I seem almost to be continuously buying insurance company stocks. This is scary to me if I think about it, since by no means am I an expert in any of the various insurance businesses in which I am now immersed. My latest find, in which I started a position Friday, is London Pacific ADR (LPGLY). Now this is a very interesting company from the perspective of looking at their business model --- and I fully admit that I'm at a point where the model is not really clear to me.
Here are some numbers which will get the stock to pop into a value investor's screen:
LPGLY closed at 15, in a yearly range of (roughly) 10-17.
According to the company, they earned $1.85 in '98. That's a
pe of about 8. They will pay a dividend they say of .928 in '99.
That's a yield of about 6%. Their stated book value is $23.44 per ADR share. So a p/bv of .63.
The interesting stuff can be got from checking the last couple of news announcements from Yahoo. Basically - and as seems to me -LPGLY is a company which does the vast majority of its business in the US. The management staff is located here too. They develop and manage fixed and variable annuity products which are sold through independent agents and through large brokerages. Sales have been generally flat ('98 over '97). Fixed annuities is not an appealing business to me. It's what they are doing with their "float" that is the kicker and the reason I started a small position:
I came across an article by William Nasgovitz - you will see it referrred to by somebody on the Yahoo msg. board - which caught my attention when I read "The firm has a venture capital division, which has invested about $100 million in nearly 15 technology companies." That's further clarified - only somewhat more - by the last couple of news releases from the company. As these companies - at least one of which might be an internet related business - come public, LPGLY intends to account for its investments by marking them to the market. Which means the potential for large swings in LPGLY earnings and stock price.
There's still a bunch of unknowns out there for me with LPGLY -- what exactly are those 15 companies, what commitments are required of LPGLY to get what benefits, when might such benefits be realized (IPO's?), what could be the future of fixed income annuities (what a lousy business -g-)--- and there's stuff I'm not happy about-- I missed the dividend, I'm coming into the stock at a relatively high price 15 above 10, I'm suspicious in general of off-shore centered 'insurance' companies of which I never heard, and probably I have more concerns if I thought about it. But the point is-- given the basic value numbers - there is a margin of safety (in my mind anyway) with an opportunity that the stock could actually perform well over the next couple of years - if someone could hold on to it. That would be my opinion anyway.
CAUTION: I have been VERY, VERY wrong on at least one other insurance company on which I've posted here before, and only less wrong on a couple of others.
Paul |
