Special Situation Investing

Friday, November 03, 2006

BancInsurance Corporation (BCIS) - Quarterly Results

BancInsurance Corp (BCIS) is a micro-cap specialty insurance company. I originally wrote a fairly bullish post on them here. The company released their quarterly results a few days ago and I still find the company to be under-valued.

The company actually came out with strong earnings numbers of $.42 / share against a $6.10 share price. This, however, is mostly attributable to the sale of a division. Without this one-time item earnings would have been approximately null. The combined ratio came in at 100.9%, ouch. Finally, premiums earned declined from $13.7 M to $12.4 M. That, in a nutshell, is the bad news. Let's move on.

First, while the combined ratio at over 100% is unmaintable, this included results from their bond operations, which have been discontinued. This is not altogether unexpected and the company has been working to exit out of this business. Without this division, the combined ratio would have been closer to 95%, not great, but maintainable.

The decline in premiums was mostly attributable to a large account which was lost. There is going to be some lumpiness in this business and a single quarterly does not necessarily reflect a trend.

Another discontinued business arbitration was resolved in the quarter. This leaves only 1, from the original 4, and should minimize the losses going forward. This in turn should cause the combined ratio to return to a more reasonable, and profitable level.

Finally, tangible book value came in at $35 million. This in comparison to a market cap of $30 million is enough to hold me in. While I certainly wouldn't commit a large percentage of your portfolio, I will continue to hold my stake. You are at a point with this company where any optimism could push the stock sharply higher while the book value should buttress any negative surprises.


Post a Comment

<< Home