QBE - First Take: QBE Feeling The Pressure On Margin Constraints
On first blush, headline figures came in broadly in-line, with net profit (reported) up 8% on last year at $761 million.
Gross written premium was also stronger year-on-year, higher by 1% to $18.43 billion dollars. Final dividend was
slightly better due to franking, with QBE reporting a $0.10 fully-franked dividend versus a $0.11 25% franked dividend
on consensus.
However, expected headline figures were around $891 million for reported NPAT, and $18.48 billion for written premium.
The number get murkier still with insurance margins up year-on-year at 8.0% versus 7.1%, however they are just below the
consensus of 8.1% with some calling for margins of 8.6%. The main question being asked is; where can the increases in
margins come from?
Management’s margin guidance of 11% was reconfirmed today; some margin increases are expected to come from
‘transformation program’ costs which should add 1% to 1.5%. However this has surely been taken into account on the
results today, therefore the additional increases to the forecasted margin are hard to find.
Guidance was also vague, and based on what we have just seen for FY12, there is downside risk to FY13. The US and
Australian guidance looks like it has been squeezed again, margin guidance looks high, and costs are up; do not be
surprised to see downgrades to guidance over the course of the year.
However, the new management team does look like its ‘clearing the decks’ with restricting of the portfolio and the will
to attack costs head on, and that may just hold back the guidance downgrades. Only time will tell.
EVAN LUCAS
Market Strategist
ENDS