• Headline Growth: 3%, with underlying growth of around 9% excluding exited lines and crop.
• Combined Operating Ratio: 93.1%, improved by around 2 points, beating the plan of 93.5%.
• Investment Income: Record total income of around $1.5 billion, representing a return of almost 5%.
• Return on Equity (ROE): 18.2%, the highest in well over a decade.
• Dividend: Final dividend of $0.63, bringing the full year dividend to $0.87, a 40% increase from the prior year.
• Gross Written Premium (GWP): $22.4 billion, up 3% over the prior period, closer to 9% excluding crop and business exits.
• Adjusted Net Profit: $1.73 billion, up almost 30%.
• Expense Ratio: Increased to 12.2%, reflecting higher change spend for modernization programs.
• North America Combined Ratio: 98.9%, with crop combined ratio around 99%.
• International Combined Ratio: 88.7%, improved by around 1 point.
• Australia Pacific Combined Ratio: Improved by around 1.5 points to 92%.
• Capital Position: PCA multiple at 1.86 times, with a core equity tier one ratio of 1.31 times.

• Warning! GuruFocus has detected 5 Warning Signs with ASX:ECF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• QBE Insurance Group Ltd (QBEIF) reported a headline growth of 3%, with underlying growth of around 9% when excluding exited lines and crop.
• The company achieved a combined operating ratio of 93.1%, which is an improvement of around 2 points and better than the planned 93.5%.
• QBE Insurance Group Ltd (QBEIF) delivered a record investment result with a total income of around $1.5 billion, representing a return of almost 5%.
• The return on equity was 18.2%, marking the highest in well over a decade for QBE Insurance Group Ltd (QBEIF).
• The company announced a final dividend of $0.63, bringing the full-year dividend to $0.87, which is 40% higher than the prior year and represents a full-year payout ratio of 50%.

Negative Points

• The crop insurance segment underperformed with a combined ratio of around 99%, which was worse than anticipated.
• The expense ratio increased to 12.2%, reflecting higher change spend to support modernization programs.
• There was a restructuring charge of $147 million, including costs associated with the exit of North America Middle market.
• The company experienced reserve strengthening in certain international liability and reinsurance lines.
• The North American non-core segment is expected to continue incurring losses, with a projected underwriting loss of around $100 million in 2025.

Q & A Highlights

Q: Can you elaborate on the target growth areas and which regions and lines of business are considered attractive for growth? A: Andrew Horton, CEO: We aim to grow across most lines, with technical pricing remaining favorable. Specifically, we see growth potential in the reinsurance market (QBEE), facilities business, and the US market, despite challenges in cyber. We are also looking to expand in areas like algorithmic underwriting and facilities with brokers.

Q: With a strong capital position, is there a possibility for the dividend payout to increase to 60% in 2025? A: Andrew Horton, CEO: We assess dividend payouts towards the end of the year based on growth prospects, performance, and capital position. While there is a possibility for an increased payout, it depends on 2025's performance and market conditions in 2026. We prioritize reinvestment if market opportunities are favorable.

Q: Can you provide a breakdown of the expected GWP growth between rate and volume, and the contribution from delegated authority facilities? A: Andrew Horton, CEO: We anticipate a 3-4% rate increase in 2025, with retention rates in the mid to high 80s. Facilities business, which is not delegated authority, is expected to grow, with current facility business around $1.2 billion.

Q: How will you define surplus capital, and is it assessed only at the end of the year? A: Andrew Horton, CEO: Surplus capital is assessed post-dividend distribution, typically at the end of the year. While it's primarily a full-year consideration, we remain open to mid-year assessments if market conditions warrant it.

Q: What actions are being taken to improve the crop business performance, and what is the expected combined ratio for this segment? A: Andrew Horton, CEO: We are optimizing the balance in our crop book and adjusting our approach to bespoke products like hail. The target combined ratio for crop in 2025 is around 93-94%, with ongoing efforts to improve balance and performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.