Under long-time chief executive Frank O'Halloran, QBE was Australia's most adventurous (still surviving) insurance company, making scores of acquisitions and getting a hold in foreign markets.
The US business has recently come back to bite it and new CEO John Neal has taken the axe to American exposures. Hurricane Sandy losses, he said, would cost $US350 million ($A338 million) to $US450 million, crop losses in the US drought of $US355 million, and another $US786 million would stem from a blow-out on individual claims and a broom being run through other US exposures.
All that means the insurance margin will fall to 8 per cent from 12 per cent, the company has been forced to raised $US500 million in debt and a $US750 million to $US1 billion equity raising is on the cards. The market didn't like the news and pushed the stock down from $12.85 to a low of $10.88, from where it has recovered a little.
But if we take the long-term view on QBE, some interesting things are emerging on the chart, this week produced by Robert Brain, a director with the Australian Technical Analysts Association.
QBE has had quite a run in the last decade. In 2001, before September 11 spoiled the party, the stock tried to break through what was then a resistance level of $11.81. The fallout from September 11 clobbered QBE and it didn't break through the resistance until 2004.
Then there was a steep run-up through 2006 to the all-time high of $35.49 in August 2007. It is notable that the frenzy that drove QBE into the stratosphere was not accompanied by high volumes, as the lower chart shows, meaning investors did not widely support the irrational exuberance.
The steep fall from late 2007 was followed by kick-ups in 2008 and 2009 but the general market malaise eventually won out and QBE has been in a downtrend since the 2007 highs. Now the chart is showing what Brain calls a "change in polarity", with the $11.81 resistance point looking like a support level - meaning QBE may have plumbed the depths of its lows and could now consolidate.
Also observable in the volume chart from 2010 onwards is that, as the share price fell, there were some steep volume spikes, which would normally indicate large numbers of investors jumping ship. But their size and random appearance lead Brain to suggest they may be indicators of high-frequency trading carried out by computers.
A comparison of QBE's performance chart (not shown) over 10 years shows QBE has made investors about 30 per cent (excluding dividends), while competitor IAG is up about 80 per cent, and Suncorp, which also has a bank attached, is down about 4 per cent.
This column is not investment advice. rodmyr@gmail.com
Frequently Asked Questions about this Article…
What recent problems has QBE faced in its US business and who is leading the company now?
QBE's US business has produced large losses that prompted new CEO John Neal to cut back American exposures. The article contrasts Neal with long-time former CEO Frank O'Halloran, who led QBE's aggressive international expansion.
How large were QBE's losses from Hurricane Sandy and the US drought?
According to the article, Hurricane Sandy losses were estimated at US$350–450 million, US crop losses from the drought were about US$355 million, and the company flagged another roughly US$786 million from individual claims and other US exposures.
How have those losses affected QBE's insurance margin and capital plans?
The company said the insurance margin would fall from 12% to about 8%. QBE raised US$500 million in debt and said an equity raising of roughly US$750 million to US$1 billion was on the cards.
How did the market react to QBE's loss and capital-raising announcements?
The market reacted negatively: the stock fell from $12.85 to a low of $10.88 before recovering a little, as reported in the article.
What does the technical chart say about QBE's share-price outlook and key levels to watch?
Technical analysis in the article highlights a 'change in polarity' where the old resistance around $11.81 now looks like possible support. That suggests QBE may have bottomed and could consolidate around that level after a long downtrend since the 2007 highs.
What do the volume spikes on QBE's chart indicate for investors?
The article notes steep, random volume spikes as the price fell from 2010 onward. While such spikes can mean investors are selling, the pattern and timing led the analyst to suggest they may reflect high-frequency trading activity rather than broad investor exits.
How has QBE performed compared with peers like IAG and Suncorp over the past decade?
Over a 10-year comparison cited in the article (excluding dividends), QBE returned about 30%, competitor IAG returned about 80%, and Suncorp was down about 4%.
Is the information in the article investment advice I can act on?
No. The article explicitly states it is not investment advice. It presents analysis and data for information purposes only, so everyday investors should do their own research or consult a licensed adviser before making decisions.
Call 1300 880 160
Start a chat
Schedule a call
