QBE Insurance Group Ltd plunges to 10-year low: Is it time to buy?

Not long into staging (what appeared to be) a remarkable recovery following the disastrous performance of a number of business divisions between 2009 and 2013, shares in Australia’s most frustrating insurance company were again hammered in August following another half of particularly underwhelming performance.

Another 22% down

While the headline number of a 10% share price fall over the month of August doesn’t appear that drastic, it hides the fact that  QBE Insurance Group Ltd (ASX: QBE) shares reached a high of $11.40 during the month and a low of $9.81 – a 14% plunge, which takes the year-to-date performance to negative 22%.

What happened this time?

Here’s a summary of the results from our report earlier this month :

  • Statutory profit after tax down 46% to $265 million
  • Cash profit after tax down 39% to $287 million
  • Cash profit ROE of 5.6% (1H15 8.6%)
  • Underwriting profit down 5% to $337 million
  • Gross written premium flat on a constant currency basis and excluding the Mortgage and Lender Services business
  • Combined operating ratio of 99% (1H15 94.1%)
  • Debt to equity of 33.7% (FY15 33.6%)
  • Final dividend of 21 cents per share, 50% franked (1H15 20 cents, 100% franked)

Worrying trends

A number of analysts continue to suggest that QBE is a solid rebound and income opportunity, with the company offering a 4+% yield and the share price remaining around the 10-year low below $10.

The major concern for shareholders is that this half’s problems have stemmed from the Australian & New Zealand operations, which have usually been the only sector investors don’t have to worry about.

Action has been taken – the local head of operations is gone and price hikes are on the way to local customers – however the company appears still a long way from receiving a boost from higher interest rates and QBE lowered its revenue forecast for the coming financial year from $US14.6 billion to $US14.1 billion.

Is now the time to buy?

For growth? Doubtful as revenue and profit disappointed once again.

For income? Maybe, however a growing dividend relies on growing profits, which analysts are struggling to see for the next few reporting periods.

Forget companies offering stagnant dividends like QBE when you can get GROWING dividends.

This "dirt cheap" company. is growing like gangbusters, and trading on a fat dividend yield, FULLY FRANKED. With interest rates set to stay at these low levels for years to come, for income-hungry investors, including SMSFs, this ASX company could be the "Holy Grail" of dividend plays for 2016. Click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required.

Motley Fool contributor Andrew Mudie owns shares of QBE Insurance Group Ltd. You can find Andrew on Twitter @andrewmudie

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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