The QBE Insurance Group Ltd (ASX: QBE) share price closed 1.12% lower at $12.37 on Wednesday.
After a shaky period in 2021, QBE shares have rebounded once again, gaining almost 9% this year to date.
Meanwhile, in wider market moves, the S&P/ASX 200 Financials index (ASX: XFJ) closed down 1.08% today at 6,495.5.
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More upside for QBE to come?
According to the team at JP Morgan, that could very well be the case. Its analysts are baking in considerable upside for QBE in 2022.
"As a global commercial insurer, QBE is subject to the vagaries of the insurance cycle and volatile natural catastrophes," the broker said in a recent note.
"Trends in the cycle are currently improving, and there could be further upside from premium rates, providing a tailwind for earnings growth, with investment yields a headwind," it added.
Building the case for JP Morgan was QBE's income derived from gross written premium (GWP) in the previous quarter. It grew 19% on the prior corresponding period.
As a result, it has increased its earnings estimates for the company from 2023. Its analysts said:
We have increased earnings in CY23 approximately 10% due predominantly to some upside on yields and strong GWP.
CY22 earnings are impacted by perils and the run-off insurance contracts, offset by higher yields, leaving no room for material changes.
Upside catalysts include more success at taking expense and claim costs out of the business than we give credit for, a quick turnaround in the economy, a limited impact from COVID-19-related losses, stronger premium rate increases, and global interest rates holding up better than currently expected.
Consequently JP Morgan is overweight on QBE shares and urges its clients to buy at the current levels, valuing the company at $16.50 per share – an upside potential of 33% from the current share price.
JP Morgan is joined by an extensive list of 10 analysts also advocating buying the stock. That's 91% of coverage with just one broker saying to hold, according to Bloomberg data. There are no sell ratings on this list.
Meanwhile, QBE shares continue powering on, and have now rushed 17% higher in the last 12 months after this most recent bull run.
