QBE Insurance Group Limited (ASX: QBE) may be on the nose with investors at the moment, with a share price not all that far from six-year lows, but the company is anything but a deer in the headlights.
Recent news hasn’t been kind. Profits are under siege from poor investment returns in the United States (due to low bond yields) and a nasty series of natural disasters, and the current CEO, Frank O’Halloran, has announced he will be departing the insurer. Add in a capital raising, and – on the surface at least – there are plenty of reasons for investors to be a little gun shy
Despite all of the external pressures, QBE is refusing to be spooked into rewriting its playbook. Instead, the company today announced a $400m deal to buy some of HSBCs insurance operations in Hong Kong and Argentina.
O’Halloran has built the Australian insurance giant into a truly global insurer by judiciously choosing between organic growth and growth by acquisition, depending on the stage of the insurance cycle and the returns on offer. This buy seems to be straight from the QBE handbook, a reassuring sign that the company isn’t allowing the market noise to distract it from running its business.
The company is yet to comment on any impact from the current round of Australian floods – we should assume there will be some impact – but those semi-regular occurrences are to be expected. (Suncorp Group Ltd (ASX: SUN) and RACV recently released early figures on the impact, but Insurance Australia Group (ASX: IAG) considered it too soon to estimate losses.)
Insurance is necessarily a lumpy business – that is why we take out insurance after all – and this latest purchase is simply another sign that QBE is taking these things in its stride and concentrating on business as usual.
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Scott Phillips is a Motley Fool investment analyst. Scott owns shares in QBE Insurance. You can follow him on Twitter @TMFGilla. The Motley Fool’s purpose is to educate, amuse and enrich investors.This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.