extract from intelligent investor report: 11/8

"Today some of Australia?s businesses are trading at prices near or below their prices of March 2009. Most have them have substantially increased their franchise value in the two years since.

I?ll stick the one I?m spending lots of time on as an example. In 2008 QBE Insurance collected US$9.3bn of net insurance premiums. This year it expects to write US$14.8bn worth, and will earn a similar underwriting profit of about 10% (in insurance jargon this means a combined operating ratio of 90% - 90% of the premiums are paid out as claims and operating expenses).

Yet the share price is 16% down on its low of $15.60 on 9 March 2009. Sure, the Aussie dollar has rallied substantially. And US and European interest rates look like they?ll be low for a very long time (a large part of QBE?s profit has historically come from investing premiums and its own shareholders? funds in highly rated debt securities).

At today?s price, though, you don?t need them to earn any return on their investments. The underwriting profit alone should be more than $1.4bn and the current market capitalisation is only 10 times that. In other words, this business should give you a pre-tax return of 10% without any return on investments and without any growth.

Those are not just conservative assumptions. They are absurd. For mine, buying QBE today is a simple decision. Working out whether GPT was going to survive was not."

I am an employee of QBE for 11 yrs and I have read on the forum negative comments on Frank O'Hallaran..Everyone is entitled to their opinion, but under his watchful helm, despite numerous catastrophes in the last few years, QBE has consistently come up trumps and announced some resounding profits year in, year out.. It has not always being rewarded by the market for some strange reason. I agree that these are concerning time. Last time, when the market tanked I was in specs... and suffered as a result. This time, I have decided to give it a go and put my money where my bread is buttered. I have taken advantage of the slump and have bought a thick wad of QBE shares at $13.20.. I do not expect a quick turnaround, but knowing the mechanics of the company, I think I am in safe hands.