The earnings at ORH are great - just fabulous - but some operating metrics are not as nice as I would like. Here are a few.
The GROSS WRITTEN PREMIUM in the Quarter was 681 million. In the third quarter it was 702 million. They wrote less business. Why?
It was not seasonal - in the previous year they wrote more business in the fourth quarter. Surely the rates haven't turned enough yet to make them want to write less business (they are writing at a good profit so that can't be the reason). So why are they writing less business?
The fall in net written premium was even sharper quarter on quarter. In the fourth quarter they purchased 142 million of reinsurance versus 121 million in the third quarter. So not only did they write less business they kept even less of it. This again is not seasonal - and it is strange.
The business acquisition costs in the fourth quarter were 129 million. They were 113 million in the third quarter. They went up. Nah - they went up EVEN THOUGH THEY WERE WRITING LESS BUSINESS. This is not a good trend - shrink your business and pay the brokers more for it. Or is the business acquisition cost written off DAC - in which case the same comment applies.
The other underwriting expenses - which are effectively ORH's internal costs - are also up in the quarter - they were 29 million versus 26 million. So the sheer cost of running ORH increased. Again this is a metric that sucks when you are writing less business...
Now the only way this squares is either (a) the reinsurers are taking a huge loss on business with ORH or (b) the current year loss pick is dramatically improved - in which case I will not hold much faith in the 95.
There is good news though. The total equities held in the company went up 200 million AT COST during the quarter - and Prem has made good gains on this. Prem is a good stock picker so I wish I knew what he is buying. Sure sounds interesting to me.
I wonder if the total equities exposure of FFH has risen by a similar proportion - if so Prem has been buying many many equities in the last quarter. Wish I could find out what they were.