Goshawk Insurance Share Discussion Threads

[alexandrews] 24/10/2005 09:44

2magpies,

Thanks for that. So, in summary, would it be fair to conclude that realistically speaking GoshawK is currently worth less than 3p/share?

BTW, point 4 was pretty much my take on the announcement too.

Alex

[2magpies] 24/10/2005 09:36

AA

Points to ponder:

1. Commission on renewal business

This business does NOT 'belong' to Rosemont, but to the actual buyers (Ins and Reinsurance entities, i.e. institutional buyers). The buyers can place it where they want (it would consist mainly of 12month, renewable contracts anyway.

Now that Goshawk has gone public with the fact that there is an 8% commission involved, when the New Company (NC) quote for renewal, savvy buyers will negotiate, knowing that NC is building in a 'commission' factor in their price. Therefore, it may find it difficult to attract the business anyway, unless it is a distress buy.

Therefore this part of the deal may turn out to be a red herring anyway (because NC has no incentive to 'renew' -- besides its not that difficult to make renewal business look 'new' and therefore not be classed a 'renewal'). In the hardening market there ought to be plenty of attractive business that is 'new' and there is no need to renew stuff (there is no obligation), especially if you have to pay 8% commission.

2. Quality of business.

Wasn't it the quality of the very portfolio (plus, perhaps the insufficiency of reinsurance &/or frequency of large claims), that led to Rosemont's demise? So why should NC renew it?

3. Residual value of Run-off portfolio.

There could be value here, but it will be a very long wait. Can take years for evrything to disappear. No doubt there will be vigourous commutation discussions, but again, it is likely to be a long wait.

4. The deal.

It appears to me that all that's happened is that NC have acquired an intact infrastructure, so it can start business immediately (not wait for premises/staff recruitment/equipment etc), and take excellent advantage of the rapidly hardening market - something, alas that Goshawk would dearly liked to have done.

All imho.

[alexandrews] 24/10/2005 08:07

OK, time for the industry experts on this thread to offer an interpretation, if they would be so kind, on this morning's announcement which includes the following statement:

"It is intended that the Investors will pay Rosemont Re a fixed up-front payment
of approximately US$2.5 million for its existing infrastructure and 8%
commission payments based on the renewing Rosemont Re business as it is bound by
the new reinsurer in 2006. There is no certainty as to the amount potentially
due under these commission payments, but the Directors anticipate approximately
US$4-7 million may become due."

Does this mean that GoshawK are expected to receive $6.5-9.5m (~£3.7-5.4m) in cash for Rosemont Re? On an issued share capital of 173,135,130 that would equate to ~2-3p per share. Is there any further value to GoshawK besides this amount?

Alex

[effortless cool] 22/10/2005 10:33

So the downgrade has come at last, and it's a big one - A- to B. The negative outlook remains as well.

Any downgrade clauses will be triggered now, meaning that Rosemont will have to return premium in these cases. (I don't know if Rosemont's exposure to these clauses is material or not).

I suspect that Paddyfool's estimate of value at less than 5p is about right.

[shirishg] 20/10/2005 23:51

Post removed by ADVFN

[jsaleem] 20/10/2005 08:56

Geenpastures and Paddyfool - thanks for your opinions.

[paddyfool] 20/10/2005 07:22

also the net asset value is clearly way below 55p with the utimate nav on six months projection likely to be under 5p. Losses for the recent Hurricanes are now withour ri protection.

[greenpastures] 19/10/2005 20:09

It has failed to raise new capital saleem and that was the major caveat in the Telegraph piece and now it has been downgraded by A M Best which means it is unlikely to be able to insure new business.

[p@] 19/10/2005 15:47

HURRY HURRY PUT YOUR MONEY IN NOW LOOK AT THE HIGH RATES YOU GET!
Institutions never learn with other peoples money.

[jsaleem] 19/10/2005 13:09

Reference to my posting yesterday, I am almost sleepless having yesterday bought GOS at 14.5 p (just under 80,000 shares) - and since seiing the share price price to fall to 10p earlier today. There is one major issue that I am trying to assess "Can Goshawk survive especially with more huricanes expected ?" if not I am doomed. Surely this is the only question now. I honestly think I have made a mistake buying this share - but I'm going to hang on for now after seeing an OLD news/tip story below. Small investors like me could buy/sell this share but one huge sell trade by one of the big holders could kill this stock if they decide to dump.

In my opinion there's a lot of bull discussed on this BB !


Source: Telegraph - 16-Sept-2005
Shades of ugly duckling in Goshawk story

Just why would anyone invest in Goshawk?

The insurer, which used to be a Lloyd's of London vehicle but now operates out of Bermuda, managed to lose money in the first half even before it has taken claims from Hurricane Katrina. With a potential loss of $25m to $30m to come, things look anything but happy.

Add in the fact that the company was kicked out of Lloyd's, has been losing money like it is going out of fashion and will need an injection of fresh capital, and the situation does not look very pretty. Dividend? It does not pay one.

There is, though, another way of looking at things. Goshawk's shares closed at 34¾p yesterday but it has a net asset value per share of 55p. That is a substantial discount by any measure.

Plus, Goshawk these days is a pure reinsurance play and, thanks to Katrina, rates are poised to go through the roof. If it can weather the storm, it is just possible that the company could find itself looking at a very attractive market.

Of course, it has to get the capital raising out of the way first. Part of the reason for the discount is that this may involve some form of equity issue which will dilute existing shareholdings.

This is not a stock for the faint hearted and, given its history, is tough to view with anything but scepticism. However, there is potential there for those willing to take a gamble and they could find themselves richly rewarded for the risk they take. That said, it is a gamble and risk averse investors should avoid Goshawk like the plague.

[2magpies] 19/10/2005 08:45

The renewal season approaches.

Clients will simply not renew with Goshawk, and go elsewhere.

Instead of buying the 'portfolio' -- which is going to walk anyway -- wouldn't it be cheaper for new capital to set up an entirely new outfit (without the run-off millstone) and simply recruit the Goshawk staff?

What would be the value of Goshawk then?

[alexandrews] 19/10/2005 08:35

RNS from GoshawK this morning saying that AM Best have downgraded them to B with a negative outlook, and this will likely necessitate that Rosemont Re will go into run-off.

Alex

[mr ashley james] 19/10/2005 02:36

deleted.

Who is the Broker BTW?

[ct98] 18/10/2005 18:56

I think Ashley knows how to pick winners.











LOL

PS Watch SEO go - his latest hottie(sic)!

[alexandrews] 18/10/2005 18:22

marksp: I have seen people come out with all sorts of reasons as to why TA doesn't work for a variety of securities and markets. The simple fact of the matter is that, applied correctly (no mean feat), it does, and a person will either accept that or not.

aidypiper: Of course it can.

Alex

[aidypiper] 18/10/2005 18:10

Can this go down anymore

[p@] 18/10/2005 17:15

Pehaps its time for GOS et al to come out with the usual insurance cap in hand saying "put your money in now ,you can't lose, the rates are so high"

[ursus] 18/10/2005 16:57

is this still a good buy, ashley?

[marksp] 18/10/2005 16:54

I must admit, I have always struggled with the idea of TA on underwriters/reinsurers as financial charts have no risk variables and camnnot reflect the degree of RI being carried

[alexandrews] 18/10/2005 15:26

handycam,

I'm still none the wiser regarding your Hiscox comments. Their latest RNS stated that they estimate the net costs of Katrina and Rita to be ~$180m. Are you saying that their net costs will in fact be 3 times this amount?

Alex

[ursus] 18/10/2005 11:42

i'm with alex on this, handycam. are you pointing out that the hiscox s/m doesn't reveal the gross position? perhaps i've been thrown by your contrasting hiscox with brit, which to my mind has made a real mess of its forecasting - see their original loss estimate for katrina on the basis of their rds work, which has been exploded by later developments.

and well done to the goshawk shorters. the opportunity even in the last week or two after the revised loss estimates was in retrospect a fantastic one - and of course one i didn't take because the price rose mysteriously during the day, which made me think someone was interested in the wreck.

[alexandrews] 18/10/2005 11:09

Sorry, I must be being thick - can you explain?

[handycam] 18/10/2005 11:07

Simple. Hiscox is telling you only one third of the picture.

It does seem Wilma might really be the death knell of GOS this time around.

Yours etc.,