UPDATE 1pm: QBE Insurance will cut hundreds of staff as it streamlines its global operations, but insists there will be no mass redundancies.
Six months after taking over as chief executive, John Neal gave the first details of his plan to cut at least $US250 million in costs for the global insurance giant within three years.
That came as QBE posted an eight per cent rise in full year profit, but cut its dividend as ongoing catastrophe costs in the United States weighed on the company.
Mr Neal said QBE plans to create “dedicated centres of excellence” to manage work currently replicated across its businesses in Australia and New Zealand, North America and Europe.
Those centres are likely to be in Manila in the Philippines and Bangalore in India, where QBE currently employs about 700 people.
"We are still going through and formulating the plans as to what will be the impact of the operational transformation program and how we'll look at jobs that we relocate offshore,” he told reporters.
The number of jobs to be cut is also yet to be finalised, although Mr Neal said 700 was “in the ball park”.
QBE employs 17,000 people worldwide, including about 3000 in Australia, plus about 1000 contractors.
The company has an average staff turnover of 10 per cent each year, so most of the job cuts could come from natural attrition and a decrease in reliance on contractors, Mr Neal said.
"That doesn't mean in some areas of the business there won't be some tough decisions to make. Inevitably there will be,” he said.
QBE made a net profit of $US761 million ($A741.97 million) in the year to December 31, up from $US704 million in the previous corresponding period.
Its Australian business posted a vastly improved performance from 2011 as catastrophe claims were significantly lower.
But in North America the company suffered from ongoing developments from claims in previous years, and measures to exit unprofitable areas.
Premium rises helped to compensate for some of those costs, and further premium hikes of five to 6 per cent are forecast in 2013.
The company has also cut the ratio of profits it intends to pay to shareholders, from up to 70 per cent to 50 per cent.
QBE declared a fully franked final dividend of 10 cents per share in 2012, down from a partly franked 25 cent dividend in the previous year.
Morningstar analyst David Ellis said QBE's changes announced this morning should provide growth in coming years.
"We believe QBE is facing much improved conditions with 5 per cent forecast insurance premium increases, a major cost out program to improve productivity and the eventual increase in Northern Hemisphere interest rates,” he said.
QBE is targeting an underlying insurance profit margin of 11 per cent in 2013, which compares to eight per cent in 2012.The company's shares were down 43 cents, or 3.3 per cent, to $12.83 at $12.83 shortly before the close of trade.