Strong TRV 2Q26 underwriting performance provides positive read-across for QBE

Overview

This report uses the 2Q26 update from Travelers Cos. (TRV) as a read-across analysis for QBE Insurance Group. Goldman Sachs believes that the underlying combined ratio, underlying loss ratio, prior-year reserve development and catastrophe loss performance of TRV's commercial insurance segment were all strong, providing positive signals for QBE's underwriting profitability, reserve quality and risk exposure. The report also notes that commercial insurance pricing is slowing, particularly in property, while renewal premium changes excluding property were broadly stable sequentially.

Core views

The core view is that TRV's 2Q26 commercial insurance underwriting metrics were better than market expectations, indicating continued resilience in the commercial insurance loss environment and reserve performance; this provides a positive read-through for QBE, which also operates globally in commercial insurance and has North American exposure. Goldman Sachs maintains its Buy rating on QBE, believing that group pricing remains adequate, that the company can deliver organic growth in an adequate pricing environment, that business diversification helps reduce volatility, and that the valuation does not fully reflect the strength of its ROE.

Analysis framework

The report applies a peer read-across approach, using TRV's disclosed 2Q26 commercial insurance underlying COR, underlying loss ratio, renewal rate change, renewal premium change, retention, new business growth, catastrophe losses and prior-year reserve development to assess underwriting trends, the pricing cycle and reserve risks for QBE's related businesses. For valuation, Goldman Sachs' QBE target price is based on an equally weighted P/NTA and DCF valuation; the P/NTA multiple is determined by the regression relationship between sustainable ROTE and P/NTA across its financial coverage universe.

Methodology notes

• Peer Read-acrossTRV 2Q26 read-across

  Assessing QBE's underwriting environment through TRV's commercial insurance performance

  TRV and QBE both have commercial insurance operations and North American risk exposure. Therefore, TRV's performance in underlying loss ratios, reserve development, catastrophe losses and pricing changes can serve as reference signals for QBE's underwriting profitability and risk trends.

• Valuation methodsEqual-weighted P/NTA and DCF valuation

  The target price is jointly determined by P/NTA and DCF methods

  Goldman Sachs discloses that QBE's 12-month target price of A$27.00 is based on an equally weighted P/NTA and DCF valuation, with the P/NTA multiple derived from the regression relationship between P/NTA and sustainable ROTE across its financial coverage universe.

• Factor FrameworkGS Factor Profile

  Comparing stock characteristics through growth, financial returns, valuation multiples and composite factors

  Goldman Sachs' factor framework compares individual stocks with the market and industry peers using growth, financial returns, valuation multiples and composite metrics. For financial stocks, key metrics include EPS, revenue growth, ROE, and P/E, P/B and P/D.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• QBE Insurance Group (QBE.AX)

  Core research subject

  Strengths

  A global commercial insurance platform covering Australia Pacific, International and North America; Goldman Sachs believes pricing remains adequate, organic growth is strong, business diversification enhances stability, and the valuation does not fully reflect the strength of ROE.

  Weaknesses

  North American profitability, the commercial insurance pricing cycle and reinsurance costs remain key uncertainties.

  Comparison

  TRV's 2Q26 commercial insurance underwriting results are used as a positive peer read-across for QBE, particularly for underlying loss ratio, reserve and catastrophe loss performance.

  Risks

  Commercial premium pricing falling materially below loss cost inflation, claims inflation and persistent catastrophes, renewal reinsurance costs exceeding expectations, weak North American profitability, and interest rates and yields below expectations.

• Travelers Cos. (TRV)

  Peer read-across company

  Strengths

  2Q26 commercial insurance underlying COR and underlying loss ratio were better than expected; reported COR was supported by favourable reserve development and moderate catastrophe losses, while core ROE reached 24.9%.

  Weaknesses

  Renewal rate growth slowed, competition in property insurance intensified, and national property premiums declined.

  Comparison

  TRV's strong underwriting performance provides a positive read-through for QBE, while the slowdown in property pricing also indicates marginal cyclical pressure across the industry.

  Risks

  Further weakening in pricing, a rebound in catastrophe losses, reduced reserve conservatism or renewed deterioration in the loss environment.

Key data

• TRV commercial insurance 2Q26 underlying COR88.2%Better than the VA consensus estimate of 89.4% and slightly better than 88.3% in the same period last year.
• TRV commercial insurance 2Q26 underlying loss ratio57.9%Improved from 58.4% in the same period last year by 50 bps and was 170 bps better than consensus expectations.
• TRV commercial insurance 1H26 underlying loss ratio58.6%Unchanged from 1H25, indicating continued strength in the underlying loss ratio.
• TRV commercial insurance 2Q26 reported COR86.8%Supported by relatively moderate catastrophe losses and favourable prior-year reserve development.
• Catastrophe loss impact4.3%Relatively moderate CAT impact in 2Q26, measured as a percentage of NEP.
• Favourable prior-year development5.7% of NEPPrimarily from workers compensation and commercial property.
• TRV commercial insurance renewal premium change4.8%Below 5.7% in 1Q26 and 7.6% in the same period last year, reflecting slower renewal rate growth.
• TRV commercial insurance renewal rate change1.9%Below 3.1% in 1Q26 and 5.1% in the same period last year, driven mainly by property.
• TRV commercial insurance underlying net premium growth5%Growth was achieved in 2Q26; national property premiums declined amid intensifying competition.
• TRV new business$805m, up 8% year over yearNew business was strong, with retention at 86%, above 85% in the same period last year.
• TRV core ROE24.9%Core ROE performance was strong in 2Q26.
• QBE target priceA$27.00Goldman Sachs' 12-month target price, based on an equally weighted P/NTA and DCF valuation.

Impact & implications

The report has positive investment implications for QBE: TRV's underwriting performance supports resilience in underlying commercial insurance profitability, while reserve releases and relatively moderate catastrophe losses reduce concerns about loss ratio deterioration. However, slowing property insurance pricing indicates marginal weakening in the pricing cycle, requiring continued monitoring of whether pricing remains sufficient to cover loss cost inflation.

Risks

• Commercial premium pricing cycle momentum is materially weaker than loss cost inflation.
• Claims inflation and catastrophe events persist.
• Reinsurance costs at renewal exceed expectations.
• North American profitability remains persistently weak.
• Interest rates and investment yields fall below expectations.
• Intensifying competition in property insurance leads to further price softening.

What to watch

• Whether QBE's underlying loss ratio and underlying COR continue to improve in subsequent results.
• Whether commercial insurance renewal rates remain sufficient to cover loss cost inflation.
• Whether renewal premium changes in non-property businesses remain stable.
• Whether North American profitability and reserve development improve.
• The impact of catastrophe losses and reinsurance renewal costs on COR.
• Whether the strength of QBE's ROE can continue to support valuation re-rating.