Hmmm, there are others that agree with ELC's view on...

Hmmm, there are others that agree with ELC's view on acquisitions.

Read this:
http://www.iifunds.com.au/bristlemouth/narrowneck-and-clear-head-qbe

And this quote: “What a disaster,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management. “My sense is that their acquisitions in the US are of a lot lower quality than their core businesses were before.”

Read more: http://www.theage.com.au/business/qbe-dives-most-in-a-decade-on-warning-20120112-1pwac.html#ixzz1kTrksipx

From the same SMH article: "While catastrophes in the second half of 2011 have attracted fewer headlines than those earlier in the year, the frequency of events continued at an unprecedented level," chief executive Frank O'Halloran said in a statement.

In the United States, where QBE is a major insurer, Hurricane Irene, tornadoes, wildfires, hail, flood, wind and snow storms all resulted in a large number of claims.

My comment and this second extract: perhaps they didn't generate headlines because they weren't 'catastrophes', but normal events that QBE didn't underwrite (that is, understand and value the risk) correctly.

I cannot forgot the presentation given on October 25 - 2 and a half months before everything changed. Look at the disasters and catastrophe's listed by QBE and ask yourself how many of these were after October 25? Then ask yourself if the comments on October 25 were justified:
"Outlook for 2011 FY remains unchanged, noting key variables such as:
- large risk losses and catastrophes
- risk free rates used to discount outstanding claims
- investment yields, particularly credit spreads on corporate bonds
The minimum projected insurance profit margin of 11% for 2011 includes:
- allowance of 13% of NEP for FY11 net large individual risk and catastrophe claims being US$1,950M
- allowance assumes net large individual risk and catastrophe claims allowance of US$870M for 2H or US$1,020M pre the additional aggregate protection (compared with US$590M in 2H10)
- risk free rates for discounting claims of around 2.6% (30 June 2011 3.15%)
- gross investment yield of 2.7% for FY11 assumes a 25bps increase in credit spreads compared with 31 December 2010
- a 25bps credit spread movement equates to approximately US$88M on our corporate bond portfolio
The underlying insurance margin of 16% is sustainable assuming normal levels of catastrophes losses, stable risk free rates and credit spreads
Dividend sustainability supported by:
- confidence in underlying insurance margin and profitability
- substantial excess regulatory capital
- recently affirmed financial strength ratings for our main insurance businesses

IMHO - the ONLY reason QBE is showing strength at the moment is because of long and distinguished past history - there seems to be some serious doubts about the acquisitions they have made, which I share, as their criteria of EPS accretion in year one is by definition a short term criteria - short term year one EPS growth doesn't appear on Buffett criteria for acquisition - immediate EPS growth is more for someone wanting to exit at a higher top in the near-ish future - eg Frank.

Plus, for a conservative company to so badly miss their financial position in only 2 and half months means there is something there that makes my nose twitch.