QBE - QBE Insurance Group

[suhm]

1.1 billion shares vs 32m traded today means the big boys haven't exited yet, there is still going to be a lot of volatility.

QBE has a decent history of having a good margin from the insurance policies it writes and having good reinsurance so they don't get blown away in case a disaster strikes. Even with all the natural disasters it is still making an insurance profit. Its downfall is that it really only invests in short term fixed interest and with bond yields being negligible its investment earnings have been paltry.

Hence it should be game on for QBE if bond yields go up.

 

[McCoy Pauley]

Funny thing insurance, have you ever noticed when there are a lot of payouts the insurance companies simply raise the premiums and people pay them? Seems like a good business to be in to me.

Depends on the events being insured, and whether the likelihood of those events occurring is rising or not.

Buffett made a lot of money out of his investment in GEICO, because GEICO specialised in insuring low-risk motorists, meaning that the "float" GEICO held was capable of being put to efficient, money-making use.

I do not think that either IAG, Suncorp or QBE are in the same category. They all insure against all types of risks. If they are insuring against loss caused by extreme weather events, if those extreme weather events will occur more frequently and cause more damage, then the insurers will need to raise greater funds to ensure they can pay out insurance claims, even accounting for reinsurance.

After the Queensland floods 12 months ago, I think there was some news articles about reinsurance companies refusing to provide reinsurance to the front-line insurers because the risks were just too great.

 

[notting]

Income from dividend investors will be running for the exits when they wake up tomorrow.
However, the price action today was not too bad from an intraday point of view.
It finished on it's high which is often bullish on a collapse day for the very short term.
If it had gone down again toward the end it would be bad for the very short term.
I think I might have baught some of SKC 'like an amature' - it just looked to good to be true, I thought there was something wrong with my system, sorry.

 

[McLovin]

You can't help but get the feeling that the actuaries' work are being blown out of the water these days on much more regular occurences.

Although insurance premiums appear to be pretty inelastic to price and often customers have little choice not to accept the higher costs being passed on.

Indeed. The fact that in August they expected catastrophic claims to be 13% of NEP and 4 months later it's 15% makes me think they are running behind the curve a bit at the moment. Hopefully, the higher premiums start to kick in and maybe we can have a few less earthquakes. I had actually thought that the hurricane season in the US this year was fairly benign.

A couple of things looked interesting in the announcement.

1. For 2012 they are planning to double the margin back to 15%.
2. Yield on cash and fixed interest to be 3% in 2012 c.f. 2.1% in 2011. Where's the increase yeild coming from, and what about the increase in risk?
3. There was no mention about some US regulatory issue which was the newspaper headline this morning before the announcement.

I haven't had a chance to listen yet but you may find the answer in the conference call...

http://www.group.qbe.com/Investor-Information/Financial-Reports/Insurance.html

 

[Knobby22]

Insurers are very hard to value.

I am still not in a rush to get in. My bet is that we will see lower lows before a turnaround occurs. I reckon maybe doewn to $7.00.

I am becoming interested though. As notting suggested, the weather catastophes are only going to get worse. Policies will be repriced so eventually the margins will go back to normal but returns from bonds and such are still low and is there any bonds in the Eurozone? I suspect there is.

 

[clinta44]

Insurers are very hard to value.

Bingo! Very Hard to value, how would anybody know what sort of policies they have been writting, the Bad ones don't turn up for years. I would like to know the percentage of short v long tail policies. Most lose money on the float the invest.

I’m a bit nervous on the old mortgage insurance front. They’d want to have deep liquid pockets if the old RE market goes belly up!

 

[Julia]

When or if??

I have always though insurance companies are a lot more riskier than the market makes out. Increasing population and a changing climate means there is a lot of environmental risk that simply cannot be factored in imo

Agree. If some of the long term buy and hold people can explain why they have QBE, I'd be interested. Its SP has been in a steady downtrend for the last five years.
Surely even the original dividend doesn't compensate for the loss of your capital investment?

 

[Chasero]

The next big natural disaster is bound to occur - and when that happens another sell off of insurance companies will occur no?

With climate change and said "increased natural disasters" (hard to ignore considering 2010-2011 events), it's hard to value the share price and related risk of insurance companies. Especially when fear is taken into account.

I'd only ever buy QBE at 10 yr lows. i.e. $6.

Should see a small swing trade on Monday? Too risky so I'll watch next weeks sp action with interest.

Anyway, interest article from bullish "Motley Fool" investors, who are always bullish on shares they own..

http://www.smh.com.au/business/why-im-buying-qbe-shares-next-week-20120113-1pyi8.html

 

[robusta]

Got in today @ $10.81 in both my SMSF and personal accounts - should be interesting times to come for QBE.

 

[Garpal Gumnut]

Agree. If some of the long term buy and hold people can explain why they have QBE, I'd be interested. Its SP has been in a steady downtrend for the last five years.
Surely even the original dividend doesn't compensate for the loss of your capital investment?

Agree Julia,

gg

 

[qldfrog]

agree with the fundamental and so with you Julia/gg
so my blue chip account had a very small amount of qbe/sun: no damage done
[I was playing the AUD/USD position with qbe earnings mostly in USD so you can play the currency there or edge other position (that was my theory at least)]

; but I bought some at $10.85 in pure spec to ofload as a day trader at the nearest sign of small profit
will see how it goes

 

[odds-on]

I'd only ever buy QBE at 10 yr lows. i.e. $6.

I have always wondered about QBE and what value to put on the company but had never thought about it that way, but it makes perfect sense to me.

Cheers

Oddson

 

[brianwh]

I think a lot of the reason many retail investors hung on to QBE was the widespread belief in the market that management, particularly the CEO, was honest, transparent and competent. Recent events cast doubts on this but unfortunately by the time this becomes apparent to most of us the damage is done.

 

[oldblue]

There's no point in trying to put a value on QBE, IMO. As has been noted by several posters, insurance company accounts are notoriously difficult to follow - even by those who know something about the subject - and future earnings are at the mercy of random catastophic events, future claims experience and future interest rates/investment yields. Too many unknowns there for my liking.

I don't see any safety in valuing the company at past lows either. The only prudent course for me would be to wait for some strength to develop in the SP trend and to then catch the upturn - if it occurs.

 

[notting]

It's just a trader as far as I'm concerned.
Insuranc is about as apealing as airlines.

 

[Huskar]

The next big natural disaster is bound to occur - and when that happens another sell off of insurance companies will occur no?

With climate change and said "increased natural disasters" (hard to ignore considering 2010-2011 events), it's hard to value the share price and related risk of insurance companies. Especially when fear is taken into account.

I'd only ever buy QBE at 10 yr lows. i.e. $6.

Should see a small swing trade on Monday? Too risky so I'll watch next weeks sp action with interest.

Anyway, interest article from bullish "Motley Fool" investors, who are always bullish on shares they own..

http://www.smh.com.au/business/why-im-buying-qbe-shares-next-week-20120113-1pyi8.html

For another bullish blog posting on QBE, see http://www.iifunds.com.au/bristlemouth.

 

[notting]

Felt it should have kept going a little on Friday instead of reversing away from the gap.
Today I figured it's just the Monday morners coming in after their weekend catchup. I used todays 3% to get out. 10% enough for me given the downside risk.
Tomorrow could be telling if it's going to have a crack at the gap, otherwise yikes.

 

[Chasero]

For another bullish blog posting on QBE, see http://www.iifunds.com.au/bristlemouth.

Yep, a lotta people seem to agree

Up 3.5% today.

 

[JTLP]

So QBE are doing a capital raising for $500m and apparently it's to be a placement at $10.70 to instos I believe.

So will $10.70 form a new base for QBE or will it get hammered for raising capital and a dismal profit?

Pretty woeful dividend as well ($0.25)...

 

[notting]

Last time the smart money came in at around 11.10.
So far history repeats.