QBE is finally becoming boring. That could be good news for investors

QBE Insurance Group (ASX: QBE) has spent much of the past decade trying to become a more predictable insurer. Its latest result suggests that work is paying off, even if investors weren't entirely convinced.

Adjusted profit rose 4% to US$1.03 billion, gross written premium increased 6%, and return on equity reached 17.7%. But the combined operating ratio of 92.8% leaves some work to do in the second half to meet QBE's full-year target of approximately 92.5%.

For Justin Koonin from Allan Gray Australia, which owns the stock in its managed portfolios, the bigger story is how much QBE has changed.

"I think 10 years ago people were very used to negative surprises, whereas today there's a lot more consistency in the results. If they say they're going to deliver something, they're probably going to deliver it."

The question now is whether that consistency can continue, particularly as premium pricing moderates and expectations rise.

Key results – 1H26

• Adjusted NPAT: US$1.03 billion, up 4%
• Gross written premium: US$15.14 billion, up 6% in constant currency terms
• Combined operating ratio: 92.8%, unchanged from 1H25
• Adjusted ROE: 17.7%, versus 19.2% in 1H25 and comfortably above QBE's 15%+ medium-term target
• Insurance profit: US$1.21 billion, up from US$1.16 billion
• Insurance profit margin: 12.6%, down from 13.1%
• Net investment return: 2.3%
• Interim dividend: 33 cents per share, up 6%
• APRA PCA multiple: 1.82x, or 1.78x pro forma after the dividend
• Share buyback: A$450 million completed in April
• FY26 outlook: Combined operating ratio of approximately 92.5% and mid-single-digit constant currency GWP growth reaffirmed.

Do you currently hold QBE and what is your rating?

We do own the stock. We don't have ratings per se, but we own it and we wouldn't own it if we didn't think it was good value.

What matters from the results?

When you're looking at an insurer, you divide its earnings into two buckets.

The first is its underwriting result, so how much it makes from its insurance. That's expressed through what insurers call the combined operating ratio, which is basically the percentage of the premium that gets paid back to clients.

In this case, they guided for the full year at 92.5%, and for the half it was 92.8%. So effectively you've got around seven and a half per cent profit. 

That's pretty good, and if an insurer can deliver that over an extended period, I think that would genuinely be perceived as pretty positive.

The other bucket is its investment results. Insurers get paid premiums in advance and might not have to pay them out, depending on the line of insurance, for a few months or a few years. They can invest that money in the meantime, so they have this big pot of funds, the insurance float, which they invest.

The return they get on those funds is highly dependent on interest rates because they're typically investing in bonds and similar instruments, with some equity exposure.

Often people invest in insurers as an exposure to interest rates, so that's something you need to watch and normalise over time for where you think interest rates will be.

How do those outcomes affect the outlook?

On the insurance side, it's been a very long journey for QBE. We've held it for close to 10 years now, and what we've seen is much greater stability in the results.

I think 10 years ago people were very used to negative surprises, whereas today there's a lot more consistency in the results. If they say they're going to deliver something, they're probably going to deliver it.

I think that's why the share price is in the $20s, whereas you could have bought it for half that or less not that long ago.

We're seeing more consistency, but obviously that needs to continue. There's always a risk that it doesn't. If people change their expectations and think everything's going to be fine and it's not, that's where you can have a problem.

On the investment side, you have to take a view on where long-term interest rates are going to be. That's hard to know, but they're probably a little bit higher than one might have expected at this point.

You probably want to take a view on how expensive or cheap this company is with investment returns somewhat below where they currently are.

What should investors be paying attention to as the story unfolds?

It's those same two buckets, but one thing we need to be careful about is QBE's ambition to grow its gross written premium at mid-single digits. It's been around 6% per annum over the past few years.

An insurer can always grow its premium. They can write as much insurance as they like, but some of that growth might be into unprofitable lines. That's the danger, where you see a company growing really big but actually becoming less profitable.

The challenge for QBE is going to be whether they can grow as they say they're going to grow without compromising their underwriting standards.

If you'd asked investors five or 10 years ago whether QBE would be able to do that, I think the answer probably would have been no because there's a history of growing really fast and it all just fell apart.

I think they are increasingly demonstrating their ability to do that and to be consistent and selective about where they're growing.

The thing about a diversified company like QBE is they can be quite careful about which areas they're growing in. It doesn't mean they have to grow 6% across the board, and that's what gives some credibility to the claim that they can do it without compromising their underwriting quality.

But it's something that has to be watched because it's not something they've demonstrated the ability to do for very long in the past.

QBE has also become much more granular in managing its portfolio and has divested a number of businesses. Back in the 2000s and early 2010s, the company acquired extensively. It looked great for a while, but many of those businesses were not profitable and it took years to unravel.

They're now at the stabilisation stage, and they're certainly much more stable than they were.

What could you be wrong about?

We've had a number of fairly consistent results that I would describe as steady, even boring.

Actually, boring is what you want from an insurer.

The risk is complacency. People assume that's what's going to happen into the future and then we all miss something. It's the bus that you don't see that kills you.

So the question you always have to ask is what's priced in. QBE doesn't seem expensive, but it's definitely not as cheap as it was.

I think what's priced in for the future is reasonable performance and no more big missteps. If we do get some big missteps, I think the company will pay the price.