Myth465 Posted November 1, 2010 Share Posted November 1, 2010 Harry, don't tell me you are happy with the bid. Unless management anticipates the effects of hidden liabilities, there is no reason for such a low price. For an insurance company with the historical results of SUR, unless there are huge, looming costs, the price should be at least 2X book value. I think you guys are expecting a bit too much when it comes to fair value. Rates are low, the market is soft, and alot of major insurance companies are trading at below book. Who is going to pay 2x BV, would you? Link to comment Share on other sites More sharing options...
twacowfca Posted November 2, 2010 Share Posted November 2, 2010 You're all very welcome! ;D Who bought after I brought SUR to the board's attention? "Almost" don't count. :-[ Link to comment Share on other sites More sharing options...
Rabbitisrich Posted November 2, 2010 Share Posted November 2, 2010 Harry, don't tell me you are happy with the bid. Unless management anticipates the effects of hidden liabilities, there is no reason for such a low price. For an insurance company with the historical results of SUR, unless there are huge, looming costs, the price should be at least 2X book value. I think you guys are expecting a bit too much when it comes to fair value. Rates are low, the market is soft, and alot of major insurance companies are trading at below book. Who is going to pay 2x BV, would you? If I possessed CNA's balance sheet and familiarity with the management and business, then I would purchase at 2x book. The assets are fixed income heavy, despite an apparent surplus of capital, and you get paid $100M+ pre-tax to manage $500M of float. Even at a $2B price tag you could earn fair returns on a large amount of money. In any case, the point isn't relevant to the issue of a fair offer. The sale of a company is only one method of unlocking assets. SUR could institute buybacks (until the bid at less than $20), pay dividends, or adjust the portfolio composition. Unless CNA and management know something about future losses, $22 per share is a cheapo offer, and the market seems to anticipate a higher bid. Link to comment Share on other sites More sharing options...
Guest Bronco Posted November 2, 2010 Share Posted November 2, 2010 Interesting on the CNA call ... we have all these unrealized gains, but don't get too excited, they will come back to earth. Implies book is overstated and everyone knows that BV will go down once rates rise. However, reinvestment will hopefully occur in higher yielding instruments. Link to comment Share on other sites More sharing options...
Guest HarryLong Posted December 1, 2010 Share Posted December 1, 2010 Looks like RLI is giving back some excess capital: http://finance.yahoo.com/news/RLI-Declares-Special-bw-1795602599.html?x=0&.v=1 Link to comment Share on other sites More sharing options...
menlo Posted December 9, 2010 Share Posted December 9, 2010 Brief analysis of RNR from bankstocks.com (they state it has 70% upside): [ftp=ftp://http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=6224&ArticleTypeID=2]http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=6224&ArticleTypeID=2[/ftp] My apologies if you have to register to access the article. Link to comment Share on other sites More sharing options...
Viking Posted December 10, 2010 Share Posted December 10, 2010 Very good summary of the bullish case. The comments at the end are also quite good. www.bankstocks.com/ArticleViewer.aspx?ArticleID=6224&ArticleTypeID=2 Link to comment Share on other sites More sharing options...
merkhet Posted December 11, 2010 Share Posted December 11, 2010 I'm a little late to the party on the discussion of what to use as a reader for 10-Ks and 10-Qs, but my favorite method is to combined dropbox on my Mac (works on PC as well) with an iPad and the free dropbox app. Essentially, dropbox creates a folder that syncs with a remote server, so you just create a folder for all your research documents on your computer. Every time you save something to that folder, the application automatically uploads it to the remote server. Then you just access the remote server via the dropbox app on your iPad. Sadly, you can't add notes on the iPad, but it certainly saves on printing reams and reams of annual and quarterly filings. (link to get a dropbox account below) https://www.dropbox.com/referrals/NTc2MTQ4OTc5?src=global0 Link to comment Share on other sites More sharing options...
bookie71 Posted December 11, 2010 Share Posted December 11, 2010 Dropbox works great. According to the technology class I went to, it is secure and guarded (and I think (?) it utilizes the Amazon servers). Link to comment Share on other sites More sharing options...
merkhet Posted December 11, 2010 Share Posted December 11, 2010 Dropbox works great. According to the technology class I went to, it is secure and guarded (and I think (?) it utilizes the Amazon servers). I'm not sure if they use the EC2 severs at Amazon, but they do have a little writeup on their security. http://www.dropbox.com/help/27 The other thing I love about dropbox is their public folder that you can use to share things with other people. (This is important since I used to use drop.io, but it got bought, so now I just use the dropbox public folder.) Link to comment Share on other sites More sharing options...
ExpectedValue Posted December 11, 2010 Share Posted December 11, 2010 Sadly, you can't add notes on the iPad, but it certainly saves on printing reams and reams of annual and quarterly filings. If you use GoodReader, which connects to DropBox, you can read and annotate pdfs. I don't though. I usually take my ipad and a legal pad with me. That way I can read through the report and take notes of important details. Writing helps me remember a bit better, especially when it comes to key details. Link to comment Share on other sites More sharing options...
Guest HarryLong Posted January 24, 2011 Share Posted January 24, 2011 I am very excited to see RLI's earning numbers after the close..... Link to comment Share on other sites More sharing options...
Guest HarryLong Posted January 24, 2011 Share Posted January 24, 2011 http://finance.yahoo.com/news/RLI-Reports-Fourth-Quarter-bw-1566287198.html?x=0&.v=1 Why is no one obsessed with RLI? This company has incredible underwriting. I will continue to pound the table. Apparently, without a cult of personality, no one is interested in the company. Link to comment Share on other sites More sharing options...
UhuruPeak Posted January 24, 2011 Share Posted January 24, 2011 http://finance.yahoo.com/news/RLI-Reports-Fourth-Quarter-bw-1566287198.html?x=0&.v=1 Why is no one obsessed with RLI? This company has incredible underwriting. I will continue to pound the table. Apparently, without a cult of personality, no one is interested in the company. The underwriting is amazing, and the company is cheap on a P/E basis + decent dividend yield (I'll ignore the $7 special dividend last month). In times of such low interest rates and considering their large bond portfolio (>5x the equity one) however, why would I want to buy a company that will face such head wind? Link to comment Share on other sites More sharing options...
Guest HarryLong Posted January 25, 2011 Share Posted January 25, 2011 100 - combined ratio is a rough apples to apples equivalence to a pre-tax investment return from a investment portfolio If you can hit 80-84 on the combined ratio consistently, to me, that resembles almost a systematic investment strategy at a 20% to 16% CAGR with lower volatility than actual investment returns and with little correlation to the stock market which (I admit, once we hit the low 80's in a specialty underwriter) is capacity constrained. Essentially, it is not as correlated to weather/cat risk as a pure play reinsurer, it is not tied to the vagaries of regulation and pricing risk concentration as personal auto, you don't have these devastating volatility years in 2005 like many P/C insurers......I don't know where to begin or end here. The list of advantages goes on and on...... Has anyone even noticed that the premium / surplus ratio is consistently low, even after the special dividend? This company is throwing off excess earnings from underwriting and still has an extremely conservative balance sheet! Has anyone even noticed that unlike most insurers which resemble roach motels (ie, capital goes in, but rarely can leave), RLI just throws off cash? Compare the returns of RLI to Fairfax and Berkshire (remember to factor in the dividends, special dividends, etc) and I think that you are going to be very, very favorably impressed. Link to comment Share on other sites More sharing options...
Packer16 Posted January 25, 2011 Share Posted January 25, 2011 I agree but there are other insurance cos with better BV growth conservative underwriting and are selling for a lower MV/BV ratio including FFH, WRB and Lancashire. Each of these has lower than 100% combined ratios, conservative underwriting per thier reserve triangles 17% to 19% BV growth over the past 5 years and are selling at a slight premium to book less than 10%. RLI has grown book by about 13% per year over the same period and sells a 33% premium to book. Good quality but a little expensive when compared to the other items on the shelf. Packer Link to comment Share on other sites More sharing options...
twacowfca Posted January 25, 2011 Share Posted January 25, 2011 RLI looks interesting, Harry. How do they make money? Their acquisition costs look high in relation to their losses and premiums. Are these related to advertising, commissions or what? I could probably ferret some of this out with a little study, but your insights would be appreciated. Thanks. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted January 25, 2011 Share Posted January 25, 2011 I agree but there are other insurance cos with better BV growth conservative underwriting and are selling for a lower MV/BV ratio including FFH, WRB and Lancashire. Each of these has lower than 100% combined ratios, conservative underwriting per thier reserve triangles 17% to 19% BV growth over the past 5 years and are selling at a slight premium to book less than 10%. RLI has grown book by about 13% per year over the same period and sells a 33% premium to book. Good quality but a little expensive when compared to the other items on the shelf. Packer True, but RLI probably warrants a lower discount rate due to the safer mix of insurance products. Their investment team is nothing special but at least they don't chronically over reach on that point. Link to comment Share on other sites More sharing options...
UhuruPeak Posted January 25, 2011 Share Posted January 25, 2011 Has anyone even noticed that the premium / surplus ratio is consistently low, even after the special dividend? This company is throwing off excess earnings from underwriting and still has an extremely conservative balance sheet! and I think that you are going to be very, very favorably impressed. Yes, saw this - again, underwriting is very impressive Has anyone even noticed that unlike most insurers which resemble roach motels (ie, capital goes in, but rarely can leave), RLI just throws off cash? and I think that you are going to be very, very favorably impressed. yes, 50% of (current) market cap over the past 5 years just in dividends, impressive indeed Compare the returns of RLI to Fairfax and Berkshire (remember to factor in the dividends, special dividends, etc) and I think that you are going to be very, very favorably impressed. Well... forget about Berkshire, the stock hasn't done anything in a few years. Where was FFH at 5 years ago? Even with the 50% dividend out by RLI over the last 5 years, FFH's stock did much better; I'm not a 'hold forever' kind of guy, I buy and sell stock Link to comment Share on other sites More sharing options...
Myth465 Posted January 25, 2011 Share Posted January 25, 2011 Just got my LRE dividend today, not bad. Talk about returning capital to SH. Link to comment Share on other sites More sharing options...
Guest HarryLong Posted January 30, 2011 Share Posted January 30, 2011 Let's keep this simple. Just find me a better underwriter in speciality lines. If there's a better one out there, I want to know. Link to comment Share on other sites More sharing options...
Guest HarryLong Posted February 13, 2011 Share Posted February 13, 2011 I'm not sure why you wouldn't give it a huge weight. In 1999 (the earliest year on the table), the reserve, as it was re-estimated 10 years later, turned out to be too conservative to the tune of 20.8%. Well if I knew SUR was underreserved by 21% hell yes I'd give it a huge weight!! :o But unfortunately, that development cannot be projected upon today's reserves (any more than one can project the required addition to 2002 reserves of 14.7% so far). If historical reserve performance is what you are after then the best to way get it is a year-by-year % calculation of development from the prior year. The cumulative nature of the calander year triangle makes this very straightforward and all prior years get incorporated as you move forward in time. I've been vindicated on SUR in my assertion that they were drastically over-reserved. Look at the latest reserve release. It is truly a wonder to behold. I was right to maintain that the book value was vastly understated due to over-reserving. I believe the same is happening at RLI, but to a lesser degree. From the SUR press release: Highlights included: * Favorable loss reserve development of $54.3 million in the fourth quarter of 2010 and $76.3 million for the year ended December 31, 2010. * A combined ratio of 34.0% in the quarter, 65.3% for the year. * Operating cash flow of $35.0 million in the quarter and $142.1 million for the year. * Book value per share of $23.88 at December 31, 2010, an increase of 14.5% from December 31, 2009. http://finance.yahoo.com/news/CNA-Surety-Announces-Fourth-prnews-1911211662.html?x=0&.v=1 http://finance.yahoo.com/news/CNA-Surety-Special-Committee-prnews-470159209.html?x=0&.v=1 http://seekingalpha.com/article/209488-the-best-insurers-in-america Link to comment Share on other sites More sharing options...
Guest HarryLong Posted February 13, 2011 Share Posted February 13, 2011 As a friend of mine said, "Incompetence never recognizes competence--it mistakes competence for arrogance. But competence always recognizes incompetence." Link to comment Share on other sites More sharing options...
onyx1 Posted February 13, 2011 Share Posted February 13, 2011 I'm not sure why you wouldn't give it a huge weight. In 1999 (the earliest year on the table), the reserve, as it was re-estimated 10 years later, turned out to be too conservative to the tune of 20.8%. Well if I knew SUR was underreserved by 21% hell yes I'd give it a huge weight!! :o But unfortunately, that development cannot be projected upon today's reserves (any more than one can project the required addition to 2002 reserves of 14.7% so far). If historical reserve performance is what you are after then the best to way get it is a year-by-year % calculation of development from the prior year. The cumulative nature of the calander year triangle makes this very straightforward and all prior years get incorporated as you move forward in time. I've been vindicated on SUR in my assertion that they were drastically over-reserved. Look at the latest reserve release. It is truly a wonder to behold. I was right ... I did a rain dance yesterday, and today it rained. Does that prove my ability to cause rain? This quarter’s reserve release doesn’t advance your stated method of predicting reserve releases either. Back up for a second. The reasoning for the assertion of ‘drastically over-reserving’ was that at one moment in 1999 reserves were set, and because 10 years later they turned out to be conservative to the tune of 21%, you assert that SUR systematically maintains reserves above actuarial estimates and is worth more than reported book value. To base an investment decision today primarily on the quality of a single reserve judgment that prior management made 10 years ago is full of potential for nasty surprises. This method isn’t predictive, and I hope no one here follows the advice of those who espouse it. Link to comment Share on other sites More sharing options...
onyx1 Posted February 13, 2011 Share Posted February 13, 2011 A wise man once said: "Sure of their qualities and demanding praise, more go to ruined fortunes than are raised." Link to comment Share on other sites More sharing options...
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