LRE.L - Lancashire Holdings Ltd

[constructive]

Of course, 25% positions are more the exception than the rule. Let me explain why LRE was such a large position:

1) In my portfolio I have many businesses that can grow and compound capital over time. I also wanted a cash machine: a business that is very profitable, but cannot grow quickly, and therefore distributes most of its earnings to shareholders.

 

I've always thought that your description of LRE's role in your portfolio made sense.

 

But on the other hand, maybe it is unlikely for outstanding businessmen like Brindle to fill the cash machine role over the long term. Aren't they typically like sharks, they never stop swimming? And like lobsters, they never stop increasing in size?

 

If you want a cash machine maybe it is better to buy cheap telecoms or real estate. But that approach may not fit into your investing style.

[fareastwarriors]

@giofranchi ,

 

Have you looked at Markel? What are your thoughts on the company?

[fareastwarriors]

`

[argonaut]

Hi FarEastWarriors,

 

If I am reading the graphic correctly, looks like one director sold out their holdings in Feb and the rest, including Brindle are sitting on theirs. How soon after a sale do they need to report?

 

Is there something else I am missing on the screen?

[fareastwarriors]

S&PBulletin: Lancashire Ratings Unaffected By CEO Retirement

 

 

NEW YORK (Standard & Poor's) April 16, 2014--Standard & Poor's Ratings

 

Services said today that its ratings on Bermuda-based Lancashire Holdings Ltd.

(LSE:LRE.L) and its operating subsidiaries (collectively LRE) are not affected

by the announcement of the retirement of the founder and Chief Executive

Officer (CEO), Mr. Richard Brindle, effective April 30, 2014. Mr. Brindle will

also resign from LRE's board when he leaves his CEO position. Alex Maloney,

currently the group's Chief Underwriting Officer (CUO) and CEO of the U.K.

subsidiary Lancashire Insurance Co. (UK) Ltd., will become CEO. Mr. Maloney

joined LRE in December 2005 as one of the company's first employees, served as

CUO since 2009, and has been a board member since 2010. During the past couple

of years, Mr. Maloney has lead much of LRE's daily operations. We don't

believe this change is a concern given LRE's strong culture and underwriters'

solid track record. However, the sudden departure of LRE's CEO is not typical

of a well thought-out succession plan.

 

 

 

[alertmeipp]

It does seem odd that he just leave the company like that.

The share price has been lagging the market big time and they just did some big acquisition.

[Fat Pitch]

Unless you have strong grasp of the management team and their effectiveness without Brindle being there, the dynamics of this company just changed materially. When it comes to insurance companies you are betting on the jockey since that’s usually the only differentiating factor in this industry.

[original mungerville]

@ Gio Sure, I don't want to rub salt in the wounds. Sorry if it felt that way.

 

@ Mungerville: I'm not just talking about dying, also about the possibility of retiring, choosing another career, losing passion for your job, your child getting sick or any other random circumstance. I'd think that after a career of 20 years the odds of such a thing happening in the next decade is on average a lot higher than the odds of KO or IBM changing their business model. So if you want predictability I would choose the latter. I could very well be mistaken though.

 

I just don't think entrepreneurs choose another career often, nor do other random illnesses happen often. So, on average, predictability related to a founder's life events are pretty negligible relative to other vagaries of business. So I think its pretty minor in terms of risk. This Brindle announcement is an exception I think rather than the rule.

 

If you want to compare it to century long moats like KO's - then fine. But if you want to compare this risk relative to say an average holding period of say 3 to 5 years, then I think its not a huge risk (defined as probability of event multiplied by consequence given the event).

 

I think there are much larger business risks out there than this one.

 

[original mungerville]

I am out at a loss as well. I was putting a lot of weight on Brindle being there long-term. I think results will continue to be good for a year or two and then with the founder gone I think there is potential for a decline over time now.

 

original mungerville,

never again heed what Gio has to say! After all, maybe, frommi’s idea was not such a bad one! ;)

 

But… I just like investing too much! … Yes, I know … Now I almost sound like an addict! ;D

 

::)

 

Gio

 

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

[fareastwarriors]

Hi FarEastWarriors,

 

If I am reading the graphic correctly, looks like one director sold out their holdings in Feb and the rest, including Brindle are sitting on theirs. How soon after a sale do they need to report?

 

Is there something else I am missing on the screen?

 

Sorry, I'm not familar with UK disclosure rules.  And Bloomberg might not capture everything and may lag with updating any new information.

[giofranchi]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

[giofranchi]

@giofranchi ,

 

Have you looked at Markel? What are your thoughts on the company?

 

Great company! And I have posted many times in the Markel's thread. ;)

 

Gio

[fareastwarriors]

@giofranchi ,

 

Have you looked at Markel? What are your thoughts on the company?

 

Great company! And I have posted many times in the Markel's thread. ;)

 

Gio

 

Yes of course. Why didn't I think to check that thread and read it through first!?

silly me

 

[WhoIsWarren]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

Gio,

 

Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever.  Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy.  And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares.

 

But for me the Brindle question was just part of the puzzle.  There were just so many factors to consider.  So I acknowledged this 'key man' risk and bought stock.  And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special.  I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created.  Therefore, there is a good chance that his record will be his successor's future.

 

There are concerns and questions however -- like the ones mentioned on earlier posts.  I am keen to get to the bottom of these, or at least as best I can.  Meanwhile, I am holding onto my shares.

 

Anyway, I'm not here to convince you one way or the other.  You've clearly got a decisive personality and a game plan that you stuck with.  Fair play!

 

[twacowfca]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

Gio,

 

Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever.  Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy.  And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares.

 

But for me the Brindle question was just part of the puzzle.  There were just so many factors to consider.  So I acknowledged this 'key man' risk and bought stock.  And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special.  I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created.  Therefore, there is a good chance that his record will be his successor's future.

 

There are concerns and questions however -- like the ones mentioned on earlier posts.  I am keen to get to the bottom of these, or at least as best I can.  Meanwhile, I am holding onto my shares.

 

Anyway, I'm not here to convince you one way or the other.  You've clearly got a decisive personality and a game plan that you stuck with.  Fair play!

 

Good perspective.

 

I shall remain a minority of one who thinks that Brindle's departure is not necessarily a bad thing.

 

I have nothing more to add.  :)

[rjstc]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

Gio,

 

Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever.  Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy.  And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares.

 

But for me the Brindle question was just part of the puzzle.  There were just so many factors to consider.  So I acknowledged this 'key man' risk and bought stock.  And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special.  I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created.  Therefore, there is a good chance that his record will be his successor's future.

 

There are concerns and questions however -- like the ones mentioned on earlier posts.  I am keen to get to the bottom of these, or at least as best I can.  Meanwhile, I am holding onto my shares.

 

Anyway, I'm not here to convince you one way or the other.  You've clearly got a decisive personality and a game plan that you stuck with.  Fair play!

 

Good perspective.

 

I shall remain a minority of one who thinks that Brindle's departure is not necessarily a bad thing.

 

I have nothing more to add.  :)

 

For what little it's worth the minority is two. I agree with you.

 

[CorpRaider]

I've sold no shares, but I don't like how it was handled.  Maybe expectations are different in the U.K.  If he's going to take over as AIG's CEO or something, I suppose I could understand.  The combination of this happening so soon after a major business transformation, a new CEO and a soft market make me cautious about new management tanking a few quarters to make some 1 foot hurdles for their future performance as well.

[tombgrt]

Add me to this minority as well. We generally have a bias towards assuming that any outperformance in companies comes from this one special buffett-like person. Think Steve Jobs etc. In reality in large companies this is rarely the case imo. More often they are mostly good drivers of strong corporate culture.

[gary17]

i do think management plays a big role though --

 

Steve Jobs was at apple, left, and then came back.  I think the stock performance reflects that.

 

The book "From Good to Great" seems to suggest managers are critical to the success of a business.

 

Gary

[Grenville]

I have no doubt you are right. And I agree first quarter results will be exceedingly good.

The reasons I invested in LRE are two: 1) Mr. Brindle, 2) Its unique characteristics.

I have never expected reason n.1 to disappear so soon. I must admit I never saw this coming.

I will keep watching LRE, but now I simply must acknowledge my thesis was wrong.

 

Gio

 

I appreciate your decisiveness and enjoy reading your thoughts. Very helpful.

 

You acknowledge your thesis was wrong and act accordingly.

[tombgrt]

i do think management plays a big role though --

 

Steve Jobs was at apple, left, and then came back.  I think the stock performance reflects that.

 

The book "From Good to Great" seems to suggest managers are critical to the success of a business.

 

Gary

 

No one said they don't play a big part in a company's success. It can however be overrated in some instances. That could be the case here. Of course they are critical, but so are sales reps, HR, accounting, ... It's simply very hard to define where success comes from exactly so we attribute it to an easy target. :)

 

I wouldn't count on Jim Collins' books for explanations btw, full of biases imo. But hey those books tell the story of success so they will keep selling no matter how flawed they are.

[tombgrt]

It shouldn't be that hard to track if LRE is staying on course.

Do they remain nimble and do they keep to their true core competency? Are they willing to leave certain markets if they don't prove interesting anymore? Do they keep their dividend policy intact? Etc.

 

I'm sure twacowfca will be here to provide insight to those who need it in times of doubt. ;)

[giofranchi]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

Gio,

 

Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever.  Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy.  And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares.

 

But for me the Brindle question was just part of the puzzle.  There were just so many factors to consider.  So I acknowledged this 'key man' risk and bought stock.  And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special.  I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created.  Therefore, there is a good chance that his record will be his successor's future.

 

There are concerns and questions however -- like the ones mentioned on earlier posts.  I am keen to get to the bottom of these, or at least as best I can.  Meanwhile, I am holding onto my shares.

 

Anyway, I'm not here to convince you one way or the other.  You've clearly got a decisive personality and a game plan that you stuck with.  Fair play!

 

Good perspective.

 

I shall remain a minority of one who thinks that Brindle's departure is not necessarily a bad thing.

 

I have nothing more to add.  :)

 

For what little it's worth the minority is two. I agree with you.

 

 

Well, no one knows LRE better than twacowfca and WhoIsWarren, also Ron has been following the company for a very long time now. If they think it will do fine, I have little doubt it is going to be so.

 

Mine is not a judgment about LRE. It simply is a judgment about what I am comfortable with. I think you all saw me averaging down aggressively with LRE. I know I won’t be able to do that anymore. It is just that. Simple and definitive like that.

 

Now, what I am really curious and exited to know is where Mr. Brindle is going next: I will most surely follow! ;)

 

Gio

 

[giofranchi]

Add me to this minority as well. We generally have a bias towards assuming that any outperformance in companies comes from this one special buffett-like person. Think Steve Jobs etc. In reality in large companies this is rarely the case imo. More often they are mostly good drivers of strong corporate culture.

 

Keep thy shop, & thy shop will keep thee.

--Ben Franklin

 

Tom,

You know what I find interesting in running a Master School inside a large University? It is the fact you get to know really a lot of entrepreneurs! Because each one of our alumni must spend the second half of the year with us working in a company. Any single company generally opens 1 or 2 stages, our students are more or less 130, every year we meet with new companies, therefore you see that I come in touch with a lot of different enterprises, and of course with the people who run them.

 

My experience is that I have yet to know a business which doesn’t depend on its master.

 

And here I am not saying a group of people, a committee. I have used and underlined the word master purposely: because I mean one person.

You see how they react to success, how they keep calm through difficulties, how they take decisions rationally, the discipline and at the same time the passion they show. … And in other instances you see the exact opposite … Don’t have many doubts about which businesses will be most successful!

 

Of course, I am not saying JNJ, KO, PG, XOM, WFC, AXP and others won’t be successful even without a great CEO … Mr. Buffett clearly thinks so!

But here we are talking about CRs around 70% … Something the whole insurance industry almost do not even long for … because, what’s the point in longing for something that seems impossible to achieve anyhow?!

My feeling is that the companies I invest in are much more similar to the companies I come to know through the management of our Master School, than to JNJ, KO, PG, XOM, WFC, and AXP … And this is true for LRE too.

 

This being said, like I have just written, no one knows LRE as well as twacowfca. If he is positive LRE will do very fine even without Mr. Brindle, you all should heed his advice and keep your investment! ;)

 

Me, I must stick to what I think I know and understand.

 

Gio

 

[twacowfca]

Gio,

 

What did we lose? Really. We'll make that amount back in Altius stock in a very short time. For example LRE was down 3.5% or so today when I sold, and Altius finished the day up a similar amount. Between the good news at Altius and bad at LRE, I finished the day even.

 

What do you do with all that cash? Until you find another good idea, I would put 90% of that in cash and 10% in silver and wait for a good idea. The silver should ensure that while you wait, the central bankers don't inflate your 25% cash position away.

 

No worries.

 

original mungerville,

I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong  … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong …

 

Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now.

 

Gio

 

Gio,

 

Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever.  Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy.  And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares.

 

But for me the Brindle question was just part of the puzzle.  There were just so many factors to consider.  So I acknowledged this 'key man' risk and bought stock.  And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special.  I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created.  Therefore, there is a good chance that his record will be his successor's future.

 

There are concerns and questions however -- like the ones mentioned on earlier posts.  I am keen to get to the bottom of these, or at least as best I can.  Meanwhile, I am holding onto my shares.

 

Anyway, I'm not here to convince you one way or the other.  You've clearly got a decisive personality and a game plan that you stuck with.  Fair play!

 

Good perspective.

 

I shall remain a minority of one who thinks that Brindle's departure is not necessarily a bad thing.

 

I have nothing more to add.  :)

 

For what little it's worth the minority is two. I agree with you.

 

 

Well, no one knows LRE better than twacowfca and WhoIsWarren, also Ron has been following the company for a very long time now. If they think it will do fine, I have little doubt it is going to be so.

 

Mine is not a judgment about LRE. It simply is a judgment about what I am comfortable with. I think you all saw me averaging down aggressively with LRE. I know I won’t be able to do that anymore. It is just that. Simple and definitive like that.

 

Now, what I am really curious and exited to know is where Mr. Brindle is going next: I will most surely follow! ;)

 

Gio

 

I think Richard will be enjoying the fragrance of Spring flowers on walks by a lake while his Lab fetches sticks thrown far out into the water.  Then, he may do something very different.  :)