Greyinvestor
12 Jun 2015
Re: Odey shorting LRE I seem to remember reading some years ago that hurricanes come in clusters, both within a year and within decades. So when they turn up the claims can be massive. You usually find a section at the back of the annual report saying how much exposure to Florida windstorms (ie hurricanes) the company has. Again I remember reading that NVA had 25% of it's capital exposed to Florida windstorms in one year. I wonder how many investors in the non life sector remember years in which you got both a big Florida windstorm and an earthquake in New Zealand?The above is why the non life sector used to sell on 1* NTA. It's because the NTA can zoom down after a big claim. Sometimes you need a rights issue to build it back up.The good news is that reinsurance is dirt cheap right now and LRE have, I believe, bought lots. So I do feel that LRE, HSX and BEZ are pretty good at spreading risk. I'm less certain of NVA, which has changed it's risk profile a lot. The big claims may fall on the back of catastrophe funds, which could get a hammering. AML feels less strong to me.I'm going to Florida for the first time next February, so I firmly expect a huge hurricane this autumn!
Broncomaniac
12 Jun 2015
Re: Odey shorting LRE Not a single major hurricane, defined as a Category 3 storm or higher on the Saffir-Simpson scale —with minimum wind gusts of at least 111 mph (178 km/h) — has directly hit the United States in nearly ten years. That's twice as long as any major hurricane landfall "drought" since 1915, and by far the longest on record since data began being collected prior to 1900.
Greyinvestor
12 Jun 2015
Re: Odey shorting LRE p.s I forgot to say that yes, the size of the short is significant
Greyinvestor
12 Jun 2015
Re: Odey shorting LRE DYOR but I have seriously reduced the size of my stakes in LRE and HSTN. In my opinion both are very good quality companies but that doesn't alter the fact they they are overvalued, in my opinion. I have, however, retained quite decent sized holdings in both companies, and would add to my stakes at a significantly lower price.
foolish learner
11 Jun 2015
Re: Odey shorting LRE Any guidance? I see that these are short at 7.5% is that considered very high and at what point should i be concerned about shortingI also have ASHM HSTN that look rather high to think about
Greyinvestor
11 Jun 2015
Odey shorting LRE [link] once I think that Odey are right. This is a good company but the price is pretty rich at the moment.......
Inatthetop
06 May 2015
Re: LRE again GreyI agree CGL & Brit money could be coming across , mine being some of it, I bought in at 604p this morning as I do want to maintain my holding in the sector.With regard to your earlier comments I don't think it is a bad thing to lose business to companies that are undercutting prices. I believe good underwriters look for profit rather than income. Following a period of relatively small claims the sector has historically seen companies increase market capacity while also quoting very low rates. Greed? Generally they end up in trouble or disappear. Sensible underwriters are there for the long term.
Greyinvestor
06 May 2015
LRE again Apologies for the typo in the message below.Games, I very much approve of Invesco as a holder. They are in this for the long term, and for the dividends. I suspect that CGL and BRIT money is coming across to maintain their weighting in the sector.But I still feel that the LRE price is on the high side.....
Greyinvestor
06 May 2015
LRE future First of all, good call Rusty on the share price. Well doen and thanks.What of the future for LRE?I wouldn't worry too much about the reinsurance side. If reinsurers want to write excesses for LRE at knockdown prices, so much the better. LRE can pass the risks on for a lower price.I see the threat to LRE as follows;Bond prices are falling and most underwriters hold their reserves in bonds. This source of earnings could evaporate.Underwriting prices are falling very sharply. Profits will be hit hard when the next round of claims comes in.LRE will lose business to companies that underprice risks. That is the price of understanding pricing.LRE still has a bunch of founder warrants out there which dilute the value of each share.Finally, LRE has reduced the size of reserves, as have other underwriters. There will be smaller dividends at times in the future.So how to value LRE? In my view you have to take a conservative view of future earnings and reserves, and allow for risk. Earnings are likely to be in the 50p to 60p region.I now believe that fair value is probably around £5.50. Post warrant NTA is about £3.98. This confirms my approximate valuation.But DYOR and feel free to disagree.the way, when QE ends, if it ends, underwriters will perform better......
aspace
05 May 2015
Re: BRIT Insurance "After a 3year study of the reinsurance sector, a team of business school academics has found that some companies are now packaging together catastrophe risks in a similar way to the carving up of subprime mortgages"Games, Thanks for your detailed response. Like you I have no special knowledge, but try to make sense of what I think are the key sources of information. I am sure there is at least an element of truth in the academic study. Were they referring to Insurance Linked Securities by any chance? I think those are likely to be dangerous in that they offer attractive returns but the capital is at risk in the event of a catastrophe, which as you point out can be packaged in ways the buyer may not understand. But I would see the likes of LRE being less vulnerable to those as the reinsurance companies understand their risks better than the pension funds who are buying the insurance linked securities. Pension trustees and their paid advisers are obliged to understand the risks they are entering into, but probably don't in many cases (which is why I managed my own pension investments in a SIPP). the way Amlin had an interesting chart showing the exponentially rising insured cost of catastrophes over the past 50 years or so on page 11 of their recent annual report. Ironically it is the phenomenal cost of catastrophes and consequent need for both insurance and reinsurance that attracts me to this sector. I'm not selling on the strength of an academic study or broker downgrades, but would sell if I thought there had been a significant shift in risk.
gamesinvestor
05 May 2015
Re: BRIT Insurance "You have told us the reinsurance sector is collapsing"aspace -- I guess just to clarify your point, I didn't tell you or the others on this board anything. The article I referenced for everyone to read was published in the FT.[link] is a small summary extract if you are not a subscriber to the FT :-"""The $575bn industry that protects insurers from earthquakes, hurricanes and other disasters risks a banking-style meltdown if it continues making “dangerous” changes to how it is structured, new research has found.After a 3year study of the reinsurance sector, a team of business school academics has found that some companies are now packaging together catastrophe risks in a similar way to the carving up of subprime mortgages by big banks before the financial crisis."""Games - LRE fell 3.1% today, probably nothing to do with this, more some broker downgrades
gamesinvestor
05 May 2015
Re: BRIT Insurance Anyone have a view on the situation highlighted in previous post on BRIT?Games
gamesinvestor
05 May 2015
Re: BRIT Insurance aspace, My reasoning to sell is mainly to reduce the number of holdings and hold a bigger % of cash for the time being.I'm now completely out of Insurance and apart from some HSBC I'm also out of banking.If there is a market shakeout I will add to my core holdings in the Pharmaceutical, Medical Equipment and Consumer sectors.I have done well out of BRIT, CGL and LRE but as highlighted in a previous post this was more by good luck than management or any superior knowledge on my part. I'm now uncomfortable with the insurance market in general.LRE may do well, but I have no idea of assessing if it will or not hence I'm calling it a day.Games -- Hope it proves OK for you though.
aspace
05 May 2015
Re: BRIT Insurance Games, You have told us the reinsurance sector is collapsing and that you feel the time is right to exit. You may well be right. But I would have thought consolidation was a normal response to market and regulatory pressure - it is more efficient to be big. Consolidation of LRE into a bigger entity would be another good reason to hold, wouldnt it? Just as Catlin's shareholders gained, so might LRE's. Besides the outsized dividends compared to the redt of the market. Maybe I'm wrong but I dont see sufficient reason to sell out. Your reasoning?
gamesinvestor
05 May 2015
Sold Decided to exit the sector for now, along with the forced sale of BRIT and Catlin.Games
