dealraker

AJG clean coal business and of course tax credits

Not sure what you are looking at for those PE's but I'll mention that AJG has elements/business that we haven't discussed here on COBF as of yet which makes it quite unique. I'll defer any of my experiences or views on AJG or any of the brokers as I much prefer getting yours (longterminvestor and spek too) without any lead-in from me.

At some point longterminvestor the Goosehead thing might stimulate your interest as to its extremes I think.

I will do the very rare sell-it-all today. Small profit somehow and/but want nothing to do with this. Thanks longterminvestor for doing this work.

Yep!

I have to give Andrew Bary credit given he wrote this tongue-in-cheek. It wasn't just total success vs total collapse, it was jolting beyond imagination what happened slowly but surely almost immediately after this was published. Buffett vs Welch and Greenberg!

So years ago two of my friends- married lawyers- said to me, "Charlie, we love watching you are social gatherings." I replied, "What's up with that?" They said, "We predict who you will be obsessed with when you get there." I continued with, "Uhh...and...that's who generally?" Both laughed saying, "It is always the most intelligent person or people there." So as I told my dad early in life, "Dad...someone has to make the C's in the advanced classes...but I know who the smart people are and I ask them the answers." Not much changed!

Exactly.

There's guy in my investment club who chants buy what goes down the hardest because it comes back the hardest. He's a CPA (big small town firm) and somewhat of a silly nut case (his CPA son has been all over the local media for defrading small businesses he's a part shareholder of- he's a high class drug addict). But in his tax free account which he shows us, in the down times, the bad times not the good, he's sold Brk to buy other things. And yes it has worked very well for him as he's well ahead of if he had just held Brk. But again, he's sold Brk to buy other stuff during big market sell-off's when at least initially Brk is slower to go down.

So I've owned Fairfax for somewhere around 30 years, I got in before the super-duper run up when Watsa was (not his choice but the media) making a run on Warren Buffett's reputation. It isn't unfathomable that the stock price could get as fully/over-valued as it did back then- I think in the mid to late 1990's or whenever it was. 3-4 times book as I remember? Some of you have more access to charts and data than I do, too many miles on me to be anywhere close to right with memory. I appreciate the work Viking has done, I do enjoy reading it and I read all of it. With experience all of you here will be able to program all of this in generalist form within your mind without doing any math much or writing detailed lengthy reports. It becomes literally obvious enough to get close enough to make investment decisions That said I wasn't much thinking about Farifax until Parsad, Viking, and others began posting and in the last couuple of years I've simply added to the stock when funds show up and that's about 30 times now. I appreciate this forum, it gives me the energy I need not to fade away in mental lethargy - what I see most my age do. But anyway, some probably get tired of me writing about the past or my connection to it but I do this here to relay what I think it by far more important than the basic math or number awareness that you need to determine whether you invest in these insurance entities. Yes, it does start with the numbers but by far the most important things after some basic "this is a good or decent time and/or a good valuation" or "this isn't a good time or valuation" - but beyond that I'd say the following: Don't ever invest in an insurance entity based on numbers only. Invest only if you have knowledge of managment and their habits, history, and how they have evolved over time. Invest only when and in entities you trust management to underwrite over time well. Invest only when and in entities you trust management to invest well. Poor pricing can come quickly and at the same time as a poor investing climate And finally don't be surpised if, particularly in the short run (which can be a couple of years) both the business and stock price does completely the opposite of what you expect. And be aware of political attacks on the insurance industry should some crappy thing happen (I've lived through these both on the underwriting and broker side). Anyway that's my experience with 45 plus years, and I began in 1977 with McDaniel Lewis and Co in Greensboro NC as a bank and insurance analyst.

Buy stuff. Whenever media begins to publish that you own that stuff then sell it.

Wells on BRO. Again I'll repeat that I post a brokerage view, in this case Wells, because for a long time (decades) I have found Wells coverage of the ins brokers to be almost perfect...no kidding! This is opposed to Morningstar for instance, they under-rate the brokers at times by as much as 40% and it absolutely never changes, they simply do not get it! Personally I do not need these reports, but I do enjoy reading them. I have my very strong beliefs about this bunch, since 1994. Insurance Brokers Brown & Brown, Inc. (BRO) BRO: No Forward Guidance Provided; Investor Day Takes Our Call BRO hosted an investor day (presentation) where the company dived into its business segments, talent, technology, and highlighted its culture. BRO shares were little changed out of the investor day as the company did not offer any financial guidance. Initial Thoughts No financial guidance: Little in the way of financial guidance was provided (BRO does not typically provide guidance). BRO flagged that their margins should fall in the 31-35% range, and it does not feel very strongly about switching to cash EPS (BRO and MMC are the two brokers that do not report cash EPS). Instead BRO geared investors to focusing on cash flow conversion and they are expecting ~$1 billion of operating cash flow, which they expect to continue to grow from here. Economic thoughts: BRO did not want to provide a forward view on the economy but pointed to a mixed picture. Some of their clients are full steam ahead and others want to hold tight on equipment spend given uncertainty about the economy. BRO did not provide an organic growth outlook, but did say that growth within its international business is about in-line with its other segment. Lastly, BRO thinks they have the management team in place that could double the size of the company. Bullish on E&S, should benefit Nat Programs and Wholesale: BRO sees a lot of E&S business coming from California, coastal Carolinas and Florida, which they do not see changing. They have the ability to be selective with property given the influx of business flow (and also said they are not over-exposed to property in their wholesale book). With casualty, they do not see public entity lines going back to the admitted market, but could see other casualty lines returning but at a slower pace. Leverage and other. BRO expects their gross leverage to be in a 2.7-2.9x range by the end of 2023. Their leverage target is 0-2.5x on a net basis and 0-3x on a gross basis. They have $500 million of debt that comes due next year that they could choose to payoff in full, in part or reissue depending on where rates are. For deals, BRO likes to pay with cash and not with stock. BRO also highlighted the level of employee ownership (with employees owning 21% of the company). Equity Analyst(s) Elyse Greenspan, CFA Equity Analyst | Wells Fargo Securities, LLC Hristian Getsov Associate Equity Analyst | Wells Fargo Securities, LLC Matthew Byrnes, CFA Associate Equity Analyst | Wells Fargo Securities, LLC Wes Carmichael, CFA Equity Analyst | Wells Fargo Securities, LLC Brown & Brown, Inc. (BRO) Equal Weight Price: $73.30/Price Target: $70.00 Market Cap: $20,789 MM Note: Pricing as of 09/14/2023 BRO pointed to slight margin improvement in FY 2023 and has seen good organic growth to start the year (driven by strength in its National Programs business). For its multiple to expand, we believe there would need to be: (1) steady organic growth that consistently beats its peers, (2) core margin improvement for the company, and (3) the completion of the integration of its three new larger deals (which is expected to take 18-24 months). We rate BRO's shares Equal Weight. Target Price Valuation for BRO: $70.00 from NC Our price target of $70 is based on a 21x multiple of our adjusted cash EPS estimate (which excludes intangibles) or around 24x our projected 2024E EPS estimate. The 24x time multiple is between its 10-Year average and peak multiples, which we believe is fair given the good organic growth and margin environment. Risks to Our Price Target and Rating for BRO Risks include tough economic conditions, which would pressure organic growth, a slowdown and leveling off of the P&C rating improvement, and the completion and successful integration of its recent large international acquisitions. Risks to the upside include organic growth and its margins coming in better than expected, as well as completing the integration of its large deals quicker than they

Pupil, I'll counter that by stating we actually spend very small amounts of our "money" - that's both investments and income - each year or even over three years. So much depends on how often you are forced to talley up or keep score.

On the China plate I have tiny investments in NOAH and FANH. NOAH is a good deal below where I'm in. But it is not a bad buy if things ever recover. I may have one more small holding there but I can't think of it now. FANH keeps getting reset by gov regulations, it is an insurance broker.

Yep.

I'd love to be able to go back to the (I guess) 1996-1997 or whatever it was time frame and re-connect with all those that were writing on the Berkshire forum at that time. I'd like to get an honest comparison as to outcome from those blasting in and out of stocks, those buying bonds when things got expensive looking, and those like me that simply posted up their stock holdings and said, "Ain't sellin'." Some of you might be surprised that on the Berkshire forum back then the least popular individual wasn't those like me posting buy-and-hold (which we normally are the least admired and liked) it was ole Warren Buffett himself. The insults were near unanimous, the rants of buy drug stock rushed to buy all tech, and the intensity of it all was outrageous. The "dominant" poster, yea there's always a dominant poster when that like tab is available, was huge into Jack Welch and John Chambers. This lady manages money independently today, I follow her firm and its results. Babyb ruled the roost! But that's a sideline to what I'm stating is that the forums, not COBF, just can't fathom long term investing - it simply isn't available to the psyche. If you state something like, "Well, I've simply held x and y since x year" you'll get two versions of replies. One is, "So you're some rich guy who..." or "So you claim that..." But there are a few who do really enjoy the forums who have held stocks for literally decades, they message you, but they don't want to openly disclose their game, it isn't one to gain popularity from. So that Berkshire forum became a day trading "post your boast" of huge claims of successes, and the downturns brought out huge claims of cash. Time passes...and I wonder. On a yearly "post and boast" thread I'm always in the bottom bunch. Never fails. Rambling. Off to the Charlotte (that school that doesn't exist) football game to join our Senior great-nephew Pax who will graduate this year and then do the one-year architecture graduate school. The other child of my sister's daughter and husband, overly religious types who lost their kids from their narrow minded intolerances. Life is great...if you can stand it! Posting a bunch lately. On the deck overlooking the lake with Angela (who proof reads me while doing her book club things) and typing away with joy!

Yea Greg, my step-sister inherited my step-mom's Berkshire stock. She lives in Raleigh now with her lawyer husband, children, and grandchildren. She's 2 years younger than me. She's flipping out in joyous praise that "we" - that's all of us - that got dad's 100 shares (my part worth less than $5,000 at his death - never sold. The praise isn't really so applicable to me given I could not sell for nearly two decades (the trust came at age 30) and by then I was off into the la la land of busy and had attained a lifestyle of both knowledge of how to life well cheaply and an understanding of who this Buffett guy was. But my older siblings, quite a bit older, didn't sell either. In the end in taxable money if you have good compounding businesses that you don't sell you are literally making many superb decisions all the time, literally constantly, without ever thinking or actually making a decision at all. Sometimes, or really all the time, others just do not accept this way of seeing it. But I do. I am astonished at some of the things that have occurred with holding stocks. Some here keep telling me that I'd have done better in bonds, yet I inherited $47,000 in 1975 and I get several hundred thousand dollars of dividends on that stuff today? Then the AJG merger where I guess I could have taken cash and bought bonds, we get $136,000 in div's on that? And the largest holding is still BRK...that doesn't pay a div at all? Oh my! Bonds here we come!

Yes-yes...I hope no_free_lunch that I'm not choosing the poorer quality of these things and thus far that hasn't panned out. Spek had bought, then sold, WTW and he did that based on the plain simple and obvious fact that it is clearly the underperformer of the insurance broker related bunch. I bought, actually added, at the same time and have no plans to sell. But my expectations of that outlay of $ are not high, but also not terribly low either. WTW is what it has been and will be - and that is a slower performer but better than cash over time and honestly pretty bomb proof in my view. It all falls into my realm and model where while others are seeking serious alpha I'm seeking a probability of near zero poor performance and hopefully more. In the end I've let Mr. Market, not by superiority (which doesn't exist), tell me which stocks and businesses are superior. So far given my decades of holding BRK and AJG which are now 80% of my holdings, those are his choices. I've just lived with the results! LOL.

Morningstar's analysts have cycled through euphoria and despair as to their insurance underwriters, the re-insurers longer tail float types particularly. They seem to have either forgotten or fully upended their past "float is equity" presentations with and gone to another model. As interest rates change it would seem some sort of adaptation to their somewhat current model of "float don't count no more" would evolve. But anyway in the long ago they had the better insurers valued at investments per share which at the time was about 3x book value for some.

I'm not sure I remember this correctly and I'm not looking it up, but I think it was the social scientist Soloman Asch who did the experiment where he put 1776 jelly beans in a jar and had his classroom (not sure it was precisely a "classroom") or his participants guess the total (jelly beans in the jar). He was pretty much surprised at the accuracy of the guessers. Then he had the same setting but added shouting guessers who were way off on one side or the other in their numbers. And, not surprisingly, the classroom or paticipants as a whole presented far less accurate guesses, aligning more with the shouters. In any event, I've tried to find satisfactory (to me) interaction as to investing in online forums now for over 25 years. What I've decided is that most forums for whatever reason end up incorporating what tends to be the obsession of the "like" tab and inevitably these forums cycle in and about one dominant poster who tends to lead the posting/shouting. The "like" tab lights up, the most liked posts get highlighted as the best. And...this is the part that is also absolutely correct in every case I've followed...the leading shouter leads the herd to places that are not condusive to investment success. That's as far as I'll go with what doesn't work as to forums except to say I've seen thousands of likes of posts that lost 70% of value within days, and it is simply not uncommon that posters would have all or nearly all their money in these failures. Parsad's board? The abolutely good to delightful: No dominant posters; generally polite disagreement; hugely helpful/additive choices/decisions to investment returns. But mostly and most importantly, no dominant poster lighting up the "like" tab leading followers down a rabbit hole of financial harm. And THAT people is unique to this board. Disagreement and diversity as to thought? Best thing since sliced bread. Keep it up. Charlie

One of the things I've done for years and years is simply buy the defense, rail, insurance broker, or whatever industry laggards, the ones that are discounted for whatever reason. The outcome has been about 14%, maybe 14.5%, or simply way above what I'm shooting for in what was a very low inflation world and now one of somewhat higher. For years I did this in the drug stocks but stopped that a long time ago. As I mentioned above, it always-always-always to me seems that BOA (where I have accounts as I do Wells) is promoting whatever is blasting ahead in price action. I may be wrong on this though, but it has registered that way to me. Again, I'm not Parsad and seeking 19% is something I have never done and that sort of performance honestly makes me very uncomfortable. I basically invest where I'm 99% certain over time I'm not going to lose and hope for some upside. Recently on another forum that I read because it was the only forum 25 plus years ago and I really enjoy forums, the crowd was blowing out of Berkshire to buy Dollar General. The DG type stocks are precisely what I would never buy at any price at any time. I consider whatever advantage or moat-no-competition sustainability they have to be completely temporary. But they guys with DG, although they are down terrifically, are in my view nowhere near Parsad in skill....but they are seeking that big alpha outcome. Ben Graham said, "The worst investor mistake is in late cyles to sell quality to buy lesser quality at chaper prices." Far-far-far away from my game. Recently LHX at an average now of about $180 and NSC at $197 have my $ and vote. I'd be happy and sleep well with 100% of my money there although LHX is less than 1% and NSC is about 2.5% of my total. I'd not owned LHX but am delighted to be there now. With LHX I'm buying as it descends; with NSC I have had the stock in 1976 and for the first time since then bought at $197.

Agree with this pupil - although it has no affect on what I will do as to investing.

Heck, I predict all kinds of things...put changegunnacome to shame on that. Just never invest based on them predictions... ...because my predictions suck just like everybody else's.

Over the years to me BOA seems a momentum house. When things are bad no price is too low and when good of course the opposite.

Wells on AJG...not much left currently. I post these because over the years the Wells people have nailed it as to brokers, a near pefect record of accuracy. And that's for a long-long time. Insurance Brokers Arthur J. Gallagher & Co. (AJG) AJG: Consistent Organic and Margin View; Takes from Investor Update Our Call AJG hosted its quarterly investor update and largely confirmed all guided items from Q2, although with a slightly higher FX hit ($0.06 for 23, vs $0.04). AJG shares should be unchanged as the update was mostly in line with Q2 earnings. Initial Thoughts Positive, but consistent organic color: Brokerage organic should be in the upper half of the 8-9% range this year (with 9% in Q3 and 8% in Q4, but 9% when adjusting for last year's accounting adjustment). The Q3 9% includes a $2-4m negative contingent impact from HI fires. Gallagher expects 2024 to be like 2023 with organic of 7-9%. Risk Management organic is better and should be ~15-16% in Q3, 12% in Q4 (they lap new business wins) and 15% for FY. See Exhibit 1 for organic guidance by business. Stable pricing: Renewal premium (which includes rate and exposure) is up 11% to-date in Q3, a touch below the 12% in Q2, but above the 8-10% throughout 2022 and early 2023. The modest 1% sequential slowdown reflects mix (Q2 had a high level of property business) as most major geographies are showing consistent renewal premium increases. Further, Gallagher is not seeing any meaningful impact of economic slowdown in their data with both policy endorsements and audits showing Y/Y growth. Margin discussion unchanged: Brokerage margin guidance is unchanged and should expand by 30-40 basis points for FY 2023 including Buck and 70-90 basis points excluding Buck, with 40 basis points of expansion in Q3 and a bit above 50 basis points in Q4. Risk Management margins should be about 20% in Q3 and Q4 (prior guide was 19.5%) and around 19.5% for the full year. Offshoring should help investment spend: Gallagher could see $25-50 million of annual savings (40 basis points benefit to Brokerage margin at the mid-point) from offshoring that it could invest back into the organization. We believe this should help Gallagher be able to consistently see organic growth that is towards the high-end of the peer group and shows in the 7-9% Brokerage organic guide for 2024, which compares to the company printing +5-6% Brokerage organic in 2018 and 2019 pre Covid. Strong M&A pipeline: Gallagher has term sheets for 55 deals with $700 million of annual revenue, unchanged from Q2 earnings. Gallagher has $450 million of cash on hand at the end of August and expects to have $3 billion to spend on M&A this year and a little more in 2024. Further, Gallagher alluded to PE interest potentially waning a bit, especially as interest rates rise. Other: Gallagher has less than a dozen client placements with Vesttoo and does not expect it to be an issue for the company. Equity Analyst(s) Elyse Greenspan, CFA Equity Analyst | Wells Fargo Securities, LLC Matthew Byrnes, CFA Associate Equity Analyst | Wells Fargo Securities, LLC Wes Carmichael, CFA Equity Analyst | Wells Fargo Securities, LLC Hristian Getsov Associate Equity Analyst | Wells Fargo Securities, LLC Arthur J. Gallagher & Co. (AJG) Overweight Price: $229.00/Price Target: $237.00 Market Cap: $49,350 MM Note: Pricing as of 09/13/2023 Highlights Of Guidance Organic Growth - Brokerage Should Approach 9% in 2023; Range of 7-9% For 2024 AJG's outlook for Brokerage organic growth largely unchanged from its prior view: In its Brokerage segment, AJG continues to expect organic growth to be 9% in the Q3, 8% in the Q4 (9% excluding the ASC 606 adjustment that boosted organic last Q4) and towards the upper end of its 8-9% guidance range for the full year. Gallagher's organic growth excludes fiduciary investment income (MMC and WTW are the two brokers that include fiduciary investment income within organic revenue growth). The company also anticipates that market conditions in 2024 will be similar to what is being seen in 2023, and provided 7-9% organic growth in 2024 as a good starting point. Looking at Q3 Brokerage organic growth by line: In Exhibit 1 below we show Q3 organic growth expectations by business with Gallagher looking for 9% in U.S. Retail, low double-digits in International Retail, 8% in Wholesale (which will be impacted by $2-4 million lower contingents due to the Hawaii wildfires), in the low-teens in London Specialty and Reinsurance, and 7% in Employee Benefits (which is an improvement from 2% in Q2, or 5% when adjusting for a three-point headwind from a larger life product transaction last Q2). 2024 Brokerage vision: When thinking about 2024 Brokerage organic growth Gallagher referenced 7-9% as a good starting point (this was also the company's outlook to start 2023) with no business expected to perform materially different from this year. A couple of exceptions were M&A/transaction oriented business (as they said they could see some strength in IPOs from the low levels this year), D&O is starting to bottom, and medical inflation could potentially impact workers' compensation. Risk Management organic a bit better: In Risk Management the organic outlook was more optimistic. AJG expects Q3 organic of 15-16% in the Q3 (up from 14% on its Q2 call), 12% in the Q4 (up from 10% on its Q2 call), and around 15% for FY 2023 (up from around 13% on its Q2 call). Exhibit 1 - Organic Growth by Quarter and Year Segment 2020 Q1 Q2 Q3 Q4 2021 Q1 Q2 Q3 Q4 2022 Q1 Q2 Q3E Q4E 2023E 2024E U.S. Retail 5% 8% 10% 13% 11% 11% 9% 8% 7.0% 13% around 9% International Retail - - 6% 10% low-double digits U.K 7%+ 9%+ 9%+ 12% 14% 8% 15% 17% more than 7% 11% Australia & New Zealand 3% 6%+ 8%+ Nearly 10% 11%+ 9% 12% 10% 10%+ Canada 13% Nearly 10% 13%+ 12%+ 14%+ 13% 9% 6% 6% U.K. Specialty 17% 19% Ghallagher Re 12% 11% Wholesale 6% 12% 16% 15% 10% 8% 9% Above 9% nearly 8% 10% ~8% Benefits 2% 4% 5% 7% 7%+ ~9% ~3% 3% nearly 7% about 2% around 7% Total Brokerage 3% 6% 7% 9% 11% 8% 9.6% 10.8% 7.8% 11.0% ~9.7% 9.1% 9.7% 9.0% 8.0% Pushing 9% Initial of 7-9% Adjusted 13.0% Close to 9% Risk Management -3% 1% 20% 16.5% 13% 12% 15.2% 10% 12.2% 15.6% 13.6% 14.3% 18.1% 15-16% around 12% Around 15% *Benefits business benefited from a one-off large life insurance funding product sale in Q3 2020. Excluding this, Q3 2021 organic would have been ~10% low-teens combined Source: Company reports and Wells Fargo Securities, LLC Margin View Unchanged, A Touch Higher In Risk Management Consistent margin view as well: Brokerage margin guidance is unchanged and should expand by 30-40 basis points for FY 2023 including Buck and 70-90 basis points excluding Buck with 40 basis points of expansion in Q3 and a bit above 50 basis points in Q4. Risk Management margins should be about 20% in Q3 and Q4 (prior guide was 19.5%) and around 19.5% for the full year. Other Guided Items - Slightly Larger FX Hit And Some Modest Corporate Adjustments FX changes: The biggest change within the CFO commentary and financial discussion is the larger FX hit the company is now looking for, with FX expected to negatively impact 2023 EPS by $0.06 (from $0.04 previously) with a negative $0.01 in Q3 (from very little impact) and a positive $0.01 in Q4 (from a positive $0.02).