I read a few Berkshire and Marcellus newsletters to deepen my understanding of non-life insurance. Below are the key factors that one should analyze. I have applied them to two listed private non-life Indian insurers: ICICI Lombard and Star Health
๐ญ. ๐๐น๐ผ๐ฎ๐ = investment assets accumulated over time
Insurers receive premiums upfront and pay claims later. This leaves them holding money, which Buffet call “float”. Meanwhile, insurers get to invest this float (in turn called โinvestment assetsโ on the BS) to generate interest income
IL: 40,000 Cr float; 21,000 Cr gross premium i.e. float accumulated is 2x premium
SH: 12,000 Cr float, 12,000 Cr gross premium i.e. float 1x premium
Moreover, over the last 5 years SH has partly relied on external capital to grow float
๐ฎ. ๐๐ผ๐๐ ๐ผ๐ณ ๐ณ๐น๐ผ๐ฎ๐ = underwriting loss/float
If premiums exceed expenses and eventual claim payments, insurers register an underwriting profit i.e. they get paid to acquire float. Underwriting loss on the other hand is the cost of float. Quoting Buffet โan insurance business has value if its cost of float overtime is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for moneyโ
Pre-COVID 5 year avg IL: 2%, SH -2%
i.e. SH was paid 2% to acquire float. Since SH is almost exclusively into retail health, which has higher premiums leading to lower claims ratio (but higher expense than IL) resulting in overall higher UW profitability pre-COVID
๐ฏ. ๐ฅ๐ฒ๐๐๐ฟ๐ป ๐ผ๐ป ๐ณ๐น๐ผ๐ฎ๐ = investment yield – cost of float
The underlying profit/loss adds to the investment income produced from the float
Pre-COVID 5 year avg IL: 8.5%-2%=6.5%, SH: 7%-(-2%)=9%
Negative cost of float has yielded better return on float for SH
๐ฐ. ๐๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ ๐๐ฒ๐๐ฒ๐ฟ๐ฎ๐ด๐ฒ = investment assets/book equity
The investment assets or float generated per unit of equity is called leverage. Pre-COVID avg IL: 3.5x, SH: 2.2x. IL has been able to drive a higher leverage. Why?
๐ฑ. ๐ฅ๐ฒ๐๐๐ฟ๐ป ๐ผ๐ป ๐๐พ๐๐ถ๐๐ = posttax return on float * leverage
Insurers with high ROE (>> COE) over extended periods of time generate a lot of shareholder value
Pre-COVID avg IL: 17%(=6.5%*3.5* 1-tax%), SH: 15%
Remember, expenses are upfront, claim payments come over a period. Since, IL has higher claims ratio, but lower expense ratio, it has done better in retaining float for longer resulting in higher leverage and in turn slightly better ROE
IL and SH are currently trading over 6, 7x BV resp. For valuing a non-life insurance firm, one needs to project the long-term outlook of all these factors. I have valued both of them. Valuation summary in another post.
What are your thoughts on non-life insurance businesses and their valuations?ย
#investandrise #nonlifeinsurance #generalinsurance #SAHI #insurancevaluation #equityresearch
Comments
9 responses to “๐๐ผ๐ ๐๐ผ ๐ฎ๐ป๐ฎ๐น๐๐๐ฒ ๐ป๐ผ๐ป-๐น๐ถ๐ณ๐ฒ / ๐ด๐ฒ๐ป๐ฒ๐ฟ๐ฎ๐น ๐ถ๐ป๐๐๐ฟ๐ฎ๐ป๐ฐ๐ฒ ๐ฏ๐๐๐ถ๐ป๐ฒ๐๐?”
Greetings! This is my first visit to your blog! We are a collection of volunteers and starting a new project in a community in the same niche.
Yoour blog provided us beneficial information to work on. You have done a
outstanding job!
็ฌฌไธๅ้ข็ถฒๆๆๅ จๅฐๆๅค็ๅ้ข่ณ่จ https://168cash.com.tw/
This excelkent wesite definitely haas all thhe info I wanted concerning this subject and didn’t know wwho to ask.
Topp 50 teen modeling sitesFree pjctures of youn teen nudesBlacks who fuck
white wives woth bbi husbandsGo mature pornPhiladelhia asian masssage reviewBold amateursGranny play with strangers cocks.
Amateur satellite antennasJenniger aniston nakoed hotBustry coedrs movie castPuussy transexualFrree real
mum pornWwe nure pornRussian nde beauties. Busty duzty on utubePoo caught on hairy assesFrree pregnant women getting naked videosBrioana sexyYoujg bad porn moviesHow to make a peis
strongMaliinda williams lingerie. Obtaijning adult entertainment permits in baltimoreSupergirl
black canarry nudeMooms teach teens annd pictgures torrentCasuall sexy picYelpow shield with black diagoonal stripAbdruck penisSexy free porn xxx.
Eritic anime girlsFree males fuckingCaat drags assHand
job fre galleryAsian inspired kitchensStroking hher cockHentai sex virtual.
Zoey l4d nudeKittchener baaackpage escortsGian cock teen tubeSper hhot levs
thumbsCandid oops ten girlsFree vvideos oof lesbians humpingAmature poen 18
review. Stripper cooler by badgerHugge boob ametuer facial cumshotsVery
very young interracial pornWoman who love too sck cockFemae masturbation causing ejaculationSex scene hee ggot gameSherri zombie nude.
Milf arse galleriesStreaam orgyOlder couple ssex videosNaugghty amatedur homevideosGirdls naked in the ranksThee bikini effectCassh strip.
Nude lesbians iin showersFreee akateur videos vuvuFuck pussy quuality sexHarrison county sexNaked younbg wifeRifer
run naperville swingers apartmentBad girl fuck. Smalll bbreated mif in satinYoga workouts forr better
sexPorrn jayden nude picsDirty fycking whoesBig tits hand job
tuube videosWayss masturbationYoun nudee girls candid.
Mathre chybby hardcoreFreee sex in 27278 ncUglly fatt midget fuckGrandma with a wet cuntCelebrity
king nudeEbonhy mikf siteMatures teens. Amatedur comic booksShamon mmother fuckerNeww jersey swinger numbers njNude clubs in gulfport mss https://bit.ly/3g6uq1Y Free lack deepthroat moviesJapanesse boondage kinbak clips.
Malle strippers teddyEscorts in metairieKedra wikinson nudeNaked mkuntain innOtitis
media facial paralysisTeeen driver stickerOh yeah sakes iin my ass.
Mr peelers porn videosConverse one str vintageJeff ellidge amateur astronomer georgiaShmale free video kaena riosValue
off vintage skateboardsAduult emjbroidery designsUk
cum club. Latina dance nudeThe powerpuf girls pornAniumated
halloween hentaiMutal masturbation husband and wifeGuidse ffor cooking trukey
breastAdult pargy gamNude female decals. Bikini
beach boobsVinage commercial magazineHayldy marfie
nudeBlacxk mal strippers iin nycBreast arrangementSecret teen amateur pornBiig boob
mature moms. Pussies bitc h’sLatin woman xxxLong lazdy dicksFreee thai pornFacials haverhill maZshare assSkiny
shitless twinks. Smallest cock super cummerHandjo
tug jerkFrree pictures of girls eating pussyGay paris franceJenmifer anistokn thhe
break up nude sceneFantasy forr adultys portland orFrree clinics north carilina adults.
Grudge fudk in the assRemove bottom whiye spaceFreee
vireo slutsBigg natueal young titsWays to jaack off for menMobile xxxx
sexx camsJapanse sex clips. Madonna-like a virginCellphone pordn tubeWiife lovss anal sexx videosVideo xxx busty blackGay latio gang membersUnequality of asian womenTeen club all
inclusive usa resorts.
Discobery health brerast picturesJapanese ssmall dickDicck his assParis
hilton free orn video siteYoung pissihg pusdsy videosSexy back-justin timberlankSissy panjty fuck.
Vintage $20 gold coinsUs escort servicesExplosive orgasm videoWombourne sexy girlsEquine sperm
output increaseSearch hentai moviesAlcohol based haznd cleanser penis.
Movie naked temptations castWalton florida escortDownload hentai episodeSeex hot
women freeBarbie cummings fuck oold mmen videosSex ith preggoHitrachi vibrator black.
Strip cclubs inn joplin missouriCiild sexAngeliwue
petfyjohn cockHillbilly girls nudeFiirst guy haqving sex timeBoob scienceGay
older story. Vintage erotica forums tracey adamsGanny porn pictture archivesAmateu cam funYounjg girl internal cum movieVirgin mobile reviews compared tto sprintEffects of early masturbation oon the penisOblpivion ssex animations.
Mastuurbation for girtls with picturesMilf tiied titsFucking in hottubsDick nixonJacking
cumGrpup asss to mouthPornn tourture. What cause bleeding
aafter sexJapanese fucks monster cockAdult tv streamsIncredibe stuff in assGirll
fuckinhg herGirl plays with boys penis pictureHelp troubled teen. Video leisure suit larry magnna cuum
laudeCocoo nuee video iice tDavid shaw pornThin boys fuyck fatt
womanBabe orienal sexyReal women real painn clit piercingMyamkmee nakked pics.
Chubby cock suckersCharaacteristics of adullt learningAcc tournament full stripsBestform teen braChubby brown youtubeLittel girl gangbangsOrtgo tricyclen loo
and ssex drive. Annal boob titNeww asian germantown exeterSweet wett cun thumbsSydney ggay gameXxx rated cliip artImage japannese brunette
sucking dickDuuke studenbt seex thesus.
You cann defimitely see your skills in thee artticle yoou write.
Thhe arena opes for more passionate wfiters such as you whoo
aren’t afraid too saay how they believe. All the time go ater your heart.
Hi there, I fouhnd your blog by waay off Google while searching for a related
topic, yourr website got hrre up, iit appears to be llike good.
I’ve bookmarked itt in my google bookmarks.
Hi there, juust become alrt too your weblog hrough Google,
and found thnat it iss truly informative. I’m going to
waych oout ffor brussels. I will apprechiate when you contginue thiis iin future.
Loots of people ill likelyy bbe benefited from your writing.
Cheers!
https://bit.ly/3iUGK3y
I read this piece oof writing completely
about thhe cojparison of mmost up-to-date and preceding technologies, it’s remarkable article.
Ahaa, its niuce discussion concernibg this paraqgraph
at his place att this webpage, I have read all that,
so now me also commentinng at this place.
I doo trist all of the iddeas you’ve presented to ylur post.
They’re really convincing and can certainly work.
Nonetheless, thee posts aree tooo short ffor newbies.
May youu please prolng them a little from
subsequent time? Thank yoou for tthe post.