This from GS is older, yet speaks to the same trend.

Investment income was 50 basis points, almost imperceptible. All and any gains must come from premium increases, which they have.

Buy

QBE Insurance Group

(QBE.AX)

Solid result, with headline earnings now better representing underlying momentum; Buy (CL)

12 August 2021 | 10:23PM AEST

QBE's 1H21 cash NPAT of US$467mn was 41% ahead of our US$330mn estimate. DPS of A11c was however below our A19c estimate (interim payout ratio of 27%) while the balance sheet remains in good shape, with the PCA ratio at 1.73x (GSe 1.70x) and gearing at 31.1%. Compositionally, the result was relatively clean and strength relative to GSe a function of 1) GWP/NEP was 2%/4% ahead of our estimates, 2) the reported COR of 90.2% was 1.6% better than GSe, with the ex-discount rate result of 93.3% 2.2% ahead, while 3) total investment income of US$58m was solid (GSe US$20m).

Headline earnings now better representing underlying momentum; Buy-CL

In assessing margin trends, the bulk of the c.2% better than expected result can be attributed to very welcome positive development across all three divisions (1.1% delta vs GSe), while there were only US$10m of additional COVID costs in 1H21 verses the planned US$130m for FY21, where QBE notes that this original estimate may now 'prove excessive'. Behind these items, the ex-COVID accident year COR at c.94.3% was broadly in line with our estimates (despite the decision to book Crop at 95%), highlighting good momentum on the FY20 exit COR of 95%. With another period of strong c.10% group wide rate increases, the outlook remains favorable where building premium growth (c.15%), strong cost control (absolute expense reductions in 2/3 divisions) and on aggregate manageable claims inflation point to further margin improvement.

In the absence of any negative surprises (particularly around reserving), headline earnings are now better representing recent underlying momentum in the business. In questioning whether this trend will continue, conservatism remained a key message throughout the briefing today where management flagged multiple examples of steps taken to build prudence into the business and reserves, which we think should boost comfort on the theme (plus earnings quality/consistency). The second key message was around measured growth, where growth ex-rate of +7% in the half was solid, and there appears opportunity for this to continue near term.

On balance, we upgrade our FY21-FY23 cash EPS by +13%/+5%/+3%, largely a function of reduced COVID costs and 1H releases in FY21, though stronger growth and margin in FY22/FY23. We note QBE formally flagged an intention to increase growth asset exposure in its investment portfolio over the medium term. With excess capital seemingly earmarked for growth currently, we have not yet modelled any re-weighting, though note a shift from the current 7% growth asset mix to the 15% ceiling at current FUM (and a 50bps running yield) would equate to a normalised annualised NPAT uplift of c.US$100m. Our 12m target price (equal weighted blend of DCF and P/NTA vs. ROTE) increases to A$13.41 (from A$12.49). Maintain Buy (on CL).