QBE

QBE Insurance (QBE) has a maintained Outperform recommendation and a $28.84 share price target after the AGM from Australian sharemarket analyst Macquarie Research.

QBE: Margins Looking Up

QBE Insurance Group (QBE) has an Outperform recommendation and a 12 month price target of $12.84 for their shares from stockmarket analyst Macquarie Research. The insurance provider is also the analysts preferred company in the insurance sector.

Macquarie Research Equities (MRE) has reiterated their outperform recommendation for QBE with a 12-month share price target of $24.02. "QBE remains MRE’s preferred general insurance exposure reflecting superior top line growth prospects, exposure to more favourable insurance pricing conditions in international markets, and relative earnings certainty." The broker notes that QBE shares have been "stand-out performers in the ASX200 for the calendar year to date" and has "gained 12.6% versus the ASX200 return of 8.9%, outperforming the market by more than 3%." QBE Ltd.

QBE Insurance have a reiterated Outperform recommendation and a 12 month price target of $35.08 per share from market analyst Maquarie Research Equities. Yesterday, QBE held its 2007 AGM, where management confirmed recent guidance at the FY06 result is unchanged. The analyst has said that yesterday's comments may "slightly enhance consensus Earnings Per Shares (EPS) forecasts", and accordingly, reiterate their outperform recommendation. FY07 guidance provided with the release of the FY06 result is unchanged:
(1) 17.5–18.5% FY07 insurance margin.
(2) 30% increase in FY07 Gross Written Premium (GWP) and 40% increase in FY07 Net Earned Premium (NEP) (subject to no regulatory delays in settling recent US acquisitions)
(3) 20% increase in FY07 NPAT and 15% increase in diluted EPS (with
capital gains on equities at a lower level than the past two years)

QBE Insurance management have reiterated that 2007 guidance is premised on average rate reductions of 3%. This does not specifically refute recent speculation that pricing has fallen by more than the 3% allowance, but if this has in fact been the case, management does not view it as material enough to warrant any change to existing margin guidance. The equity component of the US acquisition funding package has been reduced to less than $1bn from $1.3bn previously. This implies no further equity issuance and so the next two dividends will no longer be underwritten, resulting in just under 40m shares being issued, relative to the 60m originally envisaged by QBE. QBE does not contemplate any further major US acquisitions for at least the next 18 months, although it is investigating a number of small acquisitions in other countries. Importantly, currency sensitivity was provided for the first time. A 1% change in the A$ relative to all currencies (sustained for 12 months) equates to a FY07 NPAT impact of ~$10m, or 0.5% based on the anlayst's FY07 NPAT forecasts. This disclosure should alleviate any exaggerated fears regarding excessive adverse leverage to recent A$ strength. QBE also stated that subject to exchange rates, closing gross Funds Under Management (FUM) is expected to be ~$28bn by the end of FY07 and around $30bn by FY08.

QBE Insurance (QBE) have an Outperform recommendation and a price target of $32.20 per share which is subject to upgrade from Macquarie Research Equities (MRE). QBE shares are 28 percent higher since last December. The share price target is subject to upgrade reflecting revised US acquisition funding package and prospects for further acquisitions with the post balance sheet capital structure capable of absorbing further acquisitions without significant additional equity. QBE announced a FY06 NPAT of $1.483bn, up 36% from $1.091bn pcp. The final dividend was 55¢ps, up a whopping 45% from 38 cents per share pcp and well ahead of consensus. Gross Written Premium (GWP) was $10.4bn, up 10.5% from $9.41bn and NEP was $8.2bn, up 11% from $7.4bn pcp (consensus $8.42bn, MRE $8.53bn) with the slight disappointment relative to consensus due to currency related weakness and slightly higher outwards reinsurance costs. Investment income on capital was $363m, up 4% from $348m pcp (MRE $389m), reflecting higher average float and strong equity markets tempered by a reduced equity weighting and equity collars. The result itself was unlikely to surprise given quite specific guidance in early Dec and the market's tendency to project above guidance reflecting QBE's historical track record in managing then exceeding expectations. Based on proximity of MRE's existing forecasts to management guidance, at this early stage MRE do not anticipate material earnings changes. Commentary on pricing trends suggests a relatively benign cyclical downturn (at this stage) which bodes well for organic earnings sustainability. US acquisition equity funding package - still coy about details but confirmed they have secured underwriting arrangements for the next three dividend payments (totalling about $1.4 billion) which MRE interpret as giving QBE breathing space (S&P will given them capital credit for the underwriting agreements) to determine the optimal funding mix in due course.

There are a few listed insurance companies listed on the Australian Stock Exchange (ASX) such as QBE, AXA, AMP, IAG and SUN. QBE remains Citigroup Investment Research's (CIR) stand out pick. Despite its strong recent run, CIR still view QBE as their top pick in the Australian insurance sector. It looks likely to report a very strong result – their 22.2% insurance margin forecast is top of the market and we flag upside risk.

QBE Insurance Group (QBE) has an increased share price target of $34.50 (from $30) and a retained Buy/Medium Risk trading recommendation from share analyst Citigroup Investment Research (CIR). The analyst sees QBE as a good relative play in a market where most financial services stocks are trading expensive. CIR's earnings changes largely play catch-up on the Winterthur deal earlier this month, though they have also applied a further nudge to their FY08E forecasts. Their EPS changes are: FY07E: +4%; FY08E: +12%. CIR are forecasting a 22.2% margin for FY06E, but they believe even this could be exceeded depending to what degree QBE decides to strengthen its reserving assumptions. Early evidence on the 1 Jan renewals suggests a perhaps surprisingly orderly market in reinsurance with rates flat to slightly down in most classes, while in primary lines weakness is still being seen in many commercial classes. US retrocession rates, however, posted further sharp increases. With two relatively large recent US acquisitions to integrate, QBE suggests that more major US acquisitions are off the agenda for now. However, this does not prohibit further sizeable acquisitions in other jurisdictions and, in CIR's view, it still has plenty of balance sheet flexibility to enable it to take further advantage of the P/E arbitrage opportunity.

QBE Insurance Group (QBE) shares have retained their Ourperform recommendation with a $29.59 revised share price target for stock analyst Macquarie Research Equities (MRE). The analyst sees QBE having an attractive growth profile. MRE have noticed that QBE shares have performed strongly in this half with their shares up 28 percent since June. QBE, a provider of reinsurance and general insurance announced last night the acquisition of Praetorian Financial Group, a US specialist property and casualty primary insurer, from Hannover Re for US$0.8billion. In conjunction with the acquisition announcement, QBE indicated that it expects its FY06 insurance profit margin to be "around 20 percent of net earned premium" (compared to previous guidance of 17–18%). It also expects profit after tax to be up "around 30%". After this news, the analyst revised their share price target up to $29.59. On the other hand, another stock analyst Citigroup Investment Research (CIR) have a share price target of $30 for this particular Australian stock. They have lifted their share price target from $26 to $30 and retain their Buy/Medium Risk share recommendation. Their moves also follow QBE's post market close announcement that it is acquiring Praetorian Financial Group from Hannover Re for US$800m. A previous QBE Insurance stock recommendation.

QBE have a reiterated Outperform stock recommendation and a 12 month share price target of $27.33 from stock analyst Macquarie Research Equities (MRE). MRE have noted the company's performance on the ASX, having returned over 27 percent versus the 13 percent return for the market. In FY06, MRE have upgraded their earnings forecasts by +10.2%; FY07 +2.7%; and FY08 +2.9%.