2016 was the best of times, it was the worst of times, just like 1990 was 26 years ago! All our insurance groups had combined ratios below 100%, we had operating income in excess of $1 billion and we announced or completed several acquisitions, including Allied World, a transformative acquisition for us! Unfortunately, the presidential
election on November 8, 2016 changed the world for us, so we reacted quickly by removing all our index hedges and some of our individual short positions and reducing the duration of our fixed income portfolios to approximately one year – all of which resulted in a $1.2 billion net loss on our investments in 2016 which, in turn, resulted in a loss
in 2016 of $512 million or $24.18 per share. Book value per share was reduced to $367.40, a decrease of 6.4% adjusted for the $10 per share dividend paid in 2016. This was the fourth loss we reported in 31 years. More on all of this later.
Since we began 31 years ago, our book value per share has compounded by 19.4% (20.2% including dividends) per
year and our stock price has followed suit at 18.6% per year. Here’s how our insurance companies did in 2016:
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