Tim Melvin: Now, on your last conference call, as I kind of read through the transcript of that, you guys are really doing a nice job of growing your business in both markets. Can you expand a little bit on how you’re growing right now.
Raucy: Yes. Like I said, we really work hard on developing our relationships. One of the things we look at in a market is whether we have relationships established with the independent agents, because the independent agent network is going to distribute our policies. They are going to be the ones who sell our policies to the general public. For example, in Louisiana we have people on our team that have been in there for 40 years.
We expanded that philosophy in Texas, spent about 14 to 16 months just reviewing the market, getting to know people there, figuring out where we could be competitive.
We do a lot of research before we enter into a market. But then it’s really all about having the right products at the right price and having those deep relationships with those independent agents. They’ll know when a client comes in what quality of risk the client is, what quality of house and construction, everything.
Tim Melvin: You also mentioned State Farm and Allstate were decreasing their presence in some of your markets and you kind of viewed that as a real opportunity to pick up some additional business going forward. Do you see that trend continuing?
Raucy: I think it is starting to slow down a little bit and we are starting to see a little bit of creep of the big dogs, State Farm, Allstate, Farmers, Farm Bureau.
Honestly, we’ve gotten to know the agents well and we’ve got some loyalty now with those agents. When those guys do come back in, if they do come back in full board, we’ll be able to compete. But for now, they’re really not fully committed in my mind to some of those coastal markets because they look at things globally. They don’t want one state to bring down the entire company.
Tim Melvin: Now on the call you also talked about the fact that you’re sitting on quite a bit of capital and have been since the IPO. Your original intent was to be aggressive in the M&A market, but that didn’t work out. Can you expand on that and why you haven’t been really aggressive in M&A so far?
Raucy: It’s a good question. I mean, we’ve taken a deep dive in quite a few companies and honestly, we really are looking for something that we feel can be profitable within the first 12 to 18 months. When we look at that, we have not found the right company that’s going to really get us excited about doing an M&A.
I think a lot of that truly is our philosophy that we think we can block and tackle better or as good as anybody else out there. We like building our own legacy book, and we know that it really does impact long-term profitability.
Having said all that, just because we haven’t found the right company doesn’t mean someday we won’t. We really do feel like we’re taking a look at kind of our overall strategy now to decide. Are there states that we can expand into? Are there roles that we can service to kind of start putting that capital to use? That’s really what we’re taking a look at now.
Tim Melvin: Any plans to expand throughout the rest of the Gulf coastal region? I think that would seem to be where the biggest demand for your products is going to be for now.
Raucy: We distribute our products through partnerships and we’re looking at additional partnerships that could take us into maybe 3 or 4 states along the Gulf coast where we’ll go in and build our agency network out and build out the company like we did in Louisiana and Texas.
There are a lot of ways for us to expand, but we are looking at more Gulf coast states, maybe even some states along the East coast through our partnerships. We’ve got a lot of aggressive expansion plans going forward. For some of that we are going to need that capital to help fuel those plans.
Tim Melvin: Now you did use a little bit of the capital for a buyback plan, can we expect to see some more of that in the future?
Raucy: I think you’ll see a little bit. We originally authorized the buyback for exactly 500,000 shares, and we bought back some 400,000. There might be a little bit more of that. We’ll take a look at that as part of our strategic planning that we’re in the process of going through right now. But today, we bought back a lot and I don’t know if we’ll expand on that original buyback. We’ll see where the strategic planning goes, but I think today we’re pretty happy where we are from the buyback standpoint.
Tim Melvin: Now to kind of close up and not take much more of your time this morning, do you have any final thoughts for folks who might be looking at your stock and considering investing in the company?
Raucy: To me it’s a really interesting stock. I mean, we’re a little bit different.
Number one, we’re the only public specialty company that’s headquartered in Louisiana. Today a lot of the people we compete with on the market are really headquartered in Florida and are kind of subject to the ebbs and flows of Florida.
From a stock standpoint, we traded pretty much under book and then we started to get a lot of interest. As we get bigger and get more attention out there you know, we get some analysts to follow us and we’ll get more attention, but today we’re trading pretty close to book value.
I look at it and I say, I know for a fact that the book value of this is going to continue to go up pretty significantly. I mean, we’re at a point now where we’re going to do pretty well over the next 15 months and beyond because we’re going to grow and the book value is going to continue to rise. That’s what makes it intriguing to me.
Hey, take a look at it. For a while we were trading under book and that really caught a lot of investors’ attention. Today we’re trading over book, but just by a little bit, really right about close to book. That’s great. We don’t mind trading there, but the message I would have for investors is that the book value is going to continue to grow. As long as the market keeps indicating that we’re going to trade around book with a lot of our competitors, there’s potential to go way beyond book value. The worst case scenario is we’re going to trade on book.
I think it’s an interesting investment that they ought to consider taking a look at.
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