QBE Insurance Group Limited

Good day and thank you for standing by. Welcome to QBE Half Year 2026 Results. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Group Chief Executive Officer, Andrew Horton. Please go ahead.

Good morning, everyone. Thanks for joining us today. I'm here with Chris Killourhy, our Group CFO, and we'll spend the next half hour taking you through what is another strong result for QBE. Momentum in the business is positive, and we're on track for another year of sustainable growth, resilient performance, and excellent returns. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters, and culture. I pay my respects to elders past and present and extend this respect to any First Nations people joining us today. Starting on slide four with a snapshot of our result. The first half performance was consistent with all our key guidance and targets for 2026. We launched our medium-term guidance in February based around an outlook of durable mid-single-digit premium growth and confidence in sustaining returns in the 15% plus range. For the first half, returns were excellent with a Group ROE of almost 18%, representing strength across underwriting and investments. Headline gross written premium growth of 6% was in line with the prior period and consistent with our full year guidance. Underlying growth was closer to 7%, noting the modest remaining impact from non-core exits. We've executed well on our growth plans, driving high quality growth in our key focus areas. Our combined ratio of 92.8% is in line with our outlook for a full year result of around 92.5, representing the stability and predictability we strive for. This included favorable prior year development, plus better than expected catastrophe costs, which underscore the actions we've taken to build resilience. We delivered another exceptional half for investment income. At around $830 million, this represented an annualized return of almost 5% and growth of 5% on the prior period. Our adjusted net profit was just over $1 billion, up 4%, and we announced an interim dividend of 33 cents, up 6% on the prior period. Disciplined capital management is a core pillar of our strategy, and our balance sheet remains very strong. We completed our first share buyback in several years in April and will continue to use active capital management to drive value for shareholders. Let's turn to slide five. I want to open with this slide which outlines the industry's attractive long-term outlook. The role of commercial P&C has never been more critical. And 2026 will mark another year in which a range of global events and structural trends have reinforced a heightened awareness of risk among businesses. Operational resilience is the key objective for our customers who place value on capacity, but also insight, expertise, and long-term partnership. These comments are equally evident surrounding the phenomenal investment in global infrastructure, electrification, energy security, data centers, and healthcare. Continued capital investment across these sectors is creating a growing need for specialized insurance solutions. As pricing and claims sophistication have improved across the industry, competitive advantage is increasingly shifting towards those with superior risk expertise, scale and diversification. We are uniquely placed in this regard. We combine breadth, diversification and expertise with presence and ability to connect capital to risk across all major insurance and reinsurance markets globally. This underpins our ability to deliver durable growth while sustaining attractive margins and returns through the cycle. Turning to slide six. This year we're proud to celebrate our 140th anniversary, a remarkable milestone that reflects the adaptability, relevance, and resilience of our business. This is a significant milestone for any organization, but particularly so in commercial P&C, where relatively few companies have stood the test of time and supported customers through generations of economic and social change. It's also a unique success story in the Australian context. Very few Australian businesses have successfully expanded internationally and built the scale, reach, and diversification that we have today. This slide recaps the journey we've been on more recently. With a series of remedial and foundational portfolio optimization initiatives now behind us, we enter this next chapter from a position of strength. Our focus is now firmly on driving high quality, capital efficient growth while maintaining strong returns for shareholders. This will include accelerating efficiency through our technology and AI initiatives. To give you some examples, in March we launched Aurora, a fully automated lead algorithmic underwriting capability cutting quote to bind from days to under 10 minutes in our British marine P&I portfolio. We're expanding the capability across other UK commercial portfolios in the coming months. In European motor, we've deployed AI through our claims function. We expect around 25,000 claims will be handled by AI in the coming year. and we're processing over 100 claims daily across 600 claims attributes captured at greater than 94% accuracy. Finally, in our Asian Marine book, our AI solutions have led to an 88% reduction in cycle time for claims processing. Over the medium term, we aim to at least double the scale of production agents across underwriting and claims, each compressing loss ratios, accelerating claims outcomes and improving pricing precision. So let's move to slide seven, which unpacks our growth for the period. This half, we extended our track record of sustainable volume growth, which we believe remains a key differentiator in the local market. Headline X rate growth of 6% leaves us well positioned to deliver a full year outcome in the mid single digits. This growth once again is underpinned by the breadth and diversification of our global business. This is also reinforced by the diversity of our distribution model. We can often access the same risk through multiple channels, including the open market, facilities, reinsurance, third parties and digital platforms. This provides flexibility to not only pursue growth, but allocate our capital where risk-adjusted returns are most attractive. Today, the industry narrative surrounding growth is overly focused on softening premium rates. We think this overlooks three important factors. Premium rate adequacy is attractive across the vast majority of lines. A portfolio as diverse as ours is operating across multiple product and market cycles simultaneously. And there are structural growth opportunities across sectors, including infrastructure, cyber, facilities, data centers, and energy. I think this is clear in our growth this period, which was driven by many focus areas for the group. Our cyber proposition is now well established with key partners and complements many of our existing strengths and relationships. We're likely to end the year with cyber premiums around $600 million and with industry premiums expected to double or triple in the next few years, cyber can comfortably grow whilst remaining a relatively small part of our portfolio. QBE RE and QPS have maintained strong momentum, which I'll touch on shortly. We saw excellent growth across many Lloyd's portfolios this half, particularly across marine and political lines where developments in the Middle East created opportunities. Finally, in North America, we've combined the adjacencies discussed previously into a single segment here. This is a mix of more mature businesses, including specialty, casualty, and construction, alongside more recent builds in specialty healthcare and environmental. Collectively, these segments will contribute approximately $600 million in premium this year, continue to deliver strong growth while broadening the reach of our franchise. Moving to segments we didn't grow. We spoke in our first quarter update about an intentional reduction in A&H. While rates were up significantly, we didn't target new business whilst we focused on restoring margin. Also in North America last year, we stopped writing a workers' comp program, no longer aligned with our service-led strategy. The ANH volumes and this workers' comp program had a disproportionate impact on the first half. Finally, within large standalone property, we've been more selective given current dynamics. While there are still attractive opportunities in property, given the diversification of our business, we're under no pressure to chase the more competitive pockets of the market. So moving on to slide eight. This slide shows the evolution of our portfolio mix. The three key shifts in recent years have been the decline in standalone property exposure, which we've spoken length about, a desire to build the profile of our reinsurance business, QBE RE, and the growth in our facilities business, QBE Portfolio Solutions. We thought we'd share some color on these two segments today. QBE RE has grown well from around 10% of group to around 15% and is now a $4 billion business for us. It gives us access to a material profit pool within the wider industry, and importantly, we look to participate in ways that complement our insurance business, expanding our regional footprint and adding important diversification. It's often a much more effective pathway to enter a new market through partnership with a leading carrier as opposed to building a new insurance offering. We've focused on building better balance in the portfolio, striving for roughly even balance across property, specialty, and casualty. And you can see the extent to which we've reduced property exposure in recent years. We've also shifted toward more proportional profit share or quota share business rather than excess of loss. This is now the majority of what we do and ultimately reduces volatility, generating more stable earnings. Much of the industry reinsurance rate commentary is geared around what is happening in property excess of loss rates with a general focus on North America. This is a relatively small part of our book, and to highlight this point, we expect rate for QB RE to be roughly flat this year after cumulative rate increases of around 65% since 2017. Our market position is attractive. Beyond the four major reinsurers, we stand out as having capability across most products, strong representation in all key hubs, and have a one to two notch credit rating advantage relative to many non-major reinsurers. Our strategy is centered around becoming more relevant to a fewer number of strategic partners, building deeper relationships, and offering valuable panel diversification. Moving to QPS. In 2026, we'll have gross written premium of around $1.8 billion in our portfolio solutions business. This represents broker facilities where we provide a pre-committed level of capacity to a clearly defined broker portfolio. It also includes certain MGAs and platforms which we support. These facilities are sometimes spoken about as market trackers, but the products are more sophisticated. We are the lead partner on many of our facilities. We work closely with the broker to co-design the facility, and as a lead, get to define the terms, structure, and establish how and when the capacity attaches. We're the clear market leader in this space and have participated right throughout the journey. We believe the segment has matured and expect a continued structural shift toward facilities which offer more efficient placement for brokers and customers, can reduce costs for customers, and in our experience have delivered attractive returns. Particularly in syndicated or layered markets, there can be significant inefficiencies in needing to engage multiple follow markets. Importantly, the underwriter's role remains unchanged, defining the risk, price, and terms is still critical, although many following markets contribute little to this process. The final point to note is the access to data we get in taking lead roles. We now see pricing, claims, and terms data for a broad cohort of business, and in the age of LLMs, this gives us valuable insights for our open market underwriting. In both instances, QBE RE and QPS, performance has been very strong. This reflects the balance and diversification we've built, where particularly for QPS, a facility by definition is highly diversified, which gets further enhanced through participation in multiple facilities. For instance, some target specialist niches such as cyber, marine, and political violence, while others capture structural growth opportunities in construction, parametric insurance, and AI liability. Turning to slide nine on capital. Our approach to capital allocation is outlined here. We'll always hold a preference to grow the business provided returns clear our hurdle rate. This is the case for the vast majority of our portfolio today. We have a dependable 40 to 60% dividend payout ratio and remain committed to returning any excess capital beyond the dividend. This was reinforced with our first buyback in several years, which we completed successfully in April. This slide lists some of the actions we've taken to improve capital efficiency this year, which is a key focus for us moving forward. We have a series of initiatives which we think can drive real value as we work toward a more capital light model. In February, we spoke about the launch of our first sidecar, attaching to the QB re-casualty portfolio, plus the addition of a cap bond into our group property program. These initiatives not only support capital efficiency, but also our cost of capital and earning stability. We also spoke in February about the sale of our trade credit and surety business. This was a capital intensive business, which is quite correlated with macro cycles. The transaction is on track to close in the second half. And this morning, we've also agreed terms to a lost portfolio transfer for over $1 billion of reserves. The transaction covers North America and international reserves associated with segments we've exited, which will drive a release of capital. Collectively, these actions will have a positive and meaningful impact on our capital efficiency plus enhance returns. With that, I'll pass over to Chris.

Thank you, Andrew, and good morning, everyone. We've made a positive start to 2026 and delivered an excellent set of results, culminating in a very strong return on equity of 17.7%. These results reflect the continued benefit of actions taken to improve portfolio quality, build cap resilience, strengthen reserves, optimize capital allocation, and drive greater efficiency across the group. While there is more work to do, I'm confident the business is well positioned to continue delivering sustainable growth and industry leading performance through the cycle. Turning first to the result on slide 11. Gross written premium grew 6% to $15 billion. The combined ratio was 92.8% in line with the prior period and on course to deliver our 92.5% outlook. The net impact from ALM activities has been broadly neutral and our tax rate was 25% consistent with our natural tax rate. Profit for the half was up at around $1 billion, that's an increase of 4% on the prior year. And as mentioned, return on equity was an excellent 17.7%, comfortably above our medium-term guidance of 15% plus. Our capital position remains very strong with a PCA multiple of 1.82 times, and the dividend of 33 Australian cents per share equates to a first-half payout ratio of around 33%. Consistent with prior years, our distribution is a little lower in the first half and we'll true this up with the final dividend at the end of the year. Turning now to growth on slide 12. Premium growth has been solid. Group GWP growth of 6% was broadly consistent with the prior period and in line with outlook. The X rate growth of 6% has been delivered at a time where we also pulled capacity back in areas where returns did not justify the deployment of capital. As Andrew touched on, at this time, growth does continue to be weighted towards the Northern Hemisphere, highlighting the strength of our global brand and driven by strong contributions from Crop, QB Re, Portfolio Solutions, our Lloyds portfolios, Cyber and adjacencies in North America. These are all portfolios where we continue to see attractive opportunities and strong returns. Here in Australia, although aggregate GWP has remained broadly stable, we saw positive momentum in CTP and consumer, supported by distribution initiatives launched in 2025 alongside continued growth in the direct channel. In North America, crop delivered particularly strong growth of 17%, which we'll come back to in more detail shortly. Excluding crop, given the exited workers' comp programme referenced by Andrew, alongside a temporary contraction in NH volumes, GWP reduced by 12%. Adjusting for the exited programme and non-core business, North America GWP remained broadly stable against the prior half. Turning now to pricing, overall premium rate adequacy across the group remained strong, with the majority of our portfolio being premium adequate or better. Thank you very much. But as Andrew mentioned, we're being selective in how we participate in certain property markets and where pricing heads into 2027 will be a key area of focus and depend a lot on cat activity over the coming months. I'm going to turn now to slide 13 to talk about the group's underwriting performance. Underwriting performance remains solid with a combined ratio of 92.8%. Catastrophe costs were around $450 million, that's comfortably below allowance, and around $30 million less than the prior period. That's another resilient outcome in a half which includes a $75 million impact associated with conflict in the Middle East. The impact from the Middle East relates primarily to political lines, property exposure in neighbouring regions, and includes IBMR. The result also includes favourable prior year development of around $110 million, that's modestly higher than the prior period, and reflects a consistent and prudent reserving strategy where we look to hold long-tail reserving assumptions for at least three years before recognising any good news. Whilst this does drive a negative bias on the current year, it should contribute to more consistent prior year releases as the approach matures. The XCAT claims ratio was relatively stable versus the prior period. The XCAT continues to absorb industry-wide claims inflation impacting A&H and referenced in February. With only two quarters of experience, it's clear that claims inflation remains elevated. Though ultimately it's too early to make a definitive decision for the year, we've assumed limited improvement on the 2025 full-year combined operating ratio at the half. Regardless of where 2026 ends, it's clear that another round of material price increases across the industry is required into 2027. Under AASB 17, we do take an onerous contract provision in the first half. Essentially, this pulls forward an expected full year loss into the half and does serve to inflate our half one combine ratio. The ex-CAT ratio has also absorbed broader impacts associated with the Middle East. I mentioned the CAT allowance of $75 million earlier, but a half-won result also includes around $50 million of associated large losses. As Andrew referenced, we've seen meaningful growth in certain lawyers' portfolios, where particularly in marine war markets, premium rating has shifted materially. We're a market leader and a responder to support our customers and partners. We do anticipate meaningful earnings from this business in the second half, which will lead to a more balanced Middle East picture by the fall year. Diversification remains at the heart of our strategy to deliver resilient and predictable outcomes. And it's worth pausing to reflect on the various favourable and unfavourable movements across components of the claims ratio, including ex-CAT, CAT and prior year development. Some variance across these metrics is inevitable and it's important to assess them collectively rather than placing too much emphasis on any single component. I'm going to turn now to expenses. The group expense ratio was 12.4% compared to 12.1% in the prior half. This increase was driven by investment spend in support of our transformation agenda, lower TEPL credits associated with the Australia CTP business and increased weighting to a higher expense ratio OSPAC business as a result of the strengthening Australian dollar. From a headcount perspective, however, we saw an increase of just 1% and that was driven by international where we continue to support growth. We expect the full year expense ratio to trend lower over H2. I'm going to move now to slide 14, as I'd like to touch on cat resilience, as cat performance has again been a feature of this half's result. Cat was below allowance in the first half, continuing the trend of cat tracking comfortably below allowance over the past three years. This slide shows our probable maximum loss, or PML, a proxy for cat exposure, which has now reduced by around 11% since 2023. This contrasts with premium growth of nearly 20% over the same period. We've been able to grow meaningfully whilst reducing catastrophe exposure. Notwithstanding the PML reduction, we've maintained our CAT allowance steady, which continues to be set at around the 80th percentile. Although it's not an exact science, mathematically this implies that our allowance should be adequate eight out of 10 years, and indeed recent experience would seem to support this. We believe therefore that our cap performance in part reflects a structural improvement in our portfolio rather than purely a cyclical outcome. Our business model is underpinned by deliberate strategy of portfolio balance and we place the same value on earnings generated through cap resilience as we do any other dollar generated in the P&L. The slide also highlights that our maximum event retention has reduced 40% in two years, and that's as a result of a reduction in the attachment point for our main CAT reinsurance program. I wanted to put these retentions now in some context. In the US, it would now take a $75 billion East Coast hurricane to reach our 240 million maximum retention. In the past 10 years, we've seen only one event hurricane in 2022 that would have hit this level. Indeed, at that size, we're taking north of a one in 10 year event. For events in Europe or Australia, the likelihood is even more remote. I'm now going to turn to our divisional updates in slide 15. North America delivered a combined ratio of 97.3%. That's broadly in line with the prior half. But there are a few ups and downs that I'd like to take a moment to unpack. The commercial portfolio continued to perform well and the crop current year result was broadly steady at 94%. The performance of specialty however was of course impacted by accidents and health. Rate increases were strong in the high single digits underpinned by A&H at over 20%, aviation at over 10% and specialty casualty at 8% with construction and healthcare only a fraction behind this. Catastrophe costs in North America were materially below allowance and better than the prior year. PYD has been favourable, evidencing the strength of reserves and is largely attributable to releases from crop and a number of commercial and specialty short-tail portfolios. Moving to international, it's been another solid half for this business. That's despite allowances for the situation in the Middle East, with the combined ratio improving one point to 91.6%. Growth momentum remains impressive, with X-rate growth around 11%, and rate overall was modestly negative, really driven by Lloyd's portfolios referenced earlier, which were down mid-single digits. Most other segments, however, were broadly flat, and importantly, across international, terms and conditions are stable, and rate adequacy remains attractive. International has benefited from CAT running below allowance, and this has broadly offset some reserve strengthening in our energy portfolio and certain liability classes across Europe. On the topic of European liability, the lost portfolio transfer announced today will address a portfolio which has had persistent strengthening over several years. Finally, on Australia Pacific. GWP was broadly stable compared with the prior period, as was rate, which strengthened in the 2-3% range. We're pleased with the underwriting result, demonstrating resilience in what was another heavy cat half, with significant bushfires in January and numerous storm and flooding events. Favourable prior year development continued, with releases in short-tail commercial alongside CTP and LMI. I'm going to turn now to slide 16 to say a little bit more on crop. It feels an opportune time for an update on our crop business. It's been roughly two years since we reset our strategy. Starting with growth, while GWP growth has been very strong, this highlights the impact from product extensions alongside a more modest level of organic growth in the core MPCI book. Product extensions are a relatively new feature which allow farmers to increase revenue protection up to 95% from typical levels of around 75%. While product extensions have been calibrated to favourable economics and indeed performed reasonably well in recent years, it remains a new product and given our priority of managing uncertainty, we've chosen to cede the majority of growth to the federal fund. Going forward, we expect product extension uptake to moderate and for overall GWP growth to revert to more normal levels. Exposure across our priority versus non-priority states has now shifted materially, an important change given that the de-risked states had weighed on performance in recent years. This change has been driven by not only managing gross exposure, but also by increasing our session of non-priority states to the federal fund. This, alongside the product extension strategy, gives a steady increase in sessions you can see in the chart, and ultimately why crop net insurance revenue growth has lagged GWP growth. We expect sessions to the US fund to remain more stable from here, with modest reductions to third-party reinsurers in 2027, resulting in net insurance growth that should begin to mirror or even outstrip GWP growth. We've also reduced our exposure to private products. These products are ancillary purchases like hail coverage sold alongside the MPCI policy. The business tends to be less profitable and you can see today we write 40% more MPCI per dollar of hail. The overall portfolio today is materially different to the one we were managing just a few years ago. These actions have improved our confidence in achieving plan and reduced the level of downside risk. Turning now to our investment result on slide 17. Investment performance remains solid, with a return of around $830 million in the first half. This is despite elevated geopolitical and macro uncertainty. Risk assets have returned around 7.2% on an annualised basis, while fixed income returned around 4% in the half. The core fixed income portfolio exited the period at around 4.1%, while futures markets currently imply the fixed income yield will exit 2026 at around 4.3%, and total duration remains steady at around 2.5 years. Risk asset returns have been resilient, supported by strong returns across equities and infrastructure assets. We do have a very modest private credit portfolio which delivered a positive return and is well diversified with highly conservative lending. Funds under management increased 2% to $36.6 billion, while asset mix has remained unchanged with high quality core fixed income representing 85% of the portfolio. Moving now to our key theme of balance sheet and capital management on slide 18. It was pleasing to complete our first buyback in several years, returning $450 million to shareholders. Hopefully this reinforces our recent statements about a highly disciplined and transparent approach to capital allocation. Our APRA PCA multiple was 1.82 times at the end of the first half, or 1.78 times when you adjust for the interim dividend. In the second half, the sale of our trade credit and surety business is expected to complete at an anticipated pre-tax gain on sale of around $70 million. We also announced a reinsurance transaction this morning including a lost portfolio transfer covering around $1.6 billion of reserves relating to exited US middle market and workers' comp portfolios not in prior transactions in addition to a European liability book. The day one cost of the reinsurance transaction is similar to the gain on sale from trade credit at around $80 million pre-tax and we booked in the restructuring line of the P&L. In addition to reducing reserve uncertainty, this gives rise to an immediate PCA benefit of around two points. The ongoing impact of the transaction is not material. The modest amount of forgone investment income is partially offset by claims discounting benefit. And the broader implications of reinvesting that capital into more productive opportunities is also supported for returns. I'll pause here and hand back to Andrew.

Thanks, Chris. No changes to note on our outlook. We're on track to achieve constant currency growth, written premium growth around the mid-single digits. We continue to target a group combined ratio around 92.5%. As you analyze today's result, we suspect some will adjust our first half combined ratio for favorable CAT and PYD. We've made some comments this morning as to why I wouldn't necessarily follow that approach, but nonetheless, we provided a simple bridge here to our guidance, touching on the issues Chris noted earlier. Our first half ex-cat was a little overstated by the ANH onerous contract provision, and we think the Middle East impacts in half one reflected many claims, but we see a benefit from material marine wall premium in the second half. And finally, we see improvement in underwriting across a number of cells in half two, and are focused on driving a lower expense ratio. Our medium term guidance also remains unchanged, where we expect ongoing mid-single digit growth and returns in the 15% plus range. As we said in February, underpinning this outlook is a view that investment returns track above 3%, which implies an outlook of reasonably stable combined ratio. We'll hold our usual third quarter update on November the 27th and look forward to discussing second half performance then. With that, I wanted to thank you for joining us and I'll pass back to the operator for Q&A.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To ensure that we go through all the questions, please have two questions only. If you have more questions, please re-queue. Just a moment for our first question, please. First, we have Andrej Stednik from RBC. Please go ahead.

Good morning. Thank you for taking the questions and well done on a solid result. Can I ask, firstly, just around the capital, just in terms of the six percentage points of capital you're highlighting, The relief that should come through going forward, does that equate about $750 million in Australian dollars? And is that something you potentially could seek to return to investors in early 2027?

Do you want to talk about the six points made up?

The six points, as we've highlighted, are a combination of benefits we get from the LPT, from a cap bond that we're looking at at the moment. I think that in terms of how we look at returning to investors, I think we've articulated our capital strategy is the first thing that we will look to do with it is support sustainable growth. But I think as we said a few times, as and when that is still above our target range, we will continue to look for ways to redistribute that, whether that's through buybacks or other levers.

Yeah, I mean, I think we're incredibly consistent on that. So we tend to look at the capital, Andre, at the end of the year, probably with the November board, see what the plan for 2027 is going to look like, see what profitability for 2026 is going to look like, and then see where our capital position is. As Chris said, any excess, our aim is to return it.

Just to double check, that's $750 million in Aussie dollar terms. Is that a reasonable number?

What, six points? These six points, it's going to be, it's going to be, yeah, it's going to be, that sounds like a touch high, but we can just confirm the number.

Yeah. Testing your mental arithmetic at this point. Yeah.

All good. Thank you. And again, my second question.

Sorry. Next question is Nigel Pitaway. Please go ahead.

Good morning, guys. First question is on QBE RE. I mean, you're saying you've got about $4 billion of premium now. I think there's been sort of comments that there's a target for $6 billion by 2030. So my question is, first of all, is that an aspirational target or a sort of one that... Thank you very much.

Nigel, thanks for that. That is our aim. We believe from the position we've got in reinsurance and the depth of customers we have and the breadth of the portfolio that the $6 billion is an achievable target by 2030. But it's sort of linked to the second one. If all markets completely fell off a cliff between now and then, we'd obviously focus on profitability over growth. This point in time, we can see a way to do it. We talked about how property excessive loss has been under a lot of pressure in the first half of this year, but everything else is looking okay. So definitely driving towards a larger QB re-business and $6 billion sort of puts it into the first division of the premiership of reinsurers and that's where we want to be.

I think on the point of terms and conditions, although as Andrew said, we have seen pressure coming through on rates, what we haven't seen is it translating into challenges on attachment points or broader terms and conditions.

Okay, thank you for that. Secondly, just on the crop, there's about 8.1% of PYD, I understand. What sort of drove that?

We just saw returns improve from the position we took towards the end of last year. Now, we have been aiming for being slightly more conservative in our reserving, so we don't actually see the reverse of that, of seeing the returns deteriorate. We had a good return when we announced the full year, and it looks like we held a little back because we didn't want to see any deterioration from there, but we saw the return continue to improve in the first quarter.

Okay, and then maybe just finally, I mean, what caught you by surprise on A&H? and, you know, given that you say you've got to go again in terms of pricing.

So what we had last year was, I think we did try to flag that, Nigel, at the end of the year, was where we thought we weren't getting enough rate to cover the claims inflation. So what we saw was claims inflation coming through mainly towards the end of the third and fourth quarter last year A lot of the business has already been quoted at that point. So we were quoting based on what we'd seen. And then when those claims came through, we saw that they were greater than the 20% we were putting through, probably nearer 30. And therefore we have a catch-up position in 2026. You also have to some extent rate caps and you have to renew some business because it's in the admitted market there. So that constrained what we could do. This year we believe we'll be able to catch up. The whole market is in a similar boat, not that that makes us feel any better when a business isn't performing well, but it means the market is definitely moving as one in 2026.

Thank you very much. Next we have Andrej Stanic from RBC for his second question.

Thanks so much for that. Look, my second question, can I just ask around broker-led facilities? That business has grown amazingly well in the past few years. It feels like it's 30% compound or maybe better. Going forward, should we be thinking low-teens growth, and is there any colour you can give on profitability of that business relative to the rest of the book?

So on the first one, it's a great question. We believe there are going to be more. So we've seen how the major brokers are all creating them. So we saw one major broker start much earlier, about a decade ago, and then others have done that. So we are expecting others to follow suit. We've also seen over the years, the percentage going into them has actually grown. So the broker facilities tend to have started about 10% of the overall placement and now some are getting closer to 30%. So there's been growth in two elements, more brokers doing it and the percentage growing up. But also within our QPS portfolio, we do portfolios of MGAs and we're seeing more of that happening. So we do see more growth. It's going to be very hard, Andrew, to say whether it's going to continue at 30% or not. I guess I would be surprised if it grows at that level. but being a market leader in it, we are seen as a good place to start when brokers are thinking of doing them. So good growth going forwards. From a profitability point of view, they do act a bit like an enhanced market tracker. So if the Lloyds market is performing well in total, the facilities are performing well. So they've performed, I would say, in the 80s combined ratio over the time we have been on them.

Thanks so much.

Thank you, just a moment for our next question please. Next we have Andrew Buncombe from Macquarie.

Hi guys, thanks for taking my questions. Just the first one from me, some of your global competitors have been quite vocal about growth in global data centre facilities. Can you just talk to how you're approaching those risks? but also are they going through your QPS portfolio or are they separate? Thanks.

Okay, so it's a good question. So yeah, there's been a lot of talk about data centres and the opportunity and we touched on it at the end of last year. So what we're doing, we already write some through our current underwriting teams across the globe within QBE. What we have decided to do is appoint someone to coordinate our approach to them. So Jamie Thompson, who's actually based in London, has been with the company quite a long time, he is coordinating our data center approach where we can offer lines across multiple products to this data center opportunity. So a more joined up approach of leveraging our expertise. So I think this is a great opportunity where data, wherever data centers are cropping up. We will be able to grow with that. Very hard to determine exactly how much premium is going to take place within it, but we see it as a great opportunity because it lends itself to our global footprint and the breadth of product expertise. QPS will definitely be writing lines on it because it writes a portfolio of business. So within QPS, it will write it as well. And the great beauty about QPS is it ends up having relatively small limits over many, many different things. So we will end up having that doubling up impact just as we do in all our other lines of business.

Great. And then my other one was just in relation to the FY26 combined ratio guidance, your first half accident year Thank you.

I'll hand over to Chris, but I think it was only a touch lower than where it was. We're happy with the new strategy we put in place over the past couple of years, and we saw how that came to fruition in the 2025 results. The aim isn't to make a major move in it. That's right, yeah.

We're not looking to make any major change. I think we quoted earlier that the confederation was around about 94%. It's still early days, it's quite a second half business but we haven't had, at this stage our view remains pretty positive on how that portfolio is performing as we get early views on planting conditions. Thank you.

Thank you. Next we have Siddharth Parameswaran from JP Morgan. Please go ahead.

Good morning, gentlemen. I was hoping I could just get a comment around two things. Firstly, just inflation, just how that has been tracking versus what you were saying before. I think, you know, the last comment that I remember was that there was inflation that was above rate. And, you know, maybe if you just comment maybe just geographically and also, you know, maybe particularly around inflation. and some of the key classes like property and liability.

Do you want to have a go?

I think we saw that rate for the half has come in at around about half a point. I think we expect for the full year that that remains our view for the full year. I think as you say, Sid, as we look now Inflation is tracking a little above where rate is, but we're not really seeing that translate through to a material impact on our outlook, really, or in terms of our underlying performance. I think, as we discussed in the past, the challenge for us with rates and inflation, of course it does have some impact, but it's really just one lever in our much broader suite. I think the key line, as others have called out, Thank you very much.

Okay, if I could just ask a second question, particularly about the strength of buffers then. As you said, rate over inflation, mathematically things would be getting worse, at least on your loss ratios. I think you made the comment that you always start reserving a lot of your action years very conservatively, and you start releasing after three years, presumably. Thank you very much.

Yeah, I mean, look, I think what we have seen over the past few years is our our IBNR to case ratios have been increasing fairly consistently over the last few years. But that's exactly what we'd expect as we change the reserving philosophy to holding on to ultimates for a period of three years before we release on the long tail lines. We have seen again at the half this year that we've again seen that the The ratio of IBNR to case has increased again, but some of that is also just down to mix as opposed to being purely kind of where we're setting the strength. But I think the point we're making is the moment for our ex-cat is kind of a one-way test. When we see bad news, we're reflecting it straight away. And where we're seeing good news, we're holding on to it for a period of three years. and some of what you're seeing in the release of the first half has really just been the maths of that excess that we're holding on to flowing through. In terms of the part of the The extent to which the shift between rates and inflation is eroding that, that's really something we take into account at the time of planning and at the time of setting the allowances. It's not as if we take any less prudent approach because of what we're seeing in rates and inflation versus what we would have done otherwise. I don't think you should be interpreting rates and inflation having an impact on our ability to see prior releases in the future.

Thank you. Just a moment for our next question, please. Next, we have Karen Chittney from UBS. Please go ahead.

Good morning, Andrew and Chris. My first question is just on the US. If we take our crop and even if we adjust for your onerous provision on accident and health, It does look like the first half combined ratio is still over 100% across the rest of the US portfolio. Just interested in sort of what's still driving that outcome and sort of where you see combined ratios X crop moving in the US over the medium term.

Yeah, so I think it's a really good question. So if you look at the business, crop has performed well in the first half, our commercial business has formed well, and we've had some challenges within the specialty portfolio, of which A&H is one. We've also had some challenges within financial lines within that, particularly within transaction liability. Thank you very much. So answering the question, yes, I have confidence in us getting it to a lower combined ratio than the close to 97.5 and to achieve the 15% return on capital. It probably won't achieve the combined ratios of the OSPAT business and international because it's a less capital-intensive business. We've got to continue to focus on improving that ANH, which is a Gen 1 issue. So we have to give an update as we get closer to the end of the year of do we believe we've got ahead of inflation on that and also improving parts of the financial lines business. We definitely need to improve those.

And Andrew, the sort of the action on ANH, you know, you pushed up price, but obviously a lot of that, you know, A chunk of business moved elsewhere, just giving you premium there is down. Do you envisage the same thing happening if you continue to sort of try and push price ahead of market? It sort of feels like you are trying to go ahead of market on rate, but the size of that book, which is quite big outside crop within the residual of your US portfolio might continue to shrink.

I think the difference this year is the fact that the feedback from the market is they've all recognised the problem so I don't think it will shrink if we move the rate because everybody else has to do the same. We can obviously see from some announcements the performance of their medical stop-loss businesses which are not dramatically different from ours and the view back from the broking community and clients is the market is going to move Thank you. Next, we have Freya Kong from Bank of America. Hi, thanks for taking our questions. On your broker facilities, it's very helpful for driving growth, but

I'm just wondering what your ability to maintain underwriting discipline and oversight is. Would you be worried about not being able to shield the business and facilities against a broader market downturn from here?

Yes, I think it's a really, really good question on the broker facilities. So I think in our position as leading on some of them, we can dictate what is in and what isn't to some extent. Obviously, if we dictated too much wasn't in, they don't actually work as an efficiency mechanism. So there is some control around who we follow. What lines of business are in? And we can see the data coming through. So I think that gives us enough control on them. The other element is there are a balance of a number of things. So they're not all operating in a similar way. The MGAs are definitely different. The facilities that we're writing through Lloyds may have different elements in them. So there's balance within them in total. So I think we can Thank you very much. So there's a massive alignment, I think, within the market from the customer through the broker to us to ensure they continue to work. So I feel pretty good about them in their diversified in themselves and the diversified between them.

Okay, thank you. And then second question, just on the rise of these sophisticated AI models like Mythos, which are putting corporates and governments in high alert, on cybersecurity. How has this affected your risk appetite for cyber? Thank you for joining us.

From a point of an AI point of view, our aim is to continue to cover our clients, obviously be as vigilant as possible. And we believe the rollout of AI may make clients both respond to the vulnerabilities more quickly and also the bad actors attack the vulnerabilities more quickly. So the jury's out on how that works. Key is having balance in the portfolio, not too much of it, good reinsurance program. So having a stop loss program against it, having all those elements. So if things deteriorate, it has a limited impact on the overall group results. So obviously thinking it through, do we need to adjust product on the back of it? So far, we're comfortable where we are.

Thank you. Just a moment for our next question, please. Next, we have Blake Donsett from Jarden Group. Please go ahead.

Hi, guys. Thanks for taking my call and questions. So I'm just looking at slide seven in the pack. It's really useful. I appreciate that. Just trying to get an idea on growth looking forward by lines from, you know, what you can see in terms of rate today. I want to get a better idea of which lines of business is Do you think you're going to target for growth over the next 12 months to help support that single-digit volume growth target while still seeing a positive mix to shape your margin as well?

So the sort of easy ones, if anything's easy, the easy ones are continuing where we've actually grown of late. So we talked about QBRE with the aspiration of $6 billion. We talked about the portfolio solutions where we think more brokers will come up with them and there'll be opportunities within the MGA world. Talk about cyber. Despite the issue in the US, our portfolio is relatively small, so we can grow from there. And the crop business, now we have it in a good position. The drive forward will be to add crop business that actually improves the overall net premiums we're retaining, rather than this supplemental product where we've reinsured most of it. So those are the relatively straightforward ones that we can actually see growth into the foreseeable future. What we're also trying to do is leveraging our position through distribution. We've talked about this before, about building deeper relationships with fewer distribution partners, and that gives us potential growth across a wider swathe of business. So a great example of this is we're focused very much on our top seven distributors, our top seven brokers in 2026 and beyond, and we've seen greater growth with them on average than we have with the smaller broker partners. So we want to continue to do that because that gives us an opportunity of working closely with them. Where do they see opportunities? Where do we see opportunities aligning our appetite and expertise and growing with them? And that's been a change over the past two to three years as we've had a group head of distribution getting us to focus on that. So that's quite broad. I don't know if Chris you have anything to add.

The only thing I'd add is, and hopefully you do find that chart helpful showing where we're growing and contracting, but if we sort of look around the world in North America and Australia Pacific, if we sort of think about that rate inflation dynamic, we're kind of seeing in those regions that rates and inflation are really Thank you very much.

In terms of lines where you Sorry go on then Andrew I was going to say I wanted to add one other thing which is the modernisation programmes we have in place particularly here in the OSPAT business so we've had our first launch of that this year and that ultimately is going to make us move more quickly in this market which would make it easier to do business with and gives us an opportunity to grow So are you going to add something?

Yeah, no, I was just going to take the flip side as well. Just, you know, areas where you're thinking of shrinking going forward. Obviously, Living Western Workers' Comp and the US has been signaled and it looks like there's some shrinkage in property as well. And your peers are talking to walking away from property business because of rate adequacy as well. I'm just trying to get a feel for where those lines are.

Yeah, I mean, I think definitely property will be down if Rates continue as they are going forwards in total. There are certain areas which are fine, but overall I could see property continue to reduce. We could see some of the Lloyds business continue to reduce if the rate pressure in some of the lines aren't that great. But most are not falling a lot at this point. Other than property, most lines are not falling a lot. It could be in a stable position. So I haven't got a lot of ideas of where we're going to reduce. Probably it's going to be very similar to where we are currently reducing.

Thank you. Next, we have Andrew Adams from Baron Joey.

Hey, guys. Just first one on the expense ratio. We did have a target of 12% in 26 and lower in out of years. Is that still the case?

I think 12% remains absolutely our target. We're going to be working towards getting either there or very close to there by the end of the year. At the first half, the expense ratio we're printing, we recognise, is higher than that. There's been a little bit of Australia dollar movement that has impacted that, so we get a bit of an FX impact. There's an impact from a TEPL point of view on CTP business. and also just the continued investment spend. But the guidance we gave around targeting a 12% for the end of 26 remains our target. Whether we'll get there exactly, we'll see over the second half.

Sorry, for the end of 26 or for all of 26? I interpreted it as in 26. Are you saying an exit rate of 12?

No, in 26. So for the full year, our target remains 12%. As I say, whether we get there, we'll see over the remainder of the second half.

Yeah, cool. And then just on, I guess, on reserves and the points we make on the three years, et cetera, just can you give us a bit more colour on international? I guess we're still getting central estimate top-ups, so just what's driving that? Like, are we getting some reserve releases, but they're being offset by top-ups elsewhere, so net top-up? It still feels like the reserve releases I'm getting are just short tail and, you know, a bit of Aussie CTP, so... Just a bit of colour on what's going on at International and then also you mentioned on the call some of the problem childs go to the LPT so just maybe a bit more detail on what's going into the LPT.

Yeah I mean look I think in terms of your point on reserving I think we You're right, we do see some portfolios where strengthening is coming through. International in particular is where we've seen those come through over the first half. But I guess the point of us building up this more resilient approach to reserving means that we can take the opportunity to strengthen portfolios of reserves where we think that's the right thing to do. But in the aggregate, as you can see, Andrew, we have had overall a reserve reduction. But I guess the bit that you can't see within the headline number is we absolutely have had releases on long-tail portfolios as well. But it's just that in the aggregate, some long-tail has come down and then we've taken the opportunity to strengthen elsewhere. What we have in the LPT we've announced today is several portfolios where we have just seen too much prior year coming through over a sustained period and it just made sense for us to just take that noise out of the result once and for all. But I guess the main point to your question is we absolutely are seeing releases on long-tail portfolios but we're also seeing long-tail portfolios we just want to take the opportunity to improve the strength, improve the robustness of where we're holding the numbers.

Thank you very much. Our next question comes from Julian Braganza from Goldman Sachs. Please go ahead.

Good morning, guys. Just following up on the LPT conversation, how much of the adverse PYD and international that we've seen, I guess, over the last five years, would that have theoretically covered? Just want to understand that point. And also, I guess, what accident years does the LPT relate to? Just want to be clear on that. And also, is this the end of the remediation program in terms of LPTs? Just want to understand those three parts of that question, please. Thanks.

That's good to say. This is the end of the remediation programme. I always hope it is. Our aim isn't to write business that we've been put into an LPT at some point in the future. But casualty reserves, if you look at the volatility of our P&L, it generally is driven by the current year underwriting, investments and our long-tail reserves. So I'd never say never to doing an LPT at some point in the future because there may be the opportunity to release capital and just take them off our balance sheet and there is that arbitrage opportunity from somebody else who can manage it better than us from a capital efficiency and investments and so on point of view. So it's not the aim to create these reserves. It's interesting the second question about which underwriting is, because these LPTs are slightly unusual in that they have an element of current underwriting on them, don't they, Chris?

Yeah, look, I think that's an important point. I mean, it probably won't share exactly the sort of dollar numbers of PYD they've driven in the past, but I guess what has been true is they've been consistent drivers of prior year development over a sustained period. I think, to Andrew's point, the... I guess these are different to some of the LPTs we've done in the past in that these are now portfolios we've made a decision and announced an intention to exit from each of the portfolios that are included within. So in some ways this is just a way of accelerating the certainty we get from exiting portfolios onto the result today. To Andrew's point, we don't feel that LPTs should be a way of managing reserves, but where we've got an opportunity to just bring finality on portfolios we're intending to move away from, it's just, I think, tidier to get them done.

But just to be very clear, it doesn't include any of the recent accident years?

It does do that for some. Because when you pull out of something, you have it up to the current day. So it does have some recent accident years. So yes, it does. That's what I'm saying. So it's a business that was still being written and we've decided to stop it. So it goes up to the current moment.

Yeah, and exactly as Andrew says, not only does it include the current accident years, but because there's also an element of unearned premium on some of this business, we've also included the unearned component as well to bring absolute finality.

Okay, got it. No, that's clear. And then just on the previous commentary on rates versus inflation, like the math of it would suggest your ability to maintain the same level of resilience in your current accident year reserving estimates I just want to get comfortable that as we sit today and you kind of outlook, are you still able to maintain that same level of strength and resilience in your current Accenture estimates? We can't see that on our side. You're talking to rate adequacy, but I just want to understand just that current Accenture estimate resilience and how you're thinking about that given the Thank you very much.

Thank you very much. Thank you very much. We've talked about A&H where A&H inflation is 30%. Some portfolios don't have any inflation at this point in time. They're not all sitting there at three and this is very much an averaging. So we can beat the average by not redoing the portfolio that's generating the average now and changing the shape of the portfolio going forwards.

Where that prudence comes from of holding on to the ultimate for three years, that's our reserving philosophy. It's not something that's kind of cycle dependent that we Thank you. Thank you for all the questions. This concludes our Q&A session. I will now hand back to Andrew. Thank you for joining us today and thank you for those questions. I hope to see some of you over the next week or so.