I have beeen buying a few shares of a company called Unico American Corp. (UNAM) Some of you may recall that Archie Mcallaster mentioned this in Barron's, perhaps in the yearly roundtable. He said that last year, the chairman wanted to sell, but couldn't get it done. But its likey he will eventually sell the company one day, but not in this nasty envoironment.
This might be classified as a micro cap stock. It is a small insurer, with only 6.3 m shares out, trading at under $7.50 today. Book value is about $8.50 per share. So it is small, but high quality. The chairman isn't choosing to grow in this environment. Rather, he wants to maintain a positive underwriting margin. So premiums are falling. But about 14% of the company's revenue seems to be fee based, as the company owns a small agency and an adjustor. In good times, this makes for a highly profitable company, with pretax profit margins in the 26% range (1998).
As many of you know, this year has been one of the worst years for insurance companies. Even so, UNAM will likely earn over a buck in 1999. Keep in mind, things can go very wrong with insurers, and "bad things" seemed to happen to this company in 1992. But it bounced back quickly.
Last year the company earned 17% on average equity. Selling under book today, were it to earn 17% again, YOUR return on equity is over 20%. With an earnings yield of 14% to 15% at today's price with excellent economics, I think UNAM is worth a look.
As an aside, the lates proxy shows that Gen Re was a significant holder. |
