QBE's patient ROE turnaround is winning over fund managers at a low multiple

First Sentier Investors, Pendal Group and Paradice detail why QBE still trades cheaply despite improving returns

30 Jun 2026 · 6 min read

QBE Insurance Group has spent the past year converting a decade of patient turnaround work into a return-on-equity story fund managers say the market still prices too cheaply.

Blackwattle Investment Partners said in a Monthly Report in June 2026 that QBE was another positive contributor during the month, benefitting from both operational execution and the changed rate environment. The manager said the company reported a 7% increase in constant currency gross written premiums, with catastrophe claims running below expectations, keeping QBE on track for its targeted global combined operating ratio of approximately 92.5% for the 2026 financial year, while the prospect of higher-for-longer rates also benefits QBE via improved investment income on its substantial float portfolio.

Paradice Investment Management echoed that in a Quarterly Report in June 2026, saying the portfolio remains overweight the insurer as the pricing cycle remains favourable, following engagements with QBE ahead of its AGM covering board renewal, CEO succession, and the company's first mandatory climate report.

A decade-long ROE turnaround

The longer arc of the thesis was best captured by First Sentier Investors in an Article in August 2025, which credited chief executive Andrew Horton with a fantastic job of patiently improving returns after QBE was, in the manager's words, something of a horror story through most of 2010 to 2020 because of poor acquisitions. The manager said QBE's North American earnings in particular had moved from a 6% to 9% return on equity to 15% to 18%, describing it as a slow, patient improvement with more runway from here.

For a long period of time, we all know QBE was something of a horror story through most of 2010 through to 2020 because of some of the poor acquisitions that were made prior to that. What he's been able to do is just systematically, hasn't rushed the improvement.

— First Sentier Investors, Article, August 2025

Akambo put a similar view in an Article in November 2025, saying QBE has spent years simplifying its business, which is starting to pay off, with return on equity surging to around 16% while the stock traded around 10 times earnings with a 5% dividend yield, calling it really cheap for a top large stock.

The bull case building through early 2026

The turnaround thesis gained further support after QBE's full-year result. First Sentier Investors said in a Quarterly Report in March 2026 that QBE performed well following a solid FY25 result that exceeded expectations, reporting a combined operating ratio of 91.9%, ahead of guidance of 92.5%, alongside a 23% increase in adjusted net profit after tax to US$2.13 billion. The manager said catastrophe losses of US$751 million came in well below the company's US$1.16 billion allowance, with management reaffirming FY26 guidance and its medium-term target of a 15%-or-higher return on equity.

Pendal Group described the same period in a Newsletter in February 2026, saying CY25 insurance profit increased 18%, beating consensus by 4%, and while the beat included one-off good catastrophe and crop experience, it was encouraging to see the previously disclosed lift in ex-catastrophe claims no longer needing to reverse to meet CY26 guidance, resulting in consensus upgrades of 6% driven by strong volumes, recurring buybacks and higher investment balances.

There's a whole series of factors I think the market has underestimated that will allow them to grow earnings pretty well. And they're on a pretty low multiple.

— Pendal Group, Article, February 2026

Solaris Investment Management and Paradice Investment Management both pointed to the same tailwind in March 2026 Monthly Reports, with Solaris noting QBE is well positioned with an active on-market share buyback and earnings supported by higher bond yields, and Paradice saying the fund is overweight insurers QBE and IAG as they benefit from an insurance hardening pricing cycle.

Where scepticism has lingered

Not every read of QBE's numbers has been uncritical. Pendal Group flagged in a Newsletter in December 2025 that QBE's third-quarter update appeared positive at first glance, with flat pricing growth, mid-single-digit revenue growth and a $450 million buyback, but said the quality of the result was viewed as poor, with a benign period for catastrophes not flowing through to margin, implying higher claims outside catastrophes, and only partial detail from management on the cause.

Cooper Investors struck a similar note in a Quarterly Report the same month, saying the fund is underweight insurance broadly but retains a moderate overweight in QBE, with some concern that core underlying trends had deteriorated given the reliance on benign catastrophe trends and reserve releases, though it remained comfortable with the outlook given price adequacy and a new A$450 million buyback.

What managers are watching next

With the combined operating ratio guidance of roughly 92.5% reaffirmed, a medium-term ROE target of 15% or higher restated, and premium growth of 11% reported in the first four months of the AGM trading update, the managers still positioned in QBE say the remaining watch-item is whether the underlying, ex-catastrophe claims experience that worried Pendal and Cooper Investors in late 2025 continues to normalise as the pricing cycle matures.