Company Reports

QBE Insurance is an international property and casualty insurance company with over USD 21 billion of annual gross written premiums. It writes about 20% of its annual premiums in its home region of Australia and New Zealand and 35% in North America. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide-ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of hundreds of acquisitions made over decades.

QBE Insurance’s first-half 2024 net profit almost doubled to USD 777 million, benefiting from an average premium rate increase of 6.7% and material improvement in the claims ratio to 64% from 69%. Most of the improvement in the claims ratio was due to lower catastrophe claims. While QBE has progressively made changes to the portfolio to manage exposures, both lifting rates and exiting historically problematic insurance lines, investors should not be complacent this is the new norm. Volatility is to be expected. Investment income increased 10%, which practically all flows through to the bottom line.

No-moat QBE Insurance is reducing its exposure in North America, exiting the middle-market segment. The middle-market segment is insurance sold via brokers for midsize businesses, with products spanning property, auto, and general liability cover such as personal injury. The business closure reduces QBE Insurance’s gross written premium, or GWP, by around USD 500 million, representing 7% of 2023 North America premiums and 2% of group premiums. We expect the impact on profit to be minimal, given the reason for exiting is challenged performance for several years—the segment was under strategic review for sale or closure 10 years ago. Management expects a limited impact on the group's combined operating ratio in 2024, but we suspect a modest positive impact in 2025 once the business has been more substantially wound down.

QBE Insurance is an international property and casualty insurance company with over USD 21 billion of annual gross written premiums. It writes about 25% of its annual premiums in its home region of Australia and New Zealand. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide-ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of hundreds of acquisitions made over decades.

QBE Insurance expects mid-single-digit gross written premium growth and a combined operating ratio (claims plus operating expenses/premiums) of 93.5% in 2024, guidance the global insurer reaffirmed after its first-quarter 2024 update. Our forecasts are in broad agreeance. First-quarter GWP declined 2% due to lower crop premiums, with growth excluding the more volatile crop segment up 9%. Premium rate increases of 7.3% have slowed from recent quarters, and we expect will continue to moderate as returns across the insurance industry improve.

We increase our QBE Insurance fair value estimate by 4% to AUD 14 per share due to the time value of money. Group 2023 pretax profit jumped 2.7 times to USD 1.84 billion, and we don’t dwell on a 3% miss against our forecast. The massive turnaround on last year comes courtesy of double-digit premium growth, an improved claims ratio, natural hazard costs within allowances, and investment income on policyholder and shareholder funds doubling.

QBE Insurance is an international property and casualty insurance company with over USD 21 billion of annual gross written premiums. It writes about 25% of its annual premiums in its home region of Australia and New Zealand. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide-ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of hundreds of acquisitions made over decades.

QBE Insurance’s third-quarter 2023 update leaves it on track to meet guidance for 10% growth in gross written premiums and a combined operating ratio (claims plus operating expenses/premiums) of 94.5%. Renewal rate increases averaged 9.6% in the quarter, with GWP growth in the year to September 2023 at 11% in constant currency.

QBE Insurance is an international property and casualty insurance company with around USD 20 billion of annual gross written premiums. It writes about 20% of its annual premiums in its home region of Australia and New Zealand. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of hundreds of acquisitions made over decades.

QBE Insurance delivered a much stronger 2022 result than we expected. Cash profit was up 5% to USD 847 million, a material beat on our USD 560 million forecast. While premiums and claims were close to our expectations, operating and commission expenses and investment income losses were much lower.

QBE’s first-half 2021 cash NPAT of USD 463 million was much stronger than we expected, a welcome change after a disappointing 2020. On strong premium growth and much-lower-than-expected claims, we almost double our 2021 cash NPAT forecast to USD 664 million. In the first half, stronger-than-expected premium growth and the release of reserves (bucking a trend of recent reserve increases) finally offset persistent increases in claims inflation and large natural hazard events. Gross written premium growth of 20% on last year benefited from continued price increases across all regions. Net earned premium was up 10% on last year, with reinsurance taken out for growth in crop premiums.

In 2020 natural hazards events were frequent and large, returns on investment portfolios tumbled, and uncertainty around COVID-19-related business interruption claims lingered, painting a bleak outlook. In February 2021 when shares traded below AUD 9.00, we appeared more optimistic about future earnings upside than the market. Insurance margins have been under pressure globally, with most of the earnings headwinds not specific to QBE. We viewed the weak margins and return on equity as unsustainable and this validates why QBE has been successfully increasing prices. QBE reported an average price increase of 12.6% in the fourth quarter of 2020. Our forecasts imply QBE generates an insurance margin of 5% to 6.5% in fiscal 2021 and 2022, which compares with a 10-year average of 5.5%. Momentum in the share price is likely also being helped by rising bond yields. Over 90% of the insurer's USD 28 billion investment portfolio is invested in fixed income, and U.S. five-year treasury yields have risen to 0.8% from 0.4% in February 2021. Year to date, shares are up about 30%, while the ASX 200 Index has risen 9.5%, leaving QBE shares trading at a premium to our AUD 10.50 fair value estimate.

We reduce our QBE fair value estimate by 5% to AUD 10.50 per share as we incorporate a stronger Australian dollar into our forecasts. The forgettable 2020 result does not change our view on the insurer. We believe the 9.8% increase in average premium prices in fiscal 2020, with momentum accelerating to 12.6% in the fourth quarter, will see the insurer generate much better margins in the near term, especially without one-off claims associated with COVID-19.

QBE Insurance is an international property and casualty insurance company with over USD 14.5 billion of annual gross written premiums. It writes about 30% of its annual premiums in its home region of Australia and New Zealand, which accounts for more than half of the groups underwriting profit. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of 100’s of acquisitions over decades.

QBE Insurance is an international property and casualty insurance company with over USD 13 billion of annual gross written premiums. It writes about 30% of its annual premiums in its home region of Australia and New Zealand, which accounts for more than half of the groups underwriting profit. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of 100’s of acquisitions over decades.

QBE Insurance is an international property and casualty insurance company with over USD 13 billion of annual gross written premiums. It writes about 30% of its annual premiums in its home region of Australia and New Zealand, which accounts for more than half of the groups underwriting profit. Other key markets include North America, Europe, and Asia Pacific. QBE is predominantly focused on specialty insurance lines, but the offering is extremely wide ranging across property, auto insurance, agriculture, public/product liability, professional indemnity, workers compensation, marine, energy and aviation, and accident and health. The size and diversity of insurance is built on the back of 100’s of acquisitions over decades.