Amlin - Undervalued Insurer With Better Than Berkshire Track Record And 6% Dividends
- Amlin is a growing earnings powerhouse with a proven long-term record of excess returns. Amlin's well-organized insurance/reinsurance business outperforms Berkshire's insurance operations by a wide margin.
- The company has generated stable ROE=22% and BV growth of 24% over 10 years while paying significant dividends. Focus is on gross underwriting profitability with average combined ratio of 83%.
- Amlin is very cheap, currently trading at PE=7.5 and P/BV=1.3. Normalized through the cycle valuation shows 60%-100% upside from the current prices. Peer comparison indicates 30% upside.
- The market groups Amlin together with other reinsurance companies and expects Amlin to suffer significantly from the softening rates. However, Amlin's management sees improved profitability in 2014.
- Not only the impact from softening rates will be minimal, but the profitability might actually increase due to initiatives recently undertaken by management and strong company's franchise..