michael west, page-22

My apologies. This part of my previous post is partially wrong:

"If you were to use the APRA 75% (or 85% or whatever figure you want) figure you could include 90% - 75% = 15% extra in earnings by decreasing the claims provision by 15%."

Decreasing the probability of adequacy by a percentage won't equal the same percentage increase in earnings. However, the point still stands that a decrease in the probability will equal an increase in reported earnings (by how much you ask? That is up to the individual to calculate). Adjusting the POA is how an insurance company can smooth out their earnings. If they were to use the same probability year in year out, the earnings would be a lot more lumpy.

QBE has traditionally been conservative with their risk taking. Judging by the market release in question, the company is still being conservative. The last time I looked, IAG has historically had a lower POA (and Suncorp for that matter).

In addition, interest rates can't stay this low forever. Though, I am not going to predict when this will change. If you plug in say 4%, 5% or 6% investment earnings, QBE may start looking at $600mil to $1bil extra in earnings.

It may take a bit longer than I originally expected, but I am still convinced in the investment case for QBE.