QBE Generates Huge Profit Bump, Continuing Its Sporadic Trend

This morning, QBE Insurance Group Ltd [ASX:QBE] fell 3.58% to $11.59 per share.

What happened?

This morning, the giant insurer released its half yearly results for FY17.

Revenues for the period were more or less the same. A slight decrease in unearned premiums saw total revenues rise 12% to US$1.77 billion. Profit for operations was up 28.8% to US$344 million, increasing shareholders’ earnings per share from 19.3 cents to 25.1 cents.

But while profits look extremely positive, QBE’s cash flow was another story. The insurer generated a US$402 million loss for cash flow from operations. The loss was due to higher claims paid out, and higher acquisition and underwriting costs.

Because of the earnings increase, QBE’s dividends paid rose 10.4% to US$319 million.

What now?

As reported by The Australian:

QBE Insurance Group said its half-year profit rose on the back of a stronger underwriting performance in North America and its Australia and New Zealand operations, offsetting a rise in claims in emerging markets.

Yet I wouldn’t get too optimistic about the insurer. Anything can happen within one year. What’s more important is a company’s long-term average. Take a look at the following figures. All are in US$mln, expect earnings per share (EPS).

QBE earnings

Source: Bloomberg

From 2007-12, revenues grew, on average, by 12% each year. But since then, revenue has continued to decline. For free cash flow and EPS, it’s a different story entirely. Both sporadically rise and fall from year to year, trending down over time.

The geometric mean (average) for QBE’s EPS growth over the period was -12%. Not particularly encouraging. So while today the insurer has posted a big profit windfall, I would continue to expect sporadic results from the big insurer.

Instead, why not check out five of the best dividend stocks for a reliable return and income?


Härje Ronngard,

Junior Analyst, Money Morning

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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