QBE Insurance Group Ltd (ASX: QBE) shares have been a great investment over the past 12 months.
During this time, the insurance giant's shares have generated a return of 19%.
But those returns are behind us now, what might happen if you were to invest $10,000 into the company's shares today? Let's find out.
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$10,000 invested in QBE shares
With QBE shares currently changing hands for $17.61, if you were to invest $10,000 (and a further $2.48) you would end up own 568 units.
What could those shares be worth in a year? Well, Goldman Sachs has just responded to the insurance company's quarterly update by reiterating its buy rating with an improved price target of $20.90.
This values those 568 shares at a total of $11,871.20. That's a return of 18.7% or $1,868.72 on your original investment.
But wait, there's more!
QBE is traditionally one of the more generous dividend payers on the Australian share market. Goldman expects this trend to continue and is forecasting a 5.3% dividend yield this year, a 5.4% dividend yield in FY 2025, and then a 5.5% dividend yield in FY 2026.
This will mean dividends of approximately $530 over the next 12 months, which boosts the total return to $12,400 or 24%.
Why is Goldman bullish?
Goldman was pleased with QBE's "strong" quarterly update and notes that its guidance has been reaffirmed. It said:
1Q24 print was operationally strong a) Guidance reaffirmed – COR 93.5%/ GWP mid single digit b) Strong investment result (in line) – 4.8% running yield at May-24 c) Net impact across both Apr-24 YTD Perils experience & PYD flagged perhaps ~$50m positive (on our estimates) before full reserve calcs at half year. We had estimated PYD from the Italian hail event at $50m. Further, we note that QBE increased its risk asset allocation to 15% (from 12%) over the quarter which we think will be a capital strain of ~3-5bps to PCA ratio. Outside of capital management, this signals confidence in QBE's capital position / ROE of business.
Commenting on its bullish view on QBE shares, the broker concludes:
QBE is a global commercial insurer with three main geographical operations across Australia Pacific, International (encomassing Europe) and North America. We are Buy-rated on QBE because 1) QBE has the strongest exposure to the commercial rate cycle. 2) QBE's achieved rate increases continue to be strong & ahead of loss cost inflation. 3) North America on a pathway to improved profitability. 4) Valuation not demanding. 5) Strong ROE.
