QBE Insurance will be one of the biggest beneficiaries on the...

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.