QBE Insurance (QBE): The global insurer released its first half 2025 profit results, confirming the continuation of positive trends in the insurance industry with increasing premiums and lower claims inflation. The HNW Growth Portfolio has a 5.4% weight to QBE.

Key Points:

  • Earnings Up: QBE’s net profit was up +38% to US$997 million (See Below), driven by a 2% increase in premium rates and a 6% in premium volumes – this was 18% ahead of market expectations of US$840. Over the first half, QBE saw premium increases, while solid underwriting and claims for large catastrophes came in well below targets. This delivered QBE’s best result in twenty years, with a return on equity of 19%.
  • Investment Float: The net return on QBE’s US$34 billion investment float in the half was US$788 million, representing a 4.8% annualised return. Over the last year, QBE has grown their investment float by 11% as it continues to grow premiums and benefit from foreign exchange movements.
  • Strong Balance Sheet: The balance sheet remains in good shape, with their regulatory capital above the top end of the range at 1.85x (1.6-1.8x) and gearing well within their target range at 27%.
  • Dividend Up: Up +30% to $A0.31 per share (25% franked), representing a lower payout ratio of 30%, which will be increased in the second half after the US Atlantic hurricane season concludes in October.
  • Outlook: Management reiterated their guidance from February, that they expect mid-single-digit growth in revenues driven by a 3% increase in premium rates and a 3% growth in insurance volumes. In combination with existing non-profitable insurance segments, QBE profits will remain strong.
  • Why is the stock down? This is a tough one; the best we can come up with is that premium rate increases are moderating, particularly in Europe and Australia, with gains of only 2.1% over the half. This comes after a period of consecutive year-on-year increases in the teens, which has been tough for customers needing insurance. A period of very strong rate increases combined with low catastrophe claims has seen insurance industry profitability expand, which historically has resulted in moderating rates. On the call, management stated that they had no direct exposure to the Californian wildfires in January, which had estimated losses between US$100-150 billion. As investors, we are concerned with profits and dividends, not revenue, as growing premiums mean little if the insurer is writing unprofitable business!

Portfolio Strategy: QBE has a diverse class of insurance business lines across Australia, Asia, Europe and America and gives the portfolio exposure to both a falling AUD, rising interest rates and a hardening of insurance pricing globally. This result shows the benefits of the simplification drive over the past five years that has seen QBE jettison exotic businesses such as Argentinian workers comp, Columbian third-party motor, and Ecuadorian crop insurance acquired during QBE’s growth at all costs phase 15 years ago. QBE is managing inflation well by pushing through premium increases (see chart below) and is benefiting from rising rates. QBE trades on a forward PE of 11x with a 5.5% yield based on a 60% payout ratio.

QBE finished down -8.8% to $21.39, despite this fall, QBE has been a solid citizen in the portfolio over the past year, up +36% vs the ASX200 +14.6%