Insurance Australia Group vs QBE Insurance: Which is best for income?

Insurance Australia Group vs QBE Insurance Group shares

When it comes to hunting for passive income from the ASX, investors often weigh up Insurance Australia Group Ltd (ASX: IAG) and QBE Insurance Group Ltd (ASX: QBE). Both are heavyweight insurers, but their investment case, size, and income prospects do show some key differences. If you’re deciding between IAG and QBE shares, especially with income in mind, here’s how I see the strengths and weaknesses stack up.

The case for Insurance Australia Group

IAG is the largest general insurer in Australia and New Zealand, with a long history rooted in NRMA Insurance and an impressive portfolio focused on home and motor cover. In FY26, IAG underwrote over $18.4 billion in premiums across well-known brands.

Some highlights that stand out for me:

• Dividend Yield: The latest reported yield is 4.00%.
• Dividend History: IAG has reliably paid dividends for decades, although franking levels have fluctuated dramatically over time. In recent years, franking has become partial, with 25% franking for the most recent payout.
• Market Cap and Stability: Backed by a substantial $18.73 billion market cap, IAG offers size and proven market leadership.

However, I have noticed IAG’s dividend per share (0.32) trails QBE’s, and the relatively modest franking may reduce its tax effectiveness for some Australian income seekers.

The case for QBE Insurance Group

QBE Insurance Group is a genuinely global insurer and re-insurer, with a much broader international footprint than IAG. Established in the late 19th century, QBE now serves institutions, corporates, and individuals in over two dozen countries.

Here’s what jumps out from QBE’s numbers:

• Dividend Yield: QBE’s current yield is 4.75% – a solid edge over IAG.
• Dividend Per Share: QBE’s annual dividend per share (1.11) is well above IAG’s (0.32).
• Recent Momentum: A standout 23.2% year-to-date return signals strong recent market support.
• P/E Ratio: At 11.66, QBE’s P/E sits comfortably lower than IAG’s, which may hint at relative value – both operate in the same sector so this is a fair, like-for-like comparison.
• Franking: Recent QBE dividends have seen only partial franking, generally in the 10%–30% range, which remains low compared to historical fully-franked periods.

QBE’s ability to generate much higher earnings per share (1.422) also underpins its more generous payouts.

Valuation comparison

Since both companies sit squarely in the insurance sector, their fundamentals can be sensibly compared. Here’s how a few critical numbers stack up:

Note: Both companies’ P/E ratios and EPS appear mathematically consistent in the data provided.

The gap in P/E is particularly interesting: QBE looks relatively lower-valued, while offering a higher income payout. Both are only partially franked, which is worth considering if tax efficiency is a priority.

Recent share price performance

Comparing 21 August 2026 to 18 September 2026:

• IAG: Over this span, IAG dropped from $7.87 on 21 August to $8.01 on 18 September, with some volatility, including a notable one-day 5.46% jump on 2 September. The year to date return is a modest 4.4%.
• QBE: QBE climbed from $22.40 on 21 August to $23.39 on 18 September. Over this short window, the share price mostly edged higher, echoing QBE’s strong 23.2% year-to-date return.

In short, QBE’s shares have outperformed IAG not only year to date, but also over the most recent one-month stretch in the data.

Which is the better buy?

Chasing passive income, my pick would be QBE Insurance Group. QBE edges out IAG on yield (4.75% vs 4.00%), has a noticeably higher dividend per share, and sports a lower P/E ratio paired with much higher earnings per share – all positive signs for income-oriented investors. While both offer only partial franking, QBE’s slightly higher franking on the last declared dividends doesn’t close the gap, but the sheer scale of QBE’s distribution makes it more attractive to me.

Add to this QBE’s far stronger share price performance both in the short term and year to date, and I think it tips the balance for those focused on total returns as well as cash flow. IAG remains a quality, defensive blue-chip, but for pure passive income, QBE looks a step ahead in the current climate.

The post Insurance Australia Group vs QBE Insurance: Which is best for income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.