CBD

QBE result hit by stormy weather

QBE result hit by stormy weather

Yesterday's downgrade at QBE has everyone involved with the insurer looking glum - except, perhaps, former chief executive Frank O'Halloran.

His replacement, John Neal, grovelled to shareholders on Monday, apologising twice during a conference call with miffed analysts.

The analysts were less than impressed that the $1.69 billion in extra provisions set aside didn't come up in a briefing on the North American business held just a month ago.

While $400 million of Monday's surprise relates to hurricane Sandy, the rest relates to other newly discovered woes in North America, including a blowout in crop insurance and the sudden discovery that $380 million worth of old insurance claims will have to be paid out after all.

Nonetheless, it appears O'Halloran's $4.5 million final bonus is unaffected.

That's because it was calculated on the half-year results released in August, rather than the full-year result, which is now likely to be pretty dire.

Less lucky are QBE's existing management team. Only a change to the rules can save them. If the bonus scheme this year is identical to last year, they won't see any additional presents in Santa's sack.

PS: O'Halloran is also due to receive a "retirement allowance" of $2.34 million next year, subject to shareholder approval at the annual meeting in March. Will the institutional investors who dominate QBE's register let this one through to the keeper?

Bonus is win-win

Shareholders have two choices when it comes to NAB boss Cameron Clyne's bonus: like it or lump it.

In return for undertaking the unpleasant duties associated with serving as chief executive, such as announcing a 22 per cent slump in profit to a mere $4.08 billion, Clyne is to be awarded almost $4 million in bonuses.

Up to to $1.2 million in NAB shares are to be awarded under the bank's short-term incentive (STI) scheme, with up to $2.7 million more up for grabs under its long-term incentive (LTI) scheme.

Shareholders get to vote on the arrangement but even if investors say "no", Clyne won't miss out: "If shareholders do not approve the grant of these securities at this meeting, the STI and the LTI will be provided in cash," the bank said.

Brekkie off menu

Ailing broadcaster Ten finally bowed to the inevitable on Monday, axing the dire Breakfast show fronted by pugilistic New Zealander Paul Henry.

Hopefully with the end of his vanity vehicle Henry will now flap off back to the land of the long white cloud. Henry was reportedly hired late last year, at great expense and with much fanfare, by Ten chairman and former One.Tel director Lachlan Murdoch.

But now Ten is cutting more than 100 people from the network, moving to forced redundancies this week after a voluntary program failed to find the numbers.

Shown the door over the weekend was Melbourne newsreader Helen Kapalos, who was told after coming off air after reading the bulletin on Friday night that her contract wasn't to be renewed.

In earlier cost-cutting measures, Ten boned morning chat show The Circle in July - a move that raised eyebrows at the time because the much less successful Breakfast was left untouched.

The end of Breakfast leaves Ten with a gaping hole in its schedule, but CBD has a proposal that will restore both profitability and credibility to the slot.

Just swing Kellyn Morris's cartoon show Toasted TV, currently in exile on digital-only station Eleven, back on to the main channel. The likes of Pokemon, Yu-Gi-Oh! and Strawberry Shortcake's Berry Bitty Adventures can't be any worse than three hours of Henry and company.

Don't bank on it

Who says most Reserve Bank forecasts are hopeless? The Reserve Bank, in a research paper released on Monday. To be strictly accurate, the paper is by two of its economists, Peter Tulip and Stephanie Wallace, and prefaced by the usual warning that its findings "do not necessarily reflect" the bank's views of the bank. Nevertheless, the pair find Reserve Bank forecasts explain only 15 per cent of the variation in unemployment in the short term and beyond that are "less accurate than a random walk".

The bank's forecasts for gross domestic product growth are worse even in the very short-term the historic mean provides a better guide.

Its forecasts for inflation are pretty good (better than those of the market) but only for a year ahead. After that they also are no better than random. Tulip and Wallace say the best longer term predictor of inflation is 2.5 per cent the centre of the Reserve Bank's target band. The finding makes sense. The bank is good at hitting its target.

And what about market forecasts of the RBA's own decisions, made monthly by a legion of highly paid economists? Tulip and Wallace say the judgments predict short-term interest rates "only slightly better than a random walk". Sorry.

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bbutler@fairfaxmedia.com.au