial specialty insurer, I think you’d challenge whether mid-market is in the specialty space.”
“If we think we can grow that [middle market] business and grow it at an appropriate margin, then we would be happy to do so. If not, then we will deem it as being non-core and consider whether that business should be disposed,” he continued.
Noting that he has no particular concerns about either keeping or shedding the book, Neal said: “I think it’s an attractive business in the U.S market. U.S P/C business is pretty flat [and] there aren’t many books of business at that size—around $900 million—running with a claims ratio of 61 or 62 percent.
“If we don’t think it’s scalable, then I think it will be attractive to other people. We’re keeping our options open on that, but it’s under the microscope for the first half,” he said back in February.
Today’s announcement noted that a further update on the progress of the review would be included in QBE’s half-year results announcement.