market update, page-54

The currency has a big impact on QBE. QBE reports in $US now so is less likely to advise Austrlaians when our currency will reduce local returns. Their US based shareholders are winning from the same currency moves.

The key negative factors for QBE are:
-high $AUD
-low global interest rates
-rising reinsurance costs from the increase in natural disasters
-declining insurance margins, although still near the best inteh industry.

The first 3 of these are temporary/cyclical and should reverse at some stage, with benefit to the SP.

The key positives for QBE relate to:
-the cheap acquisitions they have made while the currency is high, which will mean greter benefit when the currency reverses
-that reinsurance has been locked in for 3 years before the disasters hit.

The currency/interest rate headwinds could dissappear very quickly and I think the big risks are to the upside and am in. I like the short term technicals too.