QBE Insurance Group Ltd

L1 Capital Long Short Fund continues to hold QBE Insurance Group due to its improved business performance and attractive valuation. QBE's shares rose following a strong first-half result, surpassing consensus expectations with a 15% increase in underwriting profit. The company's turnaround is evident, with Gross Written Premiums (GWP) growing by 18% in the first half of 2022, building on a solid 21% increase in 2021. Notably, QBE's North American business, which has historically struggled, showed significant improvement in both operational trends and reserving. Additionally, QBE is benefiting from rising interest rates, with its large investment book expected to generate an incremental ~$240m in earnings based on higher bond yields. After facing years of headwinds, L1 Capital believes QBE is at a turning point, poised for stronger margins, dividends, and return on equity. The market has not yet fully priced in this positive inflection point, with QBE trading at a relatively low ~8.5x FY23 consensus P/E compared to its pre-COVID 10-year average of ~13x. This undervaluation, combined with the company’s improved outlook, supports L1 Capital’s positive view.

L1 Capital Long Short Fund continues to hold QBE Insurance Group following a strong quarterly performance, with premium volumes and rates remaining robust and investment yields exceeding market expectations. The company has made significant strides in improving its North American business, which had previously been a source of underperformance. Additionally, QBE has strengthened its reserving, positioning itself for consistent earnings growth in the coming years. After years of challenges, L1 Capital believes QBE is now at a turning point, poised to deliver improved margins, higher dividends, and better return on equity. Despite these positive developments, the fund notes that market expectations have not fully priced in this inflection point, with QBE trading at a relatively low P/E ratio of around 8.4x FY23 consensus, well below its pre-COVID 10-year average.

L1 Capital Long Short Fund continues to hold its position in QBE Insurance, following a 10% increase in the company's share price after it reported strong FY22 results, with cash NPAT exceeding consensus estimates by 15-20%. The results highlighted significant improvements in the company’s earnings consistency, especially in its historically underperforming North American business. Additionally, QBE has strengthened its reserving, positioning itself well for consistent earnings growth. After years of caution due to industry and company-specific challenges, L1 Capital now sees QBE at a turning point, expecting stronger margins, dividends, and return on equity. The market has yet to fully price in this inflection point, as QBE currently trades at only 10x FY23 consensus P/E, significantly below its pre-COVID 10-year average of around 13x. L1 Capital remains optimistic about QBE’s potential for continued growth and improved performance.

L1 Capital Long Short Fund continues to hold QBE Insurance Group Ltd following a strong FY22 result, which exceeded consensus estimates by 15-20% in cash NPAT. The company has made significant progress, particularly in improving its North American business, which has been a long-standing challenge. Additionally, QBE has strengthened its reserving, positioning itself for consistent earnings growth in the coming years. After years of caution due to industry and company-specific challenges, L1 Capital now believes QBE has turned a corner. The company is on track to deliver stronger margins, dividends, and return on equity. With QBE trading at a relatively low multiple of 10x FY23 consensus P/E, compared to a pre-COVID average of around 13x, L1 Capital believes the market has yet to fully recognize the potential upside from this inflection point.

L1 Capital Long Short Fund continues to hold its position in QBE Insurance Group Ltd. following a strong 22% rally in shares after the company reported solid FY23 results, with earnings doubling year-on-year. The company’s insurance profits were in line with guidance, reflecting significant progress in delivering stronger, more consistent earnings. L1 Capital sees QBE as well-positioned to exceed expectations moving forward, with conservative guidance and consensus estimates that currently reflect minimal improvement in insurance margins, despite ongoing positive industry trends. Additionally, QBE has enhanced its resilience by increasing its weather claims budget and divesting from higher-risk portfolios. After years of challenges, L1 Capital believes QBE has reached a turning point, poised to deliver more consistent margins, dividends, and returns on equity. Despite a more than 100% increase in share price since early 2021, QBE’s shares still trade at a low multiple of 10x FY24 consensus P/E, offering further potential upside given its improved business quality and favorable market trends.

CI Australian Equities Fund continues to hold QBE Insurance Group Ltd, viewing recent developments as supportive of its long-term investment thesis. The fund welcomed QBE’s decision to exit its loss-making North American middle-market business, noting that despite prior remediation efforts, the unit remained a drag on margins and a distraction for management. The closure is expected to improve QBE’s financial profile, reduce exposure to property catastrophe risks, and increase the likelihood of achieving its 95% Combined Operating Ratio target for the North American division. While the announcement of potential losses from civil unrest in New Caledonia ($175–225 million) surprised the market, CI Australian Equities Fund was encouraged by QBE’s ability to absorb this, alongside other events such as the Baltimore Bridge disaster, within its catastrophe allowance—highlighting growing portfolio resilience and a more conservative approach to guidance. Following recent site visits to the UK and US, the fund’s industry research indicated that conditions remain broadly favourable for global insurers, with rational market behaviour and steady progress on QBE’s broader North American turnaround.

CI Australian Equities Fund recently exited its position in QBE Insurance Group Ltd (QBE), which had been one of the portfolio’s largest active weights in recent years. The initial investment thesis centered on a low-risk turnaround strategy, driven by management actions to improve returns in the long underperforming North American division. Over time, decisive management initiatives and improved industry conditions significantly strengthened the business, and the market now anticipates the group will achieve a low-90s combined operating ratio in the near future, aligning with the Fund's original "north star" target. Given the stock’s substantial appreciation—having nearly doubled since its purchase two and a half years ago—and the fact that the turnaround opportunity is no longer latent, CI Australian Equities Fund no longer finds the risk-adjusted value as compelling, prompting the decision to exit the position.