QBE fell -4.25% on Wednesday after announcing plans to close part of their North American ‘mid-market’ business after failing to sell it. It’s another step in the simplification process for QBE which has been ongoing for several years, essentially unwinding the complexity that built up over decades. QBE has had a stellar run over the last two years as their more targeted strategy and favourable macro conditions supported earnings.
- The previous few times MM has written about QBE, the narrative has been the same: We like the insurer into weakness but not up around $18.
The closure of the North American business is a positive, it’s been a drag for a long time, however the news was overshadowed yesterday after the insurer flagged $200 million in claims from the New Caledonian unrest, and this is what knocked the price. Recent results have been very positive, with QBE posting a strong uplift in profit at their last results while their combined operating ratio, a measure of underwriting profitability comparing premiums with losses and expenses, improved to 95.2% from 95.9% in the prior year.
- We will consider QBE if it corrects back under $17, or another 6% lower.
MM likes QBE ~$16.50
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