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Viking
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I think this article sums the current situation up pretty well. Once FFH completed the ORH transaction they will still be flush with cash and surplus. To grow their reinsurance business what they need is for a large hurricane to hit or for financial markets to sell off...

 

http://seekingalpha.com/article/160355-cloudy-forecast-for-global-reinsurers?source=yahoo

 

Should financial markets continue higher FFH will be in a position to harvest significant equity gains. Should BV continue to grow at 15% per year I expect the next big move we will see from FFH in the coming years are significant repurchase of FFH shares. Amazing turnaround the past two years! 

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My still limited experience as an insurance investor tells me that it's not that easy to predict the timing of the beginning or the end of a given cycle, bet it hard or soft. I'll cross my fingers that we will get better priced reinsurance market, but I will not count on that on the short and mid terms. We have great investors at the helm to manage the portfolio and that will help to grow our book value per share.

 

Regarding FFH stock repurchases, we are actually experiencing the contrary. They will issue some at a discount to their intrinsic value. They are sending the message that they will not grow at the expense of the balance sheet and do not want to repeat the 7 lean years experience. But to me, unless we buy some stuff at a very good price with the proceeds, our intrinsic value per share will be reduced after that FFH stock issue. I guess the day that you'll see massive stock buybacks will be when our stock will be really attractively priced and it will not be done at the expense of a very sound balance sheet.

 

Cheers!

 

 

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Interesting article from Morningstar.

 

Can someone please explain to me why is Renaissance Re Holdings the only Reinsurer with a wide economic moat in this list of 11 reinsurers, while to all the others is just a narrow or no economic moat at all assigned?

 

I think that is the reason Morningstar's fair value of Renaissance Re is by far the highest percentage above actual value.

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Guest misterstockwell

What is interesting is that better underwriting didn't make for better growth in book value and/or stock market returns. For these 11 firms, there's little correlation between the average combined ratio, or trends in the combined ratio, and growth in book value per share or total stock returns for the 2004-09 period. The main reason for this is the tumultuous investment environment, which dominated results in the last few years. The ambiguity and discretion in investment accounting reduce transparency when evaluating and comparing income statement measures of investment performance, but some of that can be resolved when looking at the changes in book value per share, where non-income-statement effects do show up. And investment performance, not underwriting profitability, is what ruled the roost in shareholder returns.

 

That's a very interesting quote from the Morningstar article. I wonder if the same is true if you exclude 2008 only.

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