Qbe

[Jaa]

yep .... records are made to get broken eh

They say humans have an innate problem with calculating probabilities.

While 2012 could be more disastrous than 2011, it probably won't.

[Jaa]

This is true but also QBE's historical performance of a few years back were against a backdrop of benign claims experience, relatively high interest rates and strong economies. i.e. They have had two polar extremes of operating environment back to back. The long term will be somewhere in between.

Of more concern is that QBE's strategy is to buy premium. They are really not that good at organic growth. As a generalisation their claims approach is a bit meaner than some peers and their processes are designed to minimise expense (They are quite strong at process engineering for cost control but less good at attracting and keeping customers). While low market valuations are useful to them, low profits and a slow growth environment don't support the acquisition strategy, unless they are either happy to issue cheap shares and dilute existing shareholders or increase balance sheet risk.

I like QBE and don't doubt they will continue to do well in the future but I think we are still in the wrong point of the cycle for them. $10 today was a f$%#en low price though! Well done if anyone was brave enough to catch that knife!

Great post Halebop. Extremes have indeed gone both ways. I would argue the average is way more profitable than the current share price suggests as net earned premium has increased significantly since the mid 2000s.

According to Bloomberg, Chief Executive Officer Frank O'Halloran, 64, has announced 44 acquisitions valued at $7.61 billion since taking over in January 1998.

http://news.businessweek.com/article...OP68R7F28CS6ML

QBE's acquisitions have mainly been smaller bolt on ones. Plenty of insurance companies have succeeded with a strategy of buying and harvesting books, Rothbury in NZ comes to mind. Current market conditions should be offering them plenty more acquisition opportunities!

[macduffy]

this guy from pimco reckons interest rates are zero bound

Did I dream this or did I read somewhere this week that Germany issued some bonds at a negative interest rate?ie "Pay us to keep your capital safe because everything else is too risky". I don't think it was meant to be negative "real" interest rates but that may have been the case.

If true, underwriting profits become ever more important for the likes of QBE. I won't be buying just yet!

[macduffy]

No, I didn't dream it!

"Crying at Germany's bond partyMohamed El-Erian

Published 8:05 AM, 11 Jan 2012 Last update 8:06 AM, 11 Jan 2012


--------------------------------------------------------------------------------
inShare


FT.com

Another day and another previously unthinkable development becomes reality in Europe. Yet what on the surface appears to be good news for Germany – the record low yield at its latest government debt auction – is actually an indication of growing stress elsewhere in the region.

At Monday’s regularly scheduled auction, the German government sold six-month securities at a negative yield of 0.012 per cent. Investors who bought them made history. Rather than receive interest income for lending money, they were the first to pay the German government for the privilege of converting their cash into securities that, at the margin, are less liquid and subject to mark-to-market volatility.


The outcome should not have come as a great surprise. Negative yields had already occurred in secondary market trading for short-dated German government securities. Moreover, a similar phenomena had taken place in the US at the height of the global financial crisis.


Some Germans may be tempted to welcome the cheap source of funding. But before celebrating too much, they would be well advised to consider both the causes and the implications.

Investors fleeing dislocated government debt markets elsewhere in Europe are attracted to Germany by its solid balance sheet and its fiscal discipline. Moreover, the fruits of years of structural reforms by Berlin are being harvested in the form of vibrant job creation and solid international competitiveness.

Part of this investor repositioning is funded by the sale of other European government debt. Another is being channelled through the banking system, with German banks gaining deposits at the expense of most other European banks.

Operational stress in Europe’s financial system is also a factor. Due to technical dislocations similar to what America experienced three years ago, some banks are forced to scramble in order to get their hands on high quality collateral, helping to push German yields to artificially low levels.

The longer these factors persist, the greater the likelihood that other private sector entities will also be pulled in the short-run into buying German securities. Over a longer time horizon, however, negative yields on the bills will reverse course, especially if conditions improve elsewhere in Europe. Yet, even then, there is a risk that a large portion of the new money pouring into German debt could prove more durable given that it is being hardcoded through investor- and depositor-driven changes to investment guidelines and benchmarks.

German rejoicing for borrowing money at negative rates should thus be tempered by the reality of Europe experiencing an accelerating disengagement of the private sector from the region’s economic integration project. This undermines growth and employment, shifts more of the load to taxpayers, and places even greater demands on creditor and debtor countries alike – all serving to aggravate an already strained process for agreeing on the appropriate policy response and related burden sharing.

At a time of considerable domestic resistance, governments in surplus countries (essentially Germany, but also others such as Finland and the Netherlands), as well as the European Central Bank, will face even greater external pressure to substitute more of their solid balance sheets for the delevering private sector. Meanwhile, debtor countries will be expected to do even more on the austerity front, thereby aggravating internal tensions and sacrificing both actual and potential growth.

Rather than welcome negative yields, Germany should interpret the outcome of Monday’s auction as further indication of the gravity of the situation facing the eurozone as a whole. It is another alarm bell calling for more forceful steps to improve the region’s policy mix, counter banking fragility, and strengthen the institutional underpinning of a “refounded” Europe.


The writer is the chief executive and co-chief investment officer of Pimco.

Copyright The Financial Times Limited 2012. "

[RRR]

Averaging down helped me with this one, up by 35% average buy price. The increase in earnings will follow I think and will drive the share price even higher. Dividend pay out ratio has been slashed which is also a positive. Depreciating Australian $ also helps.

[winner69]

Averaging down helped me with this one, up by 35% average buy price. The increase in earnings will follow I think and will drive the share price even higher. Dividend pay out ratio has been slashed which is also a positive. Depreciating Australian $ also helps.

Whoops - not going to plan

At least you have an apologetic CEO - After the company today said it would suffer an expected $US250 million loss this financial year, Mr Neal said it was ‘‘very frustrating and very disappointing’’ to have announced the third profit downgrade since he became chief executive in mid 2012. ‘‘From an investor point of view we are extremely understanding of the sentiment that they would have and unequivocal for disappointing them this year,’’ Mr Neal said.

http://www.theage.com.au/business/ba...209-2yzyi.html

[blueswan]

I got this from an Aussie Broker website

"We suspect that the guidance will not be achieved in 2014because:

1. The fortunes of the European business may come under pressure as theprofitability of Syndicate 386 reduces and price pressure continues across theEuropean market;
2. The company advised that it has not completed the review of its long tail USbusiness which leaves the possibility of future reserve increases;
3. The force placed mortgage insurance business should continue to dwindle asthe US housing recovery continues and losses may escalate as a consequence ofthe large fixed cost base of this business; and
4. The company’s risk margins remain low so there should be pressure to furtherincrease these.

We maintain our underperform recommendation and share price target is reducedto $11 (from $13). "

[ratkin]

from 2010

I wouldnt touch them , dont like the ownership structure (nearly all funds) and much of their growth has been by aquisition rather than organic growth, and there are questions about how they can continue this.
Dont trust the brokers , they are connected to the funds who own the stock and always have it as a buy.

Ask yourself , if this stock is so great why does its price keep dropping in a rising market

Looks like the Rat was right for once

[mark100]

Buy the insurance brokers, rather than the insurer! Take a look at the 10 year chart of AUB vs QBE

[percy]

from 2010

Looks like the Rat was right for once

Well I always learn from your posts.
Wish you would post more often.