Catastrophes come in clumps. Part of that is the correlatedness of weather. When disasters are occurring, it may pay to wait until the season is near its end to buy reinsurers. Who can tell what additional losses will arise in a year where losses are shaping up to be bad?
When there have been many tornadoes, and powerful ones, there are often many hurricanes, and powerful ones. Wait to see if the hurricane season has some punch, and if it does, wait until October to buy BRK or other reinsurers.
If the season doesn’t have punch, start buying a little in late August or early September, and complete the job in October.
Don’t get me wrong, I like BRK, and would buy it at book value, or near it. There are many other pure play reinsurers I might buy instead, if they survive the hurricane season. They would have much more upside. But in a really bad scenario, after the damage, BRK would be a low risk bet. In 2005 as the last hurricanes were hitting, I urged my boss to buy BRK — they would be the last man standing in reinsurance. And indeed BRK moved steadily up from there, without us.
BRK is much more than a reinsurer, but reinsurance will be the main focus for the next four months, so be aware…
[...] Is Berkshire Hathaway (BRKB) stock trading at a modest premium to book value a bargain? (WSJ also Aleph Blog) [...]
[...] Is Berkshire Hathaway (BRKB) stock trading at a modest premium to book value a bargain? (WSJ also Aleph Blog) [...]
[...] Is Berkshire Hathaway (BRKB) stock trading at a modest premium to book value a bargain? (WSJ also Aleph Blog) [...]
What about AIZ? Same story?
You wrote about AIZ a few months ago. Since you wrote about it, I have either held it and sold OTM next month calls, or been out of it selling OTM puts. It has been a very good run so far. The last put I sold just expired worthless. I am now looking to sell June 35.00 puts for 1.00.
Any thought? Your BRK comment has me thinking about AIZ impacts…
AIZ is different. They usually buy more than adequate reinsurance, so I am not worried about them.