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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (55382)	5/31/2015 2:21:00 PM
From: E_K_S	Read Replies (1) \| Respond to of 78748

Re: Baldwin & Lyons Inc. (BWINB) A quick check of the ADVF database for BWINB shows their total Assets growing. Not sure if this is due to gains from investments specifically from the stock market. As a result, their BV last 4 years is 30% higher. --------------------------------------------------------------------------------- I have little experience evaluating insurance companies and do not know how to analyze their risk/exposure from their book of business. It appears that the market has discounted that based on the current stock price. My simple observation is the growth is their asset based may/could be due to the growth of their investment portfolio and if/when there is a market correction, that could be reduced but not by the 30% gain from the last 4 years. Maybe one wants to look at their Operation Ratios specifically ROIC (Return on Capital Invested): ROIC looks pretty good except for 2011 which hurt their 5 yr average. (Note: Something must have blown up in 2011 and/or a liability claim and/or asset write down and/or policy payoff). What other things do you look at especially if the company has increased their risk profile in their book of business and/or a rising interest rate environment. Their total debt is quite small at $20mln so to me, there is something else accounting for this stock selling 20% below their stated BV. Could they be carrying some/more derivative exposure than usual that may/could create a huge future liability event if one or more of those derivative products blow up? I am just not sure how/where to evaluate that risk which is unique to an insurance company. I see they do have re-insurance business and maybe they also pass that risk over to other re-insurance companies. I guess that is why I have avoided these insurance companies in the past but Buffet has done well w/ their GEICO investment. Maybe Spekulatius has looked into this and/or has some ideas how to quantify this potential liability for the company. EKS