Cheers Michaelirish. I will explain my theory. Qbe has been very...

Cheers Michaelirish.

I will explain my theory.

Qbe has been very disappointing of late.

New ceo Regan has come in and as all new ceo's do, slashed the goodwill and upped the reserves to ensure they have enough claims provisions for the following years. In doing so, he has slashed the book value of the business form $10.40 to $8.40. This is a reason why the share price is trading circa $10.

The upside is this.

Regan has given a very conservative forecasts for this year. I suspect with premiums hardening in Australia over 5% and circa 2-3% in US and Europe on average, these figures will be met easily and on all probabilities exceeded especially if catastrophes settle down to an average year, interest rates keep moving up steadily, Aussie dollar depreciates against USD, the ogden rates in UK get upped to a positive rate and the latin american business settles without any additional complications.

Based on the sales of XL Group and Validus holdings for circa 1.55 times book value, Qbe would be able to attract buyers at over $13 and more probably $14 on the basis that the book value is artificially low due to the new ceo's recent actions.

Other things being equal, I suspect the book value of qbe will rise significantly over the next 12 months with huge prior year releases and retained earnings and this is the kicker for an acquirer to get in now.

Global insurers want access to the key businesses Qbe control in the US, Lloyds and Australia so this would be a very attractive proposition for an insurer like Allianz or AIG where growth organically is almost non existent and the distribution channels Qbe controls are undervalued.

DYOR