QBE will sell its Latin American business to Zurich Insurance Group for $US409 million ($521 million) as part of a wider overhaul to improve group performance.

The insurer today reported a previously flagged annual net loss of $US1.2 billion ($1.5 billion), hit by catastrophes, writedowns and emerging market issues. It says priorities this year include reducing complexity and operating only in markets and products where it is profitable and has a distinct advantage.

“The decision to exit Latin America is consistent with our focus on simplifying the group, reducing risk and improving the consistency of our results,” Group CEO Pat Regan said.

“We determined that QBE was no longer the best strategic owner of these businesses. Zurich has a significant presence in Latin America and a strong commitment to the region.”

Mr Regan, who took over as CEO at the start of the year, said late last month he had been reviewing the company and the financial results would slide into the red for last year.

He told insuranceNEWS.com.au QBE is not looking at further large-scale divestments and will focus on improving underperforming areas. He warns it may take longer to turn around the Asia business compared with the pace of improvement achieved in Australia.

“It is a more complex environment,” he said. “But I do expect we will make some significant progress in 2018, and it is important that we do.”

The group loss compares with a 2016 profit of $US844 million ($1.1 billion), while the combined operating ratio deteriorated to 104.1% from 93.7%.

Gross written premium (GWP) was $US14.19 billion ($18.09 billion), compared with $US14.09 billion ($17.96 billion) in 2016.

The Asia-Pacific combined operating ratio blew out to 115.5% due to issues in the Hong Kong workers’ compensation business, while the North American result was hit by hurricanes Harvey, Irma and Maria, and the Californian wildfires.

Mr Regan says further changes to the North American operating model may reduce costs, while the company must be selective in the areas it targets for growth.

“We can’t grow across the piece in middle-market commercial – there are some very big, successful competitors we are up against, so we need to be smart,” he said.

The European combined operating ratio deteriorated to 95.2% from 90.7%, which QBE says is a strong result amid difficult trading conditions, comparing favourably with competitors.

Australia and New Zealand continued to show improvement as premium rate increases averaged 6.1%, excluding compulsory third party.

Mr Regan says a similar increase is expected this year.

The division’s GWP grew 2% to $US4 billion ($5.1 billion) and the combined operating ratio improved to 92% from 92.4%.

QBE is targeting a group combined operating ratio of 95-97.5% for this year.

As reported in a Breaking News bulletin earlier today, the before-tax profit on the Latin American sale is estimated at about $US100 million ($127 million).

The sale includes operations in Argentina, Brazil, Colombia, Ecuador and Mexico. QBE Puerto Rico will be retained to facilitate servicing Hurricane Maria claims and will become part of the North American business.

Zurich says the acquired operations had a combined GWP of about $US790 million ($1 billion) last year and provide a highly diversified product offering and strong distribution.