QBE: Full year result - Lots of one-offs but real progress made

QBE: Full year result - Lots of one-offs but real progress made. Insurance margin 7.6% (BP 8.3%, guidance 8.0-9.0%);PCA multiple 1.70 times (BP 1.8 times, guidance 1.7-1.9 ). GWP US$16.3bn (BP US$16.8bn, guidance US16.6-17.0bn);NEP US$14.1bn (BP US$14.1bn, guidance US$13.9-14.2bn);Expense ratio 32.9% (BP 32.9%, guidance ~33.0%);Combined Operating Ratio (COR) 96.1% (BP 95.4%, guidance 95.0-96.0%);Net investment contribution 3.7% (BP 3.7%, guidance 3.5-4.0%). Bottom line and margin below expectations due to lower GWP and higher claims although other metrics including NEP are broadly in line. The insurer is still in transition (2014 was always going to be messy especially in 1H14) but progress has been made in 2H14 with the absence of adverse prior year developments and lower attritional claims. This appears a much cleaner result compared to the previous halves. Outlook: Global pricing flat; QBE will continue de-risking its book while keeping its focus on margins (in a way, shrinking to improve long term returns - e.g. the sale of the Argentine workers compensation business). We believe QBE continues to move in the right direction. For the full report click here: (VIEW LINK)