Verisk recently released their updated estimates of industry cat risk. Amazingly, average annual loss (AAL) surpassed $150B, up from $100B just four years ago. Similarly, the 1 in 100 aggregate loss (PML) grew to $400B from $300B four years ago. These are stunning rates of growth beyond what we have Continue Reading
How Long Can State Farm Lose Money? A Long, Long Time!
When I last wrote about State Farm, I suggested they had somewhere between $75-100B of excess capital. I commented at the time that their excess capital alone would make them the largest US insurer outside of Berkshire. Since then, State Farm has proceeded to post larger and larger underwriting losses Continue Reading
The Proper Way To Conduct Share Repurchase
In light of buybacks being back in the news with the proposal to increase the tax, I thought I’d write about how companies should think about buybacks since many do it wrong. First, quickly, buybacks shouldn’t be political. As you will see from my framework, they are a rational decision Continue Reading
A Better Way To Think About Excess Capital
Summary:Acquisitions should be measured not just vs. WACC but vs. the opportunity cost of finding a better deal laterWACC is a flawed concept as it doesn’t address the cost of financial distress which increases with more leverage We live in a world of low interest rates and thus low borrowing Continue Reading