QBE Insurance Group "A harder climb ahead as cycle softens" (Neutral) Chidgey

Research evidence excerpt

QBE Insurance Group "A harder climb ahead as cycle softens" (Neutral) Chidgey

Cons.

12/26E 1.35 1.41 5 1.38

Reserve releases unlikely to counter margin pressures 12/27E 1.43 1.43 0 1.43

While reserve releases can offer COR support as the cycle softens, our review suggests 12/28E 1.45 1.46 1 1.47

limited capacity given: (1) US (~15% of reserves) industry benchmarking reveals QBE's

Kieren Chidgey

surplus has moderated since FY22 despite gross top-ups, (2) International (~60% of

Analyst

reserves) redundancy is less evident given declining reserve/premium ratios despite four kieren.chidgey@ubs.com

years of top-ups, and (3) APAC (~25% of reserves) releases driven by CTP and LMI could +61-2-9324 2820

be harder to sustain. Furthermore, LPT deals also reduce potential P&L support, leading

Shreyas Patel, FIAA

us to allow for only modest releases of ~$50m pa or ~0.25% of NEP.

shreyas-k.patel@ubs.com

US turnaround ex-Crop remains a challenge in softening market +61-2-9324 2821

Divisionally, QBE North America (QBE NA) remained a significant drag on the FY25 group Fraser Noye

COR (97.7% vs <90% in International & APAC) despite an excellent Crop COR (88.1%). Analyst

Indeed, QBE NA ex-Crop reported a 103.4% COR despite benign CATs with an AY fraser.noye@ubs.com

attritional COR still >100% excluding Accident & Health (120% COR). Whilst 1Q US stat +61-2-9324 3353

accounts point to a better start to FY26E on CORs (benign CATs, low expense ratio), the

outlook remains mixed considering: (1) 1Q GWP declined 9% ex-Crop (+17%) as QBE

pulled back in key lines, and (2) an intensifying El Niño raises short-term Crop risks.

Relative valuation gap to peers has closed

Allowing for 1H26 investment marks and below-budget CATs (UBSe -$80m), our EPS

lifts 4.5% in FY26E.