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FBD said in
a trading update today that has continued to perform strongly, building on
its first half to deliver strong earnings and profit after taxation in the
second half of 2012 to date. The firm said it has performed ahead of market
guidance, primarily due to the continuation of the first half claims performance
in the underwriting business.
FBD Holdings: H2 IMS (interim management
statement) raises Operating EPS guidance by 10c to 155-165c; Eamonn Hughes of
Goodbody comments -- "A better
than anticipated claims performance in H2 allows FBD to raise its Operating EPS
guided range by 10c (+7%) to 155-165c. Our previous 150c EPS estimate lifts to
162.7c. Elsewhere, our gross written premium estimates are unchanged though we
raise our net earned premiums.
In addition to the NAV boost from higher operating earnings, the positive H2
short term investment fluctuation versus our previous loss estimate means our
year end NAV per share lifts 3% from €7.30 to €7.54. This supports a similar
sized increase in our fair value to €11.
FBD is expected to generate a 23% ROE in FY12. We recognise the benign
backdrop for large and weather related claims this year and model a higher
claims ratio in FY13. However, this still drives a 16% ROE compared with UK and
European peers offering 12%. Capital accretion dilutes returns at FBD with a
pay-out ratio of just 25-30% compared to peers closer to 50% This provides scope
for stronger growth over the medium term (dividend yield of 4% versus c.6%+
average for the peers)."
Economic View 1: A big punt on Ireland; Dermot O'Leary of
Goodbody comments - - "The story of one
US fund manager’s massive bet on Ireland makes it into this morning’s Financial
Times. According to the story, Franklin Templeton increased its holdings to
€8.4bn in Q3 and now owns c. 10% of outstanding Irish treasury bonds. In one
bond (October 2020), the fund owns over 15% of the issue. The fund started its
investment in Irish bonds last summer when yields were in double-digit territory
and have clearly performed excellently over that time period.
Along with this investment, Irish domestic banks and the ECB have increased
their ownership of Irish sovereign bonds since bond yields reached their highs
last summer. As a result, the availability of Irish sovereign bonds in the
market has become quite tight. With little in the way of supply, the price
movements have undoubtedly been exaggerated. While Ireland’s efforts on fiscal
consolidation and competitiveness have increased investor confidence in the
country, there is no doubt that this ownership issue has played a role too.
As Ireland attempts its full return to markets over the coming months, its
aim must be to broaden its investor base. While it is positive that fund
managers have taken a more positive view on Ireland and acted upon it, the
concentrated nature of ownership has its pitfalls if it is forced to sell down
some of its holdings."
Economic View 2: Greek plan is still wishful thinking; Dermot
O'Leary added - -"Ahead of
tomorrow’s special summit on the issue, there appears to be some complacency in
the markets about the approval of the next tranche of aid to Greece. From our
reading of the various comments from both EU policymakers and the IMF it is
difficult to see how an agreement will be reached in the near future at least.
A very fundamental difference of opinion still exists between the IMF and
euro area finance ministers. In comments over the weekend, IMF Managing Director
Christine Lagarde continued to voice her opposition to the current plan, saying
that she wants to "build a program for Greece that is solid, that is convincing
today, that will be sustainable tomorrow, that is rooted in reality and not in
wishful thinking". There has been a lot of wishful thinking on the issue of
Greece over the past two and a half years in our view. The latest plan which
will apparently see Greek debt rise to 190% of GDP before falling to 125% in ten
years’ time is yet another example. Lagarde’s insistence that official debt is
written down first may be unpalatable to the large EU creditors at the current
time, but will at least give Greece a chance to successfully return its public
finances to sustainability. An honest assessment of the situation was also
provided by ECB Asmussen over the weekend, when he stated that Greece will also
need aid in 2015 and 2016.
EU finance ministers can continue to throw good money after bad at the
situation in Greece. However, it would be much better for everyone if a credible
agreement can be reached. Given its record we are not optimistic of such an
Progress in negotiations to avert US fiscal cliff buoys sentiment:
MacCoille of Davy comments - - "The S&P500 rose 0.5% on Friday (November 16th)
but with the Euro Stoxx 50 Pr falling 1.4%. On Friday, US market sentiment was
buoyed by some positive signs that Democrats and Republicans may secure
agreement to avert the fiscal cliff. So some catch-up for European indices seems
likely today, with European stock index futures pointing to gains close to 1% at
Following talks with President Obama on Friday, Republicans conceded that
revenue-raising measures will likely form part of any deal. Furthermore,
comments over the weekend by President Obama, expressing confidence that a
budget deal can be reached, have also buoyed market sentiment, with Asian
indices up overnight. With few significant macroeconomic data releases, the
market's attention will now shift to the more intractable problem of Greece. EU
finance ministers are scheduled to meet on Tuesday to discuss Greece's
Today's US home sales release is expected to be flat at 4.75m in October.
Friday's release of US industrial production showed an unexpected 0.4% decline
in October, attributed to the disruptive effects of Hurricane Sandy. So both
today's existing home sales and tomorrow's housing starts data could also be
affected by temporary negative effects from the storms."
Justin Doyle, Investec Bank Ireland, said today:
same two big issues look set to sway market sentiment this week: the US fiscal
cliff and Greece. Fears over the fiscal cliff weighed heavily on markets through
much of last week as it became clear just how much ground needed to be covered
in reaching a deal.
the White House,meeting
at the end of last week, signalled the real start to talks.
Itdelivered some optimism
given the conciliatory tone of post-meeting comments from both sides of the
to home, Greece remains the big headache with Troika talks continuing as Greece
continues to push for its €31bn aid payment
is another Eurogroup meeting on Tuesday but the ongoing disagreement between the
IMF and European Commission over the debt dynamics doesn’t look to have eased
up, so we are doubtful of a firm conclusion from this meeting.
note that the US week is curtailed because of the Thanksgiving holiday which
sees markets closed on Thursday and close early on Friday too. The Thanksgiving
weekend will be bringing various ‘Black Friday’ retail reports, which equity
markets are likely to track closely, whether accurate or not.
The MSCI Asia Pacific Index rose 0.9% Monday -- the most in a
Japan's Nikkei 225 closed up 1.43; China's Shanghai Composite
Index has risen 0.11%; South Korea's Kospi added 0.93%; Australia's S&P/ASX 200
advanced 0.57% and in Mumbai, the Bombay Stock Exchange's Sensex 30 climbed 0.11%.
In Europe, the Dow Jones Stoxx Europe 600 is up 0.82% in
morning trading Monday.
The skyscrapers and immaculate beaches of Singapore's seaport
look out on one of the world’s largest parking lots: mile after mile of empty
cargo ships, as far as the eye can see.
Similar fleets bob at anchor, with empty cargo holds, off the
coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships
float empty near the giant shipyards of South Korea and China, their owners from
all over the world reluctant to accept delivery during one of the worst markets
ever for the global shipping industry.
As recently as six weeks ago large freighters that can carry
bulk commodities like iron ore or grain were fetching charter rates of $15,000 a
day. Now, brokers and owners say, the going rate is $6,000 a day. If any
customers can even be found.
The margin between the US benchmark WTI (West Texas
Intermediate) used on the New York Mercantile Exchange and Brent is at almost $22 - -
The Globe and Mail says that for the past 10 months, Canadian producers - -
whose prices are tied to WTI - - have been taking steep discounts for their oil
compared with international crude prices that are benchmarked against North Sea
Brent, which can be shipped more readily. In the past, WTI tended to trade at a
small premium to Brent, because it is easier to refine.
That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen
dramatically since then. After plans for more pipeline capacity at Cushing,
Oklahoma, the differential narrowed.