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Technology Stocks : INTEL TRADER -- Ignore unavailable to you. Want to Upgrade?

To: Berney who wrote (3085)	6/21/1998 3:31:00 AM
From: MonsieurGonzo	Read Replies (2) \| Respond to of 11051

Berney; RE:" On Value..." Apparently the buzz on BTY is an alliance with T. Interesting bit about measuring value on GRN, General RE biz.yahoo.com The stock-swap deal, announced after Friday's market close, weds ''a world class underwriter with a world class investor, brilliant because General Re has emphasized their float,'' said Alice Cornish, Bankers Trust analyst who follows General Re. General Re ''has said in every single conference call for the past several quarters they believe they can report sequential increases in (quarterly) earning because of (returns on) the float, despite their premiums going down,'' she said. The float is defined as funds set aside by an insurance company for incurred losses that have not yet been paid. ''A reinsurance company builds value by growing the float on a per share basis, and increasing the return on the float. These are the two parts of the equation, and the part that has been missing is generating 'Berkshire-type' returns on the assets, instead of five-percent bond returns.'' Reinsurance -- essentially insurance bought by insurers to spread their exposure to risks -- is cyclical, with the cycle now on the downside. ''So when pricing is bad you stop growing and when pricing is good you just open the floodgates,'' said an analyst. ''What that means is that you cannot buy and sell these stocks based on top line growth. In periods of poor pricing, they can be creating double digit value (through the float) and that nuance was consistently missed. The stock was being valued (in the market) on revenue growth, which is highly arbitrary and cyclical,'' the analyst added. Alice Schroeder, analyst at CIBC Oppenheimer, said the deal, called a merger by the companies, ''confirms our perception that General Re was significantly undervalued. Warren Buffett only buys companies where he can earn a 15 percent compounded return over time. At the price he is paying, he can earn 15 percent, while the stock market was willing to pay only $220 per share for this company.'' ...classical stuff (I thought you would enjoy) value in this case is not only revenue growth but also return on "float". We take a company with a lot of "float" kapital, being managed at something like T-Bill rates of return - and make a merger/alliance with some kind of Broker-Dealer or MM that can triple that... et voila ! -- Value In The Eye Of The Beholder (^_^) GRN is the fourth weighted component of the IUX.X Insurance Index - Components from the top: AIG TRV ALL GRN CI HIG CB AET LTR SPC PGR CNC LNC TA CINF SAFC TMK JP . TRV is also the largest-cap component of the XBD.X Broker-Dealer Index. TRV looks like a real turtle -cum- money machine; just sell PUTs whenever it hits ~60. Kinda reminds us of the trading range HWP was in, doesn't it Berney ? Other re-insurers that came up in a quick-and-dirty scan include : RE KRE NRC RGA LRE There's a Hannover RE in Germany and a Swiss RE, I think, but no ADRs. -Steve