Hey all,So alot has happened. End today at $13.38, not the $14 I...

Hey all,

So alot has happened. End today at $13.38, not the $14 I had predicted. Hopefully get there next week or so.

I would like to mention a few aspects of the FY report.

1. The higher amortization/writeoff provisions of $400 million was flagged at the nov 12 update by the new incoming CEO and hence his repeated reference to cash profit over $1 billion. The headline NPAT was not as scary as the media made out.

2. Good to see the MCR at 1.7 and gearing at 43% and coming down to 40% this year. This was their biggest single issue. The threat of a dilutive capital raising seems to have passed. The 47 million shares currently shorted by traders, would be betting on a major cat event shortly as I cannot see any other reason to believe the share price would move downwards.

3.The changes to mngt seem to be well received.

4.Another earnings source for QBE which does not seem to be discussed much, is the strength of the AUD. It would seem logical with mining investment peaking mid year that the AUD would fall into a sub parity range. A possible 5% upside to earnings not accounted for.

5. Even though the dividends were reduced to 10 cents they were fully franked compared to last divi payment at 15% franked. On a like for like basis , this equates to a 12 cent dividend to Aust shareholders with other income.

6. Has been very good snow/rain in the US farming areas the last few days. Forecasts suggest more rain in the next 14 days. A very positive sign for a good cropping season.

Now, to the outlook for 2013 and beyond.

I see Rormon has done a great job forecasting the 2013 financials.

I think all his assumptions are quite reasonable and conservative. There are potential upsides esp in the insurance margin where capital releases and risk margins may tick up on a more normalized claims year.

Investment income of 6% is quite high however considering the uptick in equity markets and govt yields recently, they are quite achieveable. Look at what super is yielding right now to compare.

Based on Rormon's numbers, with EPS at circa $1.30, you would expect a share price between $16- $18. I suspect the AGM on 27 March 2013 will update us on our progress this year.

Overall, Qbe is tracking back up on a sustainable path which will require a bit more patience than what we would have liked. Neal's cost cutting initiatives make sense in these times of prudence and cost control. Qbe must play to its advantages of being a true global player and use world best practices whether its in Manila, Bangalore or Sydney.

For the time being, I am more than happy to take the fully franked divis's and enjoy the ride.