The $19 valuation does not seem far off to me. At a simplistic level:
QBE has forecast NEP at $US15.5B - $US16B, and an insurance profit margin of 11%.
So insurance profit is forecast at $US1.71B - $1.76B.
Add earnings on shareholder funds of ±$US0.2B and subtract interest costs of $±$US0.3B, and you get profit before tax of $US1.61B - $1.66B (assuming no further writedowns of intangibles this year).
Historical tax rates have been around 20%, so profit after tax of $US1.29B - $1.33B. This equates to earnings per share of $US1.06 - $US1.09 per share. At current exchange rates that is $AUD1.17 to $AUD1.21 per share. Current market (and industry average) p/e is around 14.6, which would give a valuation of $17.08 to $17.66.
But this does not account for:
- the increase in discount rates which is massively to QBE's benefit;
- the increase in investment income that will result from higher interest rates in the US;
- the (to date) benign catastrophe environment;
- the cost reduction measures;
- ongoing above inflation increases in premium rates;
- any upside in the US business (such as is happening in crop right now).
Net result is that I am very comfortable holding at these levels, at least to see what comes out of the half year results.
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Last
$16.36 |
Change
0.020(0.12%) |
Mkt cap ! $24.62B |
Open | High | Low | Value | Volume |
$16.19 | $16.53 | $16.12 | $48.34M | 2.959M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 824 | $16.34 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$16.38 | 1336 | 2 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 20 | 16.250 |
1 | 1240 | 16.150 |
1 | 60 | 16.140 |
1 | 250 | 16.130 |
4 | 3150 | 16.110 |
Price($) | Vol. | No. |
---|---|---|
16.480 | 500 | 1 |
16.520 | 790 | 1 |
16.550 | 1000 | 1 |
16.600 | 2343 | 1 |
16.640 | 1000 | 1 |
Last trade - 16.10pm 04/10/2024 (20 minute delay) ? |
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