QBE CEO Frank O’Halloran has foreshadowed “getting out of some pockets” of its Australian business that do not meet the insurer’s 15% return on equity target.

“We’re obviously very, very conscious that we are an Australian insurer and we have a part to play in this great country of ours, but for us to produce the results that our shareholders would like us to produce we cannot afford to take on sub-standard risk,” he said last week when announcing QBE’s half-year results.

He says that after this year’s catastrophes, parts of the property book are currently returning less than 15%, and as a result the company is “cutting back exposures in certain areas, cutting back on unprofitable business, and re-examining cat exposures”.

“We continually review where our risks are, and it’s fair enough to say that we were not satisfied with the quality of some of the risks that we wrote in some of the catastrophe-affected areas and we are going to make changes in underwriting to improve our reward for the risks we underwrite,” Mr O’Halloran said.

Global Underwriting Operations CEO John Neal says QBE has “reworked” $US1.5 billion ($1.4 billion) of its portfolio this year, with a particular focus on property risks.

He says that besides rate increases, this has involved changes to terms and conditions and higher deductibles for clients, especially in catastrophe areas.

“In real terms we think the underlying book is improving significantly more than the rate indicates,” Mr Neal said.

Mr O’Halloran says overall average premium rates on renewed business were up by close to 3% for the first half, and forecast a total overall rate increase for the full year of 4%.