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Barrett Business Services Inc. Message Board

  • stillwater9999 stillwater9999 Jan 22, 2014 12:22 PM Flag

    BBSI News

    I view yesterday's developments as positive for the company. The relationship with ACE removes the issue related to self insurance. I also think it is positive that an established player like ACE has reviewed the workers comp reserves. The stock had gotten ahead of itself perhaps at 100. I continue to like the long term story here. I continue to hold the large majority of shares.

    Edward J. Roche
    President Freedom Mountain Investments

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    • I think this ACE deal is coming none too soon.

    • I'm no expert on workers comp insurance, but I'm not sure the relationship with ACE removes the WC issue. As I understand it, ACE was engaged as a fronting company to satisfy the State of California. An insurance fronting company usually does claims administration and is liable if the primary obligor (in this case, BBSI) is unable to pay the claim due to bankruptcy, but other than that the front has no liability for the claims.
      To your point, it probably helps to have ACE involved, but the WC liabilities still belong to BBSI and they can again find themselves in a position where their actual experience is either better or worse than their reserves. Let's hope that it won't be to the degree they discovered in the last quarter.

      Sentiment: Buy

      • 1 Reply to needaclue7
      • More specifically it appears to remove the issue with respect to California Senate Bill 863. As stated in their press release:

        The arrangement with ACE addresses the requirements of California Senate Bill 863, under which the Company cannot continue its self-insurance program in California beyond January 1, 2015.

        ACE also assumes responsibility for claims over $5 million as stated.

        BBSI has been an expert in Workers Comp for many years. Their have been some occasional adjustments to reserves as we saw this month. We should hear more specifics from the company next week.


    • I don't believe that BBSI has gotten ahead of itself. The long term earnings growth is estimated to be 35% which gives it a PEG of about 1. You can argue about if that is valid or not but I like that PEG.

    • I agree with your assessment but continue to be surprised at the general thin trade of this stock which in a down market is kind of alarming.

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