QBE Insurance Group Limited (QBE)
BUY

Getting Better!

 17 Feb 2023
Sector: Financials

FY22 RESULT

Need To Know

  • Strong result well ahead of market, including handy dividend beat 
  • Guidance implies upgrades to market estimates for 2023 earnings 
  • Strong valuation support with PER <10x FY23E

A very solid beat across the board with a strong performance on both insurance underwriting results and investment results.  This result will give investors improved confidence that (finally) QBE can execute cleanly and generate a decent result.  

Outlook guidance of “mid-to-high single digit Gross Written Premium (GWP) growth” compares to the market currently looking for +4% in FY23.

Along with improving returns from its investments, we would expect the market will be upgrading earnings estimates on the back of this result (mid to high single-digit EPS upgrades).  

FY22 Result Details

Cash NPAT US$847m vs US$690m market

EPS US$57cps vs US$49cps market

DPS A$39cps vs A$36cps market

GWP growth came in at +13%, which compares to QBE guidance at 1H22 Result for +10%. The cash NPAT beat of +20%, had the benefit of a lower tax rate assisting. At a pre-tax line, the beat was still a healthy +9%, which also reflected in the size of the dividend beat. 

Investment View

Rising global premiums are likely to stay strong through 2023 providing opportunities for both revenue growth and margin expansion for QBE. Positive leverage to rising interest rates should continue to help QBE’s earnings. We see the prospect for a period of strong earnings growth into 2023/24.

There remains a clear opportunity for QBE to lift its core margins from ~6% to ~10%, which is in line with global peers. 

Whilst the market earnings forecast currently assumes an 8% margin is achieved in 2024E, in our view, the current share price discounts this prospect. 

QBE is trading at a discount to both the global insurance peers, and the Australian peers of IAG and SUN. We rate QBE a Buy.

Figure 1: QBE per <10x is too cheap in our view given the insurance cycle and increasing evidence of stronger operational performance

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Stock Overview

Share Price

Company Overview

QBE is an Australia-based insurance and reinsurance company. QBE underwrites general insurance and reinsurance risks and manages Lloyd's syndicates. By revenue, QBE is one of the Top 20 global insurers/reinsurers.

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The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").

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