A_Hamilton

I mean, I responded to a post about Semper's portfolio being a proxy for Berkshire which it is not. You didn't copy that part of the chain, so don't really appreciate the out of context copy and paste. See below: Semper was up 42.6% last year and Berkshire Hathaway was up 10.9%. -- Separately, I wouldn't ever judge someone's portfolio on how a couple of positions are doing year to date, and I think if you look he took a good trim on these in Q1 (likely near multi year highs) anyway.

Absolutely this would be a governance risk. The reality is that this is not what you see them do. Typically at acquisition they'll throw some bad books of business to runoff, but there is no perpetual moving bad books into runoff from the operating businesses. Also, they've hit this item hard over time. Look at the disclosure on asbestos in 2015 - the gross liability was $1.38 billion, now it is $794 million. The cost to bring down this exposure has been insane relative to 2015 expectations, but it is coming down overall. Everyone in the space has been surprised that claims just keep coming even as the 1st generation of those exposed to asbestosis are largely passing away. There is a lot of litigation fraud, but there are also a lot of real cases where a parent worked in an asbestos laden facility and were bringing it home and child now has asbestosis. Outside of asbestos you've also had lifting of statute of limitations on various different crimes that have hurt runoff as well. There are claims on the casualty side in years that you'd have thought would be "closed" in the past because of statute of limitations that are now open again. In any case, runoff is a real liability and there are likely to be many more years of adverse development here, you just capitalize the current run rate of claims at 10/12/15x and determine for yourself if the rest is still a valuable enough earnings stream. I also agree with Viking's note above.

No. When Prem writes that there has not been adverse development in each of the last 19 years he is referring to in the operating insurance businesses, not RUNOFF. The table you are looking at includes RUNOFF where there has been persistent negative development running into the billions of dollars over the past 19 years.

See my prior post...and Prem's $7 billion figure EXCLUDES adverse development at runoff.

In the main, what you are seeing is the adverse development FFH has had from its runoff asbestos and latent other exposures. You'll see in the annual supplements that all of the operating insurers are performing much better - in theory at some point this draw on earnings declines but claims counts haven't really trailed off yet. I won't post here, but you can do some work to look at BRK and FFH's exposures to this and each year they take a similar charge relative to their exposures. The problem for FFH is that runoff is larger here as a percentage of total then at BRK. Fortunately over the past 15 years the acquisitions of Zenith, Brit, and Allied have started to make this smaller as a % of total. One other piece to note is that FFH sold off its Riverstone Europe unit that was in the Runoff segment and somewhat consistently generated underwriting profits so the "Runoff" section now looks comparably worse than in the past.

Semper was up 42.6% last year and Berkshire Hathaway was up 10.9%.

Also at 3-4% as rates rise the income generated offset the unrealized losses from bond price declines very rapidly. At 0-2% they don't.

I agree entirely. The effective duration of the insurance book ex runoff is around 4 years, there is no reason now that we are in the 3-4% range for 4 year money to not just duration match. We don't need the extra juice by being cute on this.

They've sold some non-core Europe. Fact of the matter is that there is a massive spread between the implied cap rate on their stock price and apartment pricing generally and they are doing nothing to arbitrage the difference. Too, at the rate they give money and stock to management the hold co discount on the stock should be very substantial absent FFH or someone pushing them to wind up some of these assets.

Shameful levels of comp given this is a small cap that has failed to deliver. I own companies with the same market cap where execs are paid 1/10th what these guys are.

I believe the actual "deals" that FFH has invested in with KW have been fine. The construction loans from the PACW team have been good thus far and seem generally to be good/ well protected assets given the low rise apartment nature of what they are backing. Too, some of the European deals like the state street buidling at a 10% unlevered return early on were very good. The problem has been KW equity and the KW team paying themselves by the barge ship while shareholders are left with a toy ducky. FFH is on the board of KW and hasn't rocked the boat seemingly at all. Where are the shareholders yachts definitely applies here.

FFH has done 'ok' with KW managing these commercial construction investments, but man Prem and team have been taken for a ride on the common, prefs and warrants in this. The management comp has been obscene and KW doesn't do anything to close its enormous discount to NAV. Monetize fairly liquid apartments? Nope. Cut comp to economic levels? Nope. Improve the balance sheet? Not really. Provide an expected ROI/payback period on the TOL acquisition? Nope. I'm pretty shocked by how FFH just champions this relationship.

Prem wrote the following in this year's annual letter: Is this an accurate description of how things will progress? My understanding has always been there is a sunset provision on the multi-voting shares if Prem steps down / that continuation of supervoting shares to the next generation would need to be approved by shareholders. If any one has any thoughts I'd appreciate them.

I just wouldn't get too excited about it. Every major rating agency and major insurer has spoken about casualty inflation / some with outright deficiency pointed out, others like FFH taking redundancy from other lines and strengthening in casualty. https://www.carriermanagement.com/news/2024/05/08/261925.htm https://www.insurancebusinessmag.com/us/news/breaking-news/casualty-comes-back-to-bite-476388.aspx

I'm not sure the hard market is leading to large redundancy. It seems inflation and social inflation are moving just as much as price. I think pricing is high in part because it is a hard market, but in part because inflation/litigation/to a lesser extent claims frequency are up.

That's not how it works. FFH would be taking excess of loss on homeowners (they've gotten out of quota share / 1st dollar of loss there). Thus, if an insurer wants to lay off any losses over say $25 million, up to $200 million, FFH might have reinsured exposure with a maximum loss of $175 million. It is more complicated than this as usually there are many program participants, but this is the approximate way to think about it. Also, storm hitting Tampa (or any metro area) directly implies greater losses for FFH than not as they have a lot of commercial business where they would also take loss (for instance, business interruption).

The TRS are at the Parent level. There have historically been a lot of net operating losses at the parent from interest expense in Canada that doesn't have an offsetting gain each year. You'd have to speak to the company, but my understanding a few years ago was that this was shielding a decent portion of the gain (though with the swap up so much now it is likely less).

LIke what is FFH's play here? You are trading at 8x book, do they just exit this thing? But then the runway is so long and it is so difficult to take material stakes in financial services in India. Just a wild situation. Also I realize they likely have a lockup given the recent IPO. What a great situation.

From what I've seen of Hub's financials (they have some privately traded debt and if you own it you can get access) FFH shareholders can only wish Prem had decided to be an insurance broker as opposed to a multiline insurer.

What is everyone's understanding of FFH's ownership in the Digit assets? Here's what I understand -FFH owns 49% of GoDigit Infoworks Services Private Limited ("GoDigit Insurance" - not GoDigit General Insurance LTD ("Digit") which is a sub of GoDigit Insurance. Digit is the entity that went public not GoDigit Insurance. -Upon a change in Indian Law to allow foreign ownership, FFH can own up to 68% of GoDigit Insurance. Questions: How is the increase from 49% to 68% priced? Just a pure conversion with no cost, or per some preestablished valuation mechanism? Also, If FFH owns 49% of this entity, could it sell down to say 45% and then top position back up to 49% and then have a contingency to only be able to own up to 64%? -On pg 73 of its annual, FFH notes a Fair Value for GoDigit Insurance of $477.2 million and a carrying value of $146.6. This is seemingly in direct contrast to page 18 of the annual (prem's letter) which states a cost of $154 million and a 12/31/2023 of $2.265 billion. I suppose the difference is the convertible preferred? -FFH also owns 24.2% of digit life. It isn't clear to me if this is a sub of either entity above? Anyway, this is a homerun for FFH but I wish the annual were a bit clearer on what is owned and how any convert of compulsory prefs might work.

I would argue that reputationally it is very poor form to fleece one's asset management clients by foisting material dilution on them because of a formula that was set ex-ante and with a stock that has traded very poorly. In the long term I think doing the right thing will lead them to much better opportunities here, heck maybe FIH trades at a premium to book one day and they can issue a bunch of stock and drive more fees to say nothing of all of the other relationships FFH has.

I'd close out, was a great trade at a silly price, less attractive now. The other thing is that TRS are priced at SOFR + a spread, so this isn't necessarily cheap capital.

The issue for Pacwest wasn't the loan quality or the yield they were earning. The problem for PACW was that they were seeing deposit outflows and were having to fund these with wholesale funding / using up their FHLB/discount window etc lines. The rationale for selling is that you get rid of the risk that you need to fully fund the incremental $1.7 billion (on top of the $2.3 billion already outstanding) of borrowings as these projects get completed. Too, in the current environment there is some extension risk if the deal sponsor can't find another bank to take a traditional 1st or, more troublesome, was developing on spec and can't service the loan. The mark here so close to par and the low LTV's on completion cost suggest that across the book as long as thereisn't fraud and disbursements to builders are properly done based on completion milestones, these should be money good. In any case, the overall reason for PACW to sell was to bring more liquidity on its balance sheet and get rid of a contingent but known call on liquidity.

TRV reported $459 million in pre-tax losses from Elliott versus $305 million in Uri quarter. ALL $779 million in Cat losses ($478 due to Elliott) versus $590 million for Uri. Hannover reported $190 million in losses versus $133 for Uri. I don't know how retentions have grown/ Hannover certainly has more NE exposure, but it seems this was a pretty big hit for the primary guys.

No. I'd bet dollars to donuts that its is somehow tied to the counterparties involved in the total return swaps. The price moves are small and the volumes are huge suggesting that two parties have either long or short exposure and need to swap them out and both are afraid of moving price too much.