Wednesday, July 14, 2004
Lloyd's insurers: Buffett joins the table
I'm not alone in seeing value in the Lloyd's insurance sector. Warren Buffett, the billionaire investor controls a 25% stake in Capital Insurance Holdings via Berkshire Hathaway, the company he runs.
Capital Insurance plans to acquire smaller listed Lloyd's companies, consolidating their insurance operations to maximise profitability. Capital Insurance plans to raise £125m to achieve this, taking their own market capitalisation to £134m. Investors today speculated SVB and Goshawk were Capital's most likely targets, chasing the shares up 4.4% and 6% respectively. Chaucer advanced 1% on large trading volumes whilst the larger players in the sector remained unimpressed. The financial clout of Capital has caused a nodding appreciation akin to the arrival of a tray of raisined flapjacks at a WI get-together rather than the ecstatic frenzy a quartet of Chippendales would receive.
Ambitions towards a shake-up in the sector began to look less feasible as the day progressed with market commentators revealing the obstacles such action would face:
Previous attempts at merging Lloyd's insurers have been dogged by clashes between strong-willed individuals and the departure of highly skilled underwriters, who can easily take their skills elsewhere.
Lloyd's insurers don't enjoy the same money-savings industrials or banks get through merger, nor do they suffer the conceit prevalent amongst retailers seeking international high street hegemony. Lloyd's insurers thrive operating in niches they have the time and expertise to exploit.
Though today's news from Capital Insurance won't light a firework under the sector, I welcome the publicity the companies are receiving. This area of the market contains some very tempting valuations, a rerating might benefit Chaucer Holdings, my second largest holding after Ben Bailey.
The Artful Dodger
Capital Insurance plans to acquire smaller listed Lloyd's companies, consolidating their insurance operations to maximise profitability. Capital Insurance plans to raise £125m to achieve this, taking their own market capitalisation to £134m. Investors today speculated SVB and Goshawk were Capital's most likely targets, chasing the shares up 4.4% and 6% respectively. Chaucer advanced 1% on large trading volumes whilst the larger players in the sector remained unimpressed. The financial clout of Capital has caused a nodding appreciation akin to the arrival of a tray of raisined flapjacks at a WI get-together rather than the ecstatic frenzy a quartet of Chippendales would receive.
Ambitions towards a shake-up in the sector began to look less feasible as the day progressed with market commentators revealing the obstacles such action would face:
Previous attempts at merging Lloyd's insurers have been dogged by clashes between strong-willed individuals and the departure of highly skilled underwriters, who can easily take their skills elsewhere.
Lloyd's insurers don't enjoy the same money-savings industrials or banks get through merger, nor do they suffer the conceit prevalent amongst retailers seeking international high street hegemony. Lloyd's insurers thrive operating in niches they have the time and expertise to exploit.
Though today's news from Capital Insurance won't light a firework under the sector, I welcome the publicity the companies are receiving. This area of the market contains some very tempting valuations, a rerating might benefit Chaucer Holdings, my second largest holding after Ben Bailey.
The Artful Dodger
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