QBE will exit its North American middle market segment, which recorded gross written premium of about $US500 million ($754 million) last year, to focus on better-performing business in the region. 

The middle market has experienced challenges over several years and the decision to begin “an orderly closure” was made following a strategic review, the company said in a statement today. 

QBE will begin non-renewing middle market policies in accordance with state regulations. GWP will start reducing this year before falling more substantially next year. A restructuring charge of about $US100 million ($151 million) before tax will be recorded in the financial year results. 

“The closure of middle market will serve to refocus North America’s strategy on those businesses which hold more meaningful market position, relevance and scale,” QBE said. 

“The closure will have no incremental impact on appetite or strategy for North America’s three core businesses – specialty, crop and commercial.” 

QBE has provided “admitted middle market” property and casualty policies for mid-sized businesses across a group of industries such as manufacturing, consumer goods and services. “Admitted” insurers are licensed by the US states in which they operate and require regulatory approval around policy forms, rates and rules. 

The withdrawal is the insurer’s latest move to improve its North American performance. Group CEO Andrew Horton said at the full-year results that it remained a primary focus and steps had been taken to simplify the business.  

North American GWP last year rose 4% to $US7.6 billion ($11.5 billion), with strong premium rate increases and targeted organic growth partially offset by the run-off of non-core lines. 

The combined operating ratio deteriorated to 103.7%, reflecting prior-year strengthening including from Winter Storm Elliott, and “drag from non-core lines”. 

QBE also said in a market update today that first-half group GWP is expected to be about $US13.1 billion ($19.7 billion), up about 3% on a constant currency basis, with net insurance revenue expected to be about $US8.4 billion ($12.7 billion). 

Catastrophe costs in the five months to May are estimated at $US500 million ($754 million), against a first-half budget of $US609 million ($918 million). Recent events have included US convective storms and the Dubai floods, and there is an initial estimate of $US175- $US225 million ($264-$339 million) to account for net exposure to civil unrest in New Caledonia.

Total investment income in the first five months was $US643 million ($969 million), up from $US406 million ($612 million) in the previous corresponding period. 

QBE continues to expect full-year constant currency GWP growth in the mid-single digits and a group combined operating ratio of about 93.5%. 

The company will release its half-year result on August 9.

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