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Strategies & Market Trends : Value Investing
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To: Thomas Haegin who wrote (2708)12/9/1997 9:08:00 PM
From: jeffbas  Read Replies (1) of 78542
 
I will address your question as best as I can.

There is a long history in the Multiple Employer Trust (MET) market
of very loose affinity groups being set up by shady characters who charge too low rates and set up too low reserves. Huge volumes of business get written before they get caught. These kinds of outfits
usually go out of business, only to appear under some other name somewhere else.

I believe that OXHP is a real company that (based only on reading the thread) has doctor/supplier networks that patients like. They have an advantage of size that their competitors do not. Assuming that they
do not pay their networks much different amounts than their peers,
they should be able, with competent mgmt and actuarial staff, to develop a pricing structure that is higher than they now charge but still less than their peers. They need to also do some intelligent damage control to help retain existing customers and do the best they can with new ones (as I noted on OXHP thread).

If the premises in the preceeding paragraph are correct, which they may not be, and if mgmt executes well (a tough assumption to make
under the circumstances), and was just stupid (not crooked), I would expect the company to survive. It might well be a smaller company, depending on how many customers are moved by brokers/consultants and how much new business falls off. I doubt that OXHP would make over $1 per share any time soon (unless they overstated the reserve increase and feed back the eventual excess into earnings) or carry a rich P/E. I also am skeptical that anyone would be interested in buying the business at this time, when I would consider it to be unstable.
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