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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (44320)	9/14/2011 11:50:15 AM
From: Spekulatius	Read Replies (2) \| Respond to of 78597

re TRV - >>I did not like the very slow book-value-per-share growth at TRV<< You realize that they bought back tons of stock while keeping the tangible equity the same. Since 2006 TRV reduced their outstanding shares from ~680M to ~420M now and equity is around 25B$. So book value has grown substantially per shares. I like what they are doing - they realized the overall market is stagnant (soft market since 2007) and rather than hunt for market share, they are just buying back shares, keeping their equity roughly constant. not a bad capital allocation strategy, imo. I think there is a chance that TRV ends up on BRK shopping list. They already do some business with Geico (reselling property insurance) so it might be a good fit.

To: Jurgis Bekepuris who wrote (44320)	9/14/2011 5:42:07 PM
From: Shane M	2 Recommendations Read Replies (1) \| Respond to of 78597

catastrophe exposure / risk of ruin (more trouble in property than in auto) - yes. Potentially this is a bigger issue for reinsurers. Question though: do you think that insurers don't reinsure enough? Actually I think reinsurers are in a better position to control risk of ruin than insurers. Most reinsurance deals that I've seen place limitations on how much the reinsurer will pay - but there's no way for an insurer to put a maximum cap on losses. For example: Reinsurance deals I've seen might be where reinsurance kicks in for a single hurricane after the first 2 Billion in losses, and the reinsurer might cover losses from 2B to 5B, but then the reinsurance is used up, and the initial company is back on the risk for any and all loss beyond $5B. There is no way to reinsure your way out of risk of ruin. So I guess in many ways being a reinsurer is "preferred" in my mind in the property area as maximum losses are known. I think insurers utilize reinsurance where they can - but the extraction costs are high. When you need reinsurance (often after a significant capital draining event) reinsurance rates often shoot through the roof. Reinsurance might not be the best way to approach some of the risk management issues out there - I've heard of CAT Bonds being floated as alternatives but don't know how that is going.

To: Jurgis Bekepuris who wrote (44320)	9/14/2011 5:54:23 PM
From: Shane M	2 Recommendations Respond to of 78597

- Is this year a "new normal" on cat frequency? - Will cos suffer from the superlow interest rates on fixed income? (And were the past earnings inflated by the treasury runup while yields dropped?) - Will cos invest into risky paper to bump up low yields and then collapse as that paper defaults? Every year it seems like new catastrophe models come out calling for increased "normal" cat loads. The degree to which this is company driven (i.e. do the companies select CAT models that call for ever increasing CAT indications I don't know - but I think probably it occurs. I doubt most CAT models are scientifically unbiased - but are shaped by what the desired outcome of the industry - just my guess though). Yes - in low rate environments companies have to take rates to achieve desired ROI. All the bad debt on balance sheets has hurt earnings for alot of cos. I can't gauge if we're truly past the write-offs or if it's all "pretending" that the investment debt is better now. I'm not sure about taking on risky investments - my feel for it at my co is they got burned so bad with the bad mortgage and commercial paper that they were happy to climb out of that hole still in tact and don't have a flavor for more risk at all. But yes - in the past I think games were likely played to spike earnings on the investment side. The degree to which they understood what they were doing - not sure. This is an area where CB impressed me - look at what happened with them in 2008-2009 vs. many other carriers. Also look at CB in major hurricane years.. Very impressive to me how they weathered things when other cos. were literally on the edge.