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.