something to watch, page-13

Hi T23

Yes - I think their capital allows them to purchase additional GWP as opposed to organic (remembering that most of their business is broker-based in any case, with almost zero direct business). You got to remember that the consolidation of APRA-regulated entities has resulted in freeing-up quite a bit of capital that is just sitting there in the "unused" bucket; and the Directors will be looking to leverage off that in the very near future.

I wouldn't be surpised to see CIX also depart from their quote share arrangement at the end of 2009. It has served them well (particularly in the start-up phases of the general insurer) but once COR drops below 100 the value of the QS diminished substantially.

There is a lot of value in CIX that does not seem to appear in the balance sheet. Equity in Claims Services Australia, for example, is, in my view, underestimated, given the returns to date (in terms of dividends) from that business; and given that the dividends seem to imply that CSA's business is not purely CIX based (in other words, their fingers are also in someone else's pie).

My only concern at this stage is their ability to replicate their investment result in the current year. If carefully managed (Nick - please shorten your duration on your capital funds book! - trust me!) then we could potentially see income growth in the region of 30% this year (a result around the $12-$13 million mark would be on the cards - not bad when you look at the market cap!!

Best regards
Kit