Ord Minnett believes the market is over estimating the long-term profitability of QBE Insurance on the back of rising investment income and rate increases. While continuing to expect industry margins will strengthen the broker suspects competition will limit returns over time.

Moreover, after the first half trading update the broker is cautious that increased exposure to North American crop insurance could result in periods of extreme earnings weakness for the company.

Helping offset this headwind, the broker acknowledges momentum and premium growth remains positive with premium rate increases in the 10% range across the group. Lighten rating maintained. Target is $13.

Sector: Insurance.

Target price is $13.00.Current Price is $15.67. Difference: ($2.67) - (brackets indicate current price is over target). If QBE meets the Ord Minnett target it will return approximately -21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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