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Summary

  • PIH, a property and casualty insurance firm with principal offices in Baton Rouge, Louisiana, plans to raise $25.0 million in its upcoming IPO.
  • PIH will offer 2.3 million shares at an expected price range of $10-$12 per share.
  • We plan to avoid this IPO, as PIH is not making money and the insurance climate in Louisiana is volatile.

1347 Property Insurance Holdings Inc. (NASDAQ:PIH), a property and casualty insurance firm with principal offices in Baton Rouge, Louisiana, plans to raise $25.0 million in its upcoming IPO. The firm will offer 2.3 million shares at an expected price range of $10-$12 per share.

PIH filed on January 10, 2014.

Lead Underwriter: Aegis Capital Corp.

Underwriter: EarlyBirdCapital Inc.

Summary

PIH is a property and casualty insurance holding company that offers homeowners' insurance, manufactured home insurance, and dwelling fire insurance. The firm's revenue is currently derived entirely from the marketing of its insurance offerings in Louisiana. PIH hopes to take advantage of national insurers' reticence to expose themselves to the Louisiana insurance market. The firm believes that its management's expertise in Louisiana's homeowner insurance industry and local market knowledge will allow it to function well in the less-competitive environment of Louisiana.

PIH distributes its policies through some 130 independent agents. The firm also generates many of its policies through "take-out" policies farmed out from the non-profit Citizens Insurance Corporation, which the state of Louisiana created in 2004 in response to the difficulties residents experienced in securing insurance policies from private insurers. As of December 31, 2013, the firm had approximately 11,500 policies in force.

Valuation

PIH offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:

Revenue: $5,091,000.00

Net Loss: ($748,000.00)

Total Assets: $23,178,000.00

Total Liabilities: $15,296,000.00

Stockholders' Equity: $7,882,000.00

Business

PIH faces competition from various other insurers, including national insurance companies and smaller regional firms. PIH considers its primary competitors to be ASI Lloyds, Imperial F&C Insurance Company, Lighthouse Property Insurance Corporation, Access Home Insurance Company, Americas Insurance Company, and Centauri Specialty Insurance Company.

PIH was established as a subsidiary of Kingsway Financial Services Inc.; the firm will become independent of Kingsway with the completion of this IPO, though Kingsway will maintain an approximately 28% stake in the firm.

Management

President and CEO, Douglas N. Raucy has served in his current position and as a member of PIH's board since the firm's inception in 2012. He holds the same positions with the firm's subsidiaries, Maison Insurance Company and Maison Managers Inc. He previously served as president and CEO of Access Home Holdings LLC, Access Home Insurance Company, and Access Home Managers LLC, and as the president and CEO of Prepared Holdings LLC, Prepared Insurance Company, and Prepared Managers LLC.

He formerly worked as the COO of the Institute of Business and Home Safety (IBHS). His career also includes a 20-year stint at Allstate Insurance Company. Mr. Raucy holds a bachelor's degree from Utah State University.

Conclusion

We plan to avoid this IPO, and rate it negative.

We are not impressed with the list of underwriters.

The firm isn't making money, and though there certainly is demand for insurance in Louisiana, that demand is primarily the result of national insurers' unwillingness to take on the risks of insuring properties in the state's volatile climate, which PIH cannot escape.

We do find the firm's experienced management team very impressive, and perhaps they will be able to successfully navigate the troubled waters of Louisiana property insurance, but we feel that the risks facing the company are simply too great to roll the dice on the IPO.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 1347 Property Insurance Holdings IPO Not Likely To Be Favorable For Investors