QBE Group CEO John Neal says his priority is to “stabilise returns and offer a predictable return to our shareholders”, after assuring markets the company’s North American operations will return to profit this year.

Last week the group reported a net loss of $US254 million ($282.52 million) for the year to December 31, in line with guidance to the market last December when it announced writedowns of nearly $US1 billion ($1.11 billion) on its US operations.

Mr Neal says the Australian and New Zealand operations are poised for growth after producing “really sparkling results” and completing the operational transformation program, designed to cut costs.

He says it was not appropriate to push for growth in Australia over the past 12-24 months, when the operational changes were being made.

“There was a lot of change, a lot of disruption,” he told last week’s analysts briefing. “All of that activity is over now, so the Australian team feel ready and enthusiastic and able to grow.”

He says local operations could grow 6-7% over the next 12-24 months.

The division’s gross written premium (GWP) fell 4% to $US4.79 billion ($5.3 billion) but its combined operating ratio (COR) improved to 87.4% from 90.6%.

Mr Neal forecast a 2.5% rise in average premium rates this year, which will “at least counter” claims inflation in Australia, New Zealand and North America, although pricing is expected to remain broadly flat in Europe.

He forecast a COR of 93% for this year and an underlying insurance profit margin of “about 10%” compared with 10-11% last year.

Group GWP fell 2% to $US18 billion ($20.02 billion), with the group taking action in North America and elsewhere to stem losses and “forgo premium to ensure a sustainable improvement in underwriting profit”.

QBE Group COR was 97.8%, compared with 97.1%. Mr Neal blames the deterioration on adverse prior-year claims development in North America.

North America GWP was down 11% to $US5.85 billion ($6.48 billion), while COR was 115.8%, compared with 106.8%.

The COR for the North American crop business was 102.8% due to drought claims.

The lender-placed mortgage business reported a COR of 115%, compared with 79.7% in 2012, and GWP fell 37% on fewer loans.

Analysts asked if European operations and QBE Argentina – a workers’ compensation and employer liability business – are likely to be the next problem areas.

Mr Neal says Europe is no cause for concern but Argentina “does bring a bit of complexity”, with claims inflation of about 35%, interest rates of up to 25% and currency issues.

European GWP grew 3% to $US5.23 billion ($5.79 billion) and the COR was 96.1%, compared with 94.6%.

QBE is reviewing its mid-market US business to see whether it fits with the strategy of the North America division being a commercial specialty insurer.