As a long-term participant in the Australian equity markets, one would have to look back to August 2007 or nineteen reporting seasons before the words “QBE Insurance” and “Result of the Week” had been uttered in the same sentence.

QBE’s 2016 result contained no unexpected news and confirmed to a sceptical market that the recovery in margins is underway. Whilst the cash profit of $898 million was flat on 2015, the improvement in the insurance profit margin to 9.7% highlights the success of cost out initiatives and improved business mix. North America, which has been a problem for close to five years, was profitable with a strong result in crop insurance offsetting losses from Hurricane Matthew and an April hailstorm in Texas.

On the capital management front, QBE increased the dividend by 8% and announced a A$1 billion on market share buy-back to be conducted over the next 3 years. This pleased the market and sent the price above $13, though we note that this buy-back is likely to be conducted at levels above which capital raising were conducted in 2012 and 2014 ($10.70 and $10.56 respectively).