Lancashire Share Discussion Threads

[hooley] 01/12/2014 22:34

jonwig 478: ADVFN usually guesses wrongly! How would you know? My trades always appear and are invariably right. I've been retired from the market for 20 years and must try and keep up with events. Thanks anyway for your indulgence.

[hooley] 01/12/2014 22:34

jonwig 478: ADVFN usually guesses wrongly! How would you know? My trades always appear and are invariably right. I've been retired from the market for 20 years and must try and keep up with events. Thanks anyway for your indulgence.

[effortless cool] 01/12/2014 21:30

Woodcutter re 474,

"This is now beginning to move into a price range where it would become an attractive take over target".

To whom do you think it would be an attractive takeover target and why?

I don't see it, myself.

[jonwig] 01/12/2014 19:29

Hooley - don't be taken in by reported trades on any site.
The LSE does not report a trade as B or S, but sites such as ADVFN guess, and usually wrongly.
Today's trades are mostly "AT", ie from the SETS order book and not via any market-maker. There is no "marking down",
An AT trade is in any case simultaneously a B and a S.

I must say, I thought you would know all this.
It would be better to look objectively at the situation rather than apply "confirmation bias".

[hooley] 01/12/2014 18:49

For what it's worth, there was a net sale of under 2000 shares today and the shares have been marked down by over 4%. Make of that what you will, though the mms seem to want them down. Net of the 75p special the shares, which went xd on 27/11, are now down over 6% on virtually no net selling. Anyway, I bought some more to average down.

[salpara111] 01/12/2014 18:33

Did I miss something?
Mighty close to 500 again.

[keith95] 01/12/2014 18:22

..grabbed some at 535 and 525 today ... surprised by 515 but will try and release some more cash tomorrow.

GLA.

[woodcutter] 01/12/2014 17:40

This is now beginning to move into a price range where it would become an attractive take over target.

aimho woody

[hooley] 01/12/2014 13:46

Given rates are still soft, I calculate that there will be another special this year, perhaps as much as 75p a share. Operating cash flow will be the decider, though it would require £280m and an extension of the trend in u/w rates. It's worth noting that net quick assets amounted to 320p a share at the last b/s and that this is a short-tail underwriter.

[salpara111] 01/12/2014 13:17

Still think that it is good value but bloody glad that I sold before it went ex divi.
The market really hates a company that says "We would rather have a smaller well run profitable business than, we are going to grow the business at ever smaller margins because top line growth is all that is important."
If it hits 500p then I will buy my stake back again as it will most likely yield over 12% in the coming year and that is just mental.
The share price fall suggests that they are going out of business.

[hooley] 01/12/2014 09:11

They've been generating an annual operating cash flow of at about 100p a share, which has been returned to shareholders by way of specials. In 2010 they paid out a special of 140p, the ocf generated. The equity base hasn't shrunk at all. When the tide turns, the 'surplus' cash flow will be retained to broaden the equity base for writing sufficiently profitable business. Note the correlation between ocf and specials.

No, it was my computer, not my finger!

[jonwig] 01/12/2014 08:01

Hooley - fat finger last night?

The problem with returning so much capital (not to mention share buybacks) is that they won't have the firepower to write new lines when the underwriting cycles do change. Warrant conversion won't be enough (and will dilute existing holders) and taking on debt is the opposite of what they should be doing there.

Or maybe they just feel they are around an optimum size already.

[hooley] 30/11/2014 22:16

Take a look at the shareholders list. Top quality names and half the shares are held by 9 institutions, including Woodford. The 75p special alerted me so I did some homework and then bought some.

[hooley] 30/11/2014 22:16

Take a look at the shareholders list. Top quality names and half the shares are held by 9 institutions, including Woodford. The 75p special alerted me so I did some homework and then bought some.

[hooley] 30/11/2014 22:16

Take a look at the shareholders list. Top quality names and half the shares are held by 9 institutions, including Woodford. The 75p special alerted me so I did some homework and then bought some.

[tipjunkie] 30/11/2014 17:20

from galvan

It’s hard to get a decent income from investing right now. In the UK, saving accounts offer barely 1% interest. And rising property and share prices have driven down yields. However, with a bit of digging you can still find some high yield opportunities. One that’s caught our eye is Lancashire Holdings

(Lancashire). Lancashire is one of the most successful specialist insurers on the London Stock Exchange. It provides insurance in areas such as property, aviation, marine, energy and terrorism. Insurance is a cyclical industry, meaning it goes through periods of rising rates and falling rates. Lancashire approaches these cycles in a disciplined way. Effectively, when rates are high, the company writes more business and when rates are low (like now), they write less. Unlike other insurers, Lancashire’s priority is profits not growth. This can be clearly seen in its combined ratio; which measures the cost of claims relative to the premiums collected (the lower the better). Lancashire’s combined ratio over the last 5 years has averaged 59.2%, miles better than the 90.4% average of its peer group. Because Lancashire’s underwriting is so much more profitable, it can take a very conservative approach to investing. The majority of its premiums are invested in cash and low-risk bonds. Another important factor in Lancashire’s business model is that it has a strongly diversified portfolio with no reliance on a single source of revenue or
profit. Reinsurance is also used as a way of keeping exposure limited to any particular geography or insurance class. These differentiating factors have enabled Lancashire to offer a very generous dividend policy. Each year it pays out most of its profits through dividends, via a steady regular dividend and a variable special dividend. The regular dividend has remained at 15¢ (around 10p) for the last 5 years, which is OK but nothing to get excited about. However the special dividends have been huge: 110¢ in 2008, 125¢ in 2009, 140¢ in 2010, 80¢ in 2011, 195¢ in 2012 and 65¢ in 2013 and 120¢ in 2014. To put that into context, a total dividend pay-out of 135¢ (around 86p) in 2014 puts the shares on an astonishing yield of 13.8%. This is not a freak year either. The average dividend yield on the shares over the last five years has been more than 10%. Sure, the special dividend varies year-on-year, but it allows Lancashire to maximise the pay-out by taking into account its current needs. Interestingly, when you run a search across the FTSE for high dividend yields, you won’t see Lancashire come up. That’s because screening software ignores special dividends. So Lancashire’s massive dividend pay-outs remain a bit of a secret. Overall, Lancashire is a high-quality insurer that has a great track record of paying its shareholders big dividends. As an income stock, it’s hard to beat.
Galvan Research and Trading is authorised and regulated by the Financial Conduct Authority no. 401179 1
S H A R E T I P S O F T H E Y E A R 2 0 1 5

[hooley] 30/11/2014 17:01

Add back the 425p paid in specials in past 5 years and the shares are at a discount! As long as the u/w rates remain soft, so will the coy pay back the surplus capital. Operational cash flow has been positive since the launch. For those who take a long view this counter looks suspiciously like a win-win situation.

[hooley] 30/11/2014 17:01

Add back the 425p paid in specials in past 5 years and the shares are at a discount! As long as the u/w rates remain soft, so will the coy pay back the surplus capital. Operational cash flow has been positive since the launch. For those who take a long view this counter looks suspiciously like a win-win situation.

[jonwig] 29/11/2014 09:58

Premiums to NAV at 30 June (dividends since then added back):

AML ... 36%
BEZ ... 88%
BRIT .. 42%
CGL ... 27%
HSX ... 67%
LRE ... 27%
NVA ... 22%

LRE has lost its premium rating in the sector.

[jonwig] 28/11/2014 14:33

mayzerg: Catlin is a full position, working on Admiral / Amlin / Beazley / Phoenix Group

You've four general insurers and one closed-book life assurer. Chalk and cheese?

[jonwig] 28/11/2014 14:32

EC - thanks post #456.

Brindle - RNS re retirement seemed OK to me, but, hey, I don't know the chap.

Question - if they had "strange" accounting/internal compliance policies, would they really buy back their own shares on a virtually daily basis? The buybacks seem to have been far bigger than warrant exercise obligations.

And - following Hooley's point, return of capital to shareholders doesn't square with gung-ho approaches.

[effortless cool] 28/11/2014 13:30

Hooley,

Yes, I agree, that is extraordinarily good.

[hooley] 28/11/2014 13:21

475p returned to shareholders in 5 years and still profitable without scary gearing. I like it. Last b/s showed 400p in net worth and cash generation of over 100p a share.

[hooley] 28/11/2014 13:21

475p returned to shareholders in 5 years and still profitable without scary gearing. I like it. Last b/s showed 400p in net worth and cash generation of almost 100p a share.

[mayzerg] 28/11/2014 13:11

I'm currently building my positions in the Insurance sector.

Catlin is a full position, working on Admiral / Amlin / Beazley / Phoenix Group.

Avoiding Brit / Lancashire Holdings for the time being, I feel the massive yield will add to the value trap and catch a lot of people out.