Not long into staging (what appeared to be) a remarkable recovery following the disastrous performance of a number of business divisions between 2009 and 2013, shares in Australia's most frustrating insurance company were again hammered in August following another half of particularly underwhelming performance.
Another 22% down
While the headline number of a 10% share price fall over the month of August doesn't appear that drastic, it hides the fact that QBE Insurance Group Ltd (ASX: QBE) shares reached a high of $11.40 during the month and a low of $9.81 – a 14% plunge, which takes the year-to-date performance to negative 22%.
What happened this time?
Here's a summary of the results from our report earlier this month:
- Statutory profit after tax down 46% to $265 million
- Cash profit after tax down 39% to $287 million
- Cash profit ROE of 5.6% (1H15 8.6%)
- Underwriting profit down 5% to $337 million
- Gross written premium flat on a constant currency basis and excluding the Mortgage and Lender Services business
- Combined operating ratio of 99% (1H15 94.1%)
- Debt to equity of 33.7% (FY15 33.6%)
- Final dividend of 21 cents per share, 50% franked (1H15 20 cents, 100% franked)
Worrying trends
A number of analysts continue to suggest that QBE is a solid rebound and income opportunity, with the company offering a 4+% yield and the share price remaining around the 10-year low below $10.
The major concern for shareholders is that this half's problems have stemmed from the Australian & New Zealand operations, which have usually been the only sector investors don't have to worry about.
Action has been taken – the local head of operations is gone and price hikes are on the way to local customers – however the company appears still a long way from receiving a boost from higher interest rates and QBE lowered its revenue forecast for the coming financial year from $US14.6 billion to $US14.1 billion.
Is now the time to buy?
For growth? Doubtful as revenue and profit disappointed once again.
For income? Maybe, however a growing dividend relies on growing profits, which analysts are struggling to see for the next few reporting periods.
