tag:blogger.com,1999:blog-5389144729834496735.post4736760462009837827..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: Alleghany Annual Report 2014Unknownnoreply@blogger.comBlogger12125tag:blogger.com,1999:blog-5389144729834496735.post-20835533890852605092015-03-13T10:15:39.761-04:002015-03-13T10:15:39.761-04:00I don't know if Hick's comment is necessar...I don't know if Hick's comment is necessarily optimistic. He is just saying it will hold up, which sounds more like a relative term as if comparing to other areas that may get hit from deflation (commodity type businesses) etc. They are both right; deflation will lessen costs to insurers and Buffett too is right; lower investment returns will keep pressure on pricing etc. But for Y and BRK, they don't write insurance for volume or market share so they won't be hurt as much as conventional insurers. That's the advantage that those business models have. <br /><br />This has sort of been an issue for a while now as rates have been low for a while and there has been excess capital in insurance for a long time, so I don't think what Buffett is saying is anything new. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-21582073475728171542015-03-13T00:56:09.802-04:002015-03-13T00:56:09.802-04:00Sorry, what I meant was how to do square Hicks'...Sorry, what I meant was how to do square Hicks' optimism about P&C insurers' prospects in a deflationary environment with Buffett's warning that the decreased earnings on float will lead to hard times for the industry?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-5850919843574005772015-03-12T11:38:03.853-04:002015-03-12T11:38:03.853-04:00That's a good question. I haven't been fo...That's a good question. I haven't been following insurance in Japan so I don't know. One big difference, though, is that even more than insurers in the U.S., in Japan they price for market share and not for profits so I don't know how useful comparisons would be. They've also had balance sheet problems not to mention perpetual low rates, and legal problems within their insurance operations too. <br /><br />As for Buffett's comment, this has been true for a long time and Y has a good record. <br /><br />Sorry I don't have much more to add to that at the moment... <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-39841299537669949482015-03-12T05:51:56.167-04:002015-03-12T05:51:56.167-04:00KK
Thanks, I always enjoy reading you commentary ...KK<br /><br />Thanks, I always enjoy reading you commentary on annual letters. I am also a frequent poster from over here in the peanut gallery. One question stuck out in my mind (that also relates back to things you have said in the past):<br /><br />Hicks worries about deflation, yet says P&C insurers should hold up well. What has been the case in Japan? Sure, they have lower ROEs than in the US but surely we could see if they have “held up well” relative to the overall market there? <br /><br />Also, how do we square Hicks’ thoughts with what Buffett was writing at the same time: “Unfortunately, the wish of all insurers to achieve this happy result creates intense competition, so vigorous indeed that it frequently causes the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. Competitive dynamics almost guarantee that the insurance industry, despite the float income all its companies enjoy, will continue its dismal record of earning subnormal returns on tangible net worth as compared to other American businesses. The prolonged period of low interest rates our country is now dealing with causes earnings on float to decrease, thereby exacerbating the profit problems of the industry.”<br /><br />Appreciate you always taking the time to respond.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-4885573186232813772015-03-10T16:18:09.216-04:002015-03-10T16:18:09.216-04:00Yeah, that explanation didn't sound too good. ...Yeah, that explanation didn't sound too good. It made me wonder, then why isn't Y investing too in the dominant, leading companies? The better story would have been, maybe, to list up some of the bubble stocks included in the S&P 500 index and saying that we can't keep up because we refuse to play this game of paying so much for popular, faddish stocks or some such. So that part could have definitely been written better. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-46313736617274465202015-03-10T13:13:11.792-04:002015-03-10T13:13:11.792-04:00So their excuse for not beating the s&p 500 is...So their excuse for not beating the s&p 500 is that it's too difficult because it's composed of America's best companies and so it's too hard? :/<br /><br />Seems a bit lame..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-36330678094871239262015-03-09T22:03:26.594-04:002015-03-09T22:03:26.594-04:00I don't know. They have been buying back stoc...I don't know. They have been buying back stocks, but I don't know what their philosophy is except that they obviously like to buy back shares below BPS. There is also the issue of what else is out there to invest in. Like Blankfein used to say at GS, you might not want to buy back too much because when opportunity comes, you don't want to not have the capital around. If you buy back shares and bad times come (with opportunities galore), then you won't be able to issue shares since your own stock price will probably be cheaper at that point too... <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-46208734422337974472015-03-09T18:57:04.203-04:002015-03-09T18:57:04.203-04:00Thanks as always. Any thoughts on buybacks? It&#...Thanks as always. Any thoughts on buybacks? It's probably apples/oranges but I'm thinking about BRKs 1.2 mark. Regards,Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-77939537319651587812015-03-09T13:32:05.709-04:002015-03-09T13:32:05.709-04:00That's a good question. It's alway nice t...That's a good question. It's alway nice to see insider ownership. In Y's case, historically, the Kirby family held a large stake but they have been winding that down since Hicks became CEO, and he only became CEO in 2004. So this isn't so much an owner/founder kind of situation like BRK, LUK etc. <br /><br />Also, if you read the annuals going all the way back, it may be no wonder Hicks hasn't backed up the truck on Y. Maybe he is sitting on a lot of cash and/or gold... Who knows. <br /><br />Anyway, it's not that unusual for ownership to be a lot lower after CEO-ship passes down to the next generation. The next BRK CEO, for example, won't own nearly as much stock as Buffett does etc... <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-45646463346532332482015-03-09T13:28:28.088-04:002015-03-09T13:28:28.088-04:00Yes, I read the LUK letter. It looked good to me....Yes, I read the LUK letter. It looked good to me. The style is not the same as the old LUK, but there was a lot of detail with respect to the various areas and the reasons why they did certain things. It was very clear and comprehensive in that sense. If they keep up that detail, it would be great. Of course, book value hasn't grown much since the merger but that probably has a lot to do with cleaning up, reorganizing etc. and it will take time for the new investments to start contributing. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-7992517012532865862015-03-09T10:29:04.144-04:002015-03-09T10:29:04.144-04:00Why don't officers and directors own more stoc...Why don't officers and directors own more stock?johnheider1https://www.blogger.com/profile/17168829213279094039noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-90386135148336521192015-03-09T09:30:49.524-04:002015-03-09T09:30:49.524-04:00I to was surprised about performing to the higher ...I to was surprised about performing to the higher end of their target. Have you had a chance to read leucadia's letter? Maybe I am a little use to BRK, MKL, Y, Fairfax and the old LUK, but it seemed more Jef than Luk Anonymousnoreply@blogger.com