insurance

If you grow book value, particularly if your liabilities are short, you will grow market value.  Many reinsurance and insurance companies aim at growing fully convertible book value per share.

Fully convertible book value per share assumes that you invest your dividends in the common stock (without taxation), and thus compound your gains through reinvestment, taking account of dilution.  Hmmm… when will someone dream up the idea of structuring an insurance company as an MLP or a REIT?  I don’t think it is likely, but maybe someone could dream it up.

It also implies that all possible dilution is factored in from convertible preferred stock or convertible bonds.  Now insurance companies tend to trade near book value over the long run, so companies that can grow their book value rapidly and pay dividends can be interesting investments.  Particularly where the liabilities of the company are short — property reinsurance or personal lines insurance, growth in book value plus dividends tends to be a reliable indicator of value creation.

If liabilities are longer, it gets more questionable, because under-reserving becomes more likely — it is very hard to be certain of the reserving of long-dated or volatile coverages.

Anyway, here is a list of insurance companies, and how they have accumulated book value plus dividends over the past seven years.  Note that this is a mathematical calculation off a limited database, and that splits and M&A can throw this calculation off.  With that caveat, here is the list:

company ticker sic img_desc mktcap Growth of FCBV
Life Partners Holdings, Inc. LPHI 6411 0712 – Insurance (Miscellaneous)

50.7

76%

Universal Insurance Holdings, UVE 6331 0715 – Insurance (Property & Casualty)

185.2

75%

CNinsure Inc. (ADR) CISG 6411 0712 – Insurance (Miscellaneous)

337.6

56%

Amtrust Financial Services, In AFSI 6331 0715 – Insurance (Property & Casualty)

2,128.7

38%

Employers Holdings, Inc. EIG 6331 0715 – Insurance (Property & Casualty)

652.6

32%

Enstar Group Ltd. ESGR 6331 0715 – Insurance (Property & Casualty)

1,951.0

26%

Tower Group Inc TWGP 6331 0715 – Insurance (Property & Casualty)

734.8

25%

Amerisafe, Inc. AMSF 6331 0715 – Insurance (Property & Casualty)

508.5

23%

Humana Inc. HUM 6324 0706 – Insurance (Accident & Health)

11,297.2

21%

Allied World Assurance Co Hold AWH 6331 0715 – Insurance (Property & Casualty)

2,856.1

21%

Arthur J. Gallagher & Co. AJG 6411 0712 – Insurance (Miscellaneous)

4,441.2

20%

Willis Group Holdings PLC WSH 6411 0712 – Insurance (Miscellaneous)

6,009.5

20%

China Life Insurance Company L LFC 6311 0709 – Insurance (Life)

94,339.3

20%

ProAssurance Corporation PRA 6331 0715 – Insurance (Property & Casualty)

2,698.5

19%

RenaissanceRe Holdings Ltd. RNR 6331 0715 – Insurance (Property & Casualty)

3,949.8

18%

National Interstate Corporatio NATL 6331 0715 – Insurance (Property & Casualty)

576.7

18%

Argo Group International Holdi AGII 6331 0715 – Insurance (Property & Casualty)

910.3

17%

Brown & Brown, Inc. BRO 6411 0712 – Insurance (Miscellaneous)

3,851.4

17%

AFLAC Incorporated AFL 6321 0706 – Insurance (Accident & Health)

24,134.6

16%

Endurance Specialty Holdings L ENH 6331 0715 – Insurance (Property & Casualty)

1,796.8

16%

W.R. Berkley Corporation WRB 6331 0715 – Insurance (Property & Casualty)

5,455.7

15%

American Financial Group AFG 6331 0715 – Insurance (Property & Casualty)

3,772.7

15%

Horace Mann Educators Corporat HMN 6331 0715 – Insurance (Property & Casualty)

830.9

15%

Eastern Insurance Holdings Inc EIHI 6311 0709 – Insurance (Life)

135.5

15%

Validus Holdings, Ltd. VR 6331 0709 – Insurance (Life)

3,296.1

15%

CIGNA Corporation CI 6324 0706 – Insurance (Accident & Health)

16,104.2

14%

Reinsurance Group of America I RGA 6321 0706 – Insurance (Accident & Health)

4,143.2

14%

Safety Insurance Group, Inc. SAFT 6331 0715 – Insurance (Property & Casualty)

715.6

14%

Chubb Corporation, The CB 6331 0715 – Insurance (Property & Casualty)

20,701.5

13%

Loews Corporation L 6331 0715 – Insurance (Property & Casualty)

16,854.0

13%

ACE Limited ACE 6351 0715 – Insurance (Property & Casualty)

28,285.6

13%

HCC Insurance Holdings, Inc. HCC 6331 0715 – Insurance (Property & Casualty)

3,937.5

13%

Travelers Companies, Inc., The TRV 6331 0715 – Insurance (Property & Casualty)

29,108.4

13%

Coventry Health Care, Inc. CVH 6324 0706 – Insurance (Accident & Health)

6,080.9

12%

Markel Corporation MKL 6331
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