Insurer QBE is on track to meet its savings targets.QBE says it is on track to hit its target to cut costs by “at least” $US250 million by 2015, as it replaces hundreds of jobs in western countries with staff in Manila.
The global insurer also affirmed its full-year guidance on Tuesday, as it benefits from relatively few natural disasters and the recent fall in the Aussie dollar.
At midday its shares had risen 2.6 per cent, or 39.5c, to $15.70.
QBE, which is looking to rationalise its operations after a spate of acquisition-led growth under former boss Frank O’Halloran, earlier this year unveiled a plan to save $US250 million a year by 2015 by sending about 700 positions to the Philippines.
As the changes are rolled out across its Australian division, chief executive John Neal today stressed that he expected expenses would be cut by “at least” $US250 million as a result of the program.
The cost-cutting push will also result in changes to its operations in North America and Europe – where the company may also look to carry-out cuts in its European business slightly earlier than expected.
“This is very much the start, the first wave if you like, and there will be more activity that will follow,” Mr Neal said.
So far, 521 positions in Australia have been affected by the offshoring changes.
Most of these staff are set to be redeployed within the group, while 39 have been made redundant, and 52 contractor positions have not been renewed.
The chief executive of its Australian arm, Colin Fagen, said QBE was “extremely confident” it would save more than the original $85 million in costs that it had planned to trim from its Australian operations by 2015 through the offshoring changes.
This was likely to occur because the company’s redundancy costs had been lower than expected, while the volume of work being carried out in Manila had exceeded expectations.
Mr Neal also said he was confident the company expected to hit its full-year forecast for premiums to increase by about 5 per cent, and indicated it had benefited from several one-off factors.
He said conditions were “very positive” in Australia and North America but tougher in Europe, where rates were flat.
“It’s still very very early days in the year but we are quite relaxed about where we see ourselves for the half year.”
QBE, which reports its profits on a calendar year basis, will present its half-year results in August.
Insurers have benefited relatively few natural disasters in recent months, while QBE has extensive US operations, so it tends to benefit from a falling Australian dollar.
“Overall, the weakening in the Australian dollar is good news for us, but it does bring some complications,” Mr Neal said.
Deutsche Bank analyst Kieran Chidgey said the progress on cost-cutting and positive one-off factors should cause the “market’s conviction in QBE’s turnaround” to increase.
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