I guess I should setup a mental limit of what part of my portfolio I want to invest into insurance companies and then buy a basket up to it.
Just to (re)summarize pros and cons covered by a bunch of posts:
Pros:
- Float is great, free float is super great
- Good investment of float can yield good-to-great returns
- Long term book, book-per-share growth of some insurance companies is adequate to great
- Valuations are low
- Cats should pass
- Conservative policy writing is great
Cons:
- Low bond yields may equal low return on float
- Moving to risky investments to catch yield was and is risky
- Too many players, too low policy prices - too much money sloshing around
- Everyone talks conservative underwriting, few practice it
- So-so long term growth may yield continued low valuations
- Perhaps weather patterns are changing and cats are becoming more common. Non cat insurers may have their own issues.
Unfortunately, there is no free lunch - almost - and the companies that don't have cat losses (NWLI), or have high growth (AFSI, HCC), or have good/great float allocators (BRK, FRFHF) trade at premium to run-of-the-mill, OKish, generic (??) companies. As we saw from the NWLI/BRK chart, it's not clear that buying more expensive and "better" companies outperforms cheaper OK'ish companies. So I would not dare to choose clear leaders in the current crop.
Disclosure: I still hold BRK, AXS, AFSI, FRFHF, TRH, FSR, L, CI. I added very little if at all recently. |
