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AWH and ARCL


Packer16
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In reviewing some insurance companies, I came across these two firms who have grown BV significantly over the past 5 years (Arch by 19% an Allied World by 21%).  It appears AW is more volatile with large hits in 2006 and in 1Q2010.  They both sell around book, so the are relatively cheap.  Has anyone else looked at these and what is your opinion.  TIA.

 

 

Packer

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  • 4 years later...

Hello

I'm wondering if anyone here holds AwH and has an opinion about this firm. It was one of my only holdings when I first started... made my first bag of money there before giving it away to BlackBerry :(

 

My dad was smart enough to buy them when I was selling - it now is at $110, still around book. CEO / management I believe are ex AIG. They moved from Bermuda to Switzerland. Is in Lloyds... I like everything I read in their annual report. But with what happened to Tower Group and the short attack at Am trust, I am concerned there's some underlying accounting or management issues that I'm not seeing. Would very much appreciate thoughts from those who pay attention to this space. Cheers

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Return on tangible equity has been trending down since Packer's post, now around 12 - 13% for both companies. And expected to decline further next year. Still pretty good, but the insurance industry in general is not the pound the table buy it was a few years ago. In 2010 (or maybe 2011), the average life insurer traded for 0.6x book value and the average P&C insurer traded for 0.8x book value. Those numbers are now much higher.

 

Right now I see GLRE as the most attractive growth opportunity in insurance. If Einhorn continues to work his magic, their business model will earn higher returns than their competitors in soft markets.

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They are all impressive, just one massive claim before we see hard market and if the interest rate rises there will be able to earn better income. I believe AWH has short duration bonds mow, just waiting for the rates to go up....

 

I really don't know what they will do next year or the hear after, but I think in 5 to 10 years they should perform better than S and P 500. The risk is of course they go to zero because of under reserve (a management issue) or its a fraud (an accounting issue) ...

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