QBE INSURANCE'S incoming chief executive, John Neal, has declared he has no intention of backing away from the company's efforts to grow through acquisitions, even as doubts persist whether the smaller deals now being targeted can provide a boost to profits.
Mr Neal, the former head of QBE's European operations, insisted there would be no fundamental change when he took charge in August, rather his appointment was "more about evolution rather than revolution" for the insurer that operates in more than 50 countries.
The career insurance executive was named yesterday as QBE's third chief executive in as many decades. The appointment capped off nearly two years of painstaking preparations for the retirement of Frank O'Halloran, the long-serving chief executive who has overseen more than 125 acquisitions in expanding QBE offshore.
"Frank has been the architect of modernising QBE through his tenure, acquisitions have been part of that process. We don't see any reason why that shouldn't be the case," said Mr Neal, who was last year appointed QBE's chief underwriting officer.
In outlining his plans to retire, Mr O'Halloran yesterday said there would be no changes to his approach to acquisitions over the next few months. Indeed, several bolt-on acquisitions remained under consideration, which could translate to some $750 million in additional premiums for 2012.
"I can say that I've worked my heart and soul out for QBE for 35 years and I know John will do the same," Mr O'Halloran said.
But in a surprise twist, Mr O'Halloran will rejoin the company as non-executive director early next year, leaving just a six-month break from his retirement as CEO.
The insurer's chairman, Belinda Hutchinson, defended the move, saying she believed it was still consistent with good corporate governance.
"The board made a decision we had someone who had extraordinary knowledge of the industry and we didn't want to lose him to another player in the industry," she said.
There is history of executive-to-board succession at QBE. Mr O'Halloran's predecessor, John Cloney, retired as chief executive in 1998 after 17 years. He then went on the board as a non-executive director, later becoming chairman. Mr Cloney retired from QBE in June 2010.
Corporate governance experts yesterday said most companies waited about three years before inviting a former CEO back on to the board.
Overshadowing Mr O'Halloran's retirement was a 45 per cent fall in full-year profit to $US704 million ($654 million). The result revealed QBE was barely profitable in the second half after being hit by a string of natural disasters last year which sent claims soaring.
The insurer also outlined plans to prop up its capital position by raising as much as $600 million from shareholders. Shares in QBE were placed in a trading halt until the raising is finalised later today.
Over Mr O'Halloran's time as chief executive QBE's shares have traded as high as $35, but touched a low of about $5 after the company had to undertake an emergency capital raising after the September 11 attack on New York's World Trade Centre. QBE's shares last traded at $11.50.
Mr O'Halloran is the key architect of the business model that is starting to show cracks as growth in the US and Europe remains tough to come by, even through acquisitions.
While QBE kept its discipline in rarely overpaying for an asset, it invested heavily in the US market just as the insurance cycle there was turning negative. The company's chase for high-margin insurance acquisitions, also left it heavily exposed to weather events.
The game has changed - Malcolm Maiden