QBE Insurance Group (QBE) is an international general insurance and reinsurance group. It underwrites major commercial and personal lines classes of business. It operates in 46 countries.
This week we saw QBE come out with another downgrade to first half earnings due to a higher then expect claims in Argentina.
The share price tumbled down 10% on the back of the news.
QBE has been plagued with issues around the large number of acquisitions, which they have completed over the past 10 years. Other factors include a slow US economy and interest rates at an all time low.
Many brokers have thrown up their hands and walked away from this stock.
Dividends have been reduced over the 2011 -2013 years to help build their reserves.
Which means that QBE is no longer in favor with the yield investor.
The question is can QBE turn around or will it fold.
The first issue is the large number of “Black Swan” events that have been incurred from the acquired companies.
The second issue is the US economy still on the verge of recession.
The third issue is low interest rates.
These conditions will not last forever.
I would expect to see management on top of the acquisitions issues in the coming 12-months.
Not to say there will be no more surprises but they should be able to handle these better.
The US economy will continue to struggle like most economies will for the coming 2-3 years at which time we should start to see interest rates increase.
QBE is now a higher risk blue chip stock.
However, if you have a long-term view and are happy to sacrifice income for long-term growth I expect in five years time, QBE will be a stock you are glad to have in your portfolio.
For more information about QBE Insurance Group (QBE) please contact us on 07 4771 4577.