QBE Insurance Group (ASX:QBE) executives told investors the insurer delivered a “great year” in fiscal 2025, pointing to stronger underwriting results, robust investment income and a stronger capital position that enabled increased shareholder distributions and the resumption of share buybacks.
Outgoing Group CFO Andrew Horton, joined by newly appointed Group CFO Chris Killourhy, said the company exceeded key guidance and targets, with management emphasizing improving stability in catastrophe and reserving outcomes and a medium-term focus on sustaining returns.
FY2025 results: growth, underwriting and investment performance
QBE’s combined ratio improved to 91.9%, more than a point better than the prior year and ahead of the 92.5% outlook reiterated in November. Horton said catastrophe experience and improvement in the crop business drove much of the upside versus guidance. Catastrophe costs were cited at about $750 million for the year, which management said was well below allowance, even as industry insured losses were pegged at $130 billion and the year included events such as the California wildfires and a challenging Australian catastrophe season.
Investment income was about $1.6 billion, producing a 4.9% return on QBE’s portfolio. Killourhy said risk assets returned nearly 10% while fixed income yields exited the year at approximately 3.7%.
Profit after tax was described as a record $2.1 billion, with both profit and earnings per share up around 25% year-over-year. Return on equity increased to 19.8%, which Horton said was “just shy of 20%.” The effective tax rate was 24%, which management attributed to the earnings mix skewing more toward QBE’s North American tax group.
Capital position, dividends and buybacks
QBE ended the year with a PCA multiple of 1.87, which management said remained comfortably above targets and provided flexibility for growth and capital management. Killourhy added that after the final dividend payment and adjusting for the buyback, the pro forma PCA multiple would be about 1.73.
The company declared a final dividend of AUD 0.78, taking the full-year dividend to AUD 1.09, up 25% and representing a 50% payout ratio. Killourhy said QBE increased the franking rate of the final dividend to 30%, which it expects to maintain going forward.
Horton said QBE began its first buyback in several years in late December, completing roughly $90 million in repurchases in a short pre-close window. Killourhy said total shareholder distributions, including the dividend and buyback, equated to around 65% of FY2025 profits.
In the Q&A, Horton said QBE expects to continue paying first-half dividends on a “one-third/two-thirds” basis rather than 50% of first-half profit, to reduce volatility.
Reserving, expenses and divisional performance
On reserving, Killourhy said QBE recognized a modest central estimate release of $40 million in FY2025, driven by short-tail lines plus LMI and CTP, while retaining prudence for more uncertain longer-tail lines. He said QBE was exiting the year with group reserves in the strongest position it has held for many years. In response to an analyst question, management said it had not explicitly factored reserve releases into its guidance, even though the mechanics of holding loss ratios for several years on long-tail portfolios could, all else equal, translate into releases.
The expense ratio was 12.4% in FY2025, which management said included an “elevated investment envelope” of about $300 million supporting modernization efforts, including migrating Australia Pacific portfolios to a cloud-based Guidewire platform. Killourhy said expense growth moderated to 5% from closer to 10% in recent periods, and noted QBE delivered 7% GWP growth alongside a 1% headcount reduction. Management expects an expense ratio around 12% in 2026, “gliding lower” over the medium term.
Management said all three divisions delivered margin expansion in FY2025:
- North America: Improved by over a point, with crop delivering an 88% result—its strongest in seven years—supported by strategic actions (leadership reset, recalibrated federal fund utilization, and repositioned private products) and better-than-average yields in several Midwest states. However, QBE’s U.S. specialty business posted a combined operating ratio above 100%, impacted by claims in accident and health (A&H) and aviation, plus prior-year negatives in transaction liability and underperformance in some financial lines programs.
- International: Combined ratio of 88.5%, with growth across segments. Management said catastrophe ran below allowance, offsetting some reserve strengthening in certain liability marine portfolios. International rate was described as fairly flat for the year, with low- to mid-single-digit increases in the UK, Europe and reinsurance, partly offset by softening in the Lloyd’s portfolio.
- Australia Pacific: Combined ratio improved significantly, supported by favorable reserve development across 15 of 20 lines and easing inflation, despite catastrophe costs running modestly over budget. Management said CTP rate increases implemented recently—including around 15% in New South Wales—should benefit results going forward.
Management provided more detail on A&H remediation, describing it as an attractive business through the cycle but noting higher claims severity due to rising treatment costs, medical advancements and demand for new drugs. The company said it achieved rate increases “north of 20%” at 1 January renewals (around 70% of the book), alongside tightened terms and higher attachment points. In Q&A, Horton said QBE retained “almost everything” it wanted to retain despite the pricing actions, and that in the near term the company does not want significant unit growth in the portfolio while it monitors trends.
Reinsurance, alternative capital and portfolio actions
QBE said it reduced the attachment point of its catastrophe reinsurance program to $250 million, a reduction of almost 40% in two years. Killourhy said the lower cat retentions allowed the company to modestly reduce the cat budget to $1.13 billion while maintaining sufficiency around the 80th percentile.
Management also highlighted early steps in using alternative capital. Killourhy said QBE Re launched its first catastrophe bond in 2025 and broadened coverage for 2026 to the whole group, attaching at $800 million. He also described a casualty sidecar on the QBE Re casualty portfolio that effectively quota shared around one-third of the casualty reinsurance portfolio for the 2025 underwriting year; in Q&A, he said the sidecar size was in the region of $450 million.
Separately, QBE disclosed it agreed terms to sell and exit its global trade credit and surety business, largely comprising Australian and UK trade credit operations. Management said premiums under consideration were around $200 million and the deal is expected to close later in the year, enabling capital to be recycled into core focus areas.
Outlook and medium-term targets
Horton said QBE’s FY2026 outlook is unchanged from November: mid-single-digit growth and a combined ratio of around 92.5%. Management also introduced a “medium-term” (defined as three years) outlook, calling for mid-single-digit GWP growth and group ROE trending at 15%+ over that period, assuming an effective tax rate around 25% and investment returns sustained at 3%+.
Discussing the bridge from the FY2025 combined ratio to the FY2026 guidance, Horton cited three broad drivers: lower reinsurance spend and a slightly lower catastrophe budget, an expected improvement in the expense ratio to around 12% or better, and support on ex-cat claims from pricing and portfolio actions. Management also said it expects some normalization in large claim costs and noted it lowered retention for its risk excess of loss cover for non-cat large claims from $50 million to $25 million in many instances to help manage volatility.
About QBE Insurance Group (ASX:QBE)
QBE Insurance Group Limited engages in underwriting general insurance and reinsurance risks in the Australia Pacific, North America, and internationally. It offers range of commercial, personal, and specialty products, such as commercial and domestic property, agriculture, public/product liability, motor and motor casualty, professional indemnity, workers' compensation, accident, health, financial and credit, and other insurance products, as well as marine, energy and aviation insurance products, and risk management solutions.
