QBE Insurance Group Ltd is unlikely to make any effort to reduce severance pay owed to former chief executive Frank O'Halloran, despite grumblings over write-downs of numerous acquisitions made during his tenure, according to The Australian Financial Review.
The insurance company's largest shareholder said the fact that Mr O'Halloran has moved on to become chairman of one of QBE's largest customers – insurance broker Steadfast – makes it especially unlikely QBE will make any move to water down Mr O'Halloran's $2.34 million payout plus incentives.
QBE underwrites approximately 17 per cent of Steadfast's business, according to the AFR.
"Frank is the chairman of Steadfast, which will be a sizable and long-term-customer of QBE's,” said Robert Penaloza, head of Australian equities at Aberdeen Asset Management, which holds a 14 per cent stake in QBE.
Corporate governance experts have suggested that numerous write-downs would make Mr O'Halloran's severance difficult to sell to shareholders, whose approval is required.
Mr O'Halloran has been criticised for making numerous acquisitions that left the company vulnerable to natural disasters in recent years.
QBE is seeking to cut $US250 million worth of costs annually by the end of 2015 and the company announced earlier this week that it would pay only 50 per cent of cash profit in shareholder dividends, down from 70 per cent of its report profit previously, the AFR added.