If you are on the lookout for some blue chip ASX 200 stocks to buy, then it could be worth considering QBE Insurance Group Ltd (ASX: QBE) shares.
That's the view of analysts at Goldman Sachs, which believe the insurance giant could generate market-beating returns in 2025.
What is the broker saying about this ASX 200 stock?
Ahead of earnings season next month, the broker is feeling confident about QBE's prospects and has reaffirmed its bullish view on the stock. It said:
QBE stock view ahead of Feb-25 reporting: We are Buy rated with 12m PT of A$22.50. Key points 1) FY25 guidance key: We forecast 92.5% COR with around mid single digit GWP growth (underlying volume growth mostly from International + rate increases partially offset by portfolio exits / Crop). We forecast ~92% COR for FY26. FY25 is guided to include 0.5% worth of non-core losses ($100m) which we expect to reduce into FY26 as Westwood risk expires and QBE exits North America (NA) middle market; supporting NA COR improvement to <95%.
More reasons to be positive on the ASX 200 stock according to Goldman are as follows:
2) COR improvement; mix and exposure management: QBE's strategy for COR improvement resembles other commercial underwriters through CAT exposure management for sustainable COR (flood and hurricane) and mix shift toward specialty / A&H classes driving lower COR (outside of rate); particularly in NA.
3) Thematic tailwinds still persist: a) Headline written rate ahead of inflation + inflation moderating to perhaps ~4% for FY25. b) Reinsurance renewal better than we expected. While this may be reinvested for lower layer protection, this improves COR resilience and economically benefits perils allowance / sufficiency. 4) Perils should benefit from non-core run-off. 5) Favourable FY24 underlying COR leading into FY25. 6) Strong ROTE. 7) Capital management opportunity through buy backs. 8) Valuation remains attractive.
Big potential returns
According to the note, the broker has reaffirmed its buy rating and $22.50 price target on QBE's shares.
Based on its current share price of $19.65, this implies potential upside of 14.5% for investors over the next 12 months.
In addition, the broker is forecasting dividend yields of 3.9% in FY 2024 and then 4.3% in FY 2025. This stretches the total potential 12-month return on offer from this ASX 200 stock to approximately 18.5%.
Goldman then summarises its buy rating, concluding:
We are Buy-rated on QBE because 1) QBE underlying trends look positive, 2) QBE's achieved rate increases continue to be ahead of loss cost inflation and rate adequate, 3) North America is on a pathway to improved profitability, 4) Valuation is not demanding, 5) Strong ROE.
