Cigarbutt

^Slightly different opinion on the position of the portfolio now versus 5, 10 or 20 years ago and the inflation question. First, Mr. Buffett has maintained (whatever the explanation or cause) a more or less 100% coverage of cash and fixed income over float with slightly lower float coverage with cash and fixed income when there were not as many reasons to hate cash. Even if the float portfolio was always protected against inflation and the potential effect on fixed income instruments, there has been a radical change in the relative size of the fixed income portfolio and in its composition and one may suggest that it is extra-protected at this point. Comparing with other insurers makes this almost six-sigma difference now even more apparent. A nice feature of the present "position" is that the incredibly-low duration cash and fixed income portfolio could reveal its optionality value in pretty much any circumstance or environment, if that's considered something of value, at a minimum to help with deep sleep. During 1998 and 1999, BRK was digesting GenRe and numbers moved around a bit but the integration did not really change the conclusion here as a similar "pattern" in asset allocation was reported in the following years (1999 to 2002). In 1998, float was 22.8B, fixed income was 21.2B and cash+CE was 13.6B. Fixed income over float was 0.93 In 1998, the cash/FI over float was unusually high and cash went down by 9.8B in 1999. Of the FI 21.2B, 30% was 5-10 years, 30% was more than 10 years and 6% were MBS. Also, 12.2B were US gov.-related and 4.6 were corporates. In Q1 2021, float was about 140B, fixed income was at 20.0B and cash+CE was around 145B. Fixed income over float was 0.14. Cash/FI over float is again relatively high (similar to 1997-9 and 2004-6 and that's all i'm goin' to say about that). Of the FI 20.0B, 9.8B was less than 1 year, 8.8B was between 1 and 5 years. End of 2020 numbers reported about interest rate risk reveal immaterial changes and extremely low duration. Also, 3.2B were US gov.-related, 12.1 were highly graded foreign gov.-related and 4.2 were corporates. While float has been multiplied by more than 6x, exposure to longer term debt has remained essentially the same (in absolute numbers) and duration is down, significantly, even if relatively low to start with. Corporate debt exposure is also down (absolutely and relatively++). The following graph borrowed from a Seeking Alpha article sort of says something similar with the distance between the cash line and the float line being the fixed income exposure. It seems that cash levels, for the first time in history, has taken over the float line but that's another story.

^Yes, this was an interesting company to look at. There are some parallels: long history, entrenched interests in place etc However, AAME had an unusually strong 2020 year in the Medigap segment, they have large unrealized gains in the float portfolio which is definitely skewed to reach for yield in this environment. Also, it seems Mr. Bigliari has recently cut his stake. ----- it seems an activist type of fund is trimming its large stake in UNAM.

Note: -This is a low liquidity issue/small cap idea -The stock/company is going through an interesting phase -The interest on my part here is idiosyncratic (relatively low conviction and tiny position size) and the interest here may be absolutely and relatively irrelevant to present trends; it’s clearly not a Great Gatsby stock Just in case, -Thesis Unico American Corporation (UNAM) is a commercial property-casualty insurer based in California. Unico is a small player with a long (and slightly twisted) history and has focused on some niche markets. It is presently going through a rough patch, with some similarities to what happened a few years ago (early 2000s), and the typical lag in recognizing developing poor results, and then improvements, means now an opportunity to buy at a discount to intrinsic value and to sell at intrinsic value within 3 years for a compound annual return of around 20-25%. The thesis is related to a tendency for insurers’ performance to return to the mean if they don’t fail and if factors behind the recent underperformance are identifiable and reversible. -History Unico was founded in 1969 (incorporated in 1969, initially as an insurance brokerage firm and then, since 1984, a long history of commercial niche underwriting in California) by Erwin Cheldin. There have been some deviations from trend but, basically and to this day, it has remained a commercial player focused in the California market and their main product is a multiple-peril policy in specialized markets. -The troubles in the early 2000s and the recovery after Unico did not react by moving away from eventually realized unprofitable business lines related to the very soft markets of the late 1990s while simultaneously pushing for geographic expansion outside of California. Here are key numbers for the period (in M, except % for CR): 2000 2001 2002 2003 2004 2005 2006 Net premiums written 26.4 32.1 38.4 47.4 51.1 46.0 38.2 Surplus 39.6 27.5 26.3 26.1 29.4 36.6 50.0 Shareholders’ equity 51.4 40.6 38.4 38.5 42.4 48.4 60.9 Total investments 98.2 94.7 102.7 118.6 118.5 140.6 147.3 Combined ratio 116 169 126 107 89 83 63 EPS (diluted) 0.07 (1.97) (0.59) 0.19 1.02 1.20 2.09 Diluted shares outstanding 6.1 5.5 5.5 5.5 5.6 5.6 5.7 The years 2000-3 were marked by poor underwriting results with significant negative reserve development on prior years (4.3M in 2000, 19.3M in 2001, 7.8M in 2002 and 2.8M in 2003). This was associated with rating downgrades (from A to A- to B+) and many ratios outside of normal ranges for IRIS (regulatory ratios signaling risk to policyholders). However, the company led by the founder was able to right the ship (improved underwriting standards, efficient runoff of policies outside of California and outside of their core business lines) and benefited from a significant hard market. Erwin Cheldin also provided (temporarily) 1.5M in capital to help maintain surplus above 25M. During 2001-2 (around the trough in recognized operating results), share price, represented through market cap went to about 0.4 to 0.5 of book value and the ratio of total investments to market value went to about 5. The rebound was very impressive and in correlation to the hard market with underwriting profitability increasing significantly and with significant favorable reserve development starting in 2005. AM Best increased the rating to B++ in 2006 and to A- around 2008-9. -The succession plan and business conditions leading to this opportunity Starting in 2006, because of softening in rates, Unico walked away from potentially unprofitable lines and significantly shrunk net premiums written. In 2009, Erwin Cheldin, the founder, was followed by his son Cary Cheldin as CEO. From 2009 to 2014, underwriting and general profitability slowly dwindled and Unico remained conservatively capitalized, with NPW going slightly down (from 29.6M to 27.8M) and with cumulative EPS of 2.30 and cumulative dividends of 1.92 (share count overall fairly constant). From 2015 to now (Cary Cheldin ‘retired’ in August 2020), there were various operational difficulties (information technology upgrade projects) and underwriting results deteriorated. This was compounded by irregular growth in a soft market (up to 2019) and then a recognition of significantly poor results (prior and actual reporting years). There was an impression that the 2018 year marked a positive turning point but that proved to be a false dawn. Here are key numbers for the period (in M, except for per share data and % for CR): 2014 2015 2016 2017 2018 2019 2020 Net premiums written 27.8 31.0 32.6 31.6 25.9 28.7 28.6 Surplus 63.5 61.4 59.1 50.4 50.1 46.5 26.9 Shareholders’ equity 55.1 35.0 Total investments 85.0 83.6 Combined ratio 78 87 95 114 103 118 161 EPS (diluted) 0.16 (0.22) (0.26) (1.64) (0.60) (0.59) (4.05) Diluted shares outstanding 5.3 5.3 Strengthening of reserves was 8.0M in 2020 (3.2M in 2019, 2.9M in 2018 and 7.1M in 2017) and this loss within the longer term poor underwriting trend triggered a company action level action of the CA DOI with the RBC’s adjusted capital at 278% (below 300%) and a combined ratio at or above 120%. This required the submission of a plan (submitted March 24, 2021) and means relatively close scrutiny from the regulator. The plan could involve a capital injection. At year-end 2020, Unico also had 3 of the 13 IRIS ratio tests outside of usual value range. In 2019, AM Best downgraded Unico to B++. In February 2021, the B++ rating was maintained but the outlook moved from stable to negative. The 2020 insurance year was associated with the Covid-19 issue. This meant business interruption claims (151 claims) which will likely not be enforceable. It also meant lower premium levels in certain lines (ie bars and taverns) but growth in other insurance lines (it’s not possible to define premium price increase vs increased volume from disclosures) allowed NPW to remain essentially flat (some growth in GPW). However, given overall market conditions and the markets where Unico operates, it’s likely that premium prices have been increasing significantly. There are many similarities now versus what happened to Unico in the early 2000s. Cary Cheldin retired in August 2020, there is new management in place unrelated to the Cheldin’s family and the Board is now composed of 5 out 6 directors recently put in place. Erwin Cheldin remains a director, holds 44.4% of the stock but is 89. Underwriting standards are being improved during a significant hardening of the market. Underwriting standards have degraded, especially since 2015 and policies were inappropriately priced but the level of social inflation was difficult to discount and premium prices have likely caught up with previous cost trends. -Unico’s business in general More than 90% of revenues (93.6% in 2020) come from core insurance underwriting operations. For a very long time, Unico has maintained related business revenue streams (various fees, commissions) which have been quite stable and are value neutral for the enterprise. 99.9% of core underwriting revenue (GWP) comes from California and involve 1-Transportation, 2-Food, Beverage & Entertainment, 3-Garage & Mercantile and 4-Apartments & Commercial Buildings. CMP policies made up 99.6% of GWP in 2020 (and 98.2% of reserves). They use reinsurance (cede business on an excess of loss basis) and the arrangements have been quite standard for some time. It has been a bad deal for reinsurers for a while (reserve deficiency shared with the reinsurers) and rates have been going up. The investment portfolio is quite conservative and standard for an insurer with a focus on fixed income. The average weighted maturity was at 8 years and yield on average invested assets was at 2.4% in 2020. The have some exposure to corporate debt and a small recent allocation to equities. -Opportunity now (as of year-end 2020) With improving underwriting standards, the most likely scenario is for improved underwriting results in 2021 (combined ratio expected above but closer to 100%), a neutral result in 2022 and an underwriting profit in 2023 with an expectation of a price to book value at around 1.0 at the end of 2023, in a way comparable to what happened in the early 2000s. Presently (end of 2020), market price to book is between 0.6-0.7. The ratio of total investments (cost) to market cap stands at about 3.5. With a portfolio yield at 2.4% and about a 10% tax rate on fixed income revenue, the portfolio, by itself, would supply an about 6.5% after-tax return on market price paid now, with modest float growth expected going forward. In 2020, Unico recognized a deferred tax asset valuation allowance of 10.6M (2.5M in 2019). These deferred tax assets correspond mostly to NOLs that begin to expire in 2035. With a return to profitability, this valuation allowance is likely to reverse and a discounted amount of this allowance needs to be integrated to expected book value going forward. -Results in Q1 2021 Here are key numbers for Q1 2021 (in M, except for per share data and % for CR): Q1 2021 Net premiums written (annualized) 30.8 Shareholders’ equity 36.3 Total investments 93.1 Combined ratio 116 EPS (diluted) 0.43 Diluted shares outstanding 5.3 GWP was up 13.9% and Unico ceded more (likely related to more expensive reinsurance rates) as NWP was up less at 6.6%. In Q1, there were proceeds from the sale of the HQ (12.0M) for a realized gain of 3.7M. Net income was 2.3M (EPS of 0.43) as the combined ratio was at 116%. Underwriting changes continue to be applied and growth is occurring in the transportation line of business. However, the accident year combined ratio was at 136% reflecting favorable reserve development in prior years (18%) combined with an unusual quarter with 1.4M losses related to an unusually high number of property fires (5). Positive reserve development came in at 1.2M and it’s the first time in a while when there are two subsequent quarters with positive development (positive 0.2M in Q4 2020). Market price to book is at 0.66 at quarter end. Total investments (cost) to market cap now stands at about 3.9. With a portfolio yield at 2.3% and about a 10% tax rate on fixed income revenue, the portfolio, by itself, would supply an about 8.1% after-tax return on market price paid now, with modest float growth expected going forward. Also, as of the end of Q1, the company had an unusually high cash and cash-equivalents balance of 7.8M which is not included in the total investments numbers above. -Potential catalysts The thesis rests on a regression to the mean for core insurance operations to be realized by the end of 2023. This would imply an annual compound return of 20 to 25%. Share price is now at around 4.50 and book value of 8.00 per share is expected at end of 2023. There also exists a relatively low probability that a buyout (as a going concern) is made and this would likely imply bridging the gap to intrinsic value more rapidly. Even if put into runoff, the enterprise should fetch a 0.8 to book value ratio under present circumstances and with adequate runoff expertise. An interesting aspect is that Sardar Bigliari (who is sometimes discussed here) has been holding, through the Lion Fund, for a while, as a passive investment, a 9.9% stake. -Risks Apart from the usual risks related to a property-casualty insurer, the company is small, not greatly diversified and trades with low liquidity. The biggest risk lies in the fact that it is still unclear how far the company is advanced in the recovery process concerning prior years, how efficiently new management and Board can improve underwriting standards and how hard and durable the present hard market really is in Unico’s markets. My assessment based on the above is that the worst is over for prior years, reversion to the mean (operations and underwriting) is likely under UNICO’s specific business circumstances and that the hard market has legs for a while given the unusual softness in underwriting in general and the low interest rate environment. ----- Disclosures: -i’ve built a very small position in one of my accounts -I’ve owned the stock before on two occasions when there was nothing (or not much) else to do

@Munger_Disciple i don't really want to enter the debate (Inflation/deflation yada yada) but here's some potentially useful info. The CPI is based on 8 groups, 2 of which are education (and communication) and medical care. For wages, i've used the following and found it to be reliable: Wage Growth Tracker - Federal Reserve Bank of Atlanta (atlantafed.org) For housing, there are two aspects: consumer aspect and investment aspect. In the last 30 years or so, the investment aspect has become much more predominant (and more recently, in a more volatile way). So you have consumer inflation and asset inflation. As an individual (or a household), i guess you want a low housing consumer inflation aspect and high housing asset inflation aspect... Anyways, your consumer inflation may be different (perhaps very significantly) from others and the CPI "measure" could be improved but it may be a useful starting point for a reflection. Anecdotally (and in a very irrelevant way), in the last few years, the consumer inflation that my household has been exposed to (consumer products, employees etc) has been very mild although we tend to notice when prices "jump" at times. @LearningMachine i don't really want to enter this debate among great minds but the cash-on-the-sideline thing is a tricky concept. Let's say i use my cash on the sideline to buy your VZ shares, then you have cash on the sideline. Even if i use margin cash, then i use cash on the sideline from someone else. The noise about all this growth in cash deposits is simply a reflection of expanding balance sheets (commercial banks, the Fed etc). For example, during 2020-1, corporates have built cash (for which they now face negative rates when they try to deposit at JPM or BAC) but the increase in cash was matched by revolver draws and debt issuance. Without entering the irrelevant question about the possible presence of systemic excess cash or excess debt, it's interesting to note that, during 2020-1, money market funds AUM increased by about 1T, of which all was channeled into short term government debt yielding essentially 0%. And since mid-March 2021, when MMFs call JPM and BAC, they are offered negative rates so they have turned to the reverse repo market and bought more than 500B of short-term repo collateral (short term government debt) in exchange for cash and a 0% (or slightly negative yield). i guess the opportunity cost is about 0% for cash on the sideline. Anyways, whatever your perspective on this wave of liquidity waiting to stir animal spirits, you have to reconcile with the following recent asset allocation profile prepared by Ned Davis (excellent data). Some conclusions from the graphs appear counter-intuitive but it's not fake news and it all makes sense if you actually go through the numbers.

Saying everyone’s wrong comes with the very real risk of being irrelevant. A last irrelevant bit, for a while: The best part (IMO), which lasts one or two seconds, of The Big Short is at 2:09 of this clip. That fleeting smile. It seems that being able to feel what Dr. Burry is feeling then may mean that there is some understanding and perhaps less of a disconnect than the main character displays overall with his environment. The Big Short (2015) - Dr. Michael Burry Betting Against the Housing Market [HD 1080p] - YouTube And he’s not always wrong. ?

This should be a pretty boring aspect of the 'market' but with all this inflation-is-here-and-everywhere perception and the building tension between fiat and crypto currencies, what is happening these days in the reverse repo market is quite unusual (and fascinating). Mainstream does not seem to care as well as the informed investment community. For the reserves aspect, the Fed continues to be involved in the secondary market by buying securities (and supplying reserves) while, at the same time, removing reserves through the RRP. What is going on here? Since the end of March, very little net reserves have been added to the financial plumbing, on a net basis, even if the TGA has been steadily decreasing (minus 261.2B since March 31st to May 19th). The easy technical thing to do, to let reserves build within the system, would have been to continue the SLR exemption for banks. The Fed decided otherwise for the time being and instead put in place conditions where banks are 'encouraged' to shed reserves to money market funds who themselves are trying to find places to park cash (i realize that repo people don't like the notion of money parking and see this instead as a leveraged profit opportunity) and 0% (and even negative rates at times!) happen to be the best relative opportunity. The problem is that MMFs are likely close to their limit in terms of reverse repo exposure. What happens next? Data (context of of an impression that wild inflation is coming): Treasury yields: 3mo:0.00 6mo:0.01 12mo:0.04 Even the 10-yr is at 1.62%.? The graph above shows the reverse repo action. Before January 2018, the banks used to like the RRP action especially for window dressing at the end of quarters. Since Basel III, the space has become too expensive (regulatory costs). Apart from a blip with the March financial plumbing liquidity issue in March 2020. Lately, the MMFs have been 'encouraged to participate and (sometimes) to pay in order to lend cash? There is so much cash and so many risk-free securities sloshing around and i hope the Fed notice the unstable stability but that may be too much to ask. The following is an interesting discussion: American SICO - 4.1 A Band-Aid Known as Reverse Repo (fed.tips) The title is American Sico (Psycho) and i absolutely and relatively loved that movie. So much potential energy waiting to be released.

^The Florida P+C re/insurance market has entered the vicinity of a perfect storm (!) as clouds have been gathering in the last few years. Many forces at work, some natural, others man-made and some 'collectively' self-inflicted. The following Miami Herald article may help to digest the cancellation as the growing problem seems to be widespread. Three more insurance carriers canceling Florida policies | Miami Herald There are reasonable criteria allowing individuals and insurers to unilaterally cancel contracts and financial hardship is one of them but some unduly take advantage of the flexible definition of a contract. Many factors at work and building up over a long time but litigation issues seem to be significant (there are so many embedded poor incentives at all levels with the insurer squeezed in the middle). Premium rates are expected to rise (perhaps much more if nature refuses to cooperate) and stabilization is to be expected when public funds will retain less and outside parties like BRK come in (similar to 2008) to submit reinsurance bids. It looks like 75% of the reinsurance money covering property losses in Florida comes from investors out of state. Florida Citizens to seek $850m of cat bonds before 2021 hurricane season - Artemis.bm Rising combined ratios, lower capital, to drive Florida reinsurance demand - Artemis.bm Industry flags litigation as biggest issue facing Florida's re/insurance market - Reinsurance News Disclosure: i like Florida for many reasons and may spend part of winters there when my perimeter becomes more limited.

^If interested, Enova (ENVA), which is a relevant 'fintech' loan intermediate comparable, integrated the fair value rule for loans receivables starting Jan 1st 2020. Their 2019 supplemental financial information found in their investor relations' section shows an interesting pro-forma picture (page 11). There is also an August 2020 presentation that can be found by Google (no longer on their website it seems) which has two pages on the issue (pages 38-39), rationale, accounting effect etc. Interestingly, ENVA recently announced that their annual meeting was being postponed in relation to an auditor selection.. -----) Back to a great time to be alive and $$FGNA$$

^ djco_corresp-031513.htm (sec.gov) filename1.pdf (sec.gov) -----) back to SYTE

One question that keeps coming back when going over this approach (cognitive approach, for biases etc) is how people who are receptive to this approach may, in fact, be predisposed to these approaches because of pre-established predispositions (genetic and upbringing). What i mean is, for example, that people who come to read (and apply) Dale Carnegie's How to Win Friends and Influence People may have already built-in predispositions to make friends and influence people to start with, ie the outcome is highly correlated to the cognitive starting point already imprinted. This has been shown in more extreme cases when trying to influence criminal behaviors once 'patterns' are established. Anyways, thank you for the idea. i read through the book very rapidly. Since the last edition of this book, the controversy between more 'biological' approaches and cognitive approaches lives on and antidepressant use in the US has almost doubled. ?

^Not much protection left, if any IMO. -A big chunk of the CPI-linked derivative notional value will go with the European run-off. -Overall, they've had a tendency to let contracts mature. -The residual duration was at 2.7 years at 2020 yr-end. -The contracts are far out of the money and a 5 to 10% deflation would be required to make the trade profitable upon maturation. -Even if potentially of value as a trading vehicle, the short period to maturation lessens the potential convexity to a significant degree. Anyways all the above points may be irrelevant. When those contracts were initiated, some people put in opposition the deflation thesis with an opposing view (championed by Mr. Buffett for example) that deficit spending could counteract deflationary forces and recent events suggest that this possibility remains alive and well. ---) Back to FFH and investing.

^About the bond investing bucket for FFH. It's an important part because the bond portfolio could very well match shareholders' equity and more. As SJ describes, the bond portfolio can be seen from many angles (source of earnings, pool of funds to pay claims, and a potential for positive returns in a contrarian way). Investing in FFH in the early 2000s meant expectations of superior returns on the bond portfolio going forward. As reported in 2004 (first time reported in this form): Bonds 12.0% 9.8% 9.8% Merrill Lynch Corporate Index 8.0% 7.9% 7.9% for 5, 10 and 15 year periods. As reported in 2016 (last reported in this form in 2017 and 2016 matches with a shift in personal opinion vs expected future excess returns on bond portfolio; 2017 reported numbers similar (slightly lower overall) vs 2016): Taxable bonds 6.0% 9.6% 10.3% Merrill Lynch U.S. corporate (1-10 year) bond index 3.8% 4.9% 5.1% for 5, 10 and 15 year periods. The bond results don't include the CDS returns. So, investment results from bonds (period 2001 to 2016) had been significant contributors to the bottom line. This hasn't been much discussed but the bond performance since 2016 (year when expectations about inflation changed, at least as reported) has been less impressive, see 10-yr Treasury constant rate graph for reference (what happened since 2016, where we are now after the Covid-19 episode etc). i submit the opinion that the present bond environment is, by far, most challenging (ever?). Also, during 2020, the Fed (and Treasury) put in place backstops (for corporate bonds and munis) that were relatively symbolic but that crystallized the notion (similar for GSEs and the implicit support concept) that such backstops and more will happen again anytime stress appears in the credit markets and what happens if there is a Lehman moment or a bond equivalent? At this point, FFH is positioned with low duration and liquidity but they don't have residual protection against a deflationary environment. What happens next in the bond markets is anybody's guess but reading again parts of the earlier annual reports helps to remember how FFH used to be able to find relatively cheap ways to benefit if real risk shows its ugly head. 10-year.pdf yields-overview.pdf

Than you for this info MrB. Apologies: negative outlook for Wintaai Holdings.? In the US for the last 5 years, WC insurance has been an unusually bright spot in commercial lines. What's in store and what does it mean for Stonetrust? 1-In the last 5 years, Stonetrust has consistently underperformed on the underwriting side when comparing to related peers in the WC space. From AM Best and post above (2015-19), industry vs Stonetrust: 2015 95.8 109.6 2016 95.6 100.4 2017 92.5 99.6 2018 87.0 96.3 2019 88.3 89.6 avg 2015-9 91.8 99.1 2020 85-86 86.4 2-From available disclosure, it's not possible to assess the reserving profile of Stonetrust over time and it's possible (though unlikely) that higher combined ratios in 2015 to 2019 were related to more conservative reserves than average (accident year combined ratios closer to reality than peers) and 2020 may be the beginning of the realization of this aspect. However, it is estimated that net premiums written for WC declined by about 8% in 2020 (with rates not really moving) and, for Stonestrust, NPW declined by only 2.3% (retention stayed the same). Even if this may partly reflect that Stonetrust has been geographically expanding, more likely it means that Stonetrust may not be ideally positioned counter-cyclically for reserving. AM Best suggests that the WC industry has become significantly under-reserved. This is hard to confirm prospectively but AM Best has been pretty good overall with these reserve issues in the past even if exact timing is difficult to map. For example, their asbestos reserving deficit work has proven to be quite solid, over time. Just using basic historical assumptions, it's reasonable to suggest that the high amount of reserve releases of the last 2,3 or even 4 years (for the industry as a whole) will become a correspondingly large deficiency movement in the future. Stonetrust has written business lately with an above 100% accident year combined ratio (2019's CR was subject to a non-recurrent gain on the underwriting expense side). Reversing the positive reserve development pattern at this point while growing faster than peers is a recipe for further underwriting (calendar year) losses. 3-From the investment point of view, i suggest the hypothesis that results may be relatively positive in some periods but (IMHO) it's likely that net relative results will be inferior over the long term. A differentiated investment strategy is not well looked upon by regulators when results are poor. 4-A key concern is the message that WC (and Stonetrust) should do well with the market hardening. Since the WC seems to have a life of its own , it's unlikely to follow trends seen in other commercial lines. A positive aspect is the excess capital but what happens to this excess capital and the returns obtained may disappoint. ----- Additional comments about 2020 and the WC's insurance market and what it may mean going forward (for Stonetrust). In 2020, results turned out much better than expected with the direct and indirect Covid-19's impact. WC claims were less frequent (and especially less costly) than most predicted and most of the costs came from lost wages secondary to temporary quarantine measures. Results varied to some degree across states for a variety of reasons including general policy and specific coverage rules but positive trends were noted across geographies. An aspect which occurred which is amazingly unprecedented is that claims came down (during the downturn) both absolutely and relatively. In a typical downturn, claim frequency tends to go down absolutely but not relatively (this is an interesting phenomenon but likely not interesting enough to discuss here). This wasn't the case in 2020 and people are puzzled. Puzzled in the same way when trying to explain the conundrum now where employers are looking for workers and there is a significant pool of potentially available workers and, still, employers have difficulty finding candidates...This is likely closely tied to the centralized mandate (which has gone up one notch in 2020) which implies to centrally and simultaneously provide both work and help to the masses. This is bound to fire back if the idea is to encourage productivity in this mature (aging) economy/population and is likely to be a negative for WC insurance long term (payrolls) but transfers backed by the printing press will help WC combined ratios for a while still. ----- Stonetrust reports lower average medical claims per case and this may suggest (?) that this is related to better 'management' but, just eye-balling, it appears that the difference may be simply related to the states where they do (and don't do) business. Of course, everything above could be wrong. This should be an interesting re-assessment in 5 to 10 years.

From @gfp in the BHE thread (March 3rd 2021): "Berkshire basically facilitated the transfer of Sokol's stock to Abel by financing Abel's purchase of stock. That's how Abel was able to afford a block of stock currently worth over $500 million. Abel's BHE shares are convertible into BRK.B shares and that is what I ultimately expect to happen once Greg is CEO of Berkshire." From the recent BHE 10-K and proxy and further documented buyback of Mr. Walter Scott's minority stake, the fair value (the 1% of implied equity value) of Mr. Abel's stake is well above 500M at this point.

^My pleasure. i saw that you posted about the Robinhood platform and retail investing today and it's interesting to note that for Lloyd's, even if that aspect was neither necessary nor sufficient, the relative democratization of access for Names to supply capital into the Syndicates in the 70s and 80s played a role in the eventual outcome. When things turned out the way they did, the Names were not happy and complex court cases were initiated based on the concept that they had not been sufficiently informed...At least modern-day crowd investors don't have unlimited liability although there seems to be a belief that there is an unlimited ability to print money.