Hello, and welcome to the Deutsche Bank Depositary Receipts Virtual Investor Conference, dbVIC. I'm pleased to announce that our next presentation will be from QBE from Australia. Before I introduce our speaker, a few points to note: Once the presentation session has ended, there will not be any Q&A. You can email any questions to the company, and they will respond to you in due course. On a final note, all of today's presentations will be recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome Ashley Dalziell, Head of Investor Relations at QBE.
Okay. Thanks, everyone. Thanks for your interest in QBE. As it was noted, my name is Ashley Dalziell, Head of Investor Relations here at QBE. Some very brief background on myself. I've been with the business for a couple of years now. Prior to that, spent my whole career really on the sell side as an equities research analyst covering financial sectors, most recently at Goldman's here in Sydney, covering the insurers and other non-banks. As you're hopefully aware, QBE is a global commercial insurer, and what I thought I'd do is just start with what I think is sort of the equity thesis or the equity pitch at the moment, which is really centered around three main pillars.
The first, there is definitely somewhat of a self-help turnaround element to the story, which is secondly, overlaid by particularly supportive industry and macro trends at the moment. Alongside, thirdly, what's quite a meaningful valuation opportunity. So I'll just touch on each of those briefly before jumping into the recent business performance. So firstly, on the turnaround piece, by way of background, QBE grew via acquisition quite materially through the noughties, particularly in North America. The business did over 100 transactions in a reasonably short period of time. Many of those deals were good, some less so, but a common problem was that, there was not a great deal of integration activity alongside many of those transactions.
But then I think through the early part of the last decade, led to a period of underperformance through the business as the market turned, and so really for the better part of the last well, decade or half decade, we have been through quite a heavy period of remediation. We've divested a lot of businesses, you know, exited Latin America, completely exited North American personal lines, parts of the Asian and the Pacific portfolio. And there's been a really heavy focus on uplifting skill set, capability, data, MI, across the business alongside that, de-risking phase. I'd say we've kinda exited through what was the low-hanging fruit element of that journey, through the late teens into what were quite supportive industry trends.
So the global insurance pricing cycle has been quite supportive for a handful of years now. And like many insurers, we also benefit from higher interest rates, and so that's been a meaningful tailwind for the group in the last couple of years. In terms of the valuation opportunity, you know, we are listed in Australia, and it is a PE market. We're currently trading at a PE of around 9 times, versus our own five-year history of around 12 times, and our 2 other listed peers here in Australia trading north of that. So we trade at a quite meaningful discount relative to our own history and, an even larger discount relative to the market.
And so, you know, we really do think the primary source of upside or, you know, unlocking some of that value there is by demonstrating greater consistency to the market, both in how we conduct our business, but also in terms of our financial performance. We have come from a period where over the last decade we have had too much volatility and have had our fair share of inconsistency in financial performance. So I'll talk a lot through the rest of the presentation today around what we are doing to try and improve that picture and some of the recent successes we've had over the last few years. Look, I'll move now into just a brief introduction to QBE. As I said earlier, we are a global, largely commercial insurer.
Our sweet spot is really that kind of large SME through small mid-corporate. We have roughly $20 billion of GWP of premium. The rough split to think about is around 40% of that is commercial. So that SME mid-corporate sub-segment, which I mentioned often, comes in packaged format, so a business owner that wants to buy their various insurance needs through one provider. And so these are markets where there's generally high barriers to entry. There's a meaningful level of regulatory oversight and, you know, what drives success generally comes down to, you know, the ease of doing business with the carrier, reputation in the market. You know, longevity in the market and broker relationships, right? Given that almost everything we do in this segment is intermediated.
With a couple of core franchises that I'll call out here in that commercial segment, in Australia, where we would be number one in just about everything we do in this environment. And also in the U.K., where, outside of the Lloyd's franchise that we have, and just touch on in a moment, very strong presence in that U.K. core commercial market. So roughly 40% of the business commercial, roughly 25% of the business is global specialty. And, the lion's share of the global specialty that we write is through our two Lloyd's syndicates, who play in the Lloyd's of London market or the London market.
Those two syndicates have had a long track record of very consistent profitability and have accounted for roughly 40% of total London market profits over the last decade, despite only accounting for around somewhere in that 6th, 7th, 8th in terms of premium. So very strong franchises in areas like marine, financial lines, energy, casualty, et cetera. Reinsurance makes up around 10% of our global premium pool. We have a business called QBE Re, which is a really nice global platform that plays in that second tier of global reinsurers. Business is nicely diversified, around 30% property, 30% specialty, 30% casualty. And we run a strategy where the reinsurance business is quite complementary to what we're doing in our insurance business.
So for instance, if we want to access a particular geography where we don't have an insurance presence, obviously gonna be much, i t's generally gonna be much easier for us to build a reinsurance presence in the region than it would be to try and build out an insurance presence. So 40% commercial, 25% specialty, 10% reinsurance. The other two notable businesses that we have are a crop insurance business, where we're the second largest crop insurer in North America. Chubb is the first, then QBE, then Zurich. And secondly, we have a small consumer presence in Australia, where we write home and motor largely, and have about 5% odd share of those markets. So that's a brief introduction to QBE.
I thought now just touch on our strategic focus and our strategy. It's really centered around six strategic priorities, which are outlined on this slide. I'll touch on each briefly. Portfolio optimization, what do we mean by that? It's really focused around trying to reduce volatility across the portfolio and strive for that greater consistency, which I touched on earlier. So having been through that very prolonged period of remediation, divestments, you know, trying to de-risk the balance sheet, you know, we are now starting to, yeah, really switch our focus to driving that greater refinement around portfolio mix and what makes most sense for QBE in a from a medium-term sense, and a much sharper focus on volatility across how we organize the business into cells.
Not that it hasn't been there in the past, but it's definitely much more aligned and cohesive across the enterprise now, with a much greater focus on lower return periods. So what do I mean by that? Most insurers spend a lot of calories thinking about a 1 in 100, 1 in 200 hurricane or earthquake, and that's important for how you organize your balance sheet. But in terms of, you know, the year in, year out volatility, we're definitely driving a much greater focus and appreciation around those 1 in 3, 1 in 5, 1 in 7, 1 in 10-year type events, and trying to build greater resilience for them.
Sustainable growth is really focused on the fact that we have enough breadth across the organization by product and by geography, such that we should be able to drive a level of volume growth across a cycle quite sustainably. And that, I think, is underpinned by two pillars, right? The first is that because of that product breadth, you know, not every one of our products is gonna follow an insurance cycle, and if they do, they're not gonna follow the exact same cycle as another product elsewhere. And then secondly, we do have a suite of organic growth opportunities out over the next decade, which we're quite excited about, and I'll touch on those briefly. Bring the enterprise together. We do organize ourselves across three divisions, North America, International, which is heavily biased to U.K. and Europe, and then Australia-Pacific.
Historically, those three divisions have been run quite autonomously. There hasn't been a great deal of collaboration across the three divisions, sharing of knowledge, skill set, people, technology. And so there has been a really meaningful push over the last half decade to bring the enterprise together, start operating as a more joined up group, and ultimately. You know, we've never really leveraged our scale in that sense, and we do see a lot of meaningful opportunity as we continue to drive more alignment and cohesion across the enterprise. Modernize, you know, this really summarizes a lot of our activities in and around technology, data. And you know, there's multiple streams here, both in terms of revenue and also cost efficiency.
But ultimately, a lot of the energy at the moment is being placed into, yeah, becoming an easier or the easiest business to do business with, and empowering our underwriters and claims people to have the best data available to them, to make the most informed and most expedited or responsive decisions around risk, and also, you know, paying claims in a more seamless fashion. Our people and our culture, you know, huge, huge focus over the last couple of years under our new, he's not that new anymore, but Andrew Horton, who is CEO of the group, joined us from Beazley a couple of years ago now. Look, QBE has probably had too much turnover at senior levels over the last decade.
So he has come in with a very keen focus on trying to stabilize leadership turnover, not only at the exec level, but levels one and two below, build greater internal succession pathways, and, you know, really focus on the career development, learning opportunities of our people across the group. So many new initiatives which have come in through recent years, which are all resonating well across our people, which we can sort of see in our employee engagement, wellbeing, sense of belonging surveys. I'll move now just towards some of the themes I touched on in the opening around being in quite a supportive industry operating environment at the moment.
We have enjoyed an increase in global commercial insurance rates or prices over the last few years, and that continues to be the case at the moment. This half, we achieved group-wide price increases or rate increases of around 10%. And you can see here within this chart that on top of that price growth, we've also seen some meaningful volume growth. So growth ex- rate there in the slide of 7% is meaningful, and it's culminating in sort of teens or mid-teens premium growth for the group, at least there in the first half, you can see. So the backdrop is quite conducive to organic growth at the moment, and we are seeing that in quite a broad fashion across the group.
And, you know, we never try to pontificate on where global insurance prices are gonna go much beyond 12 months out, but at least you know, from what we can see at the moment, we expect the market to remain rational and quite firm for at least the foreseeable future. Our growth guidance for the year is for GWP growth of around 10%. I wanted to touch on this slide very briefly, just to flesh out a couple of the strategic priorities that I touched on earlier. So on the left here, portfolio optimization. Again, that's around us trying to reduce volatility across the portfolio and ultimately drive greater consistency in our financial performance. One of the big themes this year has been in and around property. So, this is QBE insuring properties for business owners.
And property has definitely been a source of some of the volatility that we've seen in the business over the last five years, but probably not unique in that regard. There has been a lot of property catastrophe activity in the industry over the last half decade, and the culmination of a number of factors, you know, saw the industry coming into this year paying a lot more for the reinsurance that it purchases, and the availability of that reinsurance declined at the same time. So that led to what's been quite a broad-based increase in property prices on the insurance side. And many of our peers entered this year with a strategy to grow into that hard property market.
We came in with a very clear strategy to use this turn in the market or the opportunity ahead of us, to really try and improve the quality of the property portfolio that we have today, and, you know, not necessarily increase property's contribution to the group. So property cat exposed lines are around 25%-30% of our global premium base, and we think that's about right for QBE. We don't wanna see that mix edge up. I thought this was a useful chart to talk to as a proof point into some of the initiatives and efforts we are going to talk to in and around that portfolio optimization priority.
You can see, here at the half, that for our standalone property businesses, we achieved an average price increase of around 23%, and we actually saw a volume reduction of around 10%. And so that is a mix of us walking away from some more marginal business that we can afford not to write at the moment, but also the impact of terms and conditions. And so what do I mean by that? So the attachment point or the average deductible that the customer may take has increased by quite a lot, which this year, which has an impact on the premium that we write. The second strategic priority I just thought I'd flesh out on this slide is in and around sustainable growth.
I did mention that we are confident around being able to drive a level of volume growth through a cycle, given we have a few different pillars to that outlook. First, you can see here on this slide is that we do see scope to broaden our core franchises. These are areas where we do already have quite established market shares and positions in the market. We do see opportunity to continue inching up those market shares, and there's a strong linkage between that view and our efforts on modernization, right? And some of the work we're doing in and around data, AI, underwriting tools, but also the efficiency of how we quote business, how we price business, and how we pay our claims.
We do see some more market contingent opportunities to really expand our footprint in a couple of focus areas, and the two that we've called out here are our reinsurance business. We've been quite careful not to grow that business over the last five to five years or so, given that the opportunity in the market was not that compelling. Coming into this year, the scales have changed, and QBE Re has seen quite significant growth. But similar to some of the themes I just touched on in and around property catastrophe, they have also used the opportunity to really build a much higher quality, more resilient property catastrophe footprint, whilst also getting some meaningful growth in specialty and casualty. The final piece here, explore and innovate across new opportunities.
We do have a couple of quite exciting organic growth opportunities as we look out over the next decade. The most obvious of which is in cyber, where QBE has traditionally not been a player in the cyber market. Cyber premiums are probably only around $100, $200-odd across the group. And we do see an opportunity to you know be a more. Well, just to be a player in that market coming from a space where we're not really known for cyber. We think that's important, one, because it is gonna be a growing premium pool out over the next decade, but two, you know, it is something that our customers are increasingly asking of us, and particularly where I noted earlier, our sweet spot being that large SME through small, mid-corporate.
Many of those customers want to buy a packaged product and, you know, if we're not being able to, you know, meet the demand there in cyber, it may hinder our ability to defend, let alone grow market shares out over the next decade. Just switching gears now and, touching on our investment portfolio. It's been an unequivocally positive story for QBE over the past, couple of years. We do have a lot of leverage or positive leverage to higher global interest rates. And, our accounting regime here in Australia is quite different to the Northern Hemisphere in that we are mark-to-market accounting their value through P&L.
So as interest rates step up, we take a mark through the P&L to try to insulate, given that we also effectively value or mark to market our claims liability based on interest rate moves. But that higher interest rate environment comes through our P&L, you know, dynamically, almost daily, which is quite different to the Northern Hemisphere insurers, who will obviously hold to maturity and fair value through OCI, and the benefit of high interest rates takes some time to flow into the P&L.
So you can see here on the right-hand side of this slide, our fixed income running yield has exited the first half of this year at almost 5%, and that's coming from a place where we were exiting FY 2021 at just 70 basis points only 18 months or so ago now. So now earning 5% across the book has been quite a material tailwind for the group. In terms of how we structure up the investment portfolio, we have an asset allocation target of 85% core fixed income, 15% growth assets, so quite conservatively allocated.
What we call core fixed income, you can see there on the bottom right-hand side of the slide, is generally very highly rated government and corporate paper, with investment grade within that core fixed income bucket. You can see the makeup of our risk assets there at the bottom of the slide. Infrastructure and unlisted property make up a decent proportion of the portfolio at the moment. Much unlisted equities as we stand here today, and then in that enhanced fixed income bucket is where we typically have some high yield, some emerging market debt, some private credit, et cetera. Moving to the balance sheet.
Part of that de-risking journey that we've been on over the last decade has seen the balance sheet go from strength to strength, and that's really highlighted, I think, in this slide. Firstly, on capital, on the left, you can see that on a PCA multiple or an APRA PCA multiple, so APRA is the local prudential regulator, at 1.8x there. That is the very top end of our target range of 1.6x-1.8x . Being at the top end of that range has definitely afforded us a lot of flexibility over the past 18 months to grow into what are quite favorable market conditions at the moment. In terms of gearing, we frame our target gearing range on a debt-to-total capital basis at 15%-30% there.
In the low to mid-20s, that's a very comfortable place. In the first half, we did pre-fund for some expected redemptions in the back end of the year, and so I think where we were at FY 2022 is probably the better guide. Our dividend policy is framed around a payout of total earnings of 40%-60%. We have been paying out probably close towards the bottom half of that range the last couple of years, just because the call on capital from growth has been so material, but we have a principal capital management, you know, framework. The dividend payout ratio is first port of call, and then if there was any excess above that, we would obviously look at others. I figured I would pause there.
I didn't really intend to give a full overview of the first half result. But as again, I just wanted to thank you for your interest in QBE. I'd like to flag we have a Q3 update coming up on November 27. So please, diarize that if, if, you are looking to follow the stock in a bit more detail. And look, as always, you know, we'd welcome, any questions you have. Apologies, I can't take live questions today, but please do, you know, feel free to call or email any follow-up that you have, or indeed, if you'd be interested in touching base on the run-in to year-end. So thank you for joining me today, and, look forward to, talking in the future. Thanks.