In times like this (periods of high inflation), you want to hold cashflow positive, capital-light businesses with pricing power. The first two are obvious (tick), but the 3rd is a little bit more nuanced for ENA. From my understanding, in the world of insurance, pricing power is all about premiums.

ENA's lines of insurance are primarily 'long tail' (particularly the Australian business) and typically reflective of the state of an economy. Thus, where the cost of living increases alongside interest rate and fraud increases, people become more litigious.

As a result of this, loss ratios tend to increase, which means insurers offering long tail products will increase their premiums. This benefits ENA because as a managing general agent (MGA) the company is paid a commission based on a percentage of total gross written premiums (GWP).

This is quite a unique situation — rising premiums benefit ENA but increasing loss ratios do not hurt ENA (because as an MGA, ENA doesn't pay claims and thus does not carry any of this risk).

Where's the catch? The main risk of increasing loss ratios under an MGA model is that the capacity behind ENA (the insurer) needs to stick around and be a willing market participant through the cycle. This is why ENA's recent 3-year agreement with Liberty is so important.