QBE takes axe to costs as Neal makes his mark
QBE chief executive John Neal has moved to stamp his mark on Australia's largest global insurer, launching a new cost-cutting drive that will see hundreds of jobs sent overseas and unveiling a shake-up in the ranks of senior management.
The insurer said it was entering a new phase in its 127-year history, with a growing push to curb expenses and run existing businesses more efficiently after years of acquisition-fuelled growth.
In a move forecast to save $250 million a year, QBE will shed about 700 jobs from its operations in Australia, Europe, and North America, and fill the roles with staff in the Philippines.
It also cut the share of cash profits it will pay out as dividends to 50 per cent, from up to 70 per cent, arguing this was more suited to its goal of becoming a top-tier global insurer.
Chief financial officer Neil Drabsch, who worked closely with former boss Frank O'Halloran during his 14-year stint at the company's helm, also said he would step down as part of a broader management reshuffle.
The series of changes came after a disappointing year in which QBE's struggling US arm was battered by hefty claims from superstorm Sandy.
After-tax profits rose by a weaker-than-expected 8 per cent to $US761 million in the year to December, and the final dividend was cut to 10¢ a share, from 25¢ a year earlier.
Mr Neal, who took over from Mr O'Halloran last August, argued the cost-cutting drive was needed for the company to keep growing in a more subdued financial environment.
"QBE has been a hugely successful organisation over the last 15 years but, as the world changes, we need to evolve to continue to meet or exceed the expectations of our key stakeholders," he said.
Unions have slammed the growing number of financial services firms that are sending jobs offshore, but Mr Neal argued QBE needed to be simplified.
"If we can standardise and simplify what we do, then we can grow the business. And that means we can grow the business here in Australia, and it means we can grow the business elsewhere in the world," he said. "If we don't take that type of view then I don't think we can grow."
It is not clear how many Australian staff will be affected by the plans, which are intended to save $250 million a year by 2015.
Mr Neal said most of the changes would come from natural attrition and lower use of contractors and there would not be a mass redundancy round. He played down reports that the company was considering cutting as many as 3000 jobs from its global operations.
Under Mr O'Halloran, QBE was transformed from a mid-tier player to a global insurer through over 120 acquisitions around the world. It now has operations in 52 countries, deriving about a third of its income from the US.
An analyst at Nomura, Toby Langley, said QBE under Mr Neal's leadership appeared more focused on containing costs and running its existing businesses with greater efficiency.
QBE shares fell sharply in early trade before closing the day down 2 per cent, or 28¢, at $12.75.