Sunday, August 22, 2004
Charley and Chaucer
Last week hurricane Charley hit the USA causing billions of pounds of damage to coastline, homes and businesses.
The insurance bill will be huge, early estimates range between $15bn and $20bn. Chaucer, my second largest holding, will have to meet some claims from Floridans. Chaucer shares held steady at 44p before and after Charley wreaked havoc on the gulf coast - a reassuring sign the shares already trade at an excruciatingly cheap price.
Perversely, Charley's impact on Chaucer's operations may contain some positives, competitors capacity to write insurance will be hampered and customers' perceptions of risk will be raised. Geoff Miller of Bridgewell, a firm of city analysts was quoted in Investors' Chronicle with an upbeat prognosis:
There will be a negative impact on second-half earnings, but the effect on the insurance industry for next year should be to hold rates at a higher level than would otherwise have been the case
I remain confident in my Chaucer position but frustrated at the lack of progress. Maybe hurricane Charley will bring a silver lining, with events refocussing attention on this grossly underrated Lloyd's insurer and its peers.
Outlook for next week is encouraging, crude oil prices continue to break records on the exchanges. Dana Petroleum looks set to overtake Chaucer as second largest position in the portfolio. As the oil explorers and producers enter the earnings season, the market will hopefully re-rate these companies in the light of increased profitability.
The Artful Dodger
The insurance bill will be huge, early estimates range between $15bn and $20bn. Chaucer, my second largest holding, will have to meet some claims from Floridans. Chaucer shares held steady at 44p before and after Charley wreaked havoc on the gulf coast - a reassuring sign the shares already trade at an excruciatingly cheap price.
Perversely, Charley's impact on Chaucer's operations may contain some positives, competitors capacity to write insurance will be hampered and customers' perceptions of risk will be raised. Geoff Miller of Bridgewell, a firm of city analysts was quoted in Investors' Chronicle with an upbeat prognosis:
There will be a negative impact on second-half earnings, but the effect on the insurance industry for next year should be to hold rates at a higher level than would otherwise have been the case
I remain confident in my Chaucer position but frustrated at the lack of progress. Maybe hurricane Charley will bring a silver lining, with events refocussing attention on this grossly underrated Lloyd's insurer and its peers.
Outlook for next week is encouraging, crude oil prices continue to break records on the exchanges. Dana Petroleum looks set to overtake Chaucer as second largest position in the portfolio. As the oil explorers and producers enter the earnings season, the market will hopefully re-rate these companies in the light of increased profitability.
The Artful Dodger
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