QBE Insurance Group Limited

Good day and thank you for standing by. Welcome to QBE third quarter market update. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chief Executive Officer Andrew Halton. Please go ahead.

Thanks, and good morning, everybody, and thank you for joining us today.

As you know, this morning we released our third quarter trading update. On track for another year of exceptional performance, a strong momentum in the business, and we're confident of sustaining strong returns from here. There are three main parts to the release. First, we've announced an on-market buyback of $450 million Australian dollars to take place through 2026. Secondly, the release includes the usual details and performance for the current year. And finally, we've also included some early thoughts for the year ahead. I'm here with Inder Singh, our Group CFO, and we'll take the next five to 10 minutes to unpack each of these points in a little more detail. So let's start with the performance in the current year. Confident of delivering our 2025 guidance for both growth and the combined operating ratio. Strong underwriting result alongside excellent investment performance leaves us well-placed to deliver another return on equity in the high teens, QBE's best performance in well over a decade. Year-to-date growth rate and premium growth was 6% compared to the prior corresponding period, which included X-rate growth of 5%. If we exclude the drag from non-core lines and crop, underlying X-rate growth at 6% is broadly in line with the first half result and continues to be driven by a breadth of profitable growth opportunities across our diversified business. It's worth reminding you that our X-rate growth includes both volume and exposure adjustments, and these exposure adjustments play an important role in managing inflation. Premium rate increases in the year-to-date were around 1.5%. Change relative to the first half was probably driven by commercial property, where market dynamics have been well documented in recent months. And as we outlined in August, competition is more pronounced in commercial property and lawyers, which represent about one-fifth of our premium. Excluding these segments, rate increase was around 4% across the remainder of the business, broadly in line with the first half. It's worth noting the profitability in commercial property in Lloyds is very strong, and when we look to 2026, returns in these areas remain attractive. We now turn to claims. In aggregate, group claims are tracking broadly to plan. Our goal is to deliver resilience and consistency, and I think we've managed this well. The release details our second half catastrophe position. Experience through the four months to October was quite favorable on what was a relatively quiet hurricane season, and our allowance for November and December is around $200 million. We have indeed experienced some local catactivity in November, which will take some time to assess, though as it stands we're likely to be comfortably below our full-year catastrophe allowance again in 2025, which will mark the third consecutive year that we've beaten the budget. This highlights the resilience of our property portfolio and the improved confidence in our catastrophe allowance. We expect a modest reserve release for the year, which I think will mark the first full year release in several years. We spoke in August about our confidence in the quality and stability of reserves from here. I'm really pleased with how cooperative lending on our current assessment will have a current year result, which is slightly ahead of planned. While the overall price and yield dynamics were more supportive this year, the strategic initiatives we implemented over the past 12 months had a tangible impact on performance. And these initiatives will deliver further benefit into the year ahead. Group XCAT claims are a little above plan. At half, we spoke about large risk claims and mix. We've also seen some industry-wide claims frequency in North America's accident and health business. We expect normalization across a number of these aspects into the year ahead, particularly in A&H, given the pricing and terms adjustments anticipated at the upcoming 1-1 renewals. I think we've generally adopted a cautious stance on the current year. We're warranted. And ultimately, with the portfolio in better balance, we're well-placed to manage through any period-to-period variability. If we move to 2026, moving to the year ahead, We've included an early view of our combined ratio outlook in the release today. In 2026, we see another year of strong returns, underpinned by a combined operating ratio of around 92.5%. We've been able to share guidance at this point, given the much improved stability, breadth, and visibility of profits in the business. We'll provide GWP guidance in February with the benefit of some of the upcoming data points for our 1-1 renewal businesses plus crops. Generally speaking, however, we think premium rate increases of the year should track at similar levels to 2025, and we've spoken a lot about our focus on delivering sustainable mid-single-digit volume growth. Touching on some of the key drivers of the underwriting outlook, see three key components driving our outlook into next year. Firstly, catastrophe and large risk costs, where some normalization on the latter should occur, and our absolute cat allowance in dollars will be fairly steady year over year. Secondly, a generally supportive operating environment where we expect some reinsurance savings, operating leverage, and modest operating efficiencies. And finally, core underwriting performance. We expect further margin expansion from performance management initiatives and a reduced drag from non-core lines, notwithstanding rate softening in certain lines. We'll be able to have a better discussion with more detail around these drives in February once we've landed the result and any other outstanding aspects of our 26 plan. Moving now to capital management. We've previously spoken about the uplift in our medium-term planning effort. As it stands today, our medium-term outlook is characterized by mid-single-digit growth, driven more so by the volume than rate, fairly sustainable combined ratios around current levels, and modestly lower interest rates. This outlook returns will remain robust, will generate enough capital to fund growth, and a 50% payout will continue to generate modest surplus capital. Today we've announced a $450 million Australian dollar on market buyback for ordering shares, which we'll fund through surplus capital. If you assume we hold a 50-cent payout ratio for the full year 25 results, the buyback will increase our total shareholder distributions to around 65%. With the approvals required, we may be eligible to commence purchasing shares in late December, but ultimately expect the majority of activity in 2026 and intend to conclude the program in 2026. We remain upbeat about future growth prospects and really see an environment where we can both generate targeted growth but also return a little more capital than we have in recent years. Each year around this time, we'll review the outlook for growth, returns, and the balance sheet, and use active capital management as a lever to optimize performance. So with that, I'm going to finish here. In February, we'll unpack these points, I know, in some more detail. So thanks for joining this morning, and we're now happy to take some questions. Over to the moderator.