Morningstar says QBE’s recovery is on track after last year’s profit downgrade.

The research house expects a rise in earnings fuelled by improving insurance margins and productivity, higher premiums, strong cashflow and lower debt.

It says CEO John Neal and CFO Pat Regan are delivering on the turnaround.

“We support management actions and expect underlying earnings to post a strong recovery in coming years on the back of disciplined underwriting and further improvement in productivity,” a report on the stock says.

Pricing conditions remain challenging, but underperforming businesses have been divested, the US economy is recovering and QBE will benefit from a stronger US dollar and higher long-term interest rates.

Morningstar says it will take another 12 months before it can confidently say QBE is back to delivering consistent earnings growth, “but at this stage, it is clear the recovery is on track”.

It has a “hold” recommendation on the stock at the $13.98 per share price recorded when the report was written.

QBE was trading at $13.86 this morning.

Since May it has consistently outperformed the All Ordinaries index, suggesting investors are starting to believe the company is rebounding from a period of underperformance and writedowns following a global acquisition spree.