Author Topic: LRE.L - Lancashire Holdings Ltd  (Read 393356 times)

WhoIsWarren

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1370 on: October 12, 2018, 06:50:45 AM »
Cigarbutt - looking the share price alone is not fair the dividends since 2010 have been substantial! The dividend adjusted share price at the start of 2010 was 1.70 (i.e. a 3-bagger all in). 

Now if you'd said since 2013.....  :(

Hopefully, won't need to go back to the time when marine underwriters used to record the sinking of ships with quill pens (oops, some apparently are still doing that in the Lloyd's world).

Actually, if I'm not mistaken Lloyd's records - with a quill pen - all merchant ships (above a certain size I presume) that go down.  This isn't done by the underwriters, but rather one of the "waiters".  Lloyd's is a very traditional place, really cool to go on a tour if you're ever in London.

I'm sure you know it but Lloyd's is only one of Lancashire's four platforms.  But the point you're making is valid - a lot of insurance is a commodity.  To "beat the market" you either have to write niches that are more protected / have some barriers to entry, or else stay very disciplined.  Lancashire tries to do a combination of the two.  The second of these is much like what a good (value?) investor in the capital markets does. In fact there are similarities with the current investing and insurance markets don't you think?  Low interest rates and falling perceptions of risk have encouraged investors into both.


Cigarbutt

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1371 on: October 12, 2018, 08:17:46 AM »
Actually, if I'm not mistaken Lloyd's records - with a quill pen - all merchant ships (above a certain size I presume) that go down.  This isn't done by the underwriters, but rather one of the "waiters".  Lloyd's is a very traditional place, really cool to go on a tour if you're ever in London.

I'm sure you know it but Lloyd's is only one of Lancashire's four platforms.  But the point you're making is valid - a lot of insurance is a commodity.  To "beat the market" you either have to write niches that are more protected / have some barriers to entry, or else stay very disciplined.  Lancashire tries to do a combination of the two.  The second of these is much like what a good (value?) investor in the capital markets does. In fact there are similarities with the current investing and insurance markets don't you think?  Low interest rates and falling perceptions of risk have encouraged investors into both.

Thank you for the perspective WhoIsWarren.
That's actually quite a fascinating topic (risk perception).

I'm looking for a new book that may not exist yet: From coffee house to blockchain.
https://www.linkedin.com/pulse/chainthat-17th-century-london-market-coffee-house-rick-huckstep

The trend has certainly been to put emphasis on the complexity of models and on the quantity of data, which makes person-to-person haggling outdated. A risk though is that the wall of data complexity may put a veil in the growing distance between the basic underwriter and the actual pricer. I'm only a guy typing on screen but really wonder if the underwriting responsibility with its embedded fundamental analytical power is not being partially discarded by alternative forms of intelligence. The basic underwriter (actuarial side) is, by definition, partly playing blind and final pricing results form a whole lot of inputs and incentives that are far from transparent and rational. At times, it's what you don't know that can kill you and wonder if this is not such a time when down-to-earth historical long-term perspective should at least be considered, in terms of downside risk.

For the insurance underwriting part, here's a link, for which I cannot locate the origin, that was probably written with a typewriter but which may be more relevant than ever.

https://www.casact.org/pubs/forum/88fforum/88ff241.pdf
Let the good times roll.
« Last Edit: October 12, 2018, 08:19:40 AM by Cigarbutt »

fareastwarriors

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1372 on: November 12, 2019, 10:48:56 AM »
Awfully quiet here. What's going on with Lancashire ?

Cigarbutt

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1373 on: November 12, 2019, 02:47:55 PM »
Awfully quiet here. What's going on with Lancashire ?
I would say slow and steady wins the race.
Their Q3 trading statement is in line with expectations for catastrophes and they are (and will be able to) benefiting from the hard market.
A nice feature for LRE (like a few others) is that, contrary to many others who 'react' to the realization that reserves are inadequate by raising prices, they seem to wait for the market to meet their internally determined price points, which appears to be a defining factor for discipline and ability to really grow when hardening occurs. Their interim first six-month-2019 report is more complete and the reserve development table on page 26 is interesting.
I would say they deserve a premium to book value and the question is, at this point, by how much?

BroKon

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1374 on: November 12, 2019, 06:22:46 PM »
They were about as bullish as they have been in years, on their Q3 call, in terms of their outlook for a potential hard market. It clearly won't be a classic in terms of P&L this year, and they haven't yet quantified Hagibis losses (although they did have a decent investment return - at least compared to their historically conservative allocation). They also won't be paying out a special dividend as they want to put their capital to work in the Jan renewals, which is indicative of how bullish they are turning.

As Cigarbutt points out they have remained very disciplined throughout the soft market, but its hard to seem them trade over 1.8x tangible book until we can see whether the Jan renewals, in for example Japanese Wind, can reprice properly, or if the excess capacity continues to dampen rate increases.

BroKon

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Re: LRE.L - Lancashire Holdings Ltd
« Reply #1375 on: November 17, 2019, 06:27:54 PM »
It is also probably worth mentioning that Odey have reduced their short by just over half since June. They "only" have a 3.19% short position now, but it does help explain some of the run ups to 1.8X book we have had recently.