Here are the major changes:
I have sold Reinsurance Group of America (RGA), Allstate (ALL), Scottish Re (SCT) (there was only a stub left), Endurance (ENH), Allied World (AWH), and Employers Holdings (EIG). I have bought Safety (SAFE), Aspen (AHL), Argonaut (AGII), and PXRE (PXT). These changes have take place over the past few months. I have not mentioned them until now, because my employer was still building positions in the names; we are done now.
Why the changes? Here goes: with the exception of Scottish Re, I still like all of the companies and their management teams.
Allied World and Endurance — nice runs. Not sure I want to hold them through storm season. Aspen is a cheap substitute for AWH and ENH, maintaining some of my property exposure cheaper. Argonaut and PXRE — merging. Argonaut got PXRE cheaply, and the deal makes good long term sense. Argonaut re-domiciles in Bermuda, and slow lowers its tax rate. It also further diversifies by writing property reinsurance, but not too much. Allstate — I still own this in the broad market portfolio, but that has different objectives than the hedge fund that I work for. It has a longer time horizon. In the short run, Allstate will be pressured by increasing competition in the personal lines space. On the other hand, what a cheap valuation. I like it! Scottish Re — can’t write new business. Very opaque earnings model. It is a pig in a poke, and I don’t think one can trust the book value. Employers Holdings — I have to beg a mea culpa here, and say that my initial article on RealMoney was wrong. My goof? The prospectus was complex, badly worded, and I mis-estimated the true share count. After figuring out the true share count, I realized that the stock was fairly valued, not cheap. Apologies to all who went in with me on this; at least if I have to make an error, better to make it when no big losses are made. Reinsurance Group of America — a real class act, but past my valuation parameters for now. Safety Insurance — Very well run pure play personal lines insurer in Massachusetts, and cheap! Insulated from the general competition in personal lines in the USA.
Anyway, that’s what I am up to in insurance now, and how my portfolio differs from where I was in the first quarter.
Full disclosure: The author is long AHL, AGII, ALL, PXT, and SAFT.