QBE - QBE Insurance Group

[3 veiws of a secret]

All insurers seem to have suffered.. Is this because they rely on backing their policies from the world bond market? I'm not sure, just wondering if this is why..

Once the premiums come in there are several instuments you can use to reinvest your net premium incomes. Primarily you make sure (unlike HIH) you set up your reinsurances for your risks that your exposed too,then it fragments to ,xs loss, treaties and so on...Whether you spread your risks like the bookie does is entirely up to the risk management teams. To expose your portfolio into the bond market is a matter for each individual company.....but QBE is a very conservative insurance company from my dealings with them in the past .My long time friend is on a box at Lloyd's Corp-say lime street.....and it appears things have not changed from their conservative strategies.

I personally think,that premiums coming in from USA is the negative feature here .US $ is a poor investment currency ,and the couple this to the US stock market inflation ,then you can begin to understand the nervousness with QBE share price. Not to mention any catastrophies world wide and big insurances get the kosh treatment.
Fortunately "Insurance" is a necessary evil......but then again I hold QBE at least a few times a week!.........IAG? as Borat would say "Ino like"

 

[rostov]

(sigh. Some of you posters hold really better waters/thoughts/IQ that where I've been hanging around lately)

I too am wondering what's up with QBE. Note : I shorted from 2858 after a little deliberation, with initial (but cancelled 2 days back) target 2660, and today's target put in at 2640 was hit. Try as I might, modelling a 10year hold at 15% RR (rates of return) for QBE with expected EPS for 2007 at 237.1 (to achieve a constant delta EPS for the past 10 years) produces a max price over $34.

For 3 days, it's been supported by 2006 support, and after running a few reverse-value modelling, the only clue I have is that at current price assumed as max, the sellers are assuming that the EPS is -60(c), after having a 1/2-year close-to-100 EPS. Note that all EPS and div considerations and NTA were derived from data posted by Aspect huntley. We assume the assets declared by the company are true.

Doesn't. make. any. sense. Reason I shorted was due to psychology after the FGIC incident, adding more fears (no facts yet) that any possible bond assets covered by QBE were overrated/overstated (hence NTA goes down, etc). I also toyed around the speculation surrounding the withdrawal of shares from UBS (they sold, rated QBE upwards to pump, then sold)

Money's in the bank, and I'm not complaining. However, I've run out of valuation-reasons to go long or short, and though happy with the 2% portfolio increase, I don't know WHY <-- this bugs me lots.

Fundamentally I'm running out of clues as well.

Technically the past 3 trading days confirmed my tech entry reasons to short.

Question : What's going on with QBE and what's fore-running it at current levels?

____

Thereafter lies my posts from another forum. Appreciate any criticisms (very welcomed, in fact)

(14th Feb 2008 12:44hrs)
Order to open:
GTC Sell QBE LMT 2858 STP 2951. Target 2660.

Tech reason : fail to secure 38.2fib, 13+22ema failure, ElderRay bull dip, and buying MACD setup.

Portfolio exposed : 2% (max loss)

Cripes. Order was already triggered within last 30 minutes of yesterday's close, and closing was positive to my favour. Right now we have a USA red day bigger than yesterday's green day, and just 6 minutes before the bell starts, we have gap downs for QBE.

According to my view of the buy/sell queue for 12 prices, there is a pre-open dump of QFE. Very interesting because despite last night's downgrade of FGIC and comment that ABK and MBI were better than FGIC (causing ABK +12.3%, MBI+8.42%), the market was still red. This will be interesting for QBE.

I'm removing my limit. There's one more trading day for the USA, and if it's red, it's 2 days of red risk for Asia because Monday USA time is holiday. And OpEx was last night (no more push of prices up by hedge funds -- they cover today or tomorrow)

2660 limit was easily reached in the opening frenzies of retail dumping (my limit was removed). For the whole day, it faded up better than the ASX200. Because this is a play and directionally unconfirmed short, I move my stops forward to breakeven plus a little more to cover any commissions.

Technically there are a few problems. Besides those that I have stated before, the 100dma has just crossed the newly formed (since Oct 2007) 200dma, and all 13+22ema and their channels and all other dmas are sloping down. ElderRay bull power is 0 while bear power is -135, and this gap DOWN is a bearish breakout from the triangular wedge formed since 16th January entered from the top (means it usually breaks downwards), with target as the widest channel from the beginning at around 405 points and therefore a reasonable target would be 2400+. Note : not within a single day, and we're talking probabilities here (that's why we trade), and NOT certainties.

If it reaches, I'll decide on releasing. If it doesn't, breakeven.


I still procrastinate on (1)(b), with no other reason except that I've devoted a little more time back to the US markets. However, reading through the 2006 ANN and 2007 1/2 ANN is very interesting : I find no reason QBE is exposed to insuring any of the toxic stuff their US counterparts (FGIC, ABK, MBI, etc) are exposed to. All external searches for such clues are also absent : consistency with what they are stating : no CDO/CDS/MBS direct exposure. 9% of investment portfolio with the "top rated" (I really want to know who these banks are -- suspect) USA banks. A nearly equivalent amount in their acquisitions of US Winterthur + Praetorian. Very conservative in their investments : cash markets (very good choice) and fixed interest (again a good choice). Only thing hurting them is the exchange rate, but for that I have a thesis -- they are hurting right now but the USDX is bottomed.

I don't have a good fundamental reason to go chasing and shorting them. Except for a few notables.

1) UBS 6th November substantial shareholder reduction from 7.02% to 5.57% at 11,298,107 shares traded DOWN. The ASIC filing with ASX on 3rd January 2008 is messy as, but Aspect huntley has put together the numbers for said date. Sold into strength, QBE drops for a week 2 days later.

2) AXA 9th November substantial shareholder reduction from 7.53% to 6.22% at 5,467,401 shares traded DOWN. ASIC filing with ASX still absent. Numbers from Aspect Huntley. Sold into strength, QBE still fades down for a week thereafter

3) UBS rating of QBE to buy on 23rd November to "buy". Pump. http://www.tradingmarkets.com/.site/news/Stock News/850933/

4) UBS (currently still unfiled, so unknown even to Aspect) substantial shareholder reduction 28th December 2007. Sold into strength. QBE drops to current levels 2 days later.

Why? I don't really know. Could be anything : forced sale by UBS, or speculative knowledge of astro stuff (these are too speculative. No facts)

So far substantial shareholders (name, shares, % of QBE):
AXA Group 55,060,293 6.22
Capital Group Companies Inc 48,268,558 5.89
(barclays somewhere below, at around 5.1%)

Aspects Qualitative Analysis (recently dated -- just 1 month):

_________
Business Description

QBE is a leading provider of general insurance and reinsurance services in Australia, the Pacific, Asia, the Americas and Europe. QBE has operations in 45 countries and has made almost 100 successful acquisitions since 1982. QBE is one of the best managed and profitable insurance groups in the global general insurance and reinsurance industry.

Company Strategy and Prospects
(Last Update: 18 January, 2008)

The QBE strategic objective is to remain a highly respected and successful general insurance and reinsurance Group by earning underwriting profits in each insurance division and above benchmark investment returns. The objectives are to grow shareholder wealth over the long term while maintaining a sound solvency position and a low risk profile. Extensive risk management is in place to protect all stakeholders.

QBE reported a 56% increase in NPAT to $921m for the six months to June 30, 2007 with solid growth in both gross written and net earned premiums which increased by 15.3% and 18.8% respectively. This reflected the benefit of past acquisitions and organic growth and despite a 3% decline in average premiums and weakness in $US. Gross written premium rose to $6.52bn net earned premium increased to $4.75bn. Group combined operating ratio fell from 87.9% to 86.2% driving a strong underwriting profit. Investment income rose by 70% to $564m with the net yield rising from 4.2% to 6.0%. The insurance margin improved from 18.7% to 22.2%. The probability of adequacy of outstanding claims ratio was 95.8% leaving management little option but to release more profit to shareholders. Operating cash flow increased from $322m to $785m reflecting premium growth and a relatively benign claims environment.Interim dividend increased by 43% from 40 to 57 per share 60% franked.


Using average exchange rates GWP is expected to grow by 25% to $13bn in FY07 and by 10% in FY08 to over $14bn. Management upgraded insurance margin guidance from 17.5% to 18.5% to 18.5% to 20.0%. QBE has sufficient capital to finance acquisitions of up to $1.5bn of additional net written premium. More acquisitions will have to be undertaken otherwise surplus capital will have to be returned to shareholders.
___________


Right now, with the current EPS at $1.03 for 1/2 year, the target to attain the same 39.97% YoYoYoYoYoYoYoYoYoY increase in EPS is $2.232 for this coming 2007 ANN. Value investors will HOLD at such levels and above.

In order to attain the same EPS gain that QBE obtained between 2005 and 2006 (2005EPS=$1.344, 2006EPS=$1.785, thus % EPS increase = 32.81%), their 2007 ANN has to be EPS = $2.371 .

Psychologically I have to think about what an EPS equal, lesser, or more than $2.37 would mean. For now. That's where (1)(b) comes in.

For now, I sleep.

Despite today's action on the financials and the futes (USA) ramping up until 5am Sydney time, QBE still traded down, and the pattern was similar to 3 days ago : volume sell right at the open, and fade up later in the day till close. Each time it seems to push the 2006 support more.

Sorry if I sound a little paranoid trying to chase a reason/answer to my question. Don't like it when technicals have enough reason to win without fundamental ones.

 

[BradK]

Could today be the day for cue bee eee? I have a fish in at $26, but ironically if it breaks $26, not sure when the next stop will be

Brad

 

[Muschu]

I'm lost [and a bit of a novice!!!].
Why the 10-11% drop on what appears to be a good report?
Can anyone ease my confusion?

 

[Sean K]

I'm lost [and a bit of a novice!!!].
Why the 10-11% drop on what appears to be a good report?
Can anyone ease my confusion?

Up is down and down is up.

If they had have come out with a crap report, they'd be flying.

Musn't have been as good as hoped, or the CEO said next year will be 'difficult' or something equally as scarey.

 

[3 veiws of a secret]

Like a queen-bee I'm in again....interesting days trading .....Hey you could have been holding ABS today and felt like ?????!

 

[doctorj]

On first glance, the report looks very good considering the stage of the insurance cycle we're in.

Underwriting result looks good despite cost pressures on claim costs (raw materials, labour etc), investment result looks solid and they're reinsurance exp has fallen slightly relative to GWP but reinsurance recoveries is pretty consistent (meaning it doesn't appear they've significantly changed their risk retention).

So where are the skeletons? Exposure to the USD and the US economy in general I'm guessing, coupled with continued pressure on premiums as the cycle continues to tighten.

What were analysis expectations? It all looks pretty solid to me.
rick, I wouldn't look to attribute fundamental reasons to short term price movements, it is often just noise.

 

[3 veiws of a secret]

As I have stated in a previous post ...US$ premiums are having adverse future reactions to profits ,its the r/ex that dulls the reading for me .Talk of Aus$ possibly reaching 94 cents....and try to exchange Aus $ in Africa ,or South America then you understand how the market feels today. I for one jumped in at todays prices ...QBE is a heavyweight in Insurance terms for me.

 

[Muschu]

Thanks guys [or gals]. QBE has such a good track record there must be doubts about US exposure surely.....????
Seems to me that anytime that word [US] is mentioned then everyone ducks no matter whatever else is going on.
[I did check ABS.... ouch!!]
I already have QBE and was wondering whether to top-up for the long-term?

 

[Julia]

This is one of my long term holds. The market reaction today over the longer term will be a hardly noticeable blip.

 

[3 veiws of a secret]

Ricky! What Julia states is crystal clear! I have bought and sold today and trying to re-enter .....please somebody spare me a dime!
BTW dont forget the divi helps at these low red hot special prices!

 

[Muschu]

Did it! Thanks all. There's a lot more experience around here than I have but QBE has been very kind to me these past years and I have been reluctant to give up cash recently....
Rick"y"

 

[3 veiws of a secret]

Did it! Thanks all. There's a lot more experience around here than I have but QBE has been very kind to me these past years and I have been reluctant to give up cash recently....
Rick"y"

Hmmmm,Unfortunately I don't know nothing about shares ,but Insurance I can say I know something about. Alas if you think I had the experience in shares I would not have attended my bee duties to come back to the screen and see QBE @ $26.01 when my order was to sell @$25.60 today,even though I bought in at $25.45, it was meagre takings. Anyway back in through the side door @$25.71
As I said down on the day (-10.81%),and you gain a divi.....
Now did I have a good day with ABS!!!!!! oooooweee

 

[Muschu]

Ouch! Actually I didn't "do it"! I placed the order with my advisor by email late in the day and was too slack to follow it up with a phone call. [I trade some shares on-line myself] but my super fund shares I trade through my advisor. It's even cheaper but has its downsides. Anyway, he wasn't in - unusually.
So -- I will wait and see where QBE is tomorrow I guess.....
R

 

[M34N]

This is a fantastic company that's been unfairly hit again, like most financials. Look at the trend its had since mid-2002, it traded from $6-7 and its just been uphill since with the occasional hiccup. Even September 11 was just a "blip".

Anyone willing to suggest where support for this is at? Looks to be around $25, then around $20 for the next level. Hard to say with financials in these times!

Wouldn't count on QBE going down though, this has surprised time and time again, and I would actually expect it to rebound like it did after 9/11.

 

[3 veiws of a secret]

Ouch! Actually I didn't "do it"! I placed the order with my advisor by email late in the day and was too slack to follow it up with a phone call. [I trade some shares on-line myself] but my super fund shares I trade through my advisor. It's even cheaper but has its downsides. Anyway, he wasn't in - unusually.
So -- I will wait and see where QBE is tomorrow I guess.....
R

I personally would'nt get too emotional about what you bought today or sold....plenty of opportunities with this one ,if it goes down tomorrow then feel that warmth when you buy cheaper...if it goes up...well wait for the following day .....emotions and logic Mr Spock!

M34N.....I missed all the turmoil on the markets during Nov 2007>early Feb 2008 ( on hoilday for 3 months) ,but with all the neurosis out in the market ,everybody is like in "cold turkey mode". But I agree with you QBE's figs where not bad ,just greed has got the better of some jittery sellers.

 

[Muschu]

I personally would'nt get too emotional about what you bought today or sold....plenty of opportunities with this one ,if it goes down tomorrow then feel that warmth when you buy cheaper...if it goes up...well wait for the following day .....emotions and logic Mr Spock!

M34N.....I missed all the turmoil on the markets during Nov 2007>early Feb 2008 ( on hoilday for 3 months) ,but with all the neurosis out in the market ,everybody is like in "cold turkey mode". But I agree with you QBE's figs where not bad ,just greed has got the better of some jittery sellers.

M34N? OK, interpretation needed....
Got up during the evening for a cup of tea and see the Dow, for now, is retreating on opening - so maybe the "warmth" will be felt. It's no big deal anyway as I'm in for the long haul. And there's a lot more to life than shares and dollars is there not?

 

[BradK]

Round two???

But WHY??? Such a strong company with astute management - I will have some more of those thank you

Brad

 

[3 veiws of a secret]

Round two???

But WHY??? Such a strong company with astute management - I will have some more of those thank you

Brad

Brad does it really matter ....I bought in again today....as I say the dividend is interesting at these prices....

 

[robert toms]

Yes the divident if just over 5%...never seen it like this for QBE before.And I hope that it is subtantially franked as well !