I never particularly like this release because it's not accompanied by a full quarterly report, so it's a bit tougher to get the entire picture. I eagerly await the annual report coming in March. A few preliminary thoughts:
1) What's the deal with insurance operations? Is it just a coincidence that the favourable development for 2018 and 2019 respectively almost perfectly offset the cats for 2018 and 2019 respectively (see the final two tables at the bottom of the presser)? Is that a freakish occurrence, or is FFH pulling from the cookie jar to manage the numbers? Seriously, WEB always said that one of the biggest challenges in P&C investing is trying to assess whether you believe the numbers.
2) What's the deal with the Gross Written and Net Written in Q4 2019? Are we not in the midst of a hardening market? When you look at Q4's numbers, you see a visible bump in their ceding. Why? Is it the case that one or more of the subs is capital constrained, but still has plenty of profitable business to write, and is therefore throwing premium at the reinsurers? What the hell is going on here? If capital needs to be shifted from one sub to another, then do what needs to be done. But, it's not at all clear to me that ceding should have increased.
3) It's nice to see a double-digit increase in Net Written. Fixed income returns might be in the toilet and the CRs might be a little disappointing, but there's still room for growth in operating income if you can push up the underwriting volume. It would be super nice to see a high single digit increase in Net Written in 2020, coupled with the CR being shaved by a couple of points. A hardening market might just do that for you?
4) It will be interesting to read the annual letter and to get some colour from the conference call to better understand FFH's view of financial markets. If Prem and Brian were fussing about broad market valuations three years ago, they must be shitting a brick today.
5) The earnings per share number is nice, but will the market give it any cred? Quality of earnings over the past couple of years has been a bit suspect, but will anyone care?
Looking forward to the more detailed release in a few weeks.
SJ