QBE Insurance

By Jason Fittler

This company has been hit hard in the media for its results.

Initially the stock did pull back, but over the past week it has recovered.

Overall the result was not too bad. The cut in the dividend may indeed put many yield investors off. But, as a recovery story, I think that QBE is a company to hold.

The results highlights are as follows:

  1. Results in line with 12 November 2012 market release;
  2. Net profit after tax up 8% to US$761 million;
  3. Insurance profit up 16% to US$1,262 million, supported by a strong investment result;
  4. Disappointing underwriting result, impacted by significant prior accident year claims development, the severe US drought, Super Storm Sandy and lower risk-free rates;
  5. Final dividend for 2012 reduced to 10 Australian cents per share, fully franked;
  6. Announcement of senior management changes;
  7. Announcement of a new strategic focus underpinned by an operational transformation program, which is set to deliver annual cost savings of at least US$250 million by end 2015; and

2012 saw fewer claims than in 2011. We continue to monitor the number of events as opposed to the size of any individual event. It is the number of events, which have the biggest effect on the bottom line.

QBE advised that they intend to reduce debt through cash flow in 2013. Their overall net yield on investments was up from 2.9% to 4.1%. It is important that they continue to improve the overall yield of their investments. 

For me, this is a long-term core holding. The lack of yield will see the price stay down as investors at present are all about the yield. 

In expectation of continued performance and growth we would look to accumulate the company. 

For more information on QBE Insurance please contact us on 07 4771 4577.