QBE Group’s chief executive John Neal is stepping down after leading the insurance giant through a “challenging” five-year period, in the face of investor frustration over the company’s performance.
Mr Neal will be replaced by the head of its n and New Zealand business Pat Regan, an appointment that was welcomed by investors, amid bets Mr Regan would take the axe to costs and rationalise the sprawling business.
The outgoing chief will step down at the end of this year, having led QBE during a period in which the company has failed to ditch its reputation for springing negative surprises on the market, despite efforts by Mr Neal to simplify QBE.
QBE has in recent months been under renewed pressure from the market after unveiling more surprises including a poor performance in its emerging markets business, and disappointing market guidance at its results last month.
These shocks dealt a blow to investor confidence in Mr Neal’s turnaround of QBE, which had been expanded by a wave of acquisitions under former chief executive Frank O’Halloran, who led the company for 14 years until 2012.
Arnhem Investment Management managing partner Mark Nathan said there had been a build-up in investor disappointment towards QBE in recent years, and the negative surprises of recent months had added to this.
“It’s been quite a difficult period in insurance markets generally during John’s tenure, and there’s been a range of QBE-specific issues as well,” Mr Nathan said. “I think there’s a cumulative effect.”
Mr Nathan said it was too early to asses the legacy of Mr Neal, though history may judge him “less harshly” as the impact of his attempts to simplify QBE and cut costs became clearer.
Senior analyst at Clime Asset Management, David Walker, said many investors had already lost patience with QBE before the downgrade triggered by its emerging markets business in June.
“For many investors, this downgrade was not the last straw – the one before that was,” he said.
QBE shares rose 2.5 per cent on Tuesday to $10.50, but during Mr Neal’s tenure the stock has fallen more than 20 per cent.
Mr Walker said QBE’s share price reflected the market’s disappointment with QBE, and he stressed the June downgrade in its emerging markets business was the result of “mistakes”, as opposed to natural disasters beyond the insurer’s control.
“These are not due to hurricanes or catastrophes. These reflect internal mistakes – own goals by QBE. The emerging markets downgrade was the result of that and that only.”
QBE chairman Marty Becker on Tuesday said Mr Neal had led QBE through a “significant transformation and a challenging period in the insurance industry globally”, as he thanked the outgoing CEO and talked up the performance of Mr Regan’s businesses.
Mr Neal said in a statement: “It has been an honour to lead the organisation for the last five years and I am pleased with the work that has been done to transform QBE into a truly global franchise with an enviable position as a top 20 global insurance and reinsurance company.”
Mr Neal’s departure comes despite him saying in April this year that his contract required 12 months notice and he did not intend to leave the insurer. This occurred after his bonus was cut by $550,000 for failing to disclose to the board he was having a relationship with his assistant.
Bell Potter analyst TS Lim backed the change in CEO, saying he expected QBE would be “rationalised” under Mr Regan to focus on the higher returning businesses.
“We believe this is a good outcome with an experienced and well-regarded industry practitioner assuming the CEO role next year and to guide the insurer ahead in a world of increasing competition and complexity,” Mr Lim wrote.
Mr Regan said in a statement: “QBE has some clear strengths and great franchises, as well as talented and dedicated people and I am delighted to be appointed to lead the group.”
Mr Regan will be a paid a base salary of $2 million, in line with Mr Neal’s base pay, with the potential to earn a bonus of up to $7 million in shares and cash for “outperformance”.