short $$, page-74

Greetings Trent.

It looks like you know little more than J Coure about insurances and QBE.

This is a dull business, seething with rationality and actuarial calculation against the vicissitudes of events.

QBE is a giant bladder of cash poised to pay claims as they fall due. From this it can create and exploit a bond ladder (look it up). While interest rates were near zero it made little money from this key aspect of the business. Recent interest rate rises brought this aspect back to life and QBE redeployed funds to what it calls a 4.9% 'exit running yield' at EOFY while the achieved yield in 1H was only 2.4%. That difference may look tiny, in practical $$$ terms it is huge.

Equally important, QBE pushed through substantial premium increases - if you prefer, it declined unprofitable underwriting while customers still bought its product at higher prices.

QBE had several awful years - it made no money and had to raise $1.2b in fresh capital. All very ugly and the share price reflected this.

It is now in a happier place and I expect solid dividends to power the share price forward. It also has the capacity for acquisitions, should genuine opportunity emerge.

I recommend you take the time to read and get your mind around QBE's accounts - mastering this is a headache, yet will serve you very well. QBE is an open book to anyone willing to do this work.

Best wishes

Ash