QBE Faces Inflation and Catastrophe Risks Despite Strong Premiums
QBE Insurance Group reported robust 8% gross written premium growth in 1Q25, driven by strong momentum in North America and International markets, while managing significant catastrophe claims. The insurer reaffirmed its full-year outlook despite ongoing market challenges.
- 1Q25 gross written premium growth of 8% on a constant currency basis
- Approximately $100 million drag from non-core line run-offs in North America
- Catastrophe claims of ~$420 million in first four months, including LA wildfires and Queensland floods
- Investment portfolio grew to $31.6 billion with positive returns despite market volatility
- FY25 outlook confirmed: mid-single digit premium growth and combined operating ratio around 92.5%
Strong Premium Growth Despite Headwinds
QBE Insurance Group has kicked off 2025 with a solid performance, reporting an 8% increase in gross written premiums (GWP) on a constant currency basis for the first quarter. This growth was primarily fueled by ongoing momentum in the North America and International segments, which offset a $100 million drag from the run-off of non-core lines in North America. Excluding crop insurance and exits, premium growth remained robust at 8%, underscoring broad-based demand across QBE’s global markets.
Navigating Catastrophe Claims and Market Volatility
The quarter was not without challenges. Catastrophe claims reached approximately $420 million in the first four months, driven by significant events such as the Los Angeles wildfires, Queensland flooding, Cyclone Alfred, and convective storms in North America. These claims are within QBE’s first-half catastrophe allowance of $549 million, reflecting prudent risk management amid a volatile natural disaster environment.
On the investment front, QBE’s funds under management grew to $31.6 billion, supported by favourable interest rates and strong risk asset performance. The core fixed income yield slightly declined to 4.1% from 4.3% at FY24, but the portfolio demonstrated resilience amid increased market volatility following US tariff announcements in April. Risk assets now constitute around 15% of the portfolio, balancing growth potential with conservative positioning.
Outlook and Strategic Focus
QBE reiterated its full-year guidance, expecting mid-single digit constant currency premium growth despite the ongoing $250 million drag from non-core run-offs in North America. The group aims to maintain a combined operating ratio near 92.5%, reflecting disciplined underwriting and cost management. The company also highlighted its focus on proactively managing inflationary pressures and potential trade disruption risks, which remain key considerations in the current global economic landscape.
Looking ahead, QBE plans to release its half-year results on 8 August 2025, which will provide further clarity on the sustainability of premium growth and underwriting performance amid evolving market conditions.
Bottom Line?
QBE’s strong premium growth and disciplined risk management set the stage for a resilient 2025, but rising catastrophe costs and inflationary pressures warrant close investor attention.
Questions in the middle?
- How will QBE manage the ongoing drag from non-core line run-offs in North America?
- What impact could escalating inflation and trade disruptions have on underwriting margins?
- Will catastrophe claims exceed current allowances as the year progresses?
