It's getting extremely close to a nerve-wracking time of the year for QBE Insurance Group Ltd (ASX: QBE) shareholders. In each of the last four years the company has announced in early December that the group's full-year results would fall below expectations.
The company's share price has already plunged once this year, falling to a multi-year low around $10 in July when the group reduced its full-year estimates following a slow first half. QBE full year forecasts now predict gross written premium in the range of $16.6 – $17.0 billion, net earned premium of $13.9 – $14.2 billion, insurance profit margin of 8.0% – 9.0% and a net investment yield of 2.4% – 2.7%.
These numbers are slightly better than recent years, but are still a long way from the huge profits seen in the last decade.
Turnaround in 2015?
Most analysts believe that QBE will make it through 2014 without any further downgrades, but will the story continue to play out that way in 2015?
QBE's management team, led by relatively new CEO John Neal, has put into place a number of initiatives aimed at making QBE the profit machine it once was.
Capital Initiatives
A range of capital initiatives have been launched to boost balance sheet resilience and give the group more flexibility. An oversubscribed equity raising was completed in September, a $700m debt issue was completed last week, and asset sales are planned for 2015.
The sale of the group's US agency businesses and Central & Eastern European operations is planned for the near future. It will: "Deliver significant additional cash and capital resources that will substantially improve the Group's financial flexibility and ability to better withstand a reasonable range of downside scenarios".
Predictions of Better Times
QBE has been a basket case for years. Long-term investors have suffered through equity raisings, huge cuts to the dividend payout and a plunging share price, however the tide may be turning. Prominent analysts are predicting up to a 30% increase in net profit for the 2015 financial year and a corresponding 30% increase in dividend payout to levels not seen since 2011.
Foolish investors could be massively rewarded by holding on for the long term, however next year's yield will still likely only be around the 5% mark.
