LRE.L - Lancashire Holdings Ltd

[constructive]

Hi

I have started reading on LRE.

I am amazed at the combined ratio being so good.They have so good underwriting profit.

Here AIG and others struggling to get underwriting profit and LRE is churning out 35% underwriting profit.

 

In my 401k I cannot buy LRE as it is listed in London.

 

Does it trade on pink sheet?

How are you guys buying LRE.

 

It trades lightly on the pink sheets: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=LCSHF:PNK

 

Interactive Brokers is great, not only for access to foreign markets but also for low costs and execution.

[giofranchi]

Mr. Fascione leaving just after the announcement of the LCM initiative… twacowfca, any comments on the subject?

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

2013-03-06.pdf

[twacowfca]

Mr. Fascione leaving just after the announcement of the LCM initiative… twacowfca, any comments on the subject?

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

He's a great underwriter and will be missed, but Lancashire has a great bench.  It will be interesting to see where goes.

[bargainman]

$7.83 for BV x share, $13.86 for share price today: 13.86 / 7.83 = 1.77, actually higher than 1.6…

 

No, sorry but never heard of the word ‘bromance’… is ti really that bad?!?!  ;D ;D

 

giofranchi

 

 

No it's not bad at all!  Actually I would say that Charlie and Warren have been having the biggest bromance of all, for decades :-)

 

Ah, I see where you got that number, right here:

 

http://www.lancashiregroup.com/investor-relations.aspx

 

Thanks!

[Ross812]

Another special dividend. 68 pence along with a 6 pence regular dividend. Watch for Lancashire to drop a little more sheer the divi.

[giofranchi]

twacowfca,

any comment about the appointment of Darren Readhead as Head of LCM?

 

Thank you very much!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

LCM_Appointment.pdf

[twacowfca]

He's a very high quality underwriter with lots of experience cutting deals with all the players in the London/Bermuda+  retrocessional  sidecar markets.  He used to work at Ascot, the group acquired by AIG that Charmin sold for a pretty penny when Brindle worked for Charmin.  Redhead  has the contacts and experience to pick up where Simon left off. :)

[giofranchi]

He's a very high quality underwriter with lots of experience cutting deals with all the players in the London/Bermuda+  retrocessional  sidecar markets.  He used to work at Ascot, the group that Charmin sold for a pretty penny when Brindle worked for Charmin.  Redhead  has the contacts and experience to pick up where Simon left off. :)

 

Great!  :)

 

Thank you very much!

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

[Sunrider]

Somewhat off/on topic question:

 

With LRE returning significant amounts through dividends, rather than repurchases or BV growth, is anyone here investing in this through more tax efficient accounts (outside of US, so not talking IRA, Roth, etc.) - e.g. UK/EU citizens using spreadbet or CFD accounts? If I remember correctly spread bet profits are tax free in the UK so the dividend doesn't attract tax either. Of course, most providers force you to use leverage and charge you for it - but at -max 3%- financing costs that still wouldn't look too bad.

 

Any views?

 

C.

[jay21]

I wanted to get comfort on the taxes too.  I thought someone mentioned earlier there is withholdings in Britain even if I hold in my Roth IRA in the US?

[racemize]

I wanted to get comfort on the taxes too.  I thought someone mentioned earlier there is withholdings in Britain even if I hold in my Roth IRA in the US?

 

I believe so, or at least that has been true for me with FFH holdings in my IRA (I just moved it out).

[twacowfca]

I wanted to get comfort on the taxes too.  I thought someone mentioned earlier there is withholdings in Britain even if I hold in my Roth IRA in the US?

 

The glitch in the withholding has been resolved. See previous discussion on this thread.  :)

[twacowfca]

Lancashire has greatly reduced its 100 year US windstorm Projected Maximum Loss, its riskiest category as I expected after offloading much risk to their sidecar where most losses will be born by outside investors.  Last year that PML was 23% of equity.  It's 18% of equity for 2013.  That PML would be for a storm with two and a half times the insured damage of  Katrina.  :)

 

One reason Lancashire has done so well with less volatile losses than their peers after major catastrophes is that they quickly model a PML in their daily underwriting call for every policy they write as their underwriters and actuaries work as part of the same team.  Other insurers typically have an adversarial relationship between underwriters and actuaries and concentrate on premium to policy limit, something easier to calculate, but not so good for keeping losses low when there is a big loss event.

[giofranchi]

Lancashire has greatly reduced its 100 year US windstorm Projected Maximum Loss, its riskiest category as I expected after offloading much risk to their sidecar where most losses will be born by outside investors.  Last year that PML was 23% of equity.  It's 18% of equity for 2013.  That PML would be for a storm with two and a half times the insured damage of  Katrina.  :)

 

One reason Lancashire has done so well with less volatile losses than their peers after major catastrophes is that they quickly model a PML in their daily underwriting call for every policy they write as their underwriters and actuaries work as part of the same team.  Other insurers typically have an adversarial relationship between underwriters and actuaries and concentrate on premium to policy limit, something easier to calculate, but not so good for keeping losses low when there is a big loss event.

 

twacowfca,

thank you very much for the good news! And for the thoughtful comment on why LRE has managed to do better than its peers after major catastrophes.

 

May I ask how you always come to know all these things about LRE?!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

[twacowfca]

Lancashire has greatly reduced its 100 year US windstorm Projected Maximum Loss, its riskiest category as I expected after offloading much risk to their sidecar where most losses will be born by outside investors.  Last year that PML was 23% of equity.  It's 18% of equity for 2013.  That PML would be for a storm with two and a half times the insured damage of  Katrina.  :)

 

One reason Lancashire has done so well with less volatile losses than their peers after major catastrophes is that they quickly model a PML in their daily underwriting call for every policy they write as their underwriters and actuaries work as part of the same team.  Other insurers typically have an adversarial relationship between underwriters and actuaries and concentrate on premium to policy limit, something easier to calculate, but not so good for keeping losses low when there is a big loss event.

 

twacowfca,

thank you very much for the good news! And for the thoughtful comment on why LRE has managed to do better than its peers after major catastrophes.

 

May I ask how you always come to know all these things about LRE?!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

99% of the tangible "facts" I know about Lancashire are available to anyone willing to spend time studying them.  However, the intangibles are very important.  When a major shareholder flies over the big pond to chat with the management and realizes that absolutely nothing being discussed comes close to being inside information, that says something important about their ethics.  When the CEO gets up in the middle of a meeting to attend their daily underwriting call, that says something about their priorities. 

 

When more than one underwriter volunteers to a guest in the hall that Lancashire is unlike any other insurance company they have ever worked for, and when they speak about their passionate, collegial focus on building the very best underwriting P&C company ever, that's a genuine testimonial.  When the company demonstrates their commitment to excellence by producing industry leading results and through capital management that builds enormous shareholder value, that's not a fluke.  When they admit their mistakes without sugar coating their failings, and then move on to something better, that's continuous improvement.

 

When the CEO stays way past normal closing time to say goodby to a guest and then welcomes a broker who stopped by late, that's leadership.  When that CEO then hops a late flight and flies coach, noting that Lancashire men make the Scots look like spendthrifts by comparison, that's leading by example.

 

The numbers speak for themselves, but the intangibles, the process, the leadership and the culture support the idea that "good luck" is more likely to happen to them than to their peers.  :)

[augustabound]

Great post twacowfca.  :)

[twacowfca]

Great post twacowfca.  :)

 

Thank you very much.  :)

[augustabound]

Great post twacowfca.  :)

 

Thank you very much.  :)

 

Your comment about flying coach reminded my of the CEO's of the big 3 U.S. auto makers when they went to Washington and were crying poor in 2009.  One of the senators simply asked how they all got there from Detroit that morning (knowing full well what the answer was). 

Of course the answer was each one of them used the company jet. I think one of them used the jet to commute to and from work each week too.

 

So seeing a CEO or executive team that treats company money with respect to the shareholders is refreshing.

 

 

[giofranchi]

99% of the tangible "facts" I know about Lancashire are available to anyone willing to spend time studying them.  However, the intangibles are very important.  When a major shareholder flies over the big pond to chat with the management and realizes that absolutely nothing being discussed comes close to being inside information, that says something important about their ethics.  When the CEO gets up in the middle of a meeting to attend their daily underwriting call, that says something about their priorities. 

 

When more than one underwriter volunteers to a guest in the hall that Lancashire is unlike any other insurance company they have ever worked for, and when they speak about their passionate, collegial focus on building the very best underwriting P&C company ever, that's a genuine testimonial.  When the company demonstrates their commitment to excellence by producing industry leading results and through capital management that builds enormous shareholder value, that's not a fluke.  When they admit their mistakes without sugar coating their failings, and then move on to something better, that's continuous improvement.

 

When the CEO stays way past normal closing time to say goodby to a guest and then welcomes a broker who stopped by late, that's leadership.  When that CEO then hops a late flight and flies coach, noting that Lancashire men make the Scots look like spendthrifts by comparison, that's leading by example.

 

The numbers speak for themselves, but the intangibles, the process, the leadership and the culture support the idea that "good luck" is more likely to happen to them than to their peers.  :)

 

twacowfca,

your posts are always “troubling” to me… Let me explain: I really love Mr. Brindle and what he is accomplishing at Lancashire. I also think LRE today is a good bargain… but I am not sure it is a “fantastic” bargain (maybe, a little too pricey to really be a fantastic bargain?). So I have invested 7% of my firm’s capital in LRE, hoping to get the chance to average down in the future and move to a 15% position.

This is what I have also done with any other investment, with the only exception of FFH, in which I have already established a full position.

Now, I must admit I am having an hard time with LRE… I am aware I shouldn’t ask, but I am always curious to know your thought: do you think I should establish right away a full position in LRE, and who cares about averaging down?! I am a great believer in averaging down, even with the companies that I understand and admire the best, but LRE might be the rarest of exceptions!  :)

 

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

 

[twacowfca]

99% of the tangible "facts" I know about Lancashire are available to anyone willing to spend time studying them.  However, the intangibles are very important.  When a major shareholder flies over the big pond to chat with the management and realizes that absolutely nothing being discussed comes close to being inside information, that says something important about their ethics.  When the CEO gets up in the middle of a meeting to attend their daily underwriting call, that says something about their priorities. 

 

When more than one underwriter volunteers to a guest in the hall that Lancashire is unlike any other insurance company they have ever worked for, and when they speak about their passionate, collegial focus on building the very best underwriting P&C company ever, that's a genuine testimonial.  When the company demonstrates their commitment to excellence by producing industry leading results and through capital management that builds enormous shareholder value, that's not a fluke.  When they admit their mistakes without sugar coating their failings, and then move on to something better, that's continuous improvement.

 

When the CEO stays way past normal closing time to say goodby to a guest and then welcomes a broker who stopped by late, that's leadership.  When that CEO then hops a late flight and flies coach, noting that Lancashire men make the Scots look like spendthrifts by comparison, that's leading by example.

 

The numbers speak for themselves, but the intangibles, the process, the leadership and the culture support the idea that "good luck" is more likely to happen to them than to their peers.  :)

 

twacowfca,

your posts are always “troubling” to me… Let me explain: I really love Mr. Brindle and what he is accomplishing at Lancashire. I also think LRE today is a good bargain… but I am not sure it is a “fantastic” bargain (maybe, a little too pricey to really be a fantastic bargain?). So I have invested 7% of my firm’s capital in LRE, hoping to get the chance to average down in the future and move to a 15% position.

This is what I have also done with any other investment, with the only exception of FFH, in which I have already established a full position.

Now, I must admit I am having an hard time with LRE… I am aware I shouldn’t ask, but I am always curious to know your thought: do you think I should establish right away a full position in LRE, and who cares about averaging down?! I am a great believer in averaging down, even with the companies that I understand and admire the best, but LRE might be the rarest of exceptions!  :)

 

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

I think it's a gem, but I can't advise you to increase the size of your position if you're not comfortable with that. 

 

Lancashire is more than half our portfolio value, a huge overweight. For the first time since we have owned them, we have not reinvested their large special dividends in Lancashire, but instead in Berkshire and some in Leucadia.  This is no reflection on our opinion of Lancashire's prospects, but recognition of the need to do at least some diversification.  In my opinion they're better than ever.  I 'll be surprised if they don't increase their BV 5% to 7% when they report their Q1 results, mostly from underwriting profits. 

 

Their business is subject to fluctuations.  Last year they had a major hit from Costa Concordia, yet they still wound up with a CR in the 60% range for the year, better than 95% of their peers.  If you look at their results since their IPO, they are such an outlier that the expectation would be that they should regress to the mean.  But Brindle has been achieving the same results since the mid 1980's, and he just turned 50 and is in good health. 

 

 

[giofranchi]

I think it's a gem, but I can't advise you to increase the size of your position if you're not comfortable with that. 

 

Lancashire is more than half our portfolio value, a huge overweight. For the first time since we have owned them, we have not reinvested their large special dividends in Lancashire, but instead in Berkshire and some in Leucadia.  This is no reflection on our opinion of Lancashire's prospects, but recognition of the need to do at least some diversification.  In my opinion they're better than ever.  I 'll be surprised if they don't increase their BV 5% to 7% when they report their Q1 results, mostly from underwriting profits. 

 

Their business is subject to fluctuations.  Last year they had a major hit from Costa Concordia, yet they still wound up with a CR in the 60% range for the year, better than 95% of their peers.  If you look at their results since their IPO, they are such an outlier that the expectation would be that they should regress to the mean.  But Brindle has been achieving the same results since the mid 1980's, and he just turned 50 and is in good health.

 

I knew I shouldn’t have asked… now I MUST establish a full position!! ;D

 

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

[twacowfca]

I think it's a gem, but I can't advise you to increase the size of your position if you're not comfortable with that. 

 

Lancashire is more than half our portfolio value, a huge overweight. For the first time since we have owned them, we have not reinvested their large special dividends in Lancashire, but instead in Berkshire and some in Leucadia.  This is no reflection on our opinion of Lancashire's prospects, but recognition of the need to do at least some diversification.  In my opinion they're better than ever.  I 'll be surprised if they don't increase their BV 5% to 7% when they report their Q1 results, mostly from underwriting profits. 

 

Their business is subject to fluctuations.  Last year they had a major hit from Costa Concordia, yet they still wound up with a CR in the 60% range for the year, better than 95% of their peers.  If you look at their results since their IPO, they are such an outlier that the expectation would be that they should regress to the mean.  But Brindle has been achieving the same results since the mid 1980's, and he just turned 50 and is in good health.

 

I knew I shouldn’t have asked… now I MUST establish a full position!! ;D

 

Thank you very much,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

Past results are no guarantee of future performance.  :)

[racemize]

I'm not sure how many people will find this useful, but just in case, I've got some google finance functions that will get you the current price (in USD) and current book value automatically:

 

for current price:

=GoogleFinance("LON:LRE", "price")*GoogleFinance("CURRENCY:GBPUSD")/100

 

for current book value:

=left(Index(ImportHtml("http://www.lancashiregroup.com/investor-relations.aspx", "list", 1),3,0), 7)+0

 

 

 

[nwoodman]

for current book value:

=left(Index(ImportHtml("http://www.lancashiregroup.com/investor-relations.aspx", "list", 1),3,0), 7)+0

 

Clever stuff, many thanks

[twacowfca]

Clever, but FDBV/SH is the best, conservative metric that they report each quarter on their website.  Realize that the last reported number is seen through the rear view mirror. Each Q their FDBV typically goes up about 5% to 7% when there is no large cat or other large loss event that impacts them.  :)