QBE’s core delivers in full year result
Stock
QBE Insurance (ASX: QBE) $11.80 as at 25/02/2019
Event
It might look like another miss for QBE on face value, but the market has bought today’s result and the stock has tracked higher in the session. The core business is tracking well and signs that the downgrade cycle might be behind them are appearing.
Earnings at $US715m was a tad below consensus of $US718m, however the underlying drivers for future growth in the business are improving.
Gross written premium grew around 4% in the year while average repricing added 5%. The attritional claims ratio is moving lower, as is the expense ratio which came to 15.3% and is expected to fall to below 14% over the new 3 years.
The company is also doing its bit to de-risk as it continues to recover from the multiple disasters in 2017 which greatly impacted QBE’s capital position. Gearing fell to 38%, down over 2 percentage points in the 12 months, and now targeting 25%-35% going forward.
Certainly QBE is trending in the right direction, but there is a long way to go before it is fully recovered. The new management team is doing a good job at lowering costs and driving revenue higher while focussing on the core businesses – the simplification process is working. QBE still trades on a reasonable discount to global peers (about 15%) and this discount will close if QBE can continue to execute.
QBE Insurance (ASX: QBE) Chart
Market Matters Take/Outlook
