The property casualty space is one I watch closely for a number of reasons:
- It's an industry that doesn't change much and is largely insulated from technological disruption
- Good management matters in insurance. So the ability to evaluate management remains a relevant art in the sector.
- The good companies in the sector can compound capital at an admirable rate, causing well defined uptrends that tend to be smoother and last longer due to the steady growth dynamics involved.
- Good management can capitalize on float to aide return on equity. In an rising rate environment this becomes an even more tangible advantage.
So when I see a number of the names I watch closely in the sector begin putting together inspiring technical patterns, while fundamentals are improving in a rising rate environment AND insiders are buying in all the meanwhile, it becomes something that deserves some attention.
Here are a few that deserve more attention than they are getting outside of the insurance nerd circuit:
Let's look at what management at these companies are saying regarding recent earnings:
UIHC: "Q1 2018 saw a continuation of some very positive trends at UPC Insurance, excellent and balanced organic growth, solid and improving non-cat loss ratios, and stable or increasing average premiums. Because of these and other favorable trends, we were able to produce almost $25 million of EBITDA and over 13% annualized ROE in a seasonally low quarter and despite cat losses from winter storms in both the Gulf and Northeast regions."
"Highlights of UPC’s first quarter 2018 included GAAP net income of $8.4 million or $0.20 a share, non-GAAP core income of $17.3 million or $0.40 a share, total revenues in excess of $180 million, an increase of 47% year-over-year and we saw continued improvement in loss ratios and our combined ratio."
"Some additional insight into UPC’s revenue growth for the quarter includes gross premiums written of $280 million, up 66% year-over-year; net premiums earned of $163 million, up 52% year-over-year."
And here are some highlights from commentary given by management at UVE regarding their most recent quarter:
"We’re pleased with our results for the first quarter. Overall, we reported net income of 40.1 million and diluted EPS of $1.12 for the first quarter of 2018, which equates to an annualized ROE of 34.6% for the quarter. We reported excellent top line growth in the first quarter with 10% growth in direct premiums written including 7.2% growth within Florida and 32.7% growth in other states."
"Net investment income was 4.8 million, growth of 77% from the first quarter of '17. The increase is the result of higher returns from our available for sale debt securities, driven by growth in total invested assets, favorable market trends and actions taken to increase yield while maintaining high credit quality as well as higher returns from cash and cash equivalents due to actions taken to optimize treasury management, coupled with an increase in interest rates."
"Stockholders' equity was 465.1 million at March 31, 2018, growth of 5.7% from the year end 2017 while book value per common share was $13.28 as of March 31, 2018 growth of 4.8% from December 31, 2017 or 16.8% from the end of the first quarter in 2017."
I would be remiss to leave an article about property and casualty insurers without mentioning my favorite name in the space, albeit small in terms of market cap and smaller yet in terms of daily trading volume, PIH (1347 Property Insurance). I put out research on PIH in early 2016. The company is long overdue for a value creating event, outside of simple expansion into varying geographic regions. The activist shareholder base involved here is competent enough that an accretive acquisition to accelerate growth should occur sometime in the near future. In the meantime, the downside in the name, outside of a massive weather event, is negligible.
