QBE

QBE tabled a trading update today.

Guidance reiterated; Gross Written Premium (GWP) growth very strong even if slowing moderately…

catastophic claims tracking well, quite a bit below budget (a good thing)…

…even as inflation remains an issue, though slowing moderately…

…and fixed income running yields are enormous.

Crop insurance looks disappointing, but it does reflect wildly volatile underlying commodity prices (e.g. wheat tripling, thirding, over the past couple years). Insurance costs go up when the price of the “thing that’s being insured” goes up (e.g collateral, replacement cost) and hence they come back down when the commodity price drops materially.

Those swings and roundabouts are hard to price, in addition to the normal vagaries of weather around harvest.

Overall, a solid enough update, with positive eps drivers (the benign cat claims thus far) and negatives (crop insurance, inflation overall) largely cancelling out such that guidance is maintained.

We remain happy holders, with the insurers in general providing a hedge to our direct equity portfolios in the event that rates stay persistently high.

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