Author Topic: LRE.L - Lancashire Holdings Ltd  (Read 393088 times)

Bronco

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #10 on: November 09, 2010, 05:55:38 AM »
TWA - any slide decks from the presentation you can post?

Also, I am sympathetic to your island excursion when I am stuck looking at miserable Giants stadium from my window.  Not a lot of beauty in Rutherford NJ.


Myth465

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #11 on: November 09, 2010, 08:40:38 AM »
Very interesting twacowfca.

I really like the Management team. They remind me of LUK. It seems like they locked themselves in a room for a few weeks designing the company and have stuck to their knitting. They have a winning strategy that works quite well when one is small. If they were focused on growing they would have just become another insurance company. You cant pick the spots when you are a significant player in the industry.

Stay Nimble, focus on ROIC (return capital when its too much via buybacks and dividends).
Dont bet the farm on investing (a small profit center that has relatively low risks).
Pick your spots and react vs acting (reduce when prices suck and jump on something when it runs).

They may get 1-3 good years out of energy and then something else will hit. In the meantime capital will be returned. They even went as far as building the dividends into the warrants which leads me to believe this was the plan all along.

twacowfca

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #12 on: November 09, 2010, 09:33:21 AM »
Very interesting twacowfca.

I really like the Management team. They remind me of LUK. It seems like they locked themselves in a room for a few weeks designing the company and have stuck to their knitting. They have a winning strategy that works quite well when one is small. If they were focused on growing they would have just become another insurance company. You cant pick the spots when you are a significant player in the industry.

Stay Nimble, focus on ROIC (return capital when its too much via buybacks and dividends).
Dont bet the farm on investing (a small profit center that has relatively low risks).
Pick your spots and react vs acting (reduce when prices suck and jump on something when it runs).

They may get 1-3 good years out of energy and then something else will hit. In the meantime capital will be returned. They even went as far as building the dividends into the warrants which leads me to believe this was the plan all along.



That's a good take on their culture, Myth.  

IMO rates for energy coverage in the gulf may continue to be hard for some time because insurers have been burned three years of the last six: KRW in 05, Ike in 08 and  Deepwater Horizon this year.  It's very possible that rates in general will be hardening nicely by the time energy rates may normally be about to soften.  This may help keep elemental energy coverage rates at satisfactory pricing because energy wouldn't be one of the few classes that would have attractive pricing.
« Last Edit: November 09, 2010, 09:38:46 AM by twacowfca »

mpauls

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #13 on: November 09, 2010, 06:15:13 PM »
Too bad they don't appear to invest in equities.
Champouse Group LLC

Myth465

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #14 on: November 10, 2010, 12:28:49 AM »
Too bad they don't appear to invest in equities.

I see this as a strength. They stick to their knitting. In 2008 investments didnt kill them like just about every other insurer (except for FFH). Unfortunately there are very few people I want investing capital. Plus they are doing quite well with emerging market bonds.

These guys are great at writing insurance. The best I have come across. They can make 30 - 40% writing insurance. With those kind of returns I dont want them doing much else.

twacowfca

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #15 on: November 10, 2010, 06:18:24 AM »
Too bad they don't appear to invest in equities.


In a sense they do invest in "equity".  They have made a large equity investment that has compounded 20% per annum: their own stock!  :)

There is a problem for insurers that invest in equity.  The rating agencies greatly discount equity investments when assessing capital required to support the payment of claims.  Liquidity is very important in short tail business.  
« Last Edit: November 12, 2010, 06:45:49 PM by twacowfca »

rmitz

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #16 on: November 10, 2010, 07:23:51 AM »
I see this as a strength. They stick to their knitting. In 2008 investments didnt kill them like just about every other insurer (except for FFH). Unfortunately there are very few people I want investing capital. Plus they are doing quite well with emerging market bonds.

These guys are great at writing insurance. The best I have come across. They can make 30 - 40% writing insurance. With those kind of returns I dont want them doing much else.

Right.  Since they *do* return their excess capital, not being aggressive with investments isn't a huge issue.

stahleyp

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #17 on: November 13, 2010, 08:26:50 AM »
Does Brindle own a lot? I have no idea where to find this for most international companies.
Paul

Myth465

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #18 on: November 13, 2010, 09:14:50 AM »
This is from my write up from last year. I found the info from thumbing through the filings on the website.

It was accurate at one point but may not be right now. Also the warrants collect dividends which makes perfect sense. I think people who have been there since day one may have a low or no cost basis. I believe the hedge fund was Crescent or something like that and it sold it shares in LRE to LRE earlier in the year. Its how the bought back a huge chunk.

Filter #3 – Does it have management I can trust?

Lancashire is run by Richard Brindle, who was the long-time deputy underwriter to John Charman at Lloyds from the mid 1980s to 1999.   Over that period, their average return was 17 percentage points better than the market, and they never had a losing year.   Their business (“Tarquin”) was backed in 1994 by the predecessor fund to Capital Z and was sold to Ace in 1998 for a gain of approximately 5x.   Capital Z obviously knew Brindle quite well from these days and their involvement in Lancashire stems from this.  Both Brindle and Charman soon left Ace.  Both resurfaced following 9/11.  Charman founded Axis, which has generated the best ROE of the Bermuda “Class of 2001” (19%, versus the next best, ACGL, at 17%, after which it drops dramatically).  Brindle resurfaced at AIG’s Lloyds business.    You will find that Brindle is not your average insurance executive.  In addition to having a great track record and having learned the business from the best person in the business, he is young, very smart, savvy and tough operator.  

Management seems to have a large holding of warrants. These warrants also receive dividend payments which appears to help Management in properly managing the balance sheet. I have updated Lancashire to an Owner Manager holding due to large holdings being held by the Board and Management. One Board Member controls a hedge fund which owns 13% of LRE and that the rest of the Management team owns warrants and shares of around 10% - 13%.
« Last Edit: November 13, 2010, 09:19:10 AM by Myth465 »

Myth465

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #19 on: November 13, 2010, 09:30:23 AM »
Page 66

http://www.investis.com/l/lancashire_insurance/2009/ar09.pdf

My numbers are very dated. I would take the 2009 numbers and account for the buyback.