12/30/2010
I researched this as part of due diligence after purchasing the first half of my order for Markel. While I knew Markel was a company I really wanted to be part of, several companies came up as possible alternatives and most of those I didn't care for after researching. Like the rest Transatlantic Holdings is basically an insurance company.
Transatlantic Holdings, Inc. (TRH) is a holding company. The Company's operations are conducted principally by its three operating subsidiaries: Transatlantic Reinsurance Company (TRC), Trans Re Zurich (TRZ) and Putnam Reinsurance Company (Putnam). It offers reinsurance for a range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets on both a treaty and facultative basis. One or both of TRC and Putnam is licensed, accredited, authorized or can serve as a reinsurer in 50 states and the District of Columbia in the United States and in Puerto Rico and Guam. Through its international locations, TRH has operations, including Canada, six countries in Europe, three countries in Central and South America, one in Africa, one in Asia (excluding Japan), Japan and Australia.
Price at time of Eval: 51.63
Valuation Ratios
Price/Earnings (TTM) 8.53x
Price/Sales (TTM) 0.74x
Price/Book (MRQ) 0.75x
Price/Cash Flow (TTM) (neg), 3.54 current
% Held by Institutions 96.36
1.61% annual Dividend
Benjamim . . . . . . . 4/5: Target 60
Davison . . . . . . . . 4/5: target 60, BBB+, $63.3 fair value
Thomas . . . . . . . . 4/5: Trailing average price 49.89
Marcel . . . . . . . . . 2.5 from 3.8: Hold if you're long, no new positions or short sells
Tightly associated with AIG which formerly held a 59% interest in this company, TRH's stock price has taken a hit relative to tangible book vale, since the sale however the stock price should come into line with it's book value potentially meaning a low risk increase of 25% as the price normalizes. This is naturally subject to the number of claims and catastrophes of 2011, since TRH is in the reinsurance business. Additionally, reinsurance comes in two flavors, 97% of TRH's business is by Treaty which reinsures based on a category of risk rather than Facultative which is reinsurance of individual risks.
Beyond that, a significant portion of TRH's reinsurance agreements contain a provision allowing them to cancel their contracts should a "change of control of TRH", such as through the sale of a 59% stake, occur. However as of last December 31st, no clients have declared their intention to exercise those rights. Though even if they do, TRH still has their premiums up until that time and hopefully has been making a modest amount of money off them.
Once again a list of the loss ratios (% paid out relative to premiums)
2009 Loss ratio 66.3, expense ratio 27.2%, 93.5% combined
2008 Loss ratio 71.5, Expense ratio 27.1%, 98.6% combined
So how fast will it reach a Price to book of 1.0? It may be a while, maybe 3 years or more.
Expanded Ratio Analysis . 2009 . . . 2008 . . . 2007 . . . 2006
P/E Ratio . . . . . . . . . . .. 7.29 . . . 26.14 . . . 9.94 . . . 9.61
Price/Tangible Book Value. 0.86 . .. . 0.90 . . . 1.55 . . . 1.39
During that time the intrinsic value of the stock will increase at a pace less than that of the S&P 500 though in theory the 25% value credit you get from the stock will not protect you if the overall market goes down, indeed that could push the highly competitive reinsurance market still lower. If the market continues to improve I'd estimate at least 2 years to get your 25% out, maybe 5 or more meaning a gain of 5% a year at best if the market takes it's sweet as time recognizing the value of the TRH shares. Doing it's part, TRH has done a lot of stock repurchases since the price of it's shares are currently below their intrinsic value. Premium rates are set to rise with inflation, which I think is a good thing.
Also, despite the crash and association with AIG they've been steadily improving their dividend and revenue with none of the toxic insurance practices (that we know of I suppose) of AIG.
Overall I kinda like this one, and wouldn't mind opening a 2.5% or less stake if I could get it around the bid price (50.80), which is the major trouble. This stock does have a lot of potential, but the market doesn't care for it right now and the memory of AIG won't fade fast. So while it's trading at $51.63 today it's probably actually worth $68.84 and before the insurance snafu at AIG would be trading around $103.26 (all in 2009 dollars). So that really begs the question, will anyone ever love insurance as much as they used to? Maybe not for 5 or 10 years. Might this make it to $82.61 in that time? Yes I think it will, but probably not in 2009 dollars. The market has adjusted for this and people are literally selling shares at 25% off. If a 2.5% stake won't over expose you to insurance, or you can allocate between $1,500 and $5,000 and hold it for 5 or more years I think you'll be well rewarded if you reinvest the dividend. The 0.75 book value really makes me want to pick this one up, I just don't think it'll pop up any time soon. But if you can pick it up around 51.10 and hold it for 5 years or more I think it's a moderate risk with the potential for a very high reward. So it's probably worth it.
I researched this as part of due diligence after purchasing the first half of my order for Markel. While I knew Markel was a company I really wanted to be part of, several companies came up as possible alternatives and most of those I didn't care for after researching. Like the rest Transatlantic Holdings is basically an insurance company.
Transatlantic Holdings, Inc. (TRH) is a holding company. The Company's operations are conducted principally by its three operating subsidiaries: Transatlantic Reinsurance Company (TRC), Trans Re Zurich (TRZ) and Putnam Reinsurance Company (Putnam). It offers reinsurance for a range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets on both a treaty and facultative basis. One or both of TRC and Putnam is licensed, accredited, authorized or can serve as a reinsurer in 50 states and the District of Columbia in the United States and in Puerto Rico and Guam. Through its international locations, TRH has operations, including Canada, six countries in Europe, three countries in Central and South America, one in Africa, one in Asia (excluding Japan), Japan and Australia.
Price at time of Eval: 51.63
Valuation Ratios
Price/Earnings (TTM) 8.53x
Price/Sales (TTM) 0.74x
Price/Book (MRQ) 0.75x
Price/Cash Flow (TTM) (neg), 3.54 current
% Held by Institutions 96.36
1.61% annual Dividend
Benjamim . . . . . . . 4/5: Target 60
Davison . . . . . . . . 4/5: target 60, BBB+, $63.3 fair value
Thomas . . . . . . . . 4/5: Trailing average price 49.89
Marcel . . . . . . . . . 2.5 from 3.8: Hold if you're long, no new positions or short sells
Tightly associated with AIG which formerly held a 59% interest in this company, TRH's stock price has taken a hit relative to tangible book vale, since the sale however the stock price should come into line with it's book value potentially meaning a low risk increase of 25% as the price normalizes. This is naturally subject to the number of claims and catastrophes of 2011, since TRH is in the reinsurance business. Additionally, reinsurance comes in two flavors, 97% of TRH's business is by Treaty which reinsures based on a category of risk rather than Facultative which is reinsurance of individual risks.
Beyond that, a significant portion of TRH's reinsurance agreements contain a provision allowing them to cancel their contracts should a "change of control of TRH", such as through the sale of a 59% stake, occur. However as of last December 31st, no clients have declared their intention to exercise those rights. Though even if they do, TRH still has their premiums up until that time and hopefully has been making a modest amount of money off them.
Once again a list of the loss ratios (% paid out relative to premiums)
2009 Loss ratio 66.3, expense ratio 27.2%, 93.5% combined
2008 Loss ratio 71.5, Expense ratio 27.1%, 98.6% combined
So how fast will it reach a Price to book of 1.0? It may be a while, maybe 3 years or more.
Expanded Ratio Analysis . 2009 . . . 2008 . . . 2007 . . . 2006
P/E Ratio . . . . . . . . . . .. 7.29 . . . 26.14 . . . 9.94 . . . 9.61
Price/Tangible Book Value. 0.86 . .. . 0.90 . . . 1.55 . . . 1.39
During that time the intrinsic value of the stock will increase at a pace less than that of the S&P 500 though in theory the 25% value credit you get from the stock will not protect you if the overall market goes down, indeed that could push the highly competitive reinsurance market still lower. If the market continues to improve I'd estimate at least 2 years to get your 25% out, maybe 5 or more meaning a gain of 5% a year at best if the market takes it's sweet as time recognizing the value of the TRH shares. Doing it's part, TRH has done a lot of stock repurchases since the price of it's shares are currently below their intrinsic value. Premium rates are set to rise with inflation, which I think is a good thing.
Also, despite the crash and association with AIG they've been steadily improving their dividend and revenue with none of the toxic insurance practices (that we know of I suppose) of AIG.
Overall I kinda like this one, and wouldn't mind opening a 2.5% or less stake if I could get it around the bid price (50.80), which is the major trouble. This stock does have a lot of potential, but the market doesn't care for it right now and the memory of AIG won't fade fast. So while it's trading at $51.63 today it's probably actually worth $68.84 and before the insurance snafu at AIG would be trading around $103.26 (all in 2009 dollars). So that really begs the question, will anyone ever love insurance as much as they used to? Maybe not for 5 or 10 years. Might this make it to $82.61 in that time? Yes I think it will, but probably not in 2009 dollars. The market has adjusted for this and people are literally selling shares at 25% off. If a 2.5% stake won't over expose you to insurance, or you can allocate between $1,500 and $5,000 and hold it for 5 or more years I think you'll be well rewarded if you reinvest the dividend. The 0.75 book value really makes me want to pick this one up, I just don't think it'll pop up any time soon. But if you can pick it up around 51.10 and hold it for 5 years or more I think it's a moderate risk with the potential for a very high reward. So it's probably worth it.
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