After this week's announcement of yet another inadequate performance from its U.S. division and subsequent ratings downgrade, QBE Insurance (ASX: QBE) was quickly labelled a serial disappointer by commentators and investors alike.
While shareholders with a long-term focus can forgive the occasional down year, the issues plaguing QBE have been stretching on since the global financial crisis. The latest profit downgrade may be the final straw for some investors who have pushed the company's share price down 32% in the last four trading days.
Is it different this time?
The reason the announcement came as such a shock is because it came in a year with relatively few major disasters, which many inferred as a positive sign that earnings may finally be looking up. Indeed, just a few short weeks before QBE's announcement, Commonwealth Bank (ASX: CBA) upgraded its rating on the company from 'neutral' to 'overweight'.
As a group, QBE's failure to fire suggests it is a collection of incompatible companies rather than a joint force and despite reassurances that this is the problem has been dealt with, the biggest fear is that the U.S. brands will continue to face chronic problems, resulting in more write-downs and losses in years to come.
Perhaps the real question is whether investors can bring themselves to trust the company, which has extended its poor performance under the current management of CEO John Neal?
Outlook for 2014
After making "substantial changes" to the U.S. management team earlier this year, QBE's announcement says it expects North American operations to break even in 2014 and "generate more acceptable returns thereafter".
Outgoing Chairwoman Belinda Hutchinson is confident that the strategy which has been developed can deliver for investors, but given a repeated inability to meet investor and analyst expectations I can understand the frustration and skepticism felt by investors.
Gross written premiums are expected to reduce by around 5% in 2014 and the company says it is targeting an insurance margin of 10%.
Foolish takeaway
QBE's performance has been a shadow of its former self and a poor reflection of the company's potential in the last few years. Its U.S. operations have been draining the blood from the rest of the company's good performing units, making investors weary.
For this to be the end of QBE's troubles, management needs to definitively step up in 2014 and prove to investors they can turn the situation around to drive a new beginning for the insurance giant.
