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Shore Bancshares, Inc. Message Board

bobby2loaves 2 posts  |  Last Activity: Jul 23, 2014 7:49 AM Member since: Apr 19, 2008
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    On TRVs Lame 2Q14

    by bobby2loaves Jul 22, 2014 8:30 AM
    bobby2loaves bobby2loaves Jul 23, 2014 7:49 AM Flag

    Right. I guess we might also see companies fighting for any good business to write, which would drag down P&C business lines as well. I noticed in TRV's presentation that Business Insurance rates continued to grow more slowly this quarter, now down to 3-5% increases, after having been at 6-8% last year. Combine that with the fact they 2Q14 business division just had a combined ratio of 99%, and I'm not sure why these guys are so happy about their business segment.

    Listening to TRV on their call is way less straightforward, and less optimistic, than WRB. When asked why they didn't write more in their business segment, if it was so great, these guys danced around like they were being chased by hornets. Also, they basically have resigned themselves to a 12% ROE target due to lower interest rates.

    I guess until we get Bill's "unforseen event", whether it be a hurricane, bond crisis, or plain old inflation that deals a crushing blow to the under-pricers, we are going to have to plod along, relying on WRB's superior model to make a decent return in an indecent marketplace.

  • bobby2loaves by bobby2loaves Jul 22, 2014 8:30 AM Flag

    I like to pay attention to what TRV says in their earnings report. It comes about a week before WRB, and their commentary on their business unit usually gives a glimpse into WRB's results ahead of time.

    Well, TRV just missed the quarter after a year of huge beats. Their EPS of $1.93 missed estimates of $2.07, despite buying back 3% of the float this quarter. They blamed the miss on Midwest weather.

    With that said, the one bright spot in the report was their Business book:

    "In Business Insurance, the cumulative effect of the price increases we have achieved over the last several years, combined with our highly analytic approach to risk selection, has resulted in a product portfolio that is achieving meaningfully improved and attractive returns."

    I expect WRB will trade down today in sympathy with TRV.

    But to me, this is a good setup for WRB: a solid business rate environment with soft pricing in other areas keeping upward pressure on rates across the board, so that companies can keep their heads above water.

    Maybe this is the kind of thing Bill was talking about on the last con call when he said the "Differential between good and bad areas have never been greater." I doubt he wasn't referring to the personal lines that affected TRV this quarter. But the dynamic may be the same: If only a few select lines of business are working for companies, it would be suicide to start a bidding war on those as well.

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