Do the numbers live up to the hype for this well-backed segment of the market?

• Constant currency GWP growth of ~10%
• Combined operating ratio of ~94.5%
• 1H23 exit running yield of 4.9%

The results, on an underlying basis, look good, so I think the key point is everything's on track, and the reasons to be in the stock are still there.

This result was largely already flagged not that long ago when they updated the market. When QBE provided that update, the stock actually went up a little bit and the key thing was, although they had all these one-offs, it showed that on an underlying basis, things were still quite good. 

The key surprise was QBE’s high tax rate. So if we strip out tax, everything was in line with what they said. 

There's no reason to change our view on it. So it's still a buy for us. It's trading on roughly 10 times earnings.

So we see a huge upside there.

Yes, there are a few.

Unusual weather events: Do they keep on occurring more so than what is planned for? With global warming, you can't rule that out.

Interest rates: Insurance companies sit on their premiums for quite a while, and they invest in fixed income and cash, and we've had this huge uplift in interest rates, and that's been very positive. So if interest rates were to decline, that would be a risk.

Claims inflation: It's still lurking. We had two big events in New Zealand, the Auckland Storm and Cyclone Gabrielle. And then you had Storm Elliot last year in the US. When you have huge events in a region, it results in a lot of what you call event-driven claims inflation.

It takes a long time to work through those claims, and they cost a hell of a lot. I think we need to see claims inflation moderate to more normal levels.

There is also one stock-specific issue with QBE: North America has been a problematic region for them for a very long period of time. We really would like that to settle down and improve. And if you look at it from an underlying basis, it looks like they're doing all the right things, but as we talked about, North America had its fair share of catastrophes over the last several months.

I'm a little bit cautious about the market in general. And the key reason is that given where interest rates are right now, the market should moderate - it's a relative thing. If you can get a better income out of your term deposits, or investing in fixed income securities, then the market should have adjusted downwards to reflect that, and it really hasn't.

In many ways, they say, "Okay, interest rates are high, but they will go back down and therefore we'll value it based on the expectation that interest rates will drop." And that probably isn't going to happen. Interest rates will likely stay where they are and, on that basis, we have to be cautious.

You've really got to go into the cheaper parts of the market because those expensive parts of the market are largely premised on interest rates dropping sometime in the near to medium term.