Castelnau Share Discussion Threads

[tarvold] 10/2/2011 07:44

Results pretty much as I expected.

$50m is the current estimate for Australian related weather losses.

[tarvold] 08/2/2011 23:25

I expect the results of the underlying CGL business to be very strong, it'll all depend on their one off costs re earthquake/oil rig/etc.

The share price should be north of 400p that's for sure.

[1fox1] 08/2/2011 16:05

Some updates on the sector:

1) Chaucer takeover approaches.
2) Beazley stellar results.

Both are positive and make me optimistic that this may break out soon.

[tarvold] 06/2/2011 03:30

I caught an interview with the CEO of Suncorp, the largest insurer in QLD, on tv today. He confirmed that there is limited reinsurance in the QLD market so that pretty much eliminates any material effect on CGL re the floods/cyclone.

Interesting he made a statement that in the reinsurance market the single key event that determines whether it is a good market is the US hurricane season.
So if later in the year CGL is going well and the US is hit by lots of hurricanes it would be a good time to sell.

[tarvold] 04/2/2011 03:37

There was a comment on tv today that a lot of the policies sold by aussie insurance companies that are being claimed upon re QLD floods have not been underwritten by other insurance companies.
If this is true then the impact on CGL for the whole thing will be minimal.

[tarvold] 03/2/2011 12:02

Estimate is $700m damage to the banana and sugar cane industry.
About 90% or Australia's bananas come from that area and a lot of sugar cane.
Last time in 2006 re Cyclone Larry the price of bananas went to $15 a kg so big price increases locally are on the cards. Less so internationally but I would think the price of sugar would also increase.

Apparently a lot of farmers cut down their cane prior to the cyclones impact to reduce the long term damage.Lose the crop but save the plants I think is the idea. However the current problem now is flooding due to the huge amount rain running off the land in a similar way to what happened in Brisbane etc.

[iomhere] 03/2/2011 10:00

What's the implications for the sugar cane industry?

[tarvold] 02/2/2011 22:48

Centre of Cyclone Yasi hit Mission Beach / Tully which if anyone has been there are beautiful areas but are very sparely populated especially in the wet season (Dec-Feb). Principle industries are tourism (white water rafting, etc) and agriculture (bananas / sugar cane).

So as far as CGL is concerned this was a non event.

The stats from the cyclone were incredible. Up to 290km wind gusts, eye of cyclone 70km wide, 9 metres waves on coast, 350mm rain fell in 24 hours.
It's still a category 2 cyclone despite being 400km inland now.

[lanzarote666] 02/2/2011 08:40

I do not think the flood costs are going to be huge either judging by the movement in the share price recently.
I am hoping the results will take away some of the uncertainty and others will then spot the value at this level.
We are looking close to a breakout here in my view and I am long.
:-)

[jonwig] 01/2/2011 16:23

Low claims mean low premiums hence low profits in future years. High claims in one year drive raised premiums plus withdrawal of capacity for some players in the market.

Non-life companies need high claims to get the underwriting cycle moving.

[joesoap3] 01/2/2011 16:10

At the end of the day, this is a non life insurance company and major incidents such as this will happen so every year we can expect some incidents that will lead to large claims. Short term, it will have an impact on the profits but long term it may create more income as people tend to review their insurance positions after something like this.

However CGL pays a massive dividend that is well covered and has a low P/E. Despite natural disasters this last finacial year and potentially this one as well, the share price - imho - should be a lot higher than it is.

I am sure that next week's results will show a strong underlying company and hopefully the price will rise.

[iomhere] 01/2/2011 13:59

Tarvold
All is far from clear. The effect of typhoon is forecast to be 500 kms wide and parts of Cairns are already being evacuated. As to the previous Queensland floods there's an article in the CSM, part of which I've copied:

'So who foots the bill for the flood damage? Prime Minister Julia Gillard is eying the wealthy, on Thursday introducing a one-time tax on the middle- and upper-class to help cover what she said would be a $5.6 billion damage bill. Now, as Australians roll up their sleeves and begin putting their homes and businesses back in order, a fight is brewing between tax payers, flood victims, the government, and insurance companies.

Not all water is equal

This is just the beginning. As all that insurance policy fine print finally sees the light of day, many flood victims are finding that not all waters are treated equally. Some policies only cover damage from water that has overflowed from "natural watercourses." Property owners waist-deep in water that spilled over from reservoirs, dams, canals, or other manmade waterways need not apply.

And then there is the question of what flood damage is. Owners of properties damaged from earth being piled up against them during flooding may be left high and dry by their insurer.

"We are still in the early days regarding claims," says Catherine Uhr, a consumer protection lawyer with Legal Aid Queensland, which is providing advice to unhappy policy holders. "The barrage of complaints is still really yet to come as people work through their policies."

As radio switchboards light up with callers and newspapers ask flood victims to send in details about their experiences with insurance companies, the government is stepping into the fray. Assistant Treasurer Bill Shorten will meet with insurance executives on Tuesday to review an industry that he says needs an overhaul.'

[tarvold] 01/2/2011 07:33

Huge cyclone is going to hit the North coast of QLD in next 36 hours.
Shouldn't really effect CGL unless it wipes out Cairns, at the moment the area it could hit land is approx 400 km between Cooktown and Townsville.

[tarvold] 01/2/2011 01:38

Big ticket items will be the final numbers from NZ earthquake & the gulf oil rig/spill plus the recent floods in Australia.
The underlying business should be very strong.

[joesoap3] 31/1/2011 15:53

Final results due Thurs 10 Feb

Let's hope they are good with an increased final dividend and then maybe, just maybe, it might head a bit nearer its target price.

Unless there is something nasty hidden, then surely in needs a better rating than it currently has

[tarvold] 11/1/2011 10:06

Brisbane river has broken it's banks, 9,000 building expected to be effected in the city. Last time there was a big flood in Brisbane was 1974, this one is expected to be at least as bad depending upon the king tide tomorrow (water coming up the river from the sea).

Yes I would expect this to make a big difference to the amount the insurance companies will have to pay.

Last estimate of total cost I heard was $11bn, 75% of state of QLD is now a 'disaster zone'. When you consider how big QLD is, that's huge.
Outside of Brisbane and the coast (Sunshine coast, Gold coast) it's not very densely populated though.

[joesoap3] 11/1/2011 09:59

Floods now reaching Brisbane. That could make a big difference to the value of claims possibly ???

[tarvold] 06/1/2011 00:47

The floods aren't damaging the buildings themselves more the contents fittings etc. In order to get a mortgage of greater than 85% of the value in Australia you need to pay an insurance premium so most people don't leverage that far.
A property flooded even to the roof would still be worth at least 85% of the value on resale especially when you consider the large size of the plots they build on in region Australia. Plus most of these houses aren't built with 'bricks and mortar' so the the problems with stripping off plaster, waiting for year to refit etc don't apply that do in the UK.

In the UK there are plenty of places that can't get insurance against flooding due to poor planning allowing building on flood plains.

Estimate of cost is now $5bn in total, the mining industry is losing $100m a day and waters aren't expected go for 3+ weeks.

The scariest thing about these floods is that they are driving out all the snakes who are seeking higher ground, usually peoples houses!
Just imagine coming back to your house finding it full of mud and a load of deadly 2m long brown snakes!

[jonwig] 05/1/2011 14:05

Tarvold, you make some interesting comments ...

A large number of people in the flood areas of QLD can't get insurance as they are on flood plains...

Presumably, then, they were bought cash-outright, as a loan wouldn't be forthcoming without the lender's equity being protected? That's a lot of property!

As for industry, yes, interruption would be a major cause of claim.

[tarvold] 05/1/2011 13:16

A large number of people in the flood areas of QLD can't get insurance as they are on flood plains. There is a 'telethon' national charity fundraising event on tv this Sunday to raise money for the flood victims followed by a all star charity cricket match. All the major banks are also collecting money at this branches etc. If they were all covered by insurance this wouldn't be needed.

The larger impact is on the mining industry, the floods are expected to hit the GDP of Australia by 0.5% this year. Food prices for fruit and veg is also expected to increase by 50%.

There will be claims but not on the scale that you will have seen from flooding in the UK.

[jonwig] 05/1/2011 08:55

No insurance company has said much as yet - I wouldn't think people are actually making claims right now. However, there are some global estimates here:



There is an Australian subsidiary, so I imagine their exposure will be material.

[irenekent] 05/1/2011 08:10

Whats their exposure to Queensland disaster?

[joesoap3] 01/1/2011 18:22

analysts forecast for target share price is - low 540p high 650p with a mean average amongst 15 brokers is 640p.

[badtime] 01/1/2011 17:03

Hmm..these seem worth a bit of weekend research