Investors Sell QBE Insurance Share Price Down $1.41 Billion

QBE Insurance Ltd [ASX:QBE] dived this morning. The stock is down 7.46% to $12.27 per share.

What caused the ABE Share Price To Drop?

This morning, QBE warned that claims could be higher than expected in its emerging markets division. And it will likely impact its first half insurance profit margin.

QBE told investors:

The heightened claims activity in Emerging Markets is due to a combination of increased frequency of medium sized risk claims in Asia, weather related claims in Latin America and adverse experience in legacy portfolios in Latin America.

This is likely to add around 1% to the Group’s interim and FY17 combined operating ratio resulting in an expected interim and FY17 combined operating ratio [percentage of expense to revenue] of 94.5%-96.0%.

What now?

QBE hasn’t traded below $12.13 today. But before you think of running in now, there are a few things to consider.

Think about the long term.

Will this news hamper QBE in FY18 and beyond? Probably not. You shouldn’t be overly concerned with year-to-year financial changes. Instead, place more importance on long-run averages. By FY20, will investors care if QBE’s operating ratio was slightly higher in FY17? Highly doubtful.

You should also consider how much you’re paying for the business. Even though QBE has fallen more than 7% this morning, the stock might still be expensive.

However, if we look on a relative basis (comparing to peers), QBE looks to be cheaper the most. It’s also trading at a dividend yield higher than most, at 4.40%.

So it may be worth digging deeper into QBE to find out if it’s a good fit for your portfolio.


Härje Ronngard,

Junior Analyst, Money Morning

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