Uncertainty, Volatility To Plague Qbe

Sydney Morning Herald

Monday September 24, 2001

Sharon Kemp

QBE Insurance's share price is set for another rollercoaster ride this week despite the continued efforts of managing director Mr Frank O'Halloran at the weekend to soothe investor's nerves.

Mr O'Halloran sought late last week to give investors some sort of certainty by putting a cap of $250 million on its net exposure to damage caused by terrorist attacks in the US, and by guaranteeing a dividend.

But he is battling a lack of certainty that has undermined QBE's valuation.

Some securities analysts and fund managers are pointing to net tangible asset backing as a reasonable method of valuing the stock in the wake of QBE's revelation that US losses will eat up most of its 2001 profit.

It was when the insurer's share price fell below its NTA backing of $3.66 that directors called a trading halt on Thursday.

That value falls to $3.23 after accounting for the provision for the US tragedy, according to J P Morgan's estimates.

The stock closed at $10.21 on September 11, the last trading day in Australia before the US attacks, and at $5.09 last Friday.

As part of his campaign to restore certainty, Mr O'Halloran in his many media appearances last week also waged war against the rumour and speculation he claims had fuelled the share sell-off.

It was rumour, first of all, because QBE had not released an actual estimate (of $250 million) until last Thursday, and secondly, because investors have a clear memory of HIH's track record.

Directors claimed HIH's balance sheet was sound until two months before it collapsed with debts of more than $5 billion.

``I don't think they were malicious," Mr O'Halloran said yesterday of the speculation plaguing QBE. ``I think they were uninformed guesses of what QBE's potential exposure was."

© 2001 Sydney Morning Herald

Back to News Index | Back to Home