Key Highlights

• A figure below 100% means the Underwriting itself is profitable.

• For the half year to 30 June 2026, announced on 14 August, QBE reported adjusted net profit after tax of US$1,033 million, up 4% from US$997 million.

• Adjusted Diluted Earnings per Share were 97 US cents.

• Gross Written Premium reached US$15,137 million, up 6% in constant currency.

What should investors in QBE Insurance Group (ASX:QBE) be watching as the insurer approaches its next trading update? The short answer is whether premium growth, pricing and catastrophe costs are still tracking the targets management set in August, when it described a "encouraging start to 2026".

What QBE does and how it earns

QBE is a global general insurer and reinsurer reporting in US dollars while listing in Australia. It writes commercial, specialty and some personal lines through three divisions: North America, International (which includes the Lloyd's syndicate and European operations) and Australia Pacific.

Two things drive earnings. The first is underwriting profit, measured by the combined operating ratio: claims plus expenses as a share of net earned premium. A figure below 100% means the underwriting itself is profitable. The second is Investment income, because insurers hold premiums in largely fixed income portfolios until claims are paid.

The first-half 2026 result

For the half year to 30 June 2026, announced on 14 August, QBE reported adjusted net profit after tax of US$1,033 million, up 4% from US$997 million. Adjusted diluted earnings per share were 97 US cents. Gross written premium reached US$15,137 million, up 6% in constant currency. Excluding the Crop Business and non-core exits, growth was 4%.

The combined operating ratio was 92.8%, unchanged from the prior corresponding period. Adjusted Return on Equity was 17.7%, down from 19.2% but above the group's medium-term aim of 15% or more. Net investment return was US$828 million, an annualised 2.3%.

The Interim Dividend was 33 Australian cents per share, about 30% franked, representing a 33% payout ratio.

Divisional picture

QBE's mix matters because each region has a different claims environment, pricing cycle and regulatory backdrop.

The divisions told different stories. International wrote US$7,173 million of premium at a combined ratio of 91.6%, improved from 92.5%, with ex-rate growth of 11%. Australia Pacific wrote US$2,858 million at 88.2%, compared with 86.8%, as higher catastrophe claims, mainly from the January bushfires, were partly offset by favourable reserve releases.

North America was the weaker spot. Premium was US$5,109 million and the combined ratio was 97.3%, against 97.2%. The company pointed to elevated industry claims Inflation in Accident & Health as the cause of higher current-year claims.

Catastrophes, reserves and capital

Catastrophe claims were 4.7% of net insurance revenue, down from 5.4% and comfortably below allowance. Middle East events cost US$75 million, with a further US$50 million or so of associated large losses sitting in attritional claims. The full-year catastrophe allowance is about US$1,130 million.

Prior-year claims development was favourable by US$403 million, or 4.2% of net insurance revenue. Reserve releases of that kind support reported profit, but they depend on past claims experience and are not guaranteed to recur in future periods.

On capital, the regulatory prescribed Capital amount multiple was 1.82 times, against a stated target range of 1.6 to 1.8 times, compared with 1.87 times at the end of 2025. A A$450 million buyback was completed in April. QBE also gave notice to redeem about A$500 million of Tier 2 notes on 25 August 2026, which management said would reduce the multiple by roughly four points pro forma.

Portfolio changes under way

QBE announced a US$1.6 billion loss portfolio transfer, a deal in which legacy claims liabilities are passed to another party. It is expected to add about two points to the capital multiple but remains subject to regulatory approval. The company also plans to sell its Trade Credit business in the second half of 2026. Whether either transaction completes on those terms, and how quickly, is an item to monitor, as both affect capital and the group's earnings mix.

Outlook and sector conditions

For 2026, management guided to mid-single-digit constant-currency premium growth, a combined operating ratio of about 92.5% and investment returns above 3%, supported by a core fixed income exit Yield of 4.1%. Over the cycle it targets a ratio in the low-to-mid 90s and return on equity of 15% or more.

Sector attention has centred on whether commercial insurance rate increases are slowing. Premium rate momentum therefore remains a key datapoint for the update.

QBE's scale, Diversification across regions and lines, and exposure to both Lloyd's and regulated Australian markets are competitive strengths.

Risks and what comes next

The principal risk for any property and casualty insurer is claims volatility. Hurricanes, floods, bushfires and other catastrophes can exceed allowances in a single quarter, and large risk losses are hard to forecast. QBE's reserves are another uncertainty: if claims inflation, especially in US casualty and health lines, outpaces assumptions, adverse development could offset the benefits of recent releases.

Investment returns carry rate and credit risk, and the group's US-dollar reporting means currency movements affect Australian-dollar translation of earnings and dividends. Regulatory approval for the loss portfolio transfer, and the pace of premium growth in North America, also bear watching.

The next scheduled catalysts are the reported third-quarter update on 27 November and the full-year 2026 result, expected in February 2027. Investors will be looking for confirmation that the combined ratio is tracking close to 92.5%, that premium growth remains in the guided range and that catastrophe costs stay within allowance.