One week from today, on March 7, FNHC releases its 4th Q earnings. I have been surprised that the PPS has dropped so low, given all the good ratios and valuations on this company. I mean where can you find a company today that has both a trailing and forward PE of around 8; a price book ratio of 1.5; and and ROE of nearly 20%? Where? On top of that, long term executives who do not over-promise and who have given steady leadership over the past many years. FNHC seems to have very good reputation among FL insurers. Yes, growth rates on new policies have slowed in the past couple of quarters...but there is still good growth. I am hopeful that a good quarterly report one week from today will give a well-deserved boost to the PPS. -Scott
I share your surprise. The Florida insurers have consistently reported a strong EPS quarter. I would anticipate a good quarter from FNHC as well. Good quarters have not necessarily translated to dramatic post-earning PPS increases across the board in this space. I think that this this sector is quite out of favor at the moment.
Sentiment: Strong Buy
Thanks for your thoughts, biotech. I agree fully when you say that "this sector is quite out of favor at the moment." Berkshire Hathaway showed poor returns on its insurance company, Geico, in its report released this past Friday/Saturday. Also, a good insurer recommended by Motley Fool, MHLD (which I own) has also been down...while also being a solid company with excellent valuations. So it seems that FNHC is in good company with its depressed prices lately. And hopefully, like all good companies, they will recover in their PPS as long as they keep doing what they do best, don't get too greedy, and keep providing reliable service at a competitive price. -Scott
Under FNHC's new Florida Hurricane Catastrophe Fund contract for the 2016-17 hurricane season, FHCF will provide $750 M of coverage subject to a 25% participation by FNHC. The prior contract was for $591 M subject to a 10% participation by FNHC. I am not sure how to interpret this. Any thoughts?
Sentiment: Strong Buy
Biotech...is your question about interpretation about the high change in the percentage participation by FNHC, from 10% in 2015-2016 to 25% in 2016-2017? Or is it the cost increase that you are concerned about? About the latter, with policies increasing about 30% per year, it seems that the cost going up about 27% is in line. But the percentage participation is more troubling. Maybe they have larger set asides, cash on hand, this coming year than the previous year. -Scott
Scott, I was more trying to understand the increase from 10 to 25% participation. The increase in coverage (I believe) is a good thing as it appears that FNHC is planning for continued 25% growth YOY. Monarch was started in part because FNHC was concerned about the ceiling on the higher end homes and a slow-down in growth. I guess that FNHC is not overly worried about bumping up against that ceiling in the next 12 moths. But, I don't fully understand why the participation figure would rise from 10-25%. I am trying figure out if this is purely financial or a change in risk tolerance or something else. Thanks for your thoughts.
Sentiment: Strong Buy
..I was expecting a better quarter, so I thought I'd be able to short higher. Anyway, only caught a few.
Not shorting b/c of earnings, although its somewhat disappointing, but rather b/c all the other Florida insurers have stated that q1 will be effected by a whole bunch of hurricanes that developed through Florida so far in q1. I expect this should hurt earnings by at least 30% lower than what they would be.
We'll see in the Conf Call if they discuss the weather in q1.
FNHC is still one of the better publically traded Florida insurers (I no longer own any...I had sold my FNHC and bought UIHC a while back when UIHC was low, but sold recently). FNHC for a long time was my largest position as I was buying as low as $2.40 a few years back.
Anyway, this is just a trade for me. Of course, the other negative is that there is more and more competition in Florida, and all the insurers are lowering pricing. In recent years, the lowered pricing has been covered mostly by lower reinsurance, but I doubt that trend can continue for too long. With the supply of Citizens down to a low#, the only way to protect market share for the other FL insurers will be to lower pricing.
I covered, making $2.25/share, evidently FNHC claims there is only about $1 mil in damage related to the tornados in q1. I thought it would be more....HRTG stated that they thought there'd be something under $4 mil.
Ah, fabulous...always have appreciated your comments over the years. This time around, however, it would have been better if you had indicated your shorting before the quarterly report today. It sorta looks like, well, Monday morning quarterbacking. And it seems to put you in the category of the windbags on various boards....boasting about their "after the fact trades."
So, for the sake of us who are not traders, but are long term holders, for the next 5 years, do you think FNHC has what it takes to steadily be increasing its profits, market share, earnings, etc? Or in the same 5 year window do you think there is a better FL insurer?
Scott, I mean I basically shorted in real time, less than fifteen minutes from when I posted. And then I covered that short for a I did not short Friday b/c I thought FNHC' earnings would be better, and I wanted to short into good earnings. I then covered my short for a $2.20 gain twenty minutes later, and basically posted that in exact real time.
I thought FNHC would post strong earnings, but go down anyway, so I did not short on Friday, which is what I stated in my post. So, I shorted this early, for not a lot of shares, and covered after I heard in the Q and A of the Conf Call that FNHC expected only $1 million or so in damages related to first quarter tornados as opposed to some other Florida insurers who had said they expected more damage.
Overall, I dont like the Florida insurance sector right now, I'll wait to see where everyone is closer to next quarter. And I have said negative things, particularly about pricing and increased competition in many recent posts, and have stated FNHC should be traded, not held long term now. I do think FNHC has the best management.
Hard to say which one I like best, probably UIHC, but I'd wait till either it comes down further or till after next quarter's earnings, which I dont think will be as good as expected. HRTG is getting cheap, but I really dont like their management. Anyway, I'm waiting for a trade opportunity.
Thanks, fabulous, as always, you are perceptive and gracious. And now I understand that you posted shortly after you shorted... that helps. And to clarify, I surely do not put you in the category of windbags who boast about their profits after the fact. You are correct in your statement that you have been saying for quite a while that you think FNHC is a stock to be traded, not held for a long time at these prices. But now at $21, I think we probably have a nice base here. FNHC has always had quite a bit of volatility in its prices. I just don't have the time or the energy to watch it daily. Thanks. -Scott
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OK news this morning, about $10 million buyback of shares. But in my calculations this is only 3.6% of shares outstanding. That is good, but not fantastic news, in my opinion. The price jumped at open, on this news, but I suspect shares will end up flat for the day. At $20 per share, significant price appreciation will require patience and the continued steady hand of seasoned and respected management. But for the PPS to drop from a recent high of $32 (on Oct 28, 2015) to the recent low of $19.16 (on Mar 10, 2016), well, that does shake one's confidence. For those picking up shares now, I also imagine there will be quite a bit of selling in the next 3-6 months as the price goes back to a more "normal" price of $25+ . Some quick money to be made here, I think, which probably will mean more volatility in the months to come. And on top of that, the start of a new hurricane season, with its uncertainty. -Scott.
Maybe, maybe not. I still think the stock is worth some number closer to book value, probably $15 per share. And I am not so sure about the "seasoned and respected" management. Mike Braun ran a string of auto bucket shops prior to coming to this company called A AAPlus Discount Insurance, Inc. And yes, that's a space between the A's, not sure why, probably had something to do with placement of the ad in the yellow pages. Fact is, the management in this company has no industry experience to speak of outside this company; and certainly no experience with a major company or reinsurer. All of them rolled over from American Vehicle Insurance Company, a bucket shop auto insurer with a horrible reputation among agents.
Sentiment: Strong Sell
Luv to buy a ton at $15, but I'd definitely be in at higher levels than that. Unless a few big strorms hit in Hurricane season.
And geeze, Braun has been with FNHC for eighteen years, he's spent his entire career at FNHC since he turned 29 years old. That is tons of industry experience. He ran that other insurance company while he was in his twenties....sounds decent to me.
You don't think he knows anything about Reinsurers after dealing with them for these past eighteen years?
feldman, you certainly know your insurance, I can't debate that, but it sound as if you and FNHC (or Braun) have something personal going on.
How bout this....the Florida insurers have all gotten battered recently. Name your favorites out of these publically traded one's, favorites simply meaning which one(s) share prices have the best risk return at current prices: FNHC, UVE, HRTG, HCI, UIHC.
If a few big storms hit, it should weed out the strongest players and increase pricing which is needed.
And yes, while Mike has been at FedNat since 1998, he was acquired along with the bucket shops he was running. Those agencies (non-standard auto) are like pawn shops in the retail business......they are pretty much the armpit of the industry and Mike maintains that mentality despite his years with FedNat. Its part of the internal culture there and from where the company evolved. And yes, he's learned a lot about reinsurance over the years as the re-brokers have tutored him well.
And its nothing personal with FedNat, Mike or any of the employees. My opinions are strictly business. If I were to make it personal I'd discuss some of the real internal things I have knowledge of.
I only have one fav of the publicly traded companies and that is UIHC. I like their management, expansion plan, etc. I don't like UVE because most of what you read is true about their execs and I think the overzealous executive pay is just crazy along with the scenario where the insurance company loses money while the holding company pays record dividends. I really don't like HRTG because the background resembles FedNat too much and they are a little crazy aggressive with the expansion plan. I am in agreement with RH Analytics and others on HCI, they seem interested in everything (real estate, restaurants, etc.) except the insurance business. They have no expansion plan and can't even get a plan together to grow organically. HCI recently created a new company called TYPTAP Insurance Co. Yes, really. I wonder why their marketing department didn't choose TicToc instead, it would seem more fitting.
Sentiment: Strong Sell
oooops, dang it, I forgot to mention the one I really, really like that I bought a position in last week. That is SNC! Love this company and the stats. One of their affiliated companies just entered the FL market and has qualified for Citizens depop. I think this is on a fronting basis with an MGA.....and to boot, they have an A.M. BEST RATING!
Sentiment: Strong Buy
Fieldman...you may have "gut" feelings for SNC, over FNHC, but I am not convinced. On key stats FNHC comes out ahead, sometimes way ahead--for example PE for FNHC is 6.8, for SNC is 21. Price to book for FNHC is a very low 1.2, for SNC is 2.2. And so it goes.
And when I compare SNC to another insurance company I own, MHLD, it seems MHLD also wins, hands down. SNC is only better than MHLD in lower debt and marginally better return on earnings (ROE).
Else in comparison, first number is MHLD, second is SNC: PE=10 vs. 21; Forward PE= 6.4 vs. 11.5; Price to book: 1.1 vs. 2.2; Divvy yield 4.5% vs. 1.9% (though SNC has only started divvies in the past 3 years and might have bigger increases going forward); Estimated earnings for next year compared to this current is predicted up 20% vs. up 13%. The stats on SNC are decent, but it seems that MHLD is a better value all around.
Am I missing something? -Scott
Scott, you are probably more of a bargain hunter than I am, and those are but a few of the variables to look at. While I look at the stats, I also look at the company closely. For ex., SNC has its new arrangement with Velocity Risk, when I look who is running that, its a no brainer for me. Here is some more data:
? EPS % Chg (Last Qtr)-8%
? 3 Year EPS Growth Rate 82%
? EPS Est % Chg (Current Yr) -8%
? Annual ROE 18.53%
? Sales % Chg (Last Qtr) 30%
? 3-Year Sales Growth Rate 56%
? Debt % 0
? Market Cap $286.00 Mil
? Profit Margin 28.6%
? EPS % Chg (Last Qtr) -23%
? 3 Year EPS Growth Rate 37%
? EPS Est % Chg (Current Yr) 28%
? Annual ROE 10.16%
? Sales % Chg (Last Qtr) -3%
? 3-Year Sales Growth Rate 11%
? Debt % 27%
? Market Cap $966.00 Mil
? Profit Margin 5.6%
? EPS % Chg (Last Qtr) 78%
? 3 Year EPS Growth Rate 42%
? EPS Est % Chg (Current Yr) -1%
? Annual ROE 17.71%
? Sales % Chg (Last Qtr) 29%
? 3-Year Sales Growth Rate 19%
? Debt % 17%
? Market Cap $552.00 Mil
? Profit Margin 35.0%
At the end of the day, I prefer a strong stock to a weak one. And I am not one to wait around for a stock to perform. I will probably have moved on from SNC when you are still waiting for FNHC to catch its breath. Lets revisit the YTD % change in PPS at mid year and see where these are. Maybe I won't be dead #$%$ last, or maybe I will.....it'll be fun to see.
Sentiment: Strong Sell