Once maligned, QBE is now firing on all cyclinders

Please note: this interview was filmed on Wednesday, 26 February 2025. 

There was a period through the 2010s when QBE was on struggle street. Some misadventures into other geographies and inconsistencies in financial performance meant the share price spent most of the decade languishing below $10. 

Those days, however, appear to be long gone. In the past year, QBE reported a record $1.5 billion in investment revenue, whilst also posting a combined operating ratio (COR) of 93.1%

COR is the metric insurers use to measure efficiency - the lower, the better as it means the company is collecting more in premiums than paying out in claims and operating expenses. A COR in the 90-95% range is considered healthy and stable. And while the number itself is solid, QBE Group CFO, Inder Singh, is rightfully proud of the consistency with which the company has been delivering it. 

"We're increasingly building a track record of being more consistent around that. So I think that's a really important number", said Signh when speaking to Livewire.

Investors seem to agree, with the QBE share price reaching levels not seen since early 2010. 

On insurance premium trends, Singh acknowledged the recent double-digit increases in costs due to rising risk levels, particularly from record-breaking weather-related losses. 

However, he indicated that moving into 2025, “the rate of rate increase should start to moderate,” offering some relief to consumers. He also stressed the importance of collaboration between insurers, governments, and regulators to improve mitigation efforts and maintain affordability.

Looking ahead, Singh outlined QBE’s 2025 priorities, emphasising growth and modernisation. “The momentum at the end of 2024 has been strong,” he stated, pointing to expansion opportunities in international markets, particularly in the Lloyd’s and North American businesses. 

Additionally, he underscored the company’s focus on streamlining customer interactions, making the business “quicker to quote, quicker to assess claims.”

Make sure to watch the video or read the transcript below for all the insights. 

Sara Allen: Hello and welcome to Livewire’s C-suite Reporting Season Coverage. I'm Sara Allen, and today I'm speaking with Inder Singh, the Chief Financial Officer for QBE Insurance Group. We're going to discuss QBE's latest results and the outlook for the future. Inder, thank you so much for joining me today.

Inder Singh: Thank you for having me.

Sara Allen: To begin with, can you talk me through a couple of the key highlights from the latest annual report?

Inder Singh: So a couple of key things that really stood out for us this year was firstly our combined operating ratio, which is the main reflection of margin in our business. We reported a combined operating ratio of 93.1%. So, in essence, what that means is for every a hundred dollars of premium we collected, we made about a 7% margin. We're very proud of that because that's a strong number.

We're increasingly building a track record of being more consistent around that. So I think that's a really important number.

The other number that really stood out from my perspective was the growth number. So we grew the core part of the business about 9% year-on-year, which for a financial services company is really pleasing, and so we've got a wonderfully diverse business around the world with many products in many geographies, and we're seeing real opportunities to continue to grow the business into 2025.

Sara Allen: You just renewed your 2025 re-insurance program, were there any changes in structural cost?

Inder Singh: Yes, so we've been working with our reinsurers for a number of years, and we've got some really good, strong relationships with many of the big reinsurers around the world. So in terms of the structure of the program, it was broadly similar to 2024. The main change has been what we call a drop in the attachment point.

What that really means is, we at QBE have done a huge amount of work in improving the quality of the portfolio, so taking out some of the peak risk both in the US and in Australia, and it was really pleasing that through the reinsurance discussions, we were able to reduce our exposure to some of that by having the reinsurers attached at a lower point in the program. 

What that really validates is all the work we've done to improve the quality of the portfolio, and it gives us better coverage into 2025. 

The overall cost in terms of the margin impact was relatively modest.

Sara Allen: The last few years have seen double-digit annual growth in the cost of insurance premiums and other financial services. Last year for example was around 11%. Will consumers see some relief this year?

Inder Singh: It has been an important area of focus for us. We're obviously keen to make sure that affordability and access to insurance remains as strong as possible. The main reason prices have been going up is because the cost of risk has been going up. We are seeing just a record frequency of events, in terms of weather losses, across the world. 2024 was another record year for industry losses. So what the insurance industry, and QBE in particular, is trying to reflect is the increasing cost of risk. We've also had inflationary pressures in terms of home prices, repair costs and/or motor repair costs, et cetera, and we're trying to make sure we address those through the price increases.

But our sense is moving from '24 into '25, that the rate of rate increase should start to moderate from here.

The margins in the industry are now starting to stabilise, and hopefully we can make sure that the customers see some relief in terms of the level of increases they've seen in recent years. But there's more for us to do both as an industry, with working with the governments and regulators to make sure that things like mitigation get focused, so we can continue to make insurance an affordable product.

Sara Allen: Just following from that, to what extent does QBE actually set those premiums versus other factors?

Inder Singh: We have a lot of input into how we set the premiums. What we try and do is we assess the risk that we're writing, we try and use the latest view of modelled risk, whether it's catastrophe risk or whether it's liability risk. We then assess what we think we can earn in terms of investment returns, and all of that goes into what we think is ultimately a reasonable price to charge to deliver our target returns.

Sara Allen: So natural catastrophes like California wildfires have been an ever-present threat. How is QBE factoring this as part of your strategy going forward? How are you working with customers to reduce the risks of these events?

Inder Singh: So that's really a case in point on some of the things we've touched on already, which is the frequency of these events continues to increase. They're also happening in places where historically we probably didn't have as much population or home building. So the frequency is up, but also the impact when losses happen is more significant.

So I think continuing to work on our understanding of risk and how we price that, but also communicating more actively with the customers in terms of what can they do to help mitigate the risk, and making sure we then recognise and reward mitigation efforts. 

And I think this is where, to my earlier point, working with governments and regulators is also very important to make sure, as we think about planning, as we think about what we can do in terms of rebuilding, whether the materials we're using or the location we rebuild in, are all things that go into making the world a little bit more resilient, given the context we're now living in.

Sara Allen: What has the increasing global uncertainty meant for QBE's investments? Have you had to change the way you've positioned your portfolio to factor this?

Inder Singh: Obviously, investment volatility is ever-present - we're continuing to see that in 2025. I think importantly, we haven't changed the risk settings in our investment book. So we manage about $30 billion in assets. The risk settings are roughly 15% in risk assets, and 85% in what we call core fixed income. So that's highly rated bonds around the world.

I think the investment team has done a wonderful job managing some of the volatility, but staying very much true to our risk settings in terms of how much capital do we deploy towards investments. And having said that, in 2024, not only did we manage volatility, but we delivered a very strong result. 

The investment result was about $1.5 billion dollars - a record for the company - so we're very pleased with that.

Sara Allen: Given the proportion that's in fixed income, have you had to make any shifts in the type of fixed income that you're using, given the easing cycle?

Inder Singh: We look at really matching the duration of that book to our claims duration. So what we're not trying to do is run any mismatches across the balance sheet. So we're trying to run relatively measured risk settings, but as our claims have extended in duration, we've been able to extend the duration of the asset book a bit. And so as part of that, we've picked up a little bit of additional term premium, and that's really helped in the context of the returns.

Sara Allen: So, QBE recently announced it has redefined its key priorities for the year. Can you take us through a couple of initiatives that you think are going to generate the greatest returns or efficiency this year?

Inder Singh: I think sticking to the theme of consistency, our 2025 priorities are very similar to our 2024 priorities. We are putting a bit more emphasis on growth. The momentum at the end of 2024 has been strong. We have wonderful diversification in terms of products and geographies where we see opportunities to grow, particularly in our international business, in the Lloyd's business where we're a leading player, in the UK business, and our North American business. So some really good opportunities for us to go after in terms of growth going forward.

We're also investing meaningfully behind some of these growth initiatives in what we call the modernisation priorities. So really focusing on making the business more responsive from a customer point of view. So quicker to quote, quicker to assess claims, and really making that customer experience and the broker experience a lot more seamless. And so a big part of the ambition is to make the organisation not just more effective, but easier to do business with. 

So growth and modernisation are the two important priorities into 2025.

Sara Allen: If there was one message you wanted QBE investors to take on through this year, what would it be?

Inder Singh: It really comes down to consistency and lower volatility. We've been focusing on those things for the last two or three years. We've made great inroads, and I think there's more opportunity to continue to do that. And that consistency really applies in terms of how we go to market, in terms of the appetite we set, how we manage our employees, and some of the cultural dynamics within the organisation. And then, ultimately, all of that should result in more consistent financial results.

Sara Allen: Thank you so much for taking us through the outlook for QBE.

Inder Singh: Thank you so much.

Sara Allen: If you've enjoyed this interview, please subscribe to Livewire Markets for more in our C-suite Reporting Season Coverage. Thank you.