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Far Horizon

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  • The Unsustainable State Of The Florida Property Insurance Market, Part I [View article]
    IMHO, government intervention in insurance market pricing is always a bad outcome for all involved - as it distorts the insurance price signal around the level of risk you take by where you choose to live. This introduces subsidies which penalise people who live less risky lives, and promotes poor risk decisions. Insurance companies don't subsidise like this between risks, or states, they try to charge the right price for the quality of risk you represent, and then, because bad things don't happen to everyone all the time, diversify the risk from the individual in a big pool. This isn't a perfect mechanism, but I always find economics is a hell of a lot of a better tool than politics!
    Oct 28, 2014. 09:28 PM | 1 Like Like |Link to Comment
  • The Unsustainable State Of The Florida Property Insurance Market, Part I [View article]
    Thanks for the start to this analysis, I find little to disagree with in the factual representation of the Florida insurance market, and distortions to market pricing that can result from government intervention in the insurance space. The biggest impact of this is often poor risk decisions being made by consumers and a progressive compounding of the problem. From an academic viewpoint, all makes sense. I am missing however, how this converts into an investment thesis. I hope this will become clearer in part 2?

    On building codes and loss estimates. The insurance industry relies on catastrophe models to try to estimate the impact of future losses. These have only really been developed since the 1990's, but they apply a mix of scientific disciplines (including engineering) to incorporate all available data into predictive models. Like any model, they are never right, but they give us a best estimate of what might happen, and form the backbone of the modern property insurance industry. Florida has had more than its share of modeling attention, so the models there are as good as any. They take account of the range of building codes applied to the various buildings insured - and these models still come out with loss estimates such as those cited by the author. So yes, lots of work by some scarily smart people indicates that Florida will see more very large storms at some time in the future.
    Oct 27, 2014. 05:53 PM | 1 Like Like |Link to Comment
  • 3 Charts That Explain Seadrill's Debt Situation [View article]
    Thanks for the article, have you looked at scenarios of what dividend cuts would be needed to deal with funding cost increases? Would be interesting to see some range of outcomes.
    Sep 17, 2014. 04:51 AM | 1 Like Like |Link to Comment
  • Is This The Best Emerging Market For 2014? [View article]
    I would certainly be wary of the downside, and never 'bet the house'. In previous articles I have discussed my logic for an overweight EM allocation, and strategy for using country specific ETF 's to weight this towards countries which show the best prospects ( guided by a risk model I developed for the purpose).
    Even within this strategy, asset allocation should be balanced, and reflect specific risk tolerance and investment goals / time frames.
    Thanks for pointing out the risk, which I take as a given in investments in general and Emerging markets in particular.
    Jan 1, 2014. 07:46 PM | 1 Like Like |Link to Comment
  • Canadian Dollar Extends Weakness As The Bank Of Canada Sounds Fresh Alarms [View article]
    Interesting to track the commodity based currencies vs the USD. Similar themes with the Aussie dollar. What's your AUD- CAD thesis ?
    Dec 5, 2013. 07:34 AM | 1 Like Like |Link to Comment
  • Reinsurance Update: Interim 2013 Q1 Earnings Comparisons [View article]
    I agree that the sector is a buy, timing is tricky. The reinsurance sector is awash with capital from hedge funds, pension funds and others seeking yield, and this is putting pressure on pricing. Berkshire Hathaway is also pumping in capital.
    Buying after major events should be a good strategy, but I would choose the stronger and more diversified companies. Look at Partner Re after the NZ and Japan EQ to see the impact of being overweight to the market in a major loss. Check out, if you want to read more on the sector, and where I look at what Ajit Jain at Berkshire is up to. Brian, the sector heavyweights are the big European players, have you thought of including those in your reviews?
    Apr 27, 2013. 05:41 PM | 1 Like Like |Link to Comment
  • Indonesia: Share The Wealth [View article]
    Yes, you are correct - the text should more accurately read "For the sake of completeness, here is how IF has performed vs SPY since inception in 1990."
    My key point is the volatility of Indonesian investments, much of which has been currency related. The IDR/USD fx rate is telling. This shows how th Rupiah shot from 2000/USD to 16000 in the 90's, then stabilised in a (wide) range between 8000-12000 since then. A comparison from 1990 bears the devaluation in full.
    While as I mention in my article currency risk remains high, a repeat of this devaluation could be considered a 'tail' event.
    Apr 10, 2013. 08:07 PM | 1 Like Like |Link to Comment
  • Indonesia: Share The Wealth [View article]
    Thanks - independence was declared in 1945, but wasn't recognised by the Dutch until 1949, I chose the latter date as a milestone in economic and political development, as undisputed sovereignty heralded a new era for Indonesia.
    Apr 10, 2013. 07:42 PM | 1 Like Like |Link to Comment
  • Thailand: Taking A Stake In A Changing Economy [View article]
    I am writing a follow up article and will look at TTF as a comparison.
    Mar 2, 2013. 11:37 PM | 1 Like Like |Link to Comment
  • Thailand: Taking A Stake In A Changing Economy [View article]
    There is a state telco, and True, a private listed player. I am putting together a follow up article and will include True. Thanks for the suggestion.
    Mar 2, 2013. 11:31 PM | 1 Like Like |Link to Comment
  • United Insurance Holdings Corp.: Up 20% Since August, On Track For Doubling By End Of 2015 [View article]
    Dear Watchworth......I hope so even more, as I have taken a position in this stock. Absent an active storm season, I am confident that earnings will Be significantly higher in 2015 than 2014. Keep tuned!
    Nov 7, 2014. 04:23 AM | Likes Like |Link to Comment
  • AmTrust Financial Services: A P&C Blow-Up In The Making - Part I [View article]
    G - have to applaud the reference. Not enough Python for my liking on SA! (despite some pythonesque behaviour from the fed)
    Oct 31, 2014. 07:49 PM | Likes Like |Link to Comment
  • The Unsustainable State Of The Florida Property Insurance Market, Part I [View article]
    Herring. "Before investing in any insurance company it might make sense to know what types of policies they issue and where"
    I couldn't agree more, but this is just the beginning. If you are interested, have a look at some of the articles I have written on how to evaluate insurance companies in general, and one on UIHC in Florida specifically.
    Oct 28, 2014. 02:15 AM | Likes Like |Link to Comment
  • The Australian Dollar Stands Between Here And A Larger Correction [View article]
    Good luck with that long Aussie trade. Given your longer term bearish view, when do you plan to take profits on AUD?
    Oct 13, 2014. 06:14 AM | Likes Like |Link to Comment
  • 2 Insurance Stocks On My Radar [View article]
    Thanks for the article. AFL, TRV and CB are all great companies in the sector. I expect to see the prospect of interest rate increases generate some rotation into insurance stocks.
    Its important to understand insurance companies operations and risk drivers in detail, as it's a very complex business. There is a huge range of players in the sector. A while ago I wrote a summary of the key things to consider when looking at insurance stocks.
    As you say, the business model involves generating investment float by holding insurance premiums today against claims tomorrow. This can be a cheaper source of funds than others, if the underwriting is strong. Low rates hurt insurance companies both by reducing the differential between insurance float and other sources of funds, and also reducing the returns on invested assets, which are typically held mainly in bonds to match the future liabilities.
    Many investors will find it hard to judge between companies, which involves some heavy analysis - so an industry ETF is a good idea to consider.
    Sep 17, 2014. 07:37 PM | Likes Like |Link to Comment