Jun

24

A consideration to buy in the aussie equities on the next pullback in price (they had a strong week) as a hedge on rising U.S 10 yields… More learned stock pickers may be able to offer a more detailed analysis. This is just to showcase its potential exposure and potential for upside on this changing market condition.

Based on its current short-duration investment portfolio of almost $32 billion, the reduction in global interest rates compared with four years ago has crimped QBE's annual pre-tax profit by more than $1 billion. But with the Fed flagging to the market and the prospect of interest rates reversing and bonds falling, QBE's earnings are set to benefit significantly. To put this in context, the company delivered a 57 percent jump in investment income in 2012 to $1.2 billion ($809 million from policyholders' money and rest from shareholders' money), dwarfing the $453 million insurance underwriting profit for the year. This was generated from a near $32 billion investment portfolio, comprising mostly cash and short-duration money market instruments (i.e US Bonds).


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