Blanketstacker
03 Oct 2017
Re: Martin thinks .... But there have been two broker downgrades in the last week or so. Both give targets of 150. I am out for now, but will be back in in the 150s.
gamesinvestor
01 Oct 2017
Martin thinks .... It's Ok to invest and what's good enough for Martin is good enough for ....28-Sep-17 Aa AA. Clarke,Martin C 100,000 @ 1.66p £166,400.00Games -- will add to this "significantly" if there are further dips.
gamesinvestor
30 Sep 2017
Re: Reinsurance explained "given it needs to be lucky for at least another 10 years to reach my debt tolerance ratios."You mean lucky in the sense of not being exposed to a major underwriting loss (cxck up) or lucky in terms of maintaining it's position in breakdown which is 75%+ of the business.On the latter it seems fairly consistent."""" trying to make profits by risk underwriting is unwise, given their lack of data, cash flow, reserves and expertise compared to multiple established organisations. """>>>Perhaps the data is reasonably readily available and that some of the staff have the experience after working at one or two of the big boys, the cash flow at the AA is high.""""Maybe we are overthinking the relative risk on this small portion of their business, who knows?I'll collect the divi on the 5th and have a rethink on this but it does all seem to be in the price right now.Games
paddington_bear
30 Sep 2017
Reinsurance explained Page 97 of 134 in annual report states the company purchases reinsurance cover for motor.The reason is that AA is switching some of its car insurance from safe collection of brokerage fees from external insurers to setting up own in house underwriting in competition with the likes of Direct Line, Esure, Hastings, Admiral and some 100 other brands. To protect against major claims like a motorway pile up or liability judgements, standard practice is to limit any one loss to a small percentage of annual revenue by excess of loss reinsurance. I saw no suggestion they are acting as a reinsurer for which they would need substantial reserves and govt licences.That being said, imho to move from free money to trying to make profits by risk underwriting is unwise, given their lack of data, cash flow, reserves and expertise compared to multiple established organisations. Additionally, set up costs of underwriting and claims staff, building statistical database and refining risk selection/pricing are not cheap for a class where 10% profit would be a bonanza year. Conversely, a single adverse underwriting year can seriously impact cash flow.I had looked over this share in some depth recently, but concluded I wasn't going to vary my acceptance criteria, given it needs to be lucky for at least another 10 years to reach my debt tolerance ratios.Nevertheless good luck to all who participate.PB.
Recovery required
29 Sep 2017
Director buying Dr Martin Clarke, Financial Director, bought 100,000 shares in the company on the 28th September 2017 at a price of 166.40p. The Director now holds 1,090,105 shares.Good to s
Blanketstacker
27 Sep 2017
Re: Results Had a squint at the Annual Report. It is VERY yellow, and uses 'strategic' a lot. Neither are good things. However it seems the reinsurance element makes up about 0.18% of revenue. Hull KR are back in the Super League, by the way!!! Maybe that is an omen.
LK Hyman
27 Sep 2017
Re: Results Games,"should anyone be exposed to the big players like LGEN"Reinsurance is a game for the big boys. It's fine if you have plenty of capital backing (which LGEN does) but I wonder whether the AA is trying to play in the Premier League when it should really be in whatever league Hull Kingston Rovers plays in these days.I grant you that, if you look at the whole shine box ... the gestalt if you will ... reinsurance appears to be a small part of AA's business. However, when things go wrong, they can go wrong big time and quite suddenly.LKH on the flybridge proud LGEN shareholder
gamesinvestor
27 Sep 2017
Re: Results "LKH - is this a material part of their business? Not too familiar with it..."Given the insurance business is what 10-12% of the overall business, if you take away the 70+% roadside and the whatever % is the driving school.So the underwriting is a smaller % of the insurance arm which is mostly straight premiums (and risk) on the home and car insurance.On a scale of 1 to 10, it's gotta be about 0.5 at a rough guess, although there might be other aspects of underwriting leverage risk I am unaware of or not informed enough to comment on.Also if this is a concern at this small % of insurance, should anyone be exposed to the big players like LGEN; Aviva, RSA etc (non of which I hold)?Games
LK Hyman
27 Sep 2017
Re: Results Bill,"is this a material part of their business?"I'm not sure (I don't follow the AA as an investment in any detail) but it smacks of hubris for a small company like the AA to get involved in reinsurance which is a fine business (so I'm told) if you're a big company like Uncle Warren's but unsuited to a tiddler.LKH on the flybridge
Bill1703
27 Sep 2017
Re: Results "Three areas for worry are: Massive pension deficit... Large debt liability... Enlarged outlay on IT upgrade... more generally... PER = 6.5... Revenue steady... Yield = c5%"Blanket - I have detailed before my thoughts on why the pension deficit is almost a non-issue here (specifically)... in short, it is only an issue if interest rates and hence bond yields stay very low for the long term - and if they do, then this is a major help to the highly-leveraged financial profile. Plus, they are taking action now to mitigate the long term risks to this.I agree, the extended IT spend is a new "worry" - the only incremental one, really. It will delay the paying down of debt, to an extent, though it may well deliver longer term benefits. And it is an area where they are evidently distancing themselves from the competition.So for me, it really is all about the "large debt liability"... always has been. But as you say, revenues are steady, as are gross profits... meanwhile, cash conversion remains very good, and average debt costs are still coming down. Given the gearing in the equity valuation, I am not sure how meaningful traditional valuation metrics are here... but for me, it is the FCF yield (c.12% for each of last two FY) which is the most intriguing here - and which will likely be, if sustained, the real driver of the equity (significant) upside story."I'd add a fourth ... their reinsurance business. Can't put my finger on why it worries me.."LKH - is this a material part of their business? Not too familiar with it...
LK Hyman
27 Sep 2017
Re: Results Blanket,"Three areas for worry"I'd add a fourth ... their reinsurance business. Can't put my finger on why it worries me, but it sounds like a ratcheting up of risk; and not in a good way.LKH on the flybridge steering clear
Blanketstacker
27 Sep 2017
Re: Results Downgrade by Jefferies this morning, 'underperform' target dropped from 150 to 125.
Blanketstacker
27 Sep 2017
Re: Results All the top line figures are, very surprisingly, up. Three areas for worry are:Massive pension deficitLarge debt liabilityEnlarged outlay on IT upgradeMore generallyPER = 6.5Revenue steadyYield = c5%Credit Suisse gave a downgrade on 8 Aug, target 175 (which seems not unreasonable tome)Overall, I think there is now money to be made here now. Good luck to us all.
Blanketstacker
26 Sep 2017
Re: Results Yes, the results seem not bad at all, and certainly better than were generally expected. However there has been no substantial director buying in twelve months, and the short interest is c4%. I am crunching numbers now, but think we are at or near a buying point.
Bill1703
26 Sep 2017
Re: Results "Still - there is not a lot wrong with the results here either and everything seems to be sold off whether you do OK, badly or wonderfully -- it's a nervous market indeed."Right with you, Games...Results are fine for me - quite encouraging really, overall. Have just bought a few more at 152p... was holding off until today, as I suspected the immediate reaction would be down - whatever they came up with!Will follow up with any further thoughts when I go through the statement and figures in greater detail.
