P&C Insurance Economics 103.1: P&C Insurance, inflation and higher rates

P&C and especially Auto insurance companies’ earnings get pressured by higher combined ratios driven by claims inflation. As some central banks raise interest rates to tackle inflation forward investment returns support earnings and returns on equity. Higher investment income might increase competition and pressure underwriting margins further.  …

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Relationships are the most important thing in life! Value investors care about the price-value relationship!

Last year, many of us have experienced that living our lives without other people is pretty dull. And hopefully 2021 will bring back all the strongly missed personal interactions! Many of us want nothing more than to do all the usual things taken for granted: visit restaurants, having a drink or two, going to a party and on vacation, or just spending time with people you like. Relationships are key!

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A General Risk Framework

According to academia, the cost of equity can be calculated using the CAPM, a central model to modern financial theory. But even Damodaran critizes this as a statistical approach usually considered too narrowly. Damodaran tends to and recommends to think about business risk in a more general sense first, without applying sophisticated and data-heavy statistical methods (which might have its place).

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My initial Thoughts on Competitive Advantages and Economic Moats

Moats were useful in ancient times to defend a castle from adversaries. It is defensive work that makes it harder for attackers to infiltrate the caste. (Economic) Moat is an expression used in the domain of value investing describing specific features protecting a business from competitors.

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The Importance of Position Sizing and Trade Execution Rules – Have You thought enough about it?

Risk management needs strict rules. To limit potential harm from our emotions, errors and bad luck, the introduction and adherence to specific position limits and execution rules are very important. I am going to discuss some rules you might find useful below …

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Am I a Gambler🎲? And Striking Similarities between Gambling and Investing!

During the current corona crisis I interpret the ongoing social distancing measures quite strictly for myself. Meaning, I have not meet friends for dinner or for a drink or anything else (besides for a running) in real live for a few weeks now and! it! sucks!. So, I had to come up with a better solution for my evenings than watching TV each day …

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DCF Valuation Framework

This post describes the handling of leasing liabilities and leasing expenses wihtin the concept of discounted cashflow or DCF valuation. It is a follow-up post after IFRS 16 – Leases and What is Debt?, answering the question of How to Capture Lease Payments into Perpetuity. But first, I do a quick Introduction to DCF Valuations to get a better understanding of the topic.

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What is Debt?

As announced in my previous post about IFRS 16 Leases, this follow-up post dicusses the question of What is Debt? . First, I describe common Features of Debt and Leasing Liabilities as well as answering Why to treat them as Debt. Then I discuss What Items to include in Debt and How to calculate Net Debt. Finally I give a Summary of the article and an Outlook on a further follow-up post discussing How to incorporate Net Debt within a DCF Valuation.

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IFRS 16 – Leases

As more and more financial reports discuss the topic of IFRS 16 – Leases adoption and how its affects their reporting, I decided it is time to get a better understanding of the scope of IFRS 16 and how it affects reporting items within Balance Sheet, Income Statement and Cashflow Statements. In conclusion, I am going to describe some effects on Financial Ratios as well as giving an outlook on implications on Net Debt and Valuation Concepts.

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