Best Insurance investment right now? MFC, RE, CNA or RNR

[onyx1]

 

That's why I like the accident year triangles that FFH added to their AR this year (or was it last year?).  You can actually follow how specific accident years develop over time.  People should really look at what FFH has done for the last five or so accident years...

 

SJ

 

I agree, I wish every 10-k disclosed reserve development by accident year.

[Guest HarryLong]

Quite to the contrary. We have 10 years of actual claims paid out since 1999, so we have to give 10 years of evidence much more proportional weight than we would fewer years of reserve development, or evidence.

 

Remember, as Graham said, analysis should be penetrating, but never prophetic. Penetrating analysis is based on evidence. 10 years of evidence should get more weight than 9 years of evidence, which should get more weight than 8 years of evidence, and so on.

 

There is nothing in there about hope--it's about the evidence, the facts. It's examining a fantastic record of reserving, and seeing that in many subsequent time periods, that those estimates have been systematically too pessimistic.

[Guest HarryLong]

By the way, has anyone noticed ICE making a new 52 week high this morning? In reality, ICE is the best insurer on earth, along with CME.

 

The novation of contracts which a futures exchange engages is, in economic essence, insurance--but with some key differences from most insurers:

 

I. Very little competition.

 

II. Fantastic margins.

 

III. The ability to almost infinitely scale.

 

IV. Market/Regulatory power (on a day-to-day basis, they are the de-facto regulator).

 

V. Less risk (since they can demand more margin, forcibly close out positions, seize collateral etc.)

[prevalou]

Where is the float?

[Guest HarryLong]

Where is the float?

 

It's a futures exchange. The customers post the collateral!

[prevalou]

Yes but the collateral is not invested. No leverage there unlike insurance.

[Guest HarryLong]

Yes but the collateral is not invested. No leverage there unlike insurance.

 

You're absolutely incorrect. Although there is not the same balance sheet leverage, in essence, there is huge operating leverage.

 

It's a toll booth. Every time there is a trade on one of their exchanges, they get paid on a per contract basis. Once their fixed costs are covered, as volume rises, their margins go up, since the marginal cost of the service they provide is very low.

 

Have you even read the 10-k?

[prevalou]

Deaf people's dialogue...never mind. Thanks for sharing your ideas.

[Guest HarryLong]

AMPH is interesting, but their combined ratio recently would be a lot worse without reserve releases.....I would not put it in the same league as anything mentioned by anyone in this thread, but it is slightly interesting.

[dcollon]

This has been a great thread and I was hoping to get a little guidance from the group.

 

I would appreciate any comments or insights on AHL & AXS?  Are either of these two as solid as some of the other insurers that have been mentioned?

 

Thanks for the help.

[twacowfca]

This has been a great thread and I was hoping to get a little guidance from the group.

 

I would appreciate any comments or insights on AHL & AXS?  Are either of these two as solid as some of the other insurers that have been mentioned?

 

Thanks for the help.

.

 

 

These are above average companies in my favorite fishing hole: Bermuda. There are no corporate taxes  on the profits of Bermuda  companies, except for taxes on subsidiary profits for those that have subs in taxable jurisdictions.  AXS is a good choice if you are scared of hurricanes.  Aspen also has below average hurricane exposure compared to the most exposed Bermuda Re's.  

 

My personal favorite and largest holding by far is LRE for many reasons that have been discussed on the board.  The downside with LRE is that their results may sometimes be lumpier than Aspen, Axis or some other good Bermuda Re 's because they have more cat exposure and very little casualty exposure which tends to be slower in loss development than property exposure.

[dcollon]

Thanks for your comments twacowfca.  I will spend some time reviewing LRE as well. 

[Guest HarryLong]

RNR is not bad. I do worry, however, about the expense ratio, which seems to be rising considerably.

[Guest HarryLong]

Embarrassingly, I cannot find a reserving table for Lancashire in the downloads section of their investor relations website.

[Rabbitisrich]

LRE posts 4 years claims development somewhere near the end of their AR. It's under 'claims development' and breaks down into the gross, ceded, and net tables.

[Guest HarryLong]

LRE bears further research. RNR might be OK. We'll see how the combined on each develops in this pricing cycle.

 

 

[twacowfca]

LRE posts 4 years claims development somewhere near the end of their AR. It's under 'claims development' and breaks down into the gross, ceded, and net tables.

 

LRE estimated $39.1M initially for net liability for EOY 2006 accident year.  Three years later the estimate of ultimate liability for accident year 2006 was $27.6.

 

 

Their EOY initial estimate for accident year 2007 was $151.2M.  Two years later the estimate of ultimate liability for that accident year was down to $99.5.

 

Their EOY initial estimate for accident year 2008 was $408.9M.  One year later the estimate of ultimate liability for that accident year was down to $370.3M.  

 

They appear to reserve conservatively and to have significant redundancies in their reserves beyond what has already been released.  :)

 

[Myth465]

LRE is the only insurance company I hold. We have our first storm of the season.

Thanks again for the links. I will be looking at a few of these over the next few weeks.

 

Should be interesting.

[Partner24]

LRE seems to be a very well run insurance company on the underwriting side. On the investing side, they care about rule no. 1 (don't lose money), but even if I like their conservativeness, I also like opportunistic people like we see at Berkshire, Fairfax and others.

 

 

[Guest HarryLong]

Has anyone been following NATL's latest acquisition?

 

http://finance.yahoo.com/news/National-Interstate-Completes-pz-290243253.html?x=0&.v=1

 

http://cincinnati.bizjournals.com/cincinnati/stories/2010/06/28/daily55.html?ana=yfcpc

[Guest Bronco]

Maybe not directly on point but I still think the "cheapest" and best insurance investment right now is CNA by purchasing Loews.  You get 90% of CNA + $2.5 - $3B in cash + all the other stuff that has been written about endlessly wiht Loews. 

 

Not that this matters for stock valuation, but the CEO for Loews is now a board memeber of the Fed Reserve Bank (NY) and GE.  This isn 't amateur hour with these guys.

 

I think CNA can earn a billion - not bad for a market cap of $7B. 

 

Someone asked me how much of Loews is my portfolio on this board - over 50%.  So am I biased - yes.  But my money = my mouth.

 

Good luck to all. 

 

 

[Myth465]

The CEO (of Loews) will be on Wealthrack this week. Should be a good episode.

[vinod1]

Maybe not directly on point but I still think the "cheapest" and best insurance investment right now is CNA by purchasing Loews.  You get 90% of CNA + $2.5 - $3B in cash + all the other stuff that has been written about endlessly wiht Loews. 

 

Not that this matters for stock valuation, but the CEO for Loews is now a board memeber of the Fed Reserve Bank (NY) and GE.  This isn 't amateur hour with these guys.

 

I think CNA can earn a billion - not bad for a market cap of $7B. 

 

Someone asked me how much of Loews is my portfolio on this board - over 50%.  So am I biased - yes.  But my money = my mouth.

 

Good luck to all. 

 

 

 

CNA has in aggregate lost money over the last 10 years and its record over the last 20 years is not much better. It has not been able to increase its book value to keep pace with inflation over the last 20 years (just based on eye balling the data).

 

The only reason for optimism would be the CEO change, but I am not sure if CEO by himself can change an organization culture from being a poster child for incompetent reserving/underwriting to one with disciplined underwriting.

 

Based on a rough estimate of earnings of about 4% on its assets with an optimistic 104 CR, I get a ROE of about 8%. I would think such a business is not worth more than 0.6 or 0.7 book. Could you please share your thoughts on how you think CNA would be able to earn $1 billion?

 

I think L is attractive from a sum of parts perspective in spite of CNA but do not see it as an attractive way to invest in CNA.

 

Thanks

 

Vinod

[Guest Bronco]

Net income from ops over last 3 quarters is averaging over 250 million per quarter. 

 

Obviously, the market agrees more with you now than me.  But I am guessing they will pay 1 billion back to loews within a year.  And life is good.  If you don't like new management or the history of cna, fine. That's what makes a market.  But this investment is where I see value and a margin of safety. 

[vinod1]

Net income from ops over last 3 quarters is averaging over 250 million per quarter. 

 

Obviously, the market agrees more with you now than me.  But I am guessing they will pay 1 billion back to loews within a year.  And life is good.  If you don't like new management or the history of cna, fine. That's what makes a market.  But this investment is where I see value and a margin of safety. 

 

I do see the margin of safety with L, jut not directly in CNA. I have a very small investment in L and if not for CNA it would have been a larger position.  :)