QBE Insurance Group Limited (ASX: QBE)

QBE Insurance Group Limited (ASX: QBE) is an Australia-based insurance and reinsurance company. The principal activities of the Company include underwriting general insurance and reinsurance risks, management of Lloyd's syndicates and investment management.

Recommendation Rationale - SELL at AUD 17.505

• Trading Near the Resistance: QBE’s share price has surpassed its R1 level recommended on 1 October 2024. Therefore, share price can face resistance at the current levels.
• Technical Standpoint: With a 14-day RSI of ~69.25, QBE’s stock is approaching the overbought territory. Thus, the stock price might be overbought and could be due for a price correction or consolidation.
• Expense Ratio Increase: QBE’s expense ratio increased to 12.0% in H1 FY24 from 11.7% in the prior period, reflecting higher costs due to continued investment in its modernization program and higher run costs related to recent business growth​.
• Increased Claims Ratio: The ex-catastrophe claims ratio rose to 61.3% in H1 FY24, up from 60.6% in the previous period. This increase was driven by strains from Crop insurance and elevated large loss activity, indicating ongoing pressure on underwriting performance.

QBE Daily Chart

(Source: REFNIITIV, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY Dec'25E) (Illustrative)

QBE is expected to trade at a slight premium based on record revenue of US$1.026 billion (up 7% YoY) in FY24, financial flexibility (cash and bullion balance of US$587 million and has zero debt), and strategic growth initiatives. For conducting the valuation, the following peers have been considered: Challenger Ltd (ASX: CGF), Clearview Wealth Ltd (ASX: CVW), and NobleOak Life Ltd (ASX: NOL).

Considering that the stock has surpassed its R1 level, market uncertainties, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 17.505, as of 21 October 2024, at 2:55 PM AEDT.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 21 October 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.