LRE.L - Lancashire Holdings Ltd

[stahleyp]

myth, that looks good enough for me. Thanks for the help, as always!

[Myth465]

Also please let me know what you come up with for current insider ownership. Im lazy.

It looks like we are getting revalued with a small bit of multiple expansion. Im not sure if it will stick around after the dividend and am not sure if I want it to. LRE is one of the few insurers I would hold these days past book. I think conservatively they are worth 1.5 BV and in a hard market maybe up to 2x.

[bookie71]

A new presentation
http://www.lancashiregroup.com/lre_group/investor_relations/results_presentations/presentations/

[biaggio]

Numbers are impressive.

My question is what would prevent smart insurance guys like FFH, MKL, BRK from underwriting the same properties which would decrease profits/decrease underwriting results.

Numbers look too good to be true

Thanks for posting presentation

[beerbaron]

Numbers are impressive.

My question is what would prevent smart insurance guys like FFH, MKL, BRK from underwriting the same properties which would decrease profits/decrease underwriting results.

Numbers look too good to be true

Thanks for posting presentation

FFH and LRE are totally different structures. FFH relies on investment income while LRE relies on Underwriting profit. FFH would not have grown as fast if it had used LRE model. LRE model is limited to a small underwriting size, their capital structure will shrink and grow with cycles. The best of both worlds woul be FFH to buy LRE and then take the profits and invest it for us.

BeerBaron

[biaggio]

yes, they seem to be mirror images of each other.(they could help each other)


LRE.L still doing ~$200 million in business with very large profit margin, you would think that competitors would be after their customers.


so basically LRE stays small + will only write insurance if the price is right

in other words their competitive advantage or moat is their underwriting discipline

Thanks in advance

[Myth465]

One must remember that LREs model isnt scalable which is why we have those huge dividends and more recently share buybacks. They are quite happy staying small. Also the investments gains are not what I am looking for, but they are running 8% annualized for this year. Not too bad considering the short tail nature of the business and current rates.

[twacowfca]

Numbers are impressive.

Wait till you see Q4 and Q1.  These are normally low loss quarters without the rare earthquake.  Returning capital through the special dividend should goose their awesome ROE even more.

My question is what would prevent smart insurance guys like FFH, MKL, BRK from underwriting the same properties which would decrease profits/decrease underwriting results.  

Their reinsurance is written out of their Bermuda office through broker and client relationships.  Insurance is written mostly out of their London office through broker and client relationships.  The brokers hate BRK because they won't pay commissions.  LRE is the lead underwriter on a lot of the business that"s in their sweet spot. Other syndicates may participate, but most don't because they don't like possibly volatile returns.

Numbers look too good to be true

Yes, but they have been consistently as good over two decades of underwriting, including Brindle's record at Lloyds.  

Thanks for posting presentation

[twacowfca]

One must remember that LREs model isnt scalable which is why we have those huge dividends and more recently share buybacks. They are quite happy staying small. Also the investments gains are not what I am looking for, but they are running 8% annualized for this year. Not too bad considering the short tail nature of the business and current rates.

Actually, a lot of their business probably is scalable.  But that's the most volatile part of the business, and they will pass on a lot of good business when rates are high to avoid trouble if there is a big cat.  The next time there is a big storm, I think they will have substantially lower losses in relation to their capital than their close competitors.  95% of the rigs they are now insuring will probably survive in good shape.

[twacowfca]

Numbers are impressive.

My question is what would prevent smart insurance guys like FFH, MKL, BRK from underwriting the same properties which would decrease profits/decrease underwriting results.

Numbers look too good to be true

Thanks for posting presentation

FFH and LRE are totally different structures. FFH relies on investment income while LRE relies on Underwriting profit. FFH would not have grown as fast if it had used LRE model. LRE model is limited to a small underwriting size, their capital structure will shrink and grow with cycles. The best of both worlds woul be FFH to buy LRE and then take the profits and invest it for us.

BeerBaron

I mentioned that possibility to Prem after the last AGM, but he didn't seem very interested.  I think he, like WEB likes to buy insurers with a lot of long tail business to invest the float, and is happy to do so if he can break even or something close to even on the underwriting.