QBE - QBE Insurance Group

[robusta]

I second the above, would be great to get some research into historical bond yields. Does anyone know the % of assets that QBE hold in bonds? The next course of action is of course seeing what a 1% rise in bonds would do to income for QBE. This would give an indication on how much QBE have to gain from any bond yield rises.

Www.bond-bubble.com but take them with a grain of salt I would like to compare with the depression in the 1920's.

 

[McLovin]

I second the above, would be great to get some research into historical bond yields. Does anyone know the % of assets that QBE hold in bonds? The next course of action is of course seeing what a 1% rise in bonds would do to income for QBE. This would give an indication on how much QBE have to gain from any bond yield rises.

It's about $20b in fixed interest with a blended yield of just over 3%. There's another ~$8b in cash and short term money. Since yields on treasuries have collapsed they have been getting into commerical paper. So you'd also need to pay attention to credit spreads. In the HY report they said 25bp move in credit spreads = $80m to their investment income.

 

[jank]

Thanks for the info. Something to chew over.

 

[craft]

the status quo of low bond yields and cheap equity prices.

This is actually unusual - high probability that one will give bringing equity risk premiums back into historical norms. question is which one.

From a macro perspective QBE is positioned to benefit regardless of how the high current equity risk premium unwinds. Now if they could just get their business in order.

Bond bubble is also probably debatable when viewed as part of very long term history.

It looks to me that the recent history of 1980's is the blip not current rates. But could fiat have caused structural change?

 

[robusta]

Interesting times indeed, the German bonds are giving a negative real return to investors and the Yanks are printing money. I must admit I do not really understand the bond market except to know it is huge and to watch out when it moves because that is a lot of cash to find a home for.

As for the blip in the 80's the only risk I can see of a repeat is if inflation gets out of control again like in the 70's.

 

[notting]

How often would you see 3 inside bar days in a row on good volume?

 

[notting]

Tried to break out of the holding pattern to the downside on low volume on a negative day and failed.

It would be good if they cashed a few in when they can! -

http://www.theage.com.au/business/world-business/fed-creating-mother-of-all-bond-bubbles-20121117-29ieu.html

 

[Ves]

It's about $20b in fixed interest with a blended yield of just over 3%. There's another ~$8b in cash and short term money. Since yields on treasuries have collapsed they have been getting into commerical paper. So you'd also need to pay attention to credit spreads. In the HY report they said 25bp move in credit spreads = $80m to their investment income.

Any idea what their historical cost of float has been like? I honestly don't know enough about insurance to be able to sift through the validity of their loss provisioning etc. to be able to make a judgment call on this kind of thing.

 

[RandR]

Any idea what their historical cost of float has been like? I honestly don't know enough about insurance to be able to sift through the validity of their loss provisioning etc. to be able to make a judgment call on this kind of thing.

I'd actually like to take a nibble on QBE down at these price levels but coming up with a valuation thats justifiable to myself is proving to be tricky, given the potential for this to re-rate so quickly up or down. I love the potential upside with the massive holding of USD but theres sooo much that could yet go wrong with this business im thinking of just avoiding it and looking at easier predictions. But then cant help but feel if i ignore it for the more predictable entities i might regret.

 

[McLovin]

Any idea what their historical cost of float has been like? I honestly don't know enough about insurance to be able to sift through the validity of their loss provisioning etc. to be able to make a judgment call on this kind of thing.

I looked as far back as the mid-90s. COR was most impressive in the years leading up to the GFC, before that it had almost always been above 100, I guess not so bad when interest rates aren't at zero.

Have a look at note 22e, it's pretty interesting, during QBE's most profitable period they were actually over-reserving and adding that to profit when they adjusted their initial reserve in subsequent periods. Since the GFC, they've been doing the opposite. (that's if I'm understanding that note correctly). They're either mispricing the risk or the businesses they bought aren't as crash hot as the ones they were previously buying.

 

[UMike]

Bought in again at $10.10.

Way oversold in a nervous market imo.

No ann for the 5% odd drop yesterday. Nice to see a bit of a bounce today but it all seems a bit negative atm.

 

[skc]

Bought in again at $10.10.

Way oversold in a nervous market imo.

No ann for the 5% odd drop yesterday. Nice to see a bit of a bounce today but it all seems a bit negative atm.

Capital raising rumour yesterday.

http://finance.ninemsn.com.au/newscolumnists/other/8575656/australian-stocks-what-happened-today

QBE took a pounding today following market speculation that a capital raising may be in the wings. QBE's gearing is well above their average and lower interest rates domestically will likely mean less return on their 'float' (large swag of funds held (premiums) to payout claims as necessary). QBE closed the day down a shocking 4.72% or 50 cents to $10.10

 

[notting]

If we get past the house, BOOM!!!!
Dentistry to $12.50 easy.
Pause then BOOM again.
Christmas volume not too much wieght in that.
Just makes it a little more hidden IMO.

 

[Garpal Gumnut]

I've been tempted to buy QBE a number of times over the past 12mo., but always pulled back.

Good on you guys who bought closer to $10.

It seems to have considerable resistance at $14, and some support at $10, more lukewarm recently though. The previous support at $12 seems to be acting as resistance atm. I'll keep it on my watchlist.

gg

 

[notting]

You got bushfires and a hurrican about to hit WA and it is rising and closing at the higher end of the trading days.
It was doing the opposite when Sandy was on the way.
Be looking to buy dips.
And thinking over the horizon a little.
This is the year the US bonds will start to show signs of easing as far as I can see from here.

 

[So_Cynical]

Bought in again at $10.10.

Way oversold in a nervous market imo.

No ann for the 5% odd drop yesterday. Nice to see a bit of a bounce today but it all seems a bit negative atm.

well done UMike..350 odd posts in 5 years...and your buying the bottoms, i seem to remember you from another thread????

 

[nulla nulla]

well done UMike..350 odd posts in 5 years...and your buying the bottoms, i seem to remember you from another thread????

Maybe a recent post in CPA looking to buy in at $1.01 ?

 

[UMike]

Maybe a recent post in CPA looking to buy in at $1.01 ?

And did so I am happy to write.

I'm a bit of a looker rather than a poster.

So_Cyn, You'd know me as ZZ Somwhere else.

 

[sinner]

May be now it's the time for long term investors to buy the mean reversion...

Research on mean reversion indicates the sweetspot is around 4Y. 4Y avg in this case looks like it's heading towards $16 (intersecting with heavy S/R zone), which would make a 36% gain off todays close.

 

[white_goodman]

Research on mean reversion indicates the sweetspot is around 4Y. 4Y avg in this case looks like it's heading towards $16 (intersecting with heavy S/R zone), which would make a 36% gain off todays close.

View attachment 50427

how can you assume mean reversion on anything that doesnt statistically mean revert and doesnt have a stationary mean? Its a bad bad reason to be in a trade imo..

however im long for 3 weeks at low-mid 11's, I think this is an absolute bargain price for mid-long term and is a good proxy on playing the bond bubble trade without getting burnt by doing it directly