uk flood, page-5

As of nov 12 2012, Qbe had allowed $150 million for major cats for the remaining 40 days of year.

As of 27 december 2012, we are looking at a significant upside from previous guidance of 8% insurance margin.

Risk free bond yields have risen on average by 20 points since that time and credit spreads have narrowed. This should improve our insurance margin also.This would equate to around $20-$25 million upside in reduced future claims provisions

If we have no major cats for the next 4 days, I'm predicting a net profit after tax & amortization of between $950-$980 million or around 9% insurance margin.

If the US congress got their act together over the fiscal cliff, the risk free rates would have been significantly higher facilitating an even better insurance margin. But at the end of the day, this is just a timing issue and will eventually be reflected in the accounts when bond yields normalise to historic levels.

In terms of currency, the recent appreciation of sterling and euro will be positive to Qbe earnings in US dollars. The high AUD/USD will not be a negative factor this year due to the expected breakeven earnings from the US businesses.

Overall, I'm happy to be holder with momentum in bond yields, equity gains & hard insurance premium renewals in US & Aust, all pointing to a much better 2013. The US business should provide the largest earnings upside from a very low base.