QBE Insurance (ASX:QBE)

Prior to the last 6 months, investors in QBE had been long-suffering since the exit of Mr Frank O’Halloran in 2012 following a 14-year reign as CEO. Mr O’Halloran was responsible for more than 125 acquisitions by QBE. Some of these acquisitions were difficult for QBE to digest and the new CEO, Mr John Neal, was tasked with downgrading underperforming businesses and exiting non-core assets where possible. The last downgrade came in July 2014, when the business increased provisioning on their Latin American workers compensation business. Further cost-out initiatives and non-core asset sales provide additional support for the stock and given that QBE invests a majority of its premium in US fixed income, the company clearly has leverage to rising US interest rates. QBE is currently trading at a P/E premium and a yield discount to its peer group. However, the lower payout ratio (investing in itself) should result in earnings increasing in later periods and given forecast earnings growth, QBE becomes the cheapest of its peers in 2016 and beyond. Subscribe to our newsletter here: (VIEW LINK)