On Wednesday, QBE Insurance Group Ltd. (ASX:QBE) (OTC:QBEIF) experienced a shift in stock rating as Jefferies downgraded the company from Buy to Hold. The financial firm also adjusted the price target for QBE Insurance to AUD19.35, reflecting a revised outlook on the insurer's performance.
The downgrade follows QBE's third-quarter update for the fiscal year 2024, which reaffirmed the full-year guidance previously established. The report highlighted that the key metrics remained consistent with the guidance points provided during the first half of 2024 results. Gross written premium (GWP) growth from September year-to-date was noted at 2%, which adjusts to 9% growth after accounting for the impact of crop insurance and portfolio exits.
A significant point of concern for Jefferies was the faster runoff of QBE's mid-markets business, which is now expected to create a larger financial impact than initially forecasted. The anticipated headwind has increased from the previously guided -$550 million to -$600 million.
Despite these challenges, QBE has maintained its combined operating ratio (COR) guidance at 93.5% for the fiscal year 2024. The COR is a key metric for insurers, indicating the percentage of premiums paid out in claims and expenses; a lower ratio signifies better profitability.
This rating change by Jefferies comes at a time when investors closely monitor insurance companies' performance, especially in the face of various market pressures. QBE's adherence to its full-year guidance suggests a stable outlook, but the revised expectations from Jefferies indicate a more cautious view of the company's near-term prospects.
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