Fairfax 2020

[Gregmal]

Jeez Sanjeev. Thats harsh. Especially when Cardboard does contribute and engage on the investment side of things. Particularly even here on FRFH in a way thats at least presenting differing viewpoints. There's so many others who dwell here that dont do shit or bring even pee wee level investment insight to the table. You've generally been fair, but occasionally, IMO, things like this go overboard. You've said for the better part of 4 months now that the new website will be up and no politics. And that until then, this site is what it is. The covid thread was allowed to be a political thread for the entire year. Getting into macro stuff begs for political pondering; I dont think thats unreasonable. Of all the shit Ive heard from Cardboard, I think banning him for this is quite petty. Sometimes its Jeckyll & and Hyde with you in regards to the bans....I say this wondering if this will be my last post as well, even though I am certainly not crossing any lines with what I am currently writing.

 

If you dont think Prem's bearishness up to 2016 and then bullishness(under Trump) wasnt somewhat politically inspired....then I dont think you're assessing the entire picture in a thorough manner. Even if it wasnt, it certainly isnt outside the realm of consideration to try and account for that going forward. Will Prem be bearish under a regime change with the rumored objectives? IE increase taxes and greater social programs plus widespread debt relief? If you invest in fixed income this is very relevant. FFH invests in fixed income.

 

But its your site, you do what you want. I just question whats the purpose? Investing? Or something else? I can probably list a dozen people ahead of Cardboard on the "they offer nothing" if the goal is to build an investing community....but maybe Im missing something.

[Gregmal]

 

Second, I've warned you so many times about bringing politics to boards outside of the Politics board.  I've tried to be as fair as possible, even when I got more complaints about you than any other poster in the history of COBF...and most of those complaints came only in the last two years...but I can't justify giving you so many opportunities when you keep moving the topic off subject and onto political issues in non-political threads.  Good bye!  Cheers!

 

I'm sure I am up there as well. I even from time to time get DMs from people asking about stocks or wanting to shoot the shit and then I go to respond and it says they have me blocked! I dont think rubbing people the wrong way should be held against anyone. Its the internet and we(try) to deal with investing/financial markets, which is like the UFC for smart people. Folks need to toughen/lighten up. Nothing should be personal. People who complain about what others are posting are even more of a problem than those that post. It is a message board after all, no?

[Parsad]

Jeez Sanjeev. Thats harsh. Especially when Cardboard does contribute and engage on the investment side of things. Particularly even here on FRFH in a way thats at least presenting differing viewpoints. There's so many others who dwell here that dont do shit or bring even pee wee level investment insight to the table. You've generally been fair, but occasionally, IMO, things like this go overboard. You've said for the better part of 4 months now that the new website will be up and no politics. And that until then, this site is what it is. The covid thread was allowed to be a political thread for the entire year. Getting into macro stuff begs for political pondering; I dont think thats unreasonable. Of all the shit Ive heard from Cardboard, I think banning him for this is quite petty. Sometimes its Jeckyll & and Hyde with you in regards to the bans....I say this wondering if this will be my last post as well, even though I am certainly not crossing any lines with what I am currently writing.

 

If you dont think Prem's bearishness up to 2016 and then bullishness(under Trump) wasnt somewhat politically inspired....then I dont think you're assessing the entire picture in a thorough manner. Even if it wasnt, it certainly isnt outside the realm of consideration to try and account for that going forward. Will Prem be bearish under a regime change with the rumored objectives? IE increase taxes and greater social programs plus widespread debt relief? If you invest in fixed income this is very relevant. FFH invests in fixed income.

 

But its your site, you do what you want. I just question whats the purpose? Investing? Or something else? I can probably list a dozen people ahead of Cardboard on the "they offer nothing" if the goal is to build an investing community....but maybe Im missing something.

 

Hi Greg, I fully understand your feelings. 

 

I have no problem if he attacks Prem, me or whoever.  But he knows he's been warned countless times about keeping politics/religion/non-investment topics out of other boards/threads.  He wanted to piss me off by quoting me...on religion...while the subject was Fairfax in the Fairfax thread. 

 

You don't do that.  Yeah, once in a while you'll post outside of the Politics thread, but for all intents and purposes you do try to follow the rules, no matter how blunt you get.  Cubsfan does too...LC and the liberal contingent do too.  But Cardboard not only ignores the rules, he is often the instigator and I've had tons and tons of complaints against him...that I've ignored because he posted here so long.  But I can't ignore it forever.

 

If he's purposely going to be a dick, so be it...he's gone!  Cheers!

[beerbaron]

Jeez Sanjeev. Thats harsh. Especially when Cardboard does contribute and engage on the investment side of things. Particularly even here on FRFH in a way thats at least presenting differing viewpoints. There's so many others who dwell here that dont do shit or bring even pee wee level investment insight to the table. You've generally been fair, but occasionally, IMO, things like this go overboard. You've said for the better part of 4 months now that the new website will be up and no politics. And that until then, this site is what it is. The covid thread was allowed to be a political thread for the entire year. Getting into macro stuff begs for political pondering; I dont think thats unreasonable. Of all the shit Ive heard from Cardboard, I think banning him for this is quite petty. Sometimes its Jeckyll & and Hyde with you in regards to the bans....I say this wondering if this will be my last post as well, even though I am certainly not crossing any lines with what I am currently writing.

 

If you dont think Prem's bearishness up to 2016 and then bullishness(under Trump) wasnt somewhat politically inspired....then I dont think you're assessing the entire picture in a thorough manner. Even if it wasnt, it certainly isnt outside the realm of consideration to try and account for that going forward. Will Prem be bearish under a regime change with the rumored objectives? IE increase taxes and greater social programs plus widespread debt relief? If you invest in fixed income this is very relevant. FFH invests in fixed income.

 

But its your site, you do what you want. I just question whats the purpose? Investing? Or something else? I can probably list a dozen people ahead of Cardboard on the "they offer nothing" if the goal is to build an investing community....but maybe Im missing something.

 

Hi Greg, I fully understand your feelings. 

 

I have no problem if he attacks Prem, me or whoever.  But he knows he's been warned countless times about keeping politics/religion/non-investment topics out of other boards/threads.  He wanted to piss me off by quoting me...on religion...while the subject was Fairfax in the Fairfax thread. 

 

You don't do that.  Yeah, once in a while you'll post outside of the Politics thread, but for all intents and purposes you do try to follow the rules, no matter how blunt you get.  Cubsfan does too...LC and the liberal contingent do too.  But Cardboard not only ignores the rules, he is often the instigator and I've had tons and tons of complaints against him...that I've ignored because he posted here so long.  But I can't ignore it forever.

 

If he's purposely going to be a dick, so be it...he's gone!  Cheers!

 

Cardboard is probably a good investor but he polluted my RSS feed with political non-sense so much in the last few years that it's image reflected badly on this site. I'll miss it's 5% of investment discussion, but certainly not the 95% rotten leftover.

 

Parsad, you are the Sheriff. It's not a democracy, it's an investment board. Glad you are using your badge.

 

BeerBaron

[SharperDingaan]

I'm all for enforcing discipline, but this might be a time to borrow from the ice hockey and soccer worlds.

Maybe a 3-month ban, as the equivalent of a 5-minute major penalty? and a red card. Three red cards over a season (pick a time), and you are out?

 

Lot of Type-A's in both the investment and sports worlds, and similar underlying issues. Don't always play well together.

Much easier for the stretcher-bearers, and clean-up crews -  if they all just lose teeth, break bones, and bleed all over the same area of the carpet!

 

SD

 

 

[bizaro86]

I'm all for enforcing discipline, but this might be a time to borrow from the ice hockey and soccer worlds.

Maybe a 3-month ban, as the equivalent of a 5-minute major penalty? and a red card. Three red cards over a season (pick a time), and you are out?

 

Lot of Type-A's in both the investment and sports worlds, and similar underlying issues. Don't always play well together.

Much easier for the stretcher-bearers, and clean-up crews -  if they all just lose teeth, break bones, and bleed all over the same area of the carpet!

 

SD

 

That seems reasonable to me. A chance to cool down.

 

I think Cardboard added value on the investment side, and it'd be a shame to lose him permanently.

 

Obviously this place belongs to one person, and it isn't a democracy. So that is just a suggestion not a vote.

[Gregmal]

I'm all for enforcing discipline, but this might be a time to borrow from the ice hockey and soccer worlds.

Maybe a 3-month ban, as the equivalent of a 5-minute major penalty? and a red card. Three red cards over a season (pick a time), and you are out?

 

Lot of Type-A's in both the investment and sports worlds, and similar underlying issues. Don't always play well together.

Much easier for the stretcher-bearers, and clean-up crews -  if they all just lose teeth, break bones, and bleed all over the same area of the carpet!

 

SD

 

That seems reasonable to me. A chance to cool down.

 

I think Cardboard added value on the investment side, and it'd be a shame to lose him permanently.

 

Obviously this place belongs to one person, and it isn't a democracy. So that is just a suggestion not a vote.

 

Yup.

 

At one of the first firms I was at, one of the BSDs used to routine say to the younger guys "you know who they listen to? The producers, not the bitches in the back office"...At least there, the back office actually provided some, albeit marginal value. By and large Ive found that the people who complain or report posts, such as Sanjeev alluded to, provided little, or in many cases, no value to the site themselves. I bring this up, because just within the past page on FFH, I can highlight Viking and SharperDinegaan as folks who I know I have quite different political views from, at least in some instances. They both bring significant value on the investment side. When I see posts of theirs that lean political, the last thing on my mind is crying like a baby. I respect them as individuals and they are entitled to their views as I am mine. Even if I was appalled by the politics, without question the investment value outweighs whatever nonsense one could just easily ignore. It takes a certain mentality to be successful investing. These folks have it. I would bet bigger money most of the complainers dont. I have never in my life blocked anyone or reported a post, and I would be shocked in either of the above mentioned individuals had either.

 

My point, is to reiterate what I asked in the prior post. What is you goal for this website Sanjeev? Is it to be more like Facebook, or VIC? Because if its investment related I'd say with confidence that the 5% of Cardboard posts relating to investments significantly outweighs what many other folks and complainers bring in their entirety, in terms of value. No one is forced to be here, but I do think there should be more skew towards being like VIC where others can watch but if you dont produce you dont have any say.

 

Cheers.

 

 

EDIT: just for honesty's sake, I will clarify that one time I reported someones post, but only out of pettiness and spite since they did it to me first.

[Xerxes]

Grand Moff Tarkin said it best.

https://getyarn.io/yarn-clip/707df9ef-dd22-47e3-82df-63761e418426

 

Can we just move on, if not, please move this discussion to a different thread.

[SharperDingaan]

Agreed!

 

SD

 

[nwoodman]

There may be some useful observations for some in this piece by MS in their outlook for the P&C industry for 2021.

 

Covid, catastrophe losses, declining investment yields, rising litigation ... were just some of the big issues insurers dealt with in 2020. The silver lining is that the pricing momentum that began prior to Covid should be here to stay – at least over the near term. That leads to one of the biggest debates facing investors right now – the duration of this hard market. Some say well into the next 24 months; we think that’s a bit too optimistic, and expect a plateau sooner. Regardless, core underwriting margin gains should persist throughout the year. We’re not in the camp of blindly overweighting the commercial lines space, rather leaning toward more selectivity in our preferred names, as we still see balance sheet (namely, reserve) concerns for most of the industry. Our top picks are AIZ and HIG.

 

 

•Commercial lines: becoming more attractive, as pricing power continues – but caution needed. Commercial pricing power still has some legs. While core margin expansion still in the cards for most of the near term, prior year reserves still need to be monitored. We’re cautious on reinsurance given casualty loss trends.

• Personal auto: getting more competitive on pricing. Expectations on strong near-term margins from lower driving are fully baked into stocks, in our view. Next up is where industry pricing heads over the ensuing 6-12 months. We fully expect a more competitive environment through at least the first half of the year. We have a keen eye on the space and will look for valuations to pull back a bit before we become more incrementally positive.

• Other highlights for the coming year: Covid litigation concerns should continue to fade; disruption from new entrants to be actively monitored; valuations are near long-term averages, having recovered from Covid-led trough, but are still below pre-Covid levels.

 

Happy New Year all

 

Cheers

nwoodman

ardabo20201221135917.pdf

ardabo20201221135917.pdf

[omagh]

There may be some useful observations for some in this piece by MS in their outlook for the P&C industry for 2021.

 

Covid, catastrophe losses, declining investment yields, rising litigation ... were just some of the big issues insurers dealt with in 2020. The silver lining is that the pricing momentum that began prior to Covid should be here to stay – at least over the near term. That leads to one of the biggest debates facing investors right now – the duration of this hard market. Some say well into the next 24 months; we think that’s a bit too optimistic, and expect a plateau sooner. Regardless, core underwriting margin gains should persist throughout the year. We’re not in the camp of blindly overweighting the commercial lines space, rather leaning toward more selectivity in our preferred names, as we still see balance sheet (namely, reserve) concerns for most of the industry. Our top picks are AIZ and HIG.

 

 

•Commercial lines: becoming more attractive, as pricing power continues – but caution needed. Commercial pricing power still has some legs. While core margin expansion still in the cards for most of the near term, prior year reserves still need to be monitored. We’re cautious on reinsurance given casualty loss trends.

• Personal auto: getting more competitive on pricing. Expectations on strong near-term margins from lower driving are fully baked into stocks, in our view. Next up is where industry pricing heads over the ensuing 6-12 months. We fully expect a more competitive environment through at least the first half of the year. We have a keen eye on the space and will look for valuations to pull back a bit before we become more incrementally positive.

• Other highlights for the coming year: Covid litigation concerns should continue to fade; disruption from new entrants to be actively monitored; valuations are near long-term averages, having recovered from Covid-led trough, but are still below pre-Covid levels.

 

Happy New Year all

 

Cheers

nwoodman

Slide 32 shows that P&C M&A transactions (2016-2020) have been done at P/B multiples from 1.2 to 2.0 (throwing out that 6.0).  So, Fairfax at 0.8 P/B is well below a private buyer's transaction level.

[KFS]

There may be some useful observations for some in this piece by MS in their outlook for the P&C industry for 2021.

 

Covid, catastrophe losses, declining investment yields, rising litigation ... were just some of the big issues insurers dealt with in 2020. The silver lining is that the pricing momentum that began prior to Covid should be here to stay – at least over the near term. That leads to one of the biggest debates facing investors right now – the duration of this hard market. Some say well into the next 24 months; we think that’s a bit too optimistic, and expect a plateau sooner. Regardless, core underwriting margin gains should persist throughout the year. We’re not in the camp of blindly overweighting the commercial lines space, rather leaning toward more selectivity in our preferred names, as we still see balance sheet (namely, reserve) concerns for most of the industry. Our top picks are AIZ and HIG.

 

 

•Commercial lines: becoming more attractive, as pricing power continues – but caution needed. Commercial pricing power still has some legs. While core margin expansion still in the cards for most of the near term, prior year reserves still need to be monitored. We’re cautious on reinsurance given casualty loss trends.

• Personal auto: getting more competitive on pricing. Expectations on strong near-term margins from lower driving are fully baked into stocks, in our view. Next up is where industry pricing heads over the ensuing 6-12 months. We fully expect a more competitive environment through at least the first half of the year. We have a keen eye on the space and will look for valuations to pull back a bit before we become more incrementally positive.

• Other highlights for the coming year: Covid litigation concerns should continue to fade; disruption from new entrants to be actively monitored; valuations are near long-term averages, having recovered from Covid-led trough, but are still below pre-Covid levels.

 

Happy New Year all

 

Cheers

nwoodman

 

 

Thank you for sharing.  It's interesting to eyeball the chart showing the dramatic growth of alternate capital sources and relatively slow growth of traditional sources.  "Reinsurance disintermediation appears to be gaining traction as global capital pools seek higher returns and uncorrelated asset classes in a low return world."  (Slide 38.)  This is a narrative heard before (i.e. MKL/Nephila), but the chart really helps illuminate the drastic change over the past 10 years or so.....

[TwoCitiesCapital]

There may be some useful observations for some in this piece by MS in their outlook for the P&C industry for 2021.

 

Covid, catastrophe losses, declining investment yields, rising litigation ... were just some of the big issues insurers dealt with in 2020. The silver lining is that the pricing momentum that began prior to Covid should be here to stay – at least over the near term. That leads to one of the biggest debates facing investors right now – the duration of this hard market. Some say well into the next 24 months; we think that’s a bit too optimistic, and expect a plateau sooner. Regardless, core underwriting margin gains should persist throughout the year. We’re not in the camp of blindly overweighting the commercial lines space, rather leaning toward more selectivity in our preferred names, as we still see balance sheet (namely, reserve) concerns for most of the industry. Our top picks are AIZ and HIG.

 

 

•Commercial lines: becoming more attractive, as pricing power continues – but caution needed. Commercial pricing power still has some legs. While core margin expansion still in the cards for most of the near term, prior year reserves still need to be monitored. We’re cautious on reinsurance given casualty loss trends.

• Personal auto: getting more competitive on pricing. Expectations on strong near-term margins from lower driving are fully baked into stocks, in our view. Next up is where industry pricing heads over the ensuing 6-12 months. We fully expect a more competitive environment through at least the first half of the year. We have a keen eye on the space and will look for valuations to pull back a bit before we become more incrementally positive.

• Other highlights for the coming year: Covid litigation concerns should continue to fade; disruption from new entrants to be actively monitored; valuations are near long-term averages, having recovered from Covid-led trough, but are still below pre-Covid levels.

 

Happy New Year all

 

Cheers

nwoodman

 

 

Thank you for sharing.  It's interesting to eyeball the chart showing the dramatic growth of alternate capital sources and relatively slow growth of traditional sources.  "Reinsurance disintermediation appears to be gaining traction as global capital pools seek higher returns and uncorrelated asset classes in a low return world."  (Slide 38.)  This is a narrative heard before (i.e. MKL/Nephila), but the chart really helps illuminate the drastic change over the past 10 years or so.....

 

Isn't this the primary argument for why insurance rates have been low? Crowding out and too much capital?

 

It's why I've been so skeptical that this hard market will last, because I don't see anything changing the trend of outside capital flooding the industry at lower rates of return.

 

Any thoughts anyone has on this and why it's not expect led to affect this hard market would be helpful.

[Spekulatius]

There may be some useful observations for some in this piece by MS in their outlook for the P&C industry for 2021.

 

Covid, catastrophe losses, declining investment yields, rising litigation ... were just some of the big issues insurers dealt with in 2020. The silver lining is that the pricing momentum that began prior to Covid should be here to stay – at least over the near term. That leads to one of the biggest debates facing investors right now – the duration of this hard market. Some say well into the next 24 months; we think that’s a bit too optimistic, and expect a plateau sooner. Regardless, core underwriting margin gains should persist throughout the year. We’re not in the camp of blindly overweighting the commercial lines space, rather leaning toward more selectivity in our preferred names, as we still see balance sheet (namely, reserve) concerns for most of the industry. Our top picks are AIZ and HIG.

 

 

•Commercial lines: becoming more attractive, as pricing power continues – but caution needed. Commercial pricing power still has some legs. While core margin expansion still in the cards for most of the near term, prior year reserves still need to be monitored. We’re cautious on reinsurance given casualty loss trends.

• Personal auto: getting more competitive on pricing. Expectations on strong near-term margins from lower driving are fully baked into stocks, in our view. Next up is where industry pricing heads over the ensuing 6-12 months. We fully expect a more competitive environment through at least the first half of the year. We have a keen eye on the space and will look for valuations to pull back a bit before we become more incrementally positive.

• Other highlights for the coming year: Covid litigation concerns should continue to fade; disruption from new entrants to be actively monitored; valuations are near long-term averages, having recovered from Covid-led trough, but are still below pre-Covid levels.

 

Happy New Year all

 

Cheers

nwoodman

 

 

Thank you for sharing.  It's interesting to eyeball the chart showing the dramatic growth of alternate capital sources and relatively slow growth of traditional sources.  "Reinsurance disintermediation appears to be gaining traction as global capital pools seek higher returns and uncorrelated asset classes in a low return world."  (Slide 38.)  This is a narrative heard before (i.e. MKL/Nephila), but the chart really helps illuminate the drastic change over the past 10 years or so.....

 

Isn't this the primary argument for why insurance rates have been low? Crowding out and too much capital?

 

It's why I've been so skeptical that this hard market will last, because I don't see anything changing the trend of outside capital flooding the industry at lower rates of return.

 

Any thoughts anyone has on this and why it's not expect led to affect this hard market would be helpful.

 

Yes, I think it is correct to assume that hybrid capital which can be quickly ramped up has shortened the hard cycle duration. It is instructive to read the annual report and presentation from RNR (a very good underwriter which also manages several hybrid capital pools) on this matter.

 

I am a little more guarded in my view of insurers here than most because of low interest rates and any hard market arbitraged away by hybrid capital that can quickly swoop in.

[Viking]

Arch had an investor day in Dec. They said much of the new capital coming in to the industry was from PE firms. They called this ‘informed/thoughtful’ capital. If an acceptable return is not possible the capital will not be deployed.

——————-

 

Regarding the hard market, they said there is currently a lot of ‘momentum’.

- industry ‘understands’ they need rate increases.

 

1.) investments are going to continue to be a headwind with bond rates so low

2.) social inflation cost trends continue to ge a headwind

3.) pandemic is a headwind (globally)

 

Rate increases are a tailwind; however it will take time for rate increases to be earned and for margins to improve. Investors will need to be patient.

[Daphne]

Given that making money in the insurance business tends to be a longer term proposition coupled with the covid hit of 2020 ...hybrid capital, generally a shorter term proposition, is likely hiding in the bushes for the foreseeable future.

[SharperDingaan]

We have parked the bulk of our cash in FFH for the New Year/Jan 2021.

Simply because over the next 4-5 weeks both the annual dividend pays out, and Q4 2020 reports.

At current pricing, it is pretty hard to see how one does NOT walk away with less than a 7-10% gain on the round trip ;)

 

 

We sold some of our FFH today, and moved the proceeds into CVE. 10%+ on the round trip.

Agreed that FFH should do very well in 2021, but a little hesitant around Q4 2020. The last quarter of an insurers fiscal year is typically when the year's true-up's occur; hence a wise man should hedge his bets a little. We still have a position, just not as much.

 

May we all continue to do very well  :)

 

SD

 

 

 

 

[SharperDingaan]

We sold our CVE today, and are back in FFH.

A round trip was not the intent, but at current price levels it is worth the adverse earnings risk. We have a both a low re-entry point, and enough of a gain on this second round trip, to allow us to sleep very well :)

 

SD

 

[Pedro]

Sounds kneejerky sharper. The rationale for selling then rebuying makes me wonder if your just finding a reason to justify your actions. I wouldnt be comfortable sitting infront of clients explaining 180 this but to each his own.

[bizaro86]

Sounds kneejerky sharper. The rationale for selling then rebuying makes me wonder if your just finding a reason to justify your actions. I wouldnt be comfortable sitting infront of clients explaining 180 this but to each his own.

 

Not having to explain things to clients is the best thing about only managing your own money.

[SharperDingaan]

Sounds kneejerky sharper. The rationale for selling then rebuying makes me wonder if your just finding a reason to justify your actions. I wouldnt be comfortable sitting infront of clients explaining 180 this but to each his own.

 

FFH is just temporary parking for cash that is going to be repatriated this year, and we're private money.

For the next month or so, we just think that FFH will offer a better return than CVE will.

If we screw up, we'd also prefer to be holding FFH vs CVE.

 

SD