08-08-2025
QBE Insurance Group Ltd (QBEIF) Half Year 2025 Earnings Call Highlights: Strong Start with ...
Release Date: August 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
QBE Insurance Group Ltd (QBEIF) reported a strong start to the year with a 6% growth in Gross Written Premium (GWP), driven by underlying X-rate growth of 7%.
The company achieved a combined ratio of 92.8%, aligning with their full-year outlook, indicating predictable and resilient performance.
Return on equity was impressive at 19.2%, with the company on track to deliver high teen returns for the year.
QBE Insurance Group Ltd (QBEIF) received credit rating upgrades from S&P and Fitch, both moving to AA minus, reflecting improved business quality and resilience.
An interim dividend of $0.31 was announced, maintaining a strong capital position with a PCA multiple of 1.85 times.
Negative Points
Premium rate increases have moderated, particularly in commercial property and Lloyd's portfolios, which could impact future profitability.
The company faces challenges with large loss activity, particularly in aviation and oil refinery sectors, which could affect underwriting results.
There is a noted drag from exited lines, with a projected impact of around $250 million for the year.
The expense ratio remains steady at around 12%, with significant modernization investments expected to continue, potentially delaying cost reductions.
Inflation concerns persist, with rate increases not fully covering inflation in some segments, posing a risk to profitability.
Q & A Highlights
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Q: Can you discuss the GWP growth in segments achieving better than 92.5% group core relative to those that aren't, and how does this align with your outlook on combined ratios and premium rates? A: Andrew Houghton, CEO: We don't have a specific breakdown between segments above and below 92.5%. However, segments like Accident and Health (A&H), which grew by more than 10%, contribute positively to ROE despite being above 92.5%. We focus on technical pricing, which remains strong across portfolios, allowing us to grow even in areas with rate decreases, such as property. Inflation remains a key factor, and we aim to maintain pricing discipline to manage claims inflation effectively.
Q: Given the favorable catastrophe outcomes despite a tough global half, is your catastrophe budget too conservative, and could it impact growth opportunities? A: Andrew Houghton, CEO: We prefer a conservative catastrophe budget set at the 80th percentile, meaning we should be under budget four out of five years if accurate. This approach ensures pricing discipline and market stability. While we continuously assess competitiveness, maintaining a conservative stance helps manage market dynamics and pricing discipline.
Q: How far are you from rate adequacy deteriorating to the point of curtailing growth, given the current rate environment? A: Andrew Houghton, CEO: It's a broad question, but most lines are above 100% rate adequacy. Some lines, like D&O, are below, but many, like crop and A&H, are not cyclical and adjust for inflation annually. Property rates are falling but remain above 100%. We focus on portfolio balance, ensuring growth in lines that maintain rate adequacy.
Q: How do you view your scale in the US, and how quickly can adjacent strategies like healthcare and construction grow? A: Andrew Houghton, CEO: We see significant growth potential in the US, particularly in A&H and financial lines. Adjacent strategies like healthcare and construction are nascent but can grow significantly. Our focus is on relevance and quality, ensuring we have strong underwriting and claims services to support growth.
Q: Can you elaborate on the impact of large losses and how they affect your combined ratio and risk management strategy? A: Enda Singh, CFO: Large losses are part of the business, and we have allowances for them. We review each loss to ensure underwriting standards are met. While large losses can cause volatility, they are managed across a broad portfolio. We remain confident in our ability to deliver on our full-year outlook despite these challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
