Motley Fool Australia

Why the QBE Insurance Group Ltd share price is sinking

sinking ship

The QBE Insurance Group Ltd (ASX: QBE) share price plunged more than 7% today to $12.25 after the insurance company warned it had experience higher than expected claims activity in the first five months of 2017 in Emerging Markets.

QBE Insurance says this is due to a combination of increased frequency of medium sized risk claims in Asia, weather-related claims in Latin America and adverse experience in legacy portfolios in Latin America.

QBE says this will result in an expected interim and 2017 financial year (FY2017) combined operating ratio of between 94.5%-96%.

Offsetting the rising costs, the company says its interim investment return is above expectations so far and as a result, its interim insurance profit margin is expected to be between 8.5% and 9.5%.

QBE is an insurer specialising in general insurance, such as car and vehicle insurance, house and contents insurance and travel insurance. The company competes in Australia and New Zealand with the likes of Suncorp Group Ltd (ASX: SUN), AMP Limited (ASX: AMP) and Insurance Australia Group Ltd (ASX: IAG).

Foolish takeaway

Despite the falling share price, the factors affecting QBE may only be temporary. If so, it may be a good time for investors to pick up some more shares in the insurer. At the price of $12.25, QBE should pay a dividend yield of 4.6% in FY2017 according to consensus analyst forecasts. But a better dividend idea could be the following…

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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.

Related Articles…