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3#
发表于 2011-10-13 15:44
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Key: relationship b/w sustainable ROE and P/BV (ROTE and P/TBV, if you prefer) holds up over time. If you're not earning cost of capital, you get a discount to book value, which is the reality for most of the industry.
For P&C, the problem is it's hard to figure out what the true E and BV are from current loss reserves and risk exposures. Additionally, there's too much capital industry-wide, which depresses pricing to the point that most lines of business are not profitable. This is why you see consolidation and hopes that large loss events will take capital out of the system to see healthier pricing, i.e. a "hard market".
For Life, the business depends heavily on interest rates and the yield curve. Given the interest rate outlook, you should expect margins to get crushed and returns below cost of capital.
For Brokers, they are a more traditional cash flow business that depends on industry pricing environment to grow. Consolidation and growth into under-penetrated markets is story here. Valuation is P/E or EV/EBITDA. This is a more defensive place to hide out for financials investors when they are afraid of balance sheets. |
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