Can this blue-chip insurer rebound higher in 2017?

As I wrote last week, I’ve been punished over and over for my investment in QBE Insurance Group Ltd (ASX: QBE). The latest twist in the saga came in August when QBE reported its poor half-year result that was summarised by the Fool as:

  • 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)

At the same time QBE lowered its revenue forecast for the coming financial year from $US14.6 billion to $US14.1 billion.

2016 Onwards

Now that we’ve had time to let the dust settle, I thought it would be a good time to review what analysts are suggesting QBE might be able to achieve for the full year results, due in February 2017.

Analysts are expecting:

  • Net profit of $665 million (2015: $687 million)
  • A full year dividend of 43 cents per share (2015: 50 cents)
  • Earnings per share of 49 cents (2015: 65 cents)

Overall, if QBE can achieve those numbers it would appear to me to be a pretty good turnaround from the first half results. I’m sure I’m not alone in thinking that it will be a big task for the revamped management team (of only 2-3 months) to turn around the first half woes that quickly.

QBE’s problems have been magnified by the low interest rate environment we find ourselves in so investors need to prepare in case rates remain this way for an extended period.

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Motley Fool contributor Andrew Mudie owns shares of QBE Insurance Group Ltd. 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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