Some may say that it shouldn't be that difficult to beat the market when the market's fallen 7.6% so far in 2015, however a large portion of Australians will be underwater this year as a result of the lacklustre performance of Australian banking and finance stocks.
One massive company that's surprised most investors this year, and at the same time outperformed the S&P/ASX 200 (ASX: XJO) by a whopping 25% in just 2015 alone, is Australia's own QBE Insurance Group Ltd (ASX: QBE).
Big Effort
QBE's turnaround efforts have seen it deliver a (relatively) spectacular 17% return in the first eight-and-a-half months of 2015, although this is well off the high point of nearly 33% in mid-July.
What's Happened?
Investors need to remember that QBE's gains have come off a relatively low base. The company's shares were trading as high as $34 pre-GFC, while the share price hasn't had a '2' in front of it since 2010.
The company's dismal operational performance between 2010 and 2014 culminated in a loss in the 2014 financial year and many analysts wrote off the company as a lost cause. A new management team led by CEO John Neal has delivered a comprehensive and, in my opinion, brave turnaround strategy involving the shedding some of the group's less profitable segments, boosting capital reserves, and generally improving the group's QUALITY.
Outstanding Operational Performance
I noted earlier in August that QBE had the potential to surprise on the upside when it reported last week, and it did just that, outperforming expectations while remaining confident that it'll at least hit its guidance from the start of the year.
The highlights of QBE's report were:
- Cash profit after tax up 13% to US$471 million
- Adjusted combined operating ratio (COR) of 93.4%
- Adjusted insurance profit margin of 10%
As my colleagues noted at the time, "perhaps the most exciting point to note for shareholders from today's announcement was the board's decision to raise the pay-out ratio from 50% of cash profits to 65%."
This leads the way for QBE to boost its dividend payment and yield towards 6% in 2016 at a time when QBE's major competitors are struggling to keep profit rising.
