lou hannen

Risk/Reward Analysis Makes Financial Insurers a Buy

Free cash flow is a largely meaningless term for an insurance company. They write insurance and collect CASH long before LOSSES cost cash. The bad business written in the last few years will be costing cash for the next 3-10 years. The real key is book value, but the stated book has to be doctored to reflect the losses expected to be incurred which have not yet been reserved. That said, I own toe dipping quantities of 4 of these dogs.

Financials Not Out of the Woods Yet

Yes, but--assume that over the next year the book value drops to $10, company gets back to break even operations--at that point it could reinsure away its remaining insurance and quietly go out of business at somewhere close to $10. The near term news is terrible, but the longer term for the stock, if not the company, is pretty interesting from a speculative point of view.