Fairfax 2021

[Viking]

Growth in net premiums written at Fairfax has been impressive:

 

2018 = $12.4 billion

2019 = $13.8 

2020 = $14.9 

1H 2021 = $8.7 = est close to $18 billion for year

 

Growth the past three years has averaged 14% per year = 50% cumulatively.

Northbridge, Odyssey and Allied are all growing faster than the company average. 

 

It will be interesting to see where net premiums go from here. Based on recent commentary from insurers it appears the current hard market should continue into 2022. We will see  Chug, chug, chug…

 

 

 

 

[ERICOPOLY]

With interest rates this terrible, what would be the point of underwriting other than for a solid underwriting profit?

[Parsad]

10 minutes ago, ERICOPOLY said:

With interest rates this terrible, what would be the point of underwriting other than for a solid underwriting profit?

 

I would imagine if you believe assets are overvalued and rates won't stay low for much longer, you will get to deploy capital/float at much better long-term investment terms.  If they were only writing short-tail business like a general insurer, yeah it wouldn't make sense.  But Fairfax writes a ton of long-tail insurance where they will have that float for 10-20-30 years.  I remember Francis telling me a long time ago, "People don't understand how much long-tail insurance Fairfax underwrites."  Cheers!

[Viking]

2 hours ago, ERICOPOLY said:

With interest rates this terrible, what would be the point of underwriting other than for a solid underwriting profit?

 

I think low rates is currently THE key driver of the hard market today. The 10 year is currently yielding 1.25%. Most insurers still invest predominantly in bonds. As much higher yielding bonds in their portfolio continue to mature and they reinvest at 1.25% (or something else likely at a lower yield than what matured) the yield on their portfolio is coming down in a pretty relentless way (unless they take on more risk). 
 

If insurers expect to hit 15% ROE targets, with investment returns declining,  they MUST earn more from  underwriting. And insurance stocks that are not able to hit an acceptable ROE over time get punished by investors (one reason why Fairfax trades today at such a steep discount to BV). And management teams understand this so they are highly motivated right now to only write business at an acceptable CR.
 

If the 10 year interest rate stays at 1.25% (acting like and anchor on the whole fixed income complex) i think the hard market could last longer than expected by Mr Market. It is interesting that all insurance executives are saying they see the hard market continuing into 2022 and Mr Market thinks the hard market is pretty much over. 

 

It looks to me like some insurers are slowly getting more creative with their investment portfolios (alternative investments etc) in an attempt to thread the needle of higher return and ‘bond like’ safety/low volatility.
 

PS: we are starting to see one of the drivers of an improving CR and that is the significant top line growth resulting in a lower expense ratio. On the Q2 call i think Fairfax used Allied as an example and said the expense ratio fell 2% driven by rate increases. 

Edited July 31, 2021 by Viking

[Gregmal]

How do you guys size this up to say something like Tetragon or Gain Cap? Ive seen far too often these financial companies, that(all of them plagued by this fit the profile) are opaque with their actions....just consistently print money but trade at horrendous discounts? Saying its a cycle thing I believe is short sighted. It could be. But theres merits to non transparent financial companies or closed end funds trading at discounts in perpetuity. Only getting credit for 70-80% of every dollar you make can be a bitch, especially when things hit a rough patch.The only remedy I've seen is real, hard, aggressive buybacks. Getting 70% credit but buying at 70% works. Not aggressive authorizations that go unused or derivative trades. The fact they did a TRS vs a real repurchase because they dont have any liquidity is part of the narrative issue IMO. 

[ERICOPOLY]

So based on Viking and Sanjeev's responses, I take this from it:

 

1.  The industry compensates for low interest rates by holding the line on pricing.  Therefore expect this to last until interest rates rise again.

2.  If interest rates rise we get the benefit of long tail insurance written when pricing was strong and the short duration bond portfolio gets rolled into higher interest rates.  That would be the best of both worlds.

 

And 420 takes the stress away from buying.

Edited July 31, 2021 by ERICOPOLY

[Parsad]

7 minutes ago, ERICOPOLY said:

So based on Viking and Sanjeev's responses, I take this from it:

 

1.  The industry compensates for low interest rates by holding the line on pricing.  Therefore expect this to last until interest rates rise again.

2.  If interest rates rise we get the benefit of long tail insurance written when pricing was strong and the short duration bond portfolio gets rolled into higher interest rates.  That would be the best of both worlds.

 

And 420 takes the stress away from buying.

 

One caveat:  The industry will start to fail on #1 probably some time late next year around when renewals start.  You will see insurers start writing lesser quality business to make up for low rates, and to beat topline returns year-over-year.  It always happens.  

 

Thus the growth you are seeing at Fairfax.  They will write massive amounts of business relative to their size and their peers, but will slow when prices aren't as good.  With Andy Barnard at the helm, you won't see Allied or Brit fall into this trap going forward.  They will not write bad business to retain business.  Other Fairfax subsidiaries have already proven this in the past two cycles.  

 

Cheers!

[Viking]

3 hours ago, Gregmal said:

How do you guys size this up to say something like Tetragon or Gain Cap? Ive seen far too often these financial companies, that(all of them plagued by this fit the profile) are opaque with their actions....just consistently print money but trade at horrendous discounts? Saying its a cycle thing I believe is short sighted. It could be. But theres merits to non transparent financial companies or closed end funds trading at discounts in perpetuity. Only getting credit for 70-80% of every dollar you make can be a bitch, especially when things hit a rough patch.The only remedy I've seen is real, hard, aggressive buybacks. Getting 70% credit but buying at 70% works. Not aggressive authorizations that go unused or derivative trades. The fact they did a TRS vs a real repurchase because they dont have any liquidity is part of the narrative issue IMO. 

‘trading at discounts in perpetuity’

 

I think this is a real risk. I see it as lower probability right now but i am open minded. With their words and actions i wonder if management (lead by Prem) has done permanent and significant damage with the analyst and investment community. Credibility is a hard thing to win back once lost. With the result being the stock trades permanently below BV and perhaps significantly so. 
 

Fairfax has been creative in the past with booking transactions that cause an increase in all important book value. Quess was one such example a few years ago. The Anchorage transaction, spiking the value of BIAL, is a more recent example. Digit is the most recent example. Looking at the Fairfax India stock price today it is clear investors do not believe the value of BIAL is accurate. Looking at how Fairfax has traded since announcing the $1.8 billion Digit gain (down) it is clear investors do not believe that number is real. I am not suggesting Fairfax has done anything wrong. Or that the numbers they are reporting are not accurate. Perhaps investors expect the current valuations to be marked down in future years as happened recently with Quess. Not sure if the disconnect is a credibility issue, covid issue, timing issue or investors simply missing a good thing (or some combination).

 

Having said all that, i do like Fairfax (and Fairfax India) as an investment. I really like the current risk/reward set up. However, my eyes are also wide open to the risks 

Edited July 31, 2021 by Viking

[ERICOPOLY]

Lest we forget, the stock dropped from $100 to $90 at the open when he was running away from Canada with a suitcase full of shareholders money!
 

I mean, we have long memories.  We're not going to let him get away with that twice!

[ERICOPOLY]

Put the stock back on the NYSE where it is sure to never trade permanently at a discount to BV because the hedge funds will pump it up to a premium and book their gains, then put out bad news and short it, and then pump it up and book their gains...

 

And we could lever these cycles with LEAPS again and make money a whole lot faster and Prem can play this game too with the TRS and increase BV growth rate.

Edited July 31, 2021 by ERICOPOLY

[Viking]

1 hour ago, ERICOPOLY said:

Put the stock back on the NYSE where it is sure to never trade permanently at a discount to BV because the hedge funds will pump it up to a premium and book their gains, then put out bad news and short it, and then pump it up and book their gains...

 

And we could lever these cycles with LEAPS again and make money a whole lot faster and Prem can play this game too with the TRS and increase BV growth rate.

 

Ahhh. The good old days. I still remember them well  

[glider3834]

3 hours ago, Viking said:

‘trading at discounts in perpetuity’

 

I think this is a real risk. I see it as lower probability right now but i am open minded. With their words and actions i wonder if management (lead by Prem) has done permanent and significant damage with the analyst and investment community. Credibility is a hard thing to win back once lost. With the result being the stock trades permanently below BV and perhaps significantly so. 
 

Fairfax has been creative in the past with booking transactions that cause an increase in all important book value. Quess was one such example a few years ago. The Anchorage transaction, spiking the value of BIAL, is a more recent example. Digit is the most recent example. Looking at the Fairfax India stock price today it is clear investors do not believe the value of BIAL is accurate. Looking at how Fairfax has traded since announcing the $1.8 billion Digit gain (down) it is clear investors do not believe that number is real. I am not suggesting Fairfax has done anything wrong. Or that the numbers they are reporting are not accurate. Perhaps investors expect the current valuations to be marked down in future years as happened recently with Quess. Not sure if the disconnect is a credibility issue, covid issue, timing issue or investors simply missing a good thing (or some combination).

 

Having said all that, i do like Fairfax (and Fairfax India) as an investment. I really like the current risk/reward set up. However, my eyes are also wide open to the risks 

I think a 'permanent discount' is reasonable to apply if results are consistently poor & that applies to any listed company. 

 

But if Fairfax keep delivering great results, then share price will eventually start to close that gap with fair value IMO 

 

I think its a waiting game now as analysts, investors digest their results & start to adjust their fair value estimates and act accordingly (see recent analyst upgrades!). On top of this you have retail investors, hedge funds that won't even touch a stock if the technical indicators are poor or they cannot see enough momentum in the share price. So IMO it tends to be the value investors who jump on board first and then the technical investors who wait for the water to get warm before they jump aboard as well. 

 

 

 

 

 

 

 

 

 

[UK]

"The chief losses to investors come from the purchase of low quality securities at times of favorable business conditions"

 

This is a question I am asking re FFH, because at this stage of the cycle/markets, if something goes wrong a. lot of their investmens would suffer and b. they would not be able to take big advantage of that or do meaningfull buybacks. So you have to hope for things not to go wrong with FFH Vs it would be opportunity for say BRK (but yes, somewhat different valuation allready).

Edited July 31, 2021 by UK

[thepupil]

13 hours ago, Gregmal said:

How do you guys size this up to say something like Tetragon or Gain Cap? Ive seen far too often these financial companies, that(all of them plagued by this fit the profile) are opaque with their actions....just consistently print money but trade at horrendous discounts? Saying its a cycle thing I believe is short sighted. It could be. But theres merits to non transparent financial companies or closed end funds trading at discounts in perpetuity. Only getting credit for 70-80% of every dollar you make can be a bitch, especially when things hit a rough patch.The only remedy I've seen is real, hard, aggressive buybacks. Getting 70% credit but buying at 70% works. Not aggressive authorizations that go unused or derivative trades. The fact they did a TRS vs a real repurchase because they dont have any liquidity is part of the narrative issue IMO. 

 

if tetragon got credit for 80% of every dollar, I'd be a lot wealthier..try 35 cents. 

[ERICOPOLY]

What do you do with a TRS after you've got one?  If it turns out to be a grower and not just a shower, can you 'exercise' it and take delivery of the underlying?

 

What fees are involved in staying in the contract indefinitely?  Monthly fees and how much?

 

[TwoCitiesCapital]

1 hour ago, ERICOPOLY said:

What do you do with a TRS after you've got one?  If it turns out to be a grower and not just a shower, can you 'exercise' it and take delivery of the underlying?

 

What fees are involved in staying in the contract indefinitely?  Monthly fees and how much?

 

Your questions: 

 

1) Can you take physical delivery? No. These are most likely cash settled. So every period, Fairfax will get paid in cash (less financing fees) for the positive performance on the notional amount from the counterparty. If performance is negative for the reference period, Fairfax would pay the cash to the counterparty.

 

2)  What happens if it's a grower?

 

There are two types of swaps: fixed notional and floating notional. 

 

Fixed notional mean the notional remains the same at the end of the reference period. In the example of $10,000,000 in notional going up 10% during the reference period, Fairfax would receive $1,000,000 cash (less short-term financing fees) and the notional would remain at $10,000,000 for the next period's performance calculation. If Fairfax wanted to increase exposure, a) they could renegotiate the notional at the end of an observation period b) buy more swaps from a different counterparty or c) use the $1,000,000 in cash to repurchase physical shares

 

Floating notional means the notional gets adjusted for performance at the end of each reference period. In the same example as above, Fairfax would still receive the $1,000,000 in cash, but the notional for the next period would be adjusted to $11,000,000 and all performance and financing fees would calculated off that $11,000,000 figure in the next period. Negative performance would reduce the notional. This would more closely replicate ownership in the underlying stock and Fairfax would NOT have to trade to increase economic exposure as Fairfax's price rises unless if they wanted to. 

 

We should be able to figure out which Fairfax has simply from the disclosures of P/L over the time period, but I haven't dug into those details to try to back into this yet. 

 

3) Fees? As referenced above, typically a short-term financing fee. Most of the time reference periods are 1- or 3- months in duration so the fees would typically be a benchmark rate like 1-month LIBOR or 3-month LIBOR plus a spread for the market maker. The fees would literally be a fraction of a percent given where rates are today. 

Edited July 31, 2021 by TwoCitiesCapital

[Viking]

Fairfax results are very volatile from year to year. I thought it would be interesting/educational to put pen to paper and estimate ‘normalized’ earnings power for Fairfax on a go forward basis. Please chime in with your own numbers and rationale or questions

 

Assumption: the global economy is in the process of entering the new normal (we learn to live with covid).

 

What are normalized earnings for Fairfax today? My estimates below are US$, quarterly and i have used the template Fairfax uses in their quarterly news releases:

 

Underwriting                 $210 million/quarter

Interest and Dividend   $115

Share of Profit of Assoc $60

Sub Total                       $385

 

Run off                            -$25

Non insurance co          +$25

Int Expense                    -$115

Corp Overhead              -$25

Sub Total                       -$140

 

Total                                $245

 

Net gains on investments $225 ($900 million annually?)

Total incl net gains        $470

 

Taxes and non-cont  interest  -$120 (25%?)

 

Net earnings                 $350/quarter

Per share                       $13.50/share/quarter = $54/year

Shares are trading at US $422

Is underwriting too high? Net gains on investments too low?

Edited July 31, 2021 by Viking

[ERICOPOLY]

2 hours ago, Viking said:

Fairfax results are very volatile from year to year. I thought it would be interesting/educational to put pen to paper and estimate ‘normalized’ earnings power for Fairfax on a go forward basis. Please chime in with your own numbers and rationale or questions

 

Assumption: the global economy is in the process of entering the new normal (we learn to live with covid).

 

What are normalized earnings for Fairfax today? My estimates below are US$, quarterly and i have used the template Fairfax uses in their quarterly news releases:

 

Underwriting                 $210 million/quarter

Interest and Dividend   $115

Share of Profit of Assoc $60

Sub Total                       $385

 

Run off                            -$25

Non insurance co          +$25

Int Expense                    -$115

Corp Overhead              -$25

Sub Total                       -$140

 

Total                                $245

 

Net gains on investments $225 ($900 million annually?)

Total incl net gains        $470

 

Taxes and non-cont  interest  -$120 (25%?)

 

Net earnings                 $350/quarter

Per share                       $13.50/share/quarter = $54/year

Shares are trading at US $422

Is underwriting too high? Net gains on investments too low?

 

They have about 8% of shares outstanding worth of TRS.  So I think if you multiply $54 by 1.08 you arrive at about $58.32, assuming the shares appreciate at precisely the rate of EPS increases. 

 

It's a bit confusing to arrive at an estimate for earnings when share increases feed back into earnings and earnings drive share increases.

Edited July 31, 2021 by ERICOPOLY

[Parsad]

3 hours ago, Viking said:

Fairfax results are very volatile from year to year. I thought it would be interesting/educational to put pen to paper and estimate ‘normalized’ earnings power for Fairfax on a go forward basis. Please chime in with your own numbers and rationale or questions

 

Assumption: the global economy is in the process of entering the new normal (we learn to live with covid).

 

What are normalized earnings for Fairfax today? My estimates below are US$, quarterly and i have used the template Fairfax uses in their quarterly news releases:

 

Underwriting                 $210 million/quarter

Interest and Dividend   $115

Share of Profit of Assoc $60

Sub Total                       $385

 

Run off                            -$25

Non insurance co          +$25

Int Expense                    -$115

Corp Overhead              -$25

Sub Total                       -$140

 

Total                                $245

 

Net gains on investments $225 ($900 million annually?)

Total incl net gains        $470

 

Taxes and non-cont  interest  -$120 (25%?)

 

Net earnings                 $350/quarter

Per share                       $13.50/share/quarter = $54/year

Shares are trading at US $422

Is underwriting too high? Net gains on investments too low?

 

Due to my sheer laziness, I don't bother doing these calculations!

 

They are aiming for 15% ROE annualized...I assume in a bad decade, they hit 10% ROE annualized...$546 USD book value...$55 USD per share earnings.  Simple and easy!  No fuss, no muss!

 

If I can do 10% ROE with no leverage in my sleep, Fairfax should be able to do 10% ROE with a leveraged, conservative portfolio and good underwriting.  Cheers!

[nwoodman]

On 7/31/2021 at 2:48 PM, Viking said:

Looking at how Fairfax has traded since announcing the $1.8 billion Digit gain (down) it is clear investors do not believe that number is real. I am not suggesting Fairfax has done anything wrong.

 

I am quite bullish on Digit but a $200m raise that in turn gives a $3.5bn mark is still price discovery lite.  I remember seeing an interview with Kamesh Goyal, where he indicated the first raise (that got them to unicorn status) was about price discovery.  The second raise of $200m, is certainly a little more material but not by much .   I don’t recall if the actual % amount that was purchased for 200m was disclosed.  Based on the note in the quarterly, and comments in the CC it looks like Fairfax has at least attempted to  discount the valuation of the raise a little, which is welcome.  

 

“During June 2021, the company's associate Go Digit Infoworks Services Private Limited ("Digit") entered into agreements with certain third party investors whereby its general insurance subsidiary Go Digit Insurance Limited ("Digit Insurance") will raise approximately $200 (14.9 billion Indian rupees) of new equity shares, valuing Digit Insurance at approximately $3.5 billion (259.5 billion Indian rupees) (the "transaction fair value"). The transactions are subject to customary closing conditions and regulatory approval, and are expected to close in the third quarter of 2021. The company estimated the fair value of Digit at June 30, 2021 using a probability weighted valuation model, attributing 60% weighting to the fair value determined through an internal discounted cash flow analysis and 40% weighting to the risk-adjusted transaction fair value, which resulted in the company recording a net unrealized gain of $425.0 (inclusive of foreign exchange losses of $13.7) on its investment in Digit compulsory convertible preferred shares. Increasing (decreasing) the weighting of the transaction fair value by 5% would increase (decrease) the net unrealized gain by $54.4 ($54.4). The company also holds a 49.0% equity accounted interest in Digit as described in note 6.”

 

It is still only the 1st innings for Digit, while it is looking good  I can understand the market’s reticence.   Then again you pay a high price for a cheery consensus as WEB would say.

Edited August 2, 2021 by nwoodman

[Viking]

Comments from Selective Insurance CEO on Q2 call. Views the current pricing environment as sustainable.

 

James Bach: …where do you see rate increases going from here?

 

John Marchioni

Yes. So I mean, obviously, if you look at our performance over the first 2 quarters, it’s been relatively stable. And while the market dynamic is an influence on how we manage pricing, we also have taken a very measured approach in terms of understanding our own pricing targets based on our starting point profitability and our expectation of trend, and we’re going to manage rate in that context as opposed to just trying to maximize rate in the short-term because the market may or may not be conducive.

 

I guess what I would point you to and what -- how we think about this going forward and why we think the current pricing environment is sustainable is what’s driving the pricing environment and whether those forces continue to be present when we look forward, and we would argue that they are.

 

So let me just hit the key ones. So #1 is the low interest rate environment. We don’t know where that is. And I think as we try to point out in our prepared comments, while we think we’ve got a high-quality alternative investment portfolio and it’s been generating really strong returns for us. We realize that, that that to a certain extent for the entire industry is masking the pressure on the core fixed income portfolios. And when you roll forward the investment income impact from those declining yields, that is something that will put pressure on underwriting margins.

 

The second piece is, when you think about -- and a number of companies, we would -- not us, but other companies have continued to point to a little bit more volatility in their non-cat losses in the more recent quarters. But if you look back over the last couple of years, you’ve seen higher and elevated and more volatile cat and non-cat property, you’ve got firming reinsurance pricing, and while it may be disappointing for the reinsurers in terms of where they are relative to where they would expected it to be from a pricing perspective, prices are still up, and that has to be factored in.

 

And then loss trends with and without additional inflation continue to be a pressure point. And as we pointed to, the social inflation trends that were emerging and included in our loss reserve estimates and our loss picks, pre-pandemic, we fully expect to reemerge as the economy reopens.

 

Everybody is dealing with those same drivers, and we think that props up the pricing environment. Now the other, I think, when you put it all together and think about it, is the starting margins for most of the industry needs improvement. And I realize everybody is reporting really strong results. We tend to focus on the underlying not ex-cat -- underlying with a normal cat load when you think about the starting point. And when you look at that for many companies in the industry and the industry broadly, there’s some loss ratio improvement still necessary.

 

And then the final point I would make would be a lot of the back down in the last couple of quarters in the headline rate number for the industry have been driven by the lines that were really high in terms of rate level. So think high hazard, excess umbrella, specialty lines, D&O, EPL, management liability, that’s what’s bringing the overall number down. But I think you’ve seen a little bit more stability in commercial auto, general liability, commercial property in the lines that make up our portfolio.

[Thrifty3000]

On 7/31/2021 at 2:26 PM, Viking said:

Fairfax results are very volatile from year to year. I thought it would be interesting/educational to put pen to paper and estimate ‘normalized’ earnings power for Fairfax on a go forward basis. Please chime in with your own numbers and rationale or questions

 

Assumption: the global economy is in the process of entering the new normal (we learn to live with covid).

 

What are normalized earnings for Fairfax today? My estimates below are US$, quarterly and i have used the template Fairfax uses in their quarterly news releases:

 

Underwriting                 $210 million/quarter

Interest and Dividend   $115

Share of Profit of Assoc $60

Sub Total                       $385

 

Run off                            -$25

Non insurance co          +$25

Int Expense                    -$115

Corp Overhead              -$25

Sub Total                       -$140

 

Total                                $245

 

Net gains on investments $225 ($900 million annually?)

Total incl net gains        $470

 

Taxes and non-cont  interest  -$120 (25%?)

 

Net earnings                 $350/quarter

Per share                       $13.50/share/quarter = $54/year

Shares are trading at US $422

Is underwriting too high? Net gains on investments too low?

 

@Viking and @Parsad how are you factoring in share count/dilution going forward? From 2009 to 2019 dilution was a pretty serious tax on EPS. Are those days behind us? I get they may have changed course on that recently, and some of the dilution may have been one time stock awards to incentivize long term managers. But, I dug up some of my notes from last year on this and the trend isn't in our favor:

 

Annualized Share Growth Rate Approx 4%

 

Diluted Share Count:

 

2009: 18,397,898

2010: 20,534,572

2011: 20,405,427

2012: 20,566,866

2013: 20,360,251

2014: 21,598,139

2015: 22,564,816

2016: 23,017,184

2017: 26,100,817

2018: 28,396,881

2019: 28,060,536

 

Share Based Awards

 

2009: 96,765

2010: 98,226

2011: -

2012: 240,178

2013: -

2014: 411,814

2015: 494,874

2016: -

2017: 689,571

2018: 890,985

2019: 1,159,352

Edited August 2, 2021 by Thrifty3000

[Parsad]

3 hours ago, Thrifty3000 said:

 

@Viking and @Parsad how are you factoring in share count/dilution going forward? From 2009 to 2019 dilution was a pretty serious tax on EPS. Are those days behind us? I get they may have changed course on that recently, and some of the dilution may have been one time stock awards to incentivize long term managers. But, I dug up some of my notes from last year on this and the trend isn't in our favor:

 

Annualized Share Growth Rate Approx 4%

 

Diluted Share Count:

 

2009: 18,397,898

2010: 20,534,572

2011: 20,405,427

2012: 20,566,866

2013: 20,360,251

2014: 21,598,139

2015: 22,564,816

2016: 23,017,184

2017: 26,100,817

2018: 28,396,881

2019: 28,060,536

 

Share Based Awards

 

2009: 96,765

2010: 98,226

2011: -

2012: 240,178

2013: -

2014: 411,814

2015: 494,874

2016: -

2017: 689,571

2018: 890,985

2019: 1,159,352

 

When the largest shareholder is the CEO, dilution is always going to be of paramount interest to him/her.  There were some shares issued for the Allied purchase and then there were some incentive shares issued for employees, as well as a slew of new directors added to the board.  I'm pretty certain the board and Prem is careful about this stuff.  Cheers!

[glider3834]

1 hour ago, Parsad said:

 

When the largest shareholder is the CEO, dilution is always going to be of paramount interest to him/her.  There were some shares issued for the Allied purchase and then there were some incentive shares issued for employees, as well as a slew of new directors added to the board.  I'm pretty certain the board and Prem is careful about this stuff.  Cheers!

Just checked - interesting stat - Allied world GWP was around $3bil in 2017 & it looks like Allied GWP is around $3 bil for just the first 6 mths of 2021! 

 

 

 

 

 

 

 

 

 

 

 

 

[modiva]

5 hours ago, Thrifty3000 said:

@Viking and @Parsad how are you factoring in share count/dilution going forward? From 2009 to 2019 dilution was a pretty serious tax on EPS. Are those days behind us? I get they may have changed course on that recently, and some of the dilution may have been one time stock awards to incentivize long term managers. But, I dug up some of my notes from last year on this and the trend isn't in our favor:

 

Annualized Share Growth Rate Approx 4%

 

This is astonishing.  The share count was diluted by ~10 million shares.  It translates to ~$5B dilution or ~50% of the market value.  Imagine what it would do to the share price if there was a buyback vs. dilution of the same.  I think this is one of the biggest reasons for underperformance over the last 10 years.  I hope the situation reverses in the coming decade.