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Cheap Insurance

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July 07, 2014 – Comments (1) | RELATED TICKERS: BCRH , MRH , VOYA

While the industry certainly faces some challenges, valuations in the insurance sector have dropped to an extremely attractive level.  I came across two relatively obscure companies in the sector that look interesting this weekend.

The first, Blue Capital Reinsurance Holdings (BCRH), trades here in the U.S. I came across the idea in an interesting write-up on the company over at Seeking Alpha by Maredin Capital Advisors.

Blue Capital is a new, small reinsurance company that is 29% owned and managed a successful company that I have owned stock in in the past and currently own bonds of, Montpilier (MRH). Most systems that report on this stock don't recognize that its Q4 dividend will be significantly larger than its dividends for Q1 through Q3. Blue Capital's actual dividend is currently around 12% annually, compared with the 6% and change that shows up on most screens,...while using no leverage. Add some leverage and it will be even bigger than that. If its underwriting is solid, and with MRH managing it there's reason to think that it will be, it seems almost certain to trade higher once investors realize how late its dividend is.

While there'sa lot to like about Blue Capital and Montpilier's involvement, one has to keep in mind that the company is externally managed.  It looks like MRH takes some decent sized management fees out of it and it will likely be in competition with it to some degree for deals.  On the plus side, MRH also has a decent chunk of ownership interest so it's not as if they want to completely gouge BCRH either.

Blue Capital Reinsurance Holdings Considerable Capital Appreciation And Yield Opportunity In New, Underfollowed Reinsurer

http://seekingalpha.com/article/2298605-blue-capital-reinsurance-holdings-considerable-capital-appreciation-and-yield-opportunity-in-new-underfollowed-reinsurer?ifp=0

In a way, the other insurance company is even more obscure than the aforementioned $170 million reinsurer in that it does not trade here in the U.S. The company is ING's recent spin-off NN Group (Ticker: unknown)

ING is being forced by its government to spinoff its insurance holdings.  This type of forced selling often leads to interesting bargains.  NN Group is now a public company trading on the on Euronext Amsterdam exchange. I came across a great write-up on the company on the excellent global investing blog Value and Opportunity in my ever widening search for global investment opportunities. I actually tried to buy shares last week but was thwarted by my broker's arcane Global trading platform. I have mastered trading on the Toronto Exchange but I could not figure out what the ticker symbol would be for NN Group. I may have to e-mail them later in the week to find out.

NN Group is super cheap.  Some of the financials look worse than they really are because it looks as though the company cleaned up its books before going out on its own and had a bunch of one-time charges related to pensions and other things. One metric that still looks very attractive is the fact that NN Group is trading at 0.5 times book value versus an average of 1.4 for its competitors in the insurance sector.

One really interesting comp is Voya (VOYA). It is an insurance company that ING also spunoff in its forced sale last March. It trades in the U.S. Its stock has doubled since it went on its own.

NN Group "Hands Off" IPO or Interesting Special Situation?

http://valueandopportunity.com/2014/07/03/nn-group-nv-hands-off-ipo-or-interesting-special-situation/

So there you go, two cheap insurance companies.  If anyone out there has any idea how to trade NN Group on a major broker or has any interesting investment ideas I'd love to hear them.

Thanks for reading.  Have a great day!

Jason

1 Comments – Post Your Own

#1) On July 10, 2014 at 5:09 PM, TMFDeej (99.24) wrote:

Here's why I was not able to figure out how to trade NN Group with my broker. 

"The ability to trade NN Group NV is not yet available in any XXXX account due to the U.S. Securities Act of 1933 which requires a forty calendar day waiting period for U.S. investors following a foreign public offering of shares. The IPO date for NN Group NV was July 2, 2014. Therefore, the first day these shares can potentially be traded is August 11, 2014. Once it is deemed available to trade, we can request that it be added for trading in the Global Account on a best efforts basis."

Interesting. I definitely had not heard that one before. You learn something new every day.  I'm going to keep an eye on NN with the potential to purchase it later this year.

Jason

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