Why have investors been piling back into QBE Insurance Group Ltd (ASX: QBE)?
Shares in the big insurer have been on a cracking run in the last month, up 11%, compared to the 4% rise in the S&P/ASX 200 (INDEXASX: XJO), and a meager 2% lift in shares of Insurance Australia Group Ltd (ASX: IAG).
It would be fun to imagine the share price is somehow correlated to the cracking performance of the Sydney Swans of late, which QBE prominently sponsor in the AFL (this of course would be crazy and is known in finance as a 'spurious correlation'). Instead, it is far more likely that investors are just feeling optimistic that the company has turned a corner after its investor day, held earlier this month.
Finally starting to shine
QBE is starting to look fighting-fit after a long bout of under-performance and a central theme of the investor day was to stress that the company is now worthy of investment. Operating expenses are down, the company's balance sheet is strong and the previously fragmented North America operations are finally expected to add value to the business.
This is especially important because the North America division is also targeting strong growth in insurance premiums in the year ahead. Investors have been waiting to see evidence that the hemorrhaging of money from North America has ceased and it certainly appears that the engines are spluttering back into life.
Seeing QBE begin to shine again after so much talk of change has been positive for investor confidence and the company's beaten-down share price.
Should you buy QBE Insurance Group?
No one would classify QBE insurance as a 'growing company'. In fact it's been in retrenchment over the last two years selling un-profitable business units and getting back to strength in a competitive market.
Where it sits now is as a mature, globally diversified insurance group with growing cash flows. Unlike the Sydney Swans, it will probably not fill you with excitement by owning it, but in my view it is an appealing option for income-focused investors looking for growing dividends.
