Don’t get spooked, this ASX 200 share is still a buy: expert

A man runs away from a large shadow on the wall reaching down with its arms as if to grab him.A man runs away from a large shadow on the wall reaching down with its arms as if to grab him.

In turbulent times like 2022, the share market can get quite skittish.

An example of this is how it reacted to QBE Insurance Group Ltd (ASX: QBE)’s business update on Monday.

A perception that the numbers were slightly unflattering sent the share price immediately plummeting 4% that morning.

But if the business is still fundamentally sound for the long term, prudent investors may want to pick it for cheap after such knee-jerk reactions.

And that’s exactly what Morgans senior analyst Richard Coles thinks, as he urged investors to take a chill pill.

Everyone settle down, this isn’t that bad

It seems the market freaked out from QBE’s 2022 catastrophe claims tracking to come in higher than what QBE had previously allowed for.

But Coles said on the Morgans blog that the US$100 million figure is nothing to worry about.

“We would argue this is still a reasonable outcome in what has been a very volatile year for weather, noting the global insurance industry is likely to see total claims greater than US$100 billion.”

In fact, Coles insisted this is a better result than how the company might have performed a couple of years ago.

“We believe that in years gone by, the size of the claims blow-out for QBE in a similar scenario would have been much larger, reflecting the company’s efforts to improve underwriting quality in recent periods.”

2022 might be bumpy, but 2023 will be bumper

Admittedly, the Morgans team has downgraded the 2022 earnings per share forecast by 6% due to the higher claim costs.

But they have actually lifted the 2023 estimate by 5% on higher investment yield assumptions.

“The higher running yield QBE is achieving on fixed income securities — now 3.9% versus 2.5% in June — and the continuation of robust premium rate increases should position the company for a strong FY23 in our view.”

The QBE share price now trades 6.2% higher than where it started this year while paying out a 2.2% dividend yield.

The insurance giant is hot with professional investors at the moment.

According to CMC Markets, eight out of nine analysts are rating the stock as a strong buy.

The post Don’t get spooked, this ASX 200 share is still a buy: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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