QBE Insurance Group Management and Business Context Name: Akshay Patel ID: 12035408 Subject: Management and business context Tutor: Michael Burgess Date: 17-4-2017 Company Overview QBE insurance group is a diversified insurance as well as reinsurance company that is based in Sydney, Australia that is ranked in the top 25 insurance companies from across the world (QBE, 2016). The company has its offices in over 45 countries. The gross premium of the group for the period ended 2016 was $ 1135 million (CapitalCube, 2017). The net premium of the company in the same year stood at $729 million (Morningstar, 2017). The insurance group also underwrites personal and commercial classes of business. These include motor, motor casualty, property, bloodstock, agriculture, marine, liability, aviation and energy, credit and financial, workers compensation, accidental and health, professional indemnity and others (Fadata.Eu, n.d.). The company operates within the above stated segments in Europe, North America, Australia, New Zealand, Equatorial and emerging markets. The company operations in North America reinsurance and general insurance businesses within the United States while the European markets allows for general as well as reinsurance businesses in the Lloyds region in London and parts of mainland Europe and Ireland (QBEeurope, 2017). The underwriting business for genera; insurance is undertaken all across Australia and New Zealand. Business Structure The company is a public limited company issuing shares of their own and is listed across various stock exchanges. A management called the board of directors heads the company. The chairman of this board is Marty Becker (QBE, 2017a). The senior management assists the board of directors. The senior management is also in charge of various committees handling different business functions. These committees include, risk management, audit, remuneration, investments, technology, Operations among others. The board meets once a year in Australia for its annual general meeting. The company’s company secretary is independent and holds accountability only to the board. The number of independent directors is maintained as per the statute. Majority of the board comprises of independent directors as per the definition of ASX corporate governance council. An independent director can serve the company for a maximum of 10 years in a single term. The directors have the responsibility and are accountable to the board for sharing their views and opinions that they feel do not go with QBE’s interests. At the committee level, each committee comprises of three independent directors to ensure maximum transparency in decision-making. The directors are selected on the basis of a wide range of skills and experience that is complimentary to the group’s activities. The chairman is responsible for performance evaluation of the board of directors while the remuneration committee oversees the performance evaluation for the senior management. The remuneration report also lays down the remuneration details for each director and the chairperson (Group.QBE, 2017). The business is primarily divided into four basic operational regions namely, Australia Asia Pacific, European Operations, The Americas, and Equator reinsurances Limited. These four divisions of the business are again listed public subsidiaries. The businesses further divide in functional divisions and later, into different operational groups in different nations based on the type of business and the business function (Insurance.wa.gov, 2007). SWOT Analysis The SWOT analysis lays down the key internal factors that affect company operations and decision making by highlighting the internal strengths, weaknesses, opportunities, and threats of the company. The SWOT analysis of QBE Insurance Group is presented below: Strengths • The company is a very strong player in the segment of non-life insurance in Australia • The widespread geographic reach allows for a greater access to markets and hence a wider reach • The company is omnipresent in 45 nations (Morningstar, 2017). • Their employee strength is over 15000 in the global scale (Ken Research, 2015). • The company has a strong resilience even in the adverse market conditions along with a robust capital adequacy ratio. • The company’s acquisitions of prominent companies allows for has helped in strengthening company value and increasing the value of its expertise. Weaknesses • The company’s business is such that there is a high amount of reliance on the third party and this in turn results in a higher cost for reinsurance (QBE, 2015). • The underwriting profitability seems to be declining and this causes a drastic fall in company’s operating ratios. Opportunities • There are great opportunities for the company in their long-term growth and there is sufficient scope to launch new services within the non-life insurance market in Australia. Emerging economies provide a great market base and give international exposure to the company (QBE, 2016) • Providing customized consumer options and such other diversification of financial services can prove to be a great platform for improving business (QBE, 2016) Threat • The rise in the number of frauds in the insurance segment has led to a huge rise in the losses that come through claims (Ebscohost, 2014). • Increasing number of natural disasters are continuously testing the claim paying capacities of the insurance companies • Implementation and adoption of Solvency II will contribute towards a rise in competition for access to capital. The SWOT analysis further expanded into the analysis of company strategies that could be adopted based on the above assessment of Strengths, Weaknesses, opportunities, and Threats. These are the SO Strategy, ST Strategy, WO Strategy, and WT Strategy. Such strategies highlight the key steps that can be taken by the company in order to improve its business position in the market. SO Strategy The company can make use if their strength in the non-life segment and expand into the emerging markets for expansion of their market base. ST Strategy The threat of a rising number of cases of natural disasters can be overcome by the strength of the company in managing adverse economic conditions, which gives them an edge over other insurance companies. WO Strategy The QBE group company can take the loss making underwriting business to the emerging nations where the untapped market potential can cover up for the rising losses to make this division profitable for the group. WT Strategy The rise in the number of frauds and the company’s weakness in being highly dependent on third party favors for their business make the company quite vulnerable. This calls for an approach that reduces third party dependency in order to gain higher control over business operations and strategic decision making so as to control the cases of fraud internally. Such an approach would help in making the business fundamentally strong. Firm Risks in the Global Market The risks of a firm apart from the financial risk, can be broken down into three major categories namely, economic risk, political risk and societal risk. These risks for QBE Insurance group have been highlighted below: Economic Risk The economic risk of the company comes in terms of high dependency of the company on third party transactions for their insurance business. This acts negatively in two key ways. First, it increases the cost of reinsurance for its reinsurance business and thereby makes the company less competitive in terms of pricing for reinsurance (Credit-Suisse, 2016). Second, it reduces the control of the company on business operations through third party dependency where the company is exposed to higher rates of fraud in these transactions. Political Risk The company operates on a large geographical base. This allows for a great market for its business operations. However, the presence of the company is not strong in every market. For example, the presence in the emerging nations is a nascent stage. The market of Europe is restricted to few regions in London, parts of Europe and Ireland (QBEeurope, 2017). In such a scenario, the company gets highly impacted by the smallest change in the political scenario. The Brexit had changed the complete ways of doing business and had long drawn legal implications for political compliances and permissions in the recent political scenario. Societal Risk In terms of societal risk, the company is exposed to different legal and cyber norms in every region, nation, or continent it operates. The cyber laws are different for many countries. Chinese cyber laws are highly distinguished. In addition, cyber protection is also varied between nations. This exposes their business and data analytics to different kinds of cyber security and coverage issues, which is also a very big risk in the internet era of today. How to mitigate risk and establish organizational best practices Economic risk mitigation requires that the company reduces third party dependency and acknowledges greater control on business operations. In other ways, the business can also control the third party operations by laying down statutes that have to be mandatorily followed in the event that third party transactions appear to be cost effective. In such case, the company’s business will have to be price sensitive. Political risk can be mitigated if the company enters into new markets as a part of a joint venture or a merger. This would have minimum impact on company operations in case of a political turmoil. Societal risk can be mitigated by way of having government cooperation in provision of cyber security. As for data analytics, a hub for data management and cyber security would cut down on cyber risk. These measures are suggestions that could help the company in gaining a competitive advantage in the global business context. References Credit-Suisse, (2016). QBE Insurance Group. Retrieved from: https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&source_id=csplusresearchcp&document_id=807238050&serialid=RRJlliefVowl6CQTq4Y82qKQpjEqDWs%2BcEFZueKw4Uw%3D Ebscohost, (2014). QBE Insurance Group Limited SWOT Analysis. Retrieved from: http://connection.ebscohost.com/c/articles/94485321/qbe-insurance-group-limited-swot-analysis Fadata.Eu, (n.d.). QBE Insurance Group, Sydney. Retrieved from: http://www.fadata.eu/case_study/qbe-insurance-group-sydney-australia/ Group.QBE, (2017). Corporate Governance Report. Retrieved from: https://www.group.qbe.com/sites/default/files/Default%20Media/2016%20QBE%20Corporate%20Governance%20Statement_0.pdf Insurance.wa.gov, (2007). Group and regional Structure. Retrieved from: https://www.insurance.wa.gov/laws-rules/administrative-hearings/judicial-proceedings/documents/G07-0156QBEpostorg.pdf Ken Research, (2015). QBE Insurance Group Limited-Strategy, SWOT and Corporate Finance Report. Retrieved from: https://www.kenresearch.com/blog/2017/03/qbe-insurance-group-limited-strategy/ Morningstar, (2017). QBE Insurance Groups Ltd. Retrieved from: http://www.morningstar.com.au/Stocks/NewsAndQuotes/QBE QBE, (2015). Environmental Risk Management. Retrieved from: https://www.group.qbe.com/corporate-governance/environmental-risk-management QBE, (2016). QBE Annual Report. Retrieved from: https://www.group.qbe.com/system/files_force/Default%20Media/8175_QBE_Annual_Review_2016_v27_FA1.pdf QBEeurope, (2017). QBEEurope About US. Retrieved from: https://qbeeurope.com/about-us/ QBE, (2017a). Executive Leadership. Retrieved from: https://www.qbe.com.au/about/our-business/leadership