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Brian Abbott  

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  • The Fairy Tale Of [View article]
    unless a disruptive technology comes along and either changes the landscape of business models. The lowest cost buggy whip producer went out of business long ago.
    Oct 23, 2013. 10:12 AM | Likes Like |Link to Comment
  • The Fairy Tale Of [View article]
    Great article. Love the company, hate the stock.Lots of money has been lost by a lot of people shorting this stock. Every time it manages to sell off 10-15% it comes back with a vengeance, as happened the past couple of weeks. Great analysis on a puzzling stock valuation.
    Oct 22, 2013. 06:00 PM | 1 Like Like |Link to Comment
  • Biogen Gains A Leg Up In Fiercely Competitive MS Field [View article]
    News since this article published: WIth recent case of PML in patient with competing Novartis drug, may mean less competitive situation for Tysabri, which to date was the main treatment associated with PML risk.
    Sep 3, 2013. 02:02 PM | Likes Like |Link to Comment
  • Blending Alpha And Beta: Building A 'Mini-Endowment' [View article]
    i totally agree with international index stock ETF. That's the best value I have found and also where I have been putting my new money to work.
    Aug 25, 2013. 11:29 AM | Likes Like |Link to Comment
  • Reinsurance Update: 2013 Q2 Results [View article]
    I did not make that adjustment for accumulated other comprehensive income. I just track the book value per fully diluted share and the top-line combined ratios, for ease of comparison. The more individualized one makes adjustments for different companies, the harder it is to make comparisons or keep track of the differences. Over long of time, the book value should track the company performance - but even that omits the impact of paid out dividends as a component of total return.
    Aug 7, 2013. 02:27 PM | Likes Like |Link to Comment
  • Reinsurance Update: Summary Of Q12013 Earnings [View article]
    you can't calculate it without knowing all the administrative costs and also the total underwriting profits and losses, and I believe reserve releases or charges as well. An individual investor will never get all of that data. It's an internal calculation and they report it quarterly with earnings reports.
    Jul 25, 2013. 05:57 PM | Likes Like |Link to Comment
  • Writing Uncovered Put Options On Reinsurance Stocks [View article]
    Thanks for the comment. Combined ratio is reported by the companies quarterly as a basic metric for insurance companies. There isn't anything for us to calculate. Combined ratio combines the administrative overhead cost and the underwriting profit/loss. Obviously those are hard things to calculate and a lot of assumptions probably have to made along the way, but the bottom line is that an outside investor is not going to get enough of those details to calculate this metric on their own. Don't look at just one quarter, because of the noise some of those assumptions cause, but over a long view this number helps you compare the underwriting skill across companies - but even then you don't know the risk they took to get there,.
    Jul 24, 2013. 05:12 PM | Likes Like |Link to Comment
  • Reinsurance Update: Looking Ahead To Q1 2013 Results [View instapost]
    Wow, I remember writing a VERY similar article.... hope this is due to some kind of error. (thanks for the heads up @a_girl_irl )
    Jul 21, 2013. 02:52 PM | Likes Like |Link to Comment
  • Selling Puts On The Dogs Of The Dow [View instapost]
    >>But why do you choose the smallest price? Shouldn't you be looking at some more fundamental things like P/E?

    Good question, and I think it is that the Dow already consists predominantly of dividend-paying, value-slanted companies. You've already screened out the growth-oriented companies by limiting analysis to the Dow.

    >>Another question I have (might be trivial) but how do you price your puts when you sell?

    The best time to sell is when volatility is higher (which is also when there has been a sell-off - a second reason to use that timing).

    I place an offer to sell limit order with my broker about one third up from the bid/ask spread. Another advantage of this Dogs of Dow put technique is that they have among the most liquid option markets so you lose less to the spread that way.
    Jul 14, 2013. 10:24 AM | Likes Like |Link to Comment
  • Reinsurance Update: Summary Of Q12013 Earnings [View article]
    Thanks for your comment. The combined ratio is taken from the quarterly report filings.I have yet to find a good free third party source of the information. Wikinvest had it at one point, but I just checked and couldn't find it on there anymore. The investor relations website at most of these companies posts some nice presentations, but of course they all frame the data in a way to position themselves in the best light so, while interesting, probably aren't the best source for data needed for investing decisions.
    May 24, 2013. 04:54 PM | Likes Like |Link to Comment
  • Aspen Insurance Holdings: Discounted And Shareholder Friendly [View article]
    I've been lucky enough to sit next to a few reinsurance brokers (Willis Re, AON) on flights. Insight from them is that it is EXTREMELY competitive. There is a lot of capital chasing risk these days. The low yield environment is driving mispricing across all asset classes, and the risk business is no different. What is hiding it right now is a benign risk environment.

    A lot of the gains in the stocks themselves is due to one-off event, like price to book closing the gap from 70% across the industry to now 95-100%, some even higher than 100%. Even if that is just a reversion to the mean, it is a one-off event. Price to book is not (or should not) go over 110%, at least historically. So much of those gains aren't going to be repeated, and that leaves you with a business growing premium at around 6% and earning 1.5% on their bond portfolio in reserves. That's not a lot of compensation for the catastrophe risk many of these companies take. Cats don't happen every quarter, so earnings are lumpy for ones with heavy reinsurance focus. Don't mistake the closure of the price to book value gap as a repeatable part of their business model.

    One last note: share buybacks have fueled some of that P/B gap closure, and buybacks aren't accretive anymore once P/B is at 100%. They make a ton of sense when P/B is 60-70% because it's like getting an instant 30% return on capital. they make almost no sense at 100%.
    May 9, 2013. 09:24 AM | 2 Likes Like |Link to Comment
  • Aspen Insurance Holdings: Discounted And Shareholder Friendly [View article]
    <I>if the future tends to be as redundantly reserved as the past, then there will be reserve releases which will make tangible book increase.</I>

    That's a nice way to look at it from a conservative standpoint, but one could just as easily say they left money on the table by not writing to their full capacity. If there is a mega-cat, they'll look like geniuses but in a benign risk environment they are putting a drag on profitability.

    Great article. AHL is one of my favorite companies!
    May 8, 2013. 08:57 PM | 2 Likes Like |Link to Comment
  • Reinsurance Update: Interim 2013 Q1 Earnings Comparisons [View article]
    good question. The tricky part is making sure the low price to book isn't just the market punishing a poor performer. I do cash out when my covered calls get hit - which has been happening lately. Then it brings up the next question you'll probably ask - how do you know when to get back in? - and I do that by writing out of the money naked puts. That ensures that if I buy again, it is after some degree of a sell-off, and if the price doesn't go down, then it generates current income in the meantime.

    Thinking about it more philosophically, selling puts is like earning an insurance-type of premium, on a reinsurer (who insures the risks of another insurer) - so in terms of calculus it is like a 3rd or 4th derivative depending on how you count it (since a put option itself is a derivative, on an equity which already has a degree of optionality embedded in it).
    May 2, 2013. 06:51 PM | Likes Like |Link to Comment
  • Reinsurance Update: Interim 2013 Q1 Earnings Comparisons [View article]
    great question. PRE is a European reinsurer that I will include in the larger update next weekend. They haven't announced earnings yet. I agree with you that there is too much cash chasing yield, and is finding its way into this sector.

    I sell puts to acquire shares, and then sell calls to get rid of the shares, and the runup in the sector is so big that no puts have exercised in a while, and exercised covered calls will take me out of ALL my equity positions by June, barring a major (>10%) sector decline. Thus I am not in the mood to buy. But it has been hard to know where to put cash to work - nothing is cheap lately.
    Apr 27, 2013. 07:09 PM | Likes Like |Link to Comment
  • Property Casualty Insurance And Reinsurance: What You Need To Know [View article]
    great article!
    Apr 27, 2013. 07:05 PM | Likes Like |Link to Comment