QBE share price tumbles despite 105% FY23 profit jump

QBE's result was strong but perhaps not quite strong enough.

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The QBE Insurance Group Ltd (ASX: QBE) share price is under pressure on Friday.

In morning trade, the insurance giant's shares are down almost 5% to $15.61.

This follows the release of QBE's FY 2023 results before the market open.

QBE share price drops on results

  • Gross written premium (GWP) up 10% to US$21,748 million
  • Insurance operating result up 30% to US$796 million
  • Adjusted cash net profit after tax up 105% to US$1,362 million
  • Final dividend up 60% to 48 Australian cents per share

What happened in FY 2023?

For the 12 months ended 31 December, QBE more than doubled its adjusted cash net profit after tax to US$1,362 million.

This was underpinned by strong premium growth, with GWP rising 10% thanks to group-wide renewal rate increases of 9.7% and targeted new business growth.

QBE's combined operating ratio improved to 95.2% due to supportive market conditions and favourable current year catastrophe experience, partially offset by the impact of short-tail prior year development.

This allowed the insurer to increase its final dividend by 60% to 48 cents per share, which brought its full-year dividend to 62 cents per share. This represents a 59% increase year on year and a dividend payout ratio of 45% of adjusted cash profit. Based on the current QBE share price, this equates to a 4% dividend yield.

How does this compare to expectations?

This result appears to have fallen a touch short of expectations, which may be why the QBE share price is falling today.

For example, Goldman Sachs was forecasting a profit of US$1,424.73 million for FY 2023. This compares to its adjusted cash profit of US$1,362 million.

Management commentary

QBE's Group CEO, Andrew Horton, was happy with the result. He said:

Over the last two years, QBE has been focused on delivering greater resilience and consistency. I see meaningful progress across the business, and I am confident that we can drive further progress against our strategic priorities in 2024.

Our strategy to improve performance in North America remains a key focus for the Board and management, and we are tasked to build a business which delivers performance that is consistent with our Group targets. We have renewed our focus on building and strengthening relationships with our major trading partners, and are confident we can successfully manage our priorities for the division.

Outlook

QBE has provided guidance for FY 2024.

It is expecting 2024 constant currency GWP growth in the mid‑single digits and a combined operating ratio of ~93.5%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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