By Rebecca Delaney

Feb 21 - (The Insurer) - QBE said on Friday that it expects the drag from exited lines in its North American segment to moderate in 2025 and beyond as the carrier concludes its shedding of non-core and unprofitable business, with ambitions to grow its reinsurance and cyber books.

• Exited North American lines impact premium growth by 3 points in 2024

• Drag from exited North American lines expected to roughly halve from $600 million in 2024 to $250 million in 2025

• QBE plans growth in reinsurance, cyber, US E&S property and Bermuda operations

The carrier has undertaken a series of portfolio optimisation initiatives since setting strategic priorities at the beginning of 2022.

QBE's efforts to de-risk and reshape its portfolio, as well as reduce volatility and improve performance in North America, have included several loss portfolio transfers, most recently a $1.2 billion transaction with RiverStone in November 2024.

The insurer also exited North American property programs (around $300 million), as well as its North American middle-market portfolio, as first reported by this publication in June last year.

Speaking on QBE's earnings call on Friday, group CFO Inder Singh said the middle-market run-off has tracked ahead of expectations, with GWP decreasing from $500 million in 2023 to around $200 million in 2024.

The firm also exited domestic third-party property relationships totalling around $200 million.

“As a result, the total drag from exited portfolios in 2024 was around $600 million, amounting to around a 3 point impact on the group's premium growth rate,” said Singh.

“The drag from exited portfolios will moderate from here. Our portfolio is in good health and balance; we have sound remediation plans in place for those remaining underperforming portfolios.”

Performance of the non-core segment in North America was broadly in line with expectations, Singh said, with a loss of around $220 million for 2024. This was mainly driven by exposure to convective storms in H1, with some additional impact from hurricanes in H2.

“As we look to 2025 we expect the GWP drag from remaining middle-market and homeowners books to be around $250 million with a negligible amount in 2026. We will have around $300 million in non-core net insurance revenue in 2025 with a small amount left in 2026,” Singh added.

“The outlook for the non-core segment in 2025 remains an underwriting loss of around $100 million, and this is in line with our previous guidance.”

At group level, the drag from exited lines is expected to broadly halve from around $600 million in 2024 to $250 million in 2025, representing a 1 point to 2 point drag on group growth.

QBE CEO Andrew Horton described 2024 as an “important transition year” for the company, highlighting headroom to grow further in core and profitable lines.

“In recent years, our strategy and focus held a heavy bias towards portfolio optimisation initiatives, including a number of portfolio exits, reserve transactions and actions to reduce property exposure,” said Horton during the call.

“With the vast majority of our business performing well, we should be able to spend more of our time planning for the future, rather than addressing problems created in the past. It's more enjoyable to be modernising and growing our business than being preoccupied with remediation.”

Having added capabilities in QBE Re and European specialities, Horton said the firm plans to bolster its offerings in U.S. E&S property and global cyber in 2025, as well as writing more business directly out of Bermuda.

“The aim really is to try to grow almost everything, if we can, because we do still think technical pricing across most lines is fine. We've outlined before that public company D&O in the U.S. is very tough at this point in time,” he said.

“If we look at specifics, we still believe we can grow our presence in the reinsurance market. At QBE Re, we start from a reasonably sized book of business that can grow. And despite the challenges within the cyber market at this point in time, we start from a relatively low base, so we are looking to grow that, but are aiming to grow across the board.”