2 Yr at Multi Year High, page-42

QBE Insurance will be one of the biggest beneficiaries on the ASX from rising bond yields. As an insurer, the company holds US$23 billion in cash and short dated debt as a “ float” (this occurs as premiums collected before claims are paid out). Whilst QBE has managed this float well, it has nevertheless generated meagre returns in this period of low rates. A mere 0.5% increase in interest rates will add over US$100 million to 2017 net profits or boost reported profits by 11%. Additionally Australian investors will see a translation benefit from the company’s USD-denominated earnings if rising bond yields continue to weaken the AUD.