Professor Glen Arnold

Lloyds Banking Group – financial strength

Mar 22 2021 @ 10:56
Lloyds Banking Group’s (LSE:LLOY) main business can be simplified to taking in customer deposits through Halifax, Bank of Scotland and Lloyds and then lending that money out, mostly for people buying houses but also for credit cards, unsecured personal loans, for buying cars, for businesses. At any one time it has about £410bn – £450bn […]
 

Lloyds Banking Group – Earnings are likely to rise

Mar 20 2021 @ 09:41
Yesterday’s Newsletter pointed out that Lloyds’ current share price of 41.69p (LSE:LLOY) is only 9.9 times underlying earnings averaged over the last ten years.  At face value, it therefore seems cheap if we assume merely that EPS over the next ten years will match those of the last ten. However, there are reasons to believe […]
 

Lloyds Banking Group – bought as the great recovery gets under way

Mar 18 2021 @ 07:23
I’ve bought shares in Lloyds (LSE:LLOY) at 41.69p (Market capitalisation £29.4bn).  The group, which also owns Halifax, Scottish Widows and Bank of Scotland, seems on a low price relative to proven earnings over the last ten years, and it has a strong balance sheet providing plenty of downside protection. While its shares have risen from […]
 

Warren Buffett's four treasured investment companies

Mar 10 2021 @ 09:22
In the early 2000s Joe Brandon and Tad Montross really turned around General Re. In thirteen of the next fourteen years between 2003 and 2016 this part of Berkshire reported an underwriting profit – see Figure 10.6. It did so on a decreasing level of business: premiums fell from $8.25bn in 2003 to only $5.64bn […]
 

Warren Buffett's $22bn investment loses $8bn in five years

Mar 09 2021 @ 09:24
Once inside the Berkshire fold insurance giant General Re’s executives were encouraged to feel free of the previous constraints that limited growth. This helped to lift annual premiums from $6bn in the year it was bought, 1998, to $8.7bn in 2000 – see Figure 10.1. Buffett wanted them to continue “increasing the proportion of its […]
 

Why Warren Buffett bought an insurance company for $22bn

Mar 04 2021 @ 06:25
Yesterday’s newsletter showed that showed that in the eleven years before Warren Buffett purchased it General Re was firing on all four cylinders, in the later years making almost £1bn in profits. It also held $14.9bn of float, which was available at apparently no cost because underwriting pricing was so good. But would you pay […]
 

Building Berkshire Hathaway's insurance business - GEICO and General Re purchases

Mar 03 2021 @ 05:53
For nineteen years Berkshire had enjoyed dividends flowing from its 51% stake in GEICO when it bought the remaining shares in 1996 for $2.3bn. GEICO was an exceptionally well-run primary insurer with a focus on auto policies (see earlier newsletters on GEICO). Its two key managers continued to run the business: Tony Nicely managing underwriting (until […]
 

How Warren Buffett measures insurance company performance

Mar 02 2021 @ 05:45
Insurance float comes in different qualities. Insurance against hail damage to crops over a few days or weeks does not produce much float at all because premiums are paid shortly before the threat and claims are paid shortly afterwards. This means that combined ratio of 100 is of no value to the insurer because it […]
 

How to run an insurance company - the Berkshire Hathaway way

Mar 01 2021 @ 06:01
Berkshire Hathaway insurance business has always been run with an iron discipline approach. Warren Buffett and Charlie Munger would rather shrink the business than take on poorly priced insurance risk. Thus, in the years preceding 1985 Berkshire was the slowest-growing large US insurer. In fact, it shrank. It wasn’t that it withdrew from the market. […]
 

What Warren Buffett learned from his mistakes in insurance

Feb 27 2021 @ 02:40
Until 1982 Buffett took on personal responsibility for Berkshire’s  insurance business strategy, senior appointments, and monitoring. As the business grew he realised the need to take more of a back seat, freeing time to concentrate on investments. He looked around for a talented manager to take over as head of all Berkshire’s insurance operations, and […]
 
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