Macquarie analysts expect that QBE, the Australian insurer listed on the ASX, may announce a ongoing share buyback program in February. This move is seen as a way for the company to manage its excess cash, which currently sits at over US$300 million and could grow to US$600 million by the end of the financial year.
A perpetual buyback plan involves the company regularly purchasing its own shares over an extended period. For QBE, such an announcement would signal strong confidence from management and the ability to consistently generate capital from its operations.
While share buybacks are common among international insurers, especially in North America, they are not often described as "perpetual." QBE’s decision to consider this approach stands out in the Australian market.
One point to note is that QBE’s franking balance—the amount of tax credits attached to dividends—is limited. This might affect the appeal of buybacks as a way to return value to shareholders.
Overall, a perpetual buyback hints that QBE is sitting on solid capital reserves and is looking for ways to use this cash to benefit investors steadily over time. Investors and industry watchers will be keen to see how the insurer moves forward when it makes an official announcement early next year.