QBE Insurance Group Ltd (ASX: QBE)
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QBE Details
Impact from Hurricanes and downgrade in guidance:QBE Insurance’s stock plunged about 3.5% on October 03, 2017 while dragging the Australian benchmark index lower, as the group released a market update indicating impact from the latest natural calamities. Particularly, the global insurer has identified an impact of about US$600 million (AU$766 million) to its 2017 earnings from Hurricanes Harvey, Irma and Maria and the earthquakes in Mexico. The losses highlighted in 2017 have made the year to be the worst year for losses for the group and the calamities forced QBE to increase the amount of money set aside for natural disasters. The group’s allowance for large individual risk and catastrophe claims has been increased to $1.75 billion for 2017, with an increase of $600 million in fourth quarter. It is further anticipated that costs blowout can result in reinsurance and primary insurance price hikes. On the other hand, the group expects to benefit from price rises with its reinsurance programs already purchased for 2018.
QBE has now changes its guidance for its unadjusted combined operating ratio (COR) to 100%-102% against the August guidance of 94.5-96% (wherein COR over 100 indicates that an underwriting business is unprofitable).
The stock has fallen over 21% in last six months, as at October 02, 2017. QBE has its majority of operations in North America, and this makes it exposed to more losses in comparison to IAG and Suncorp. Given the uncertainty around claims and recent events leading to an earnings’ impact,we maintain our “Expensive” recommendation on the stock at the current price of $ 9.82
Australia and New Zealand Banking Group Ltd (ASX: ANZ)
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ANZ Details
Footprint into Real-Estate: Australia and New Zealand Banking Group now aims to have an exposure into Australia’s real estate market through its latest acquisition of an emerging Australian tech start-up, REALas, which has developed an app that enables home buyers figure-out accurate sale price predictions for properties on the market. This move comes under the bank’s approach to undergo a transition to “agile teams” for attaining operating metrics, to the likes of Google and Facebook, with regards to its digital transformation efforts. Further, the fact that the bank could see value when its customers have the access to accurate price predictions for buying a house, has helped stemming-up the acquisition stroke.
REALas is said to have a unique price predication algorithm that offers the most accurate price predictions in the property market. Further, users have the ability to access the “favourite” properties. In addition, a new feature in development has been highlighted to be an online communications tool that is expected to simulate the natural chatter among people resulting in an open house for inspection. In return, ANZ would help provide extra resources with regards to marketing efforts and making improvements to the platform.
Issuance of Capital Notes 5: Australia and New Zealand Banking Group has recently raised $931m of Additional Tier 1 Capital by issuing 9.31m Capital Notes 5 at $100 each; and has settled CPS3 Buy-Back with all Participating CPS3 sold on-market through the Buy-Back Facility for $100 each.Earlier, the group had announced that the margin was set at 3.8% per annum and $552m of ANZ Capital Notes 5 were allocated to the Syndicate Brokers.
With the recent developments and efforts on transformation, we give a “Buy” on the stock at the current price of $ 29.87
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