Big Beat On Earnings - Big Steal On Value
Summary
- International General Insurance has posted a Q1 GAAP EPS of $0.30 beats by $0.10.
- Posted a 14.5m Net Profit for the quarter putting it on pace for another record breaking year.
- IGIC is expanding its footprint into Malta allowing it to tap into the E.U. market.
- Keeps adding new lines of business to expand its TAM, most recently, contingency lines of business.
Investment Thesis
The base case for International General Insurance (NYSE:IGIC) was laid out in my original article: International General Insurance Is A Well-Entrenched, Highly Profitable Sleeper.
With ever increasing beats on earnings and revenue, ever-focused expansion into new markets inflating their TAM, and the addition of new lines of business IGIC remains one of the best value investments on the market today.
Increasing their Total Addressable Market
IGIC has always practiced slow, methodical growth. Focusing on highly profitable and predictable lines of business. Staying in their lane by focusing on their core competencies and competitive advantages (unique lines of business and their strong brand recognition in the Middle East namely).
“We recently announced our entry into the contingency market, which you’ll know from the headlines has experienced significant disruption globally as a result of the COVID-19 pandemic. Consistent with our underwriting philosophy, we will grow this book carefully and thoughtfully. We are also close to completing the process of establishing a European platform in Malta and we expect to be able to start writing business inside the European Union in the near future.”
This focus on slow methodical growth does not contribute to massive topline (and subsequently bottom line) growth. Instead it gives us as investors a comfortable outlook into the future cash flows and dividends that IGIC will generate for investors. Last year we saw an 89% increase in their dividend as well as shareholder concentration via stock buybacks. We will see these activities increase until IGIC's book value is on par with its fair-market price.
Their expansion into America last year and the EU in FY 2021 bode well for continued, sustained growth. The tail-winds of higher premiums in 2020 allow for continued cash-fueled growth of IGIC. International General Insurance will now operate in 9 locations covering 36 countries in total.
Their addition of the contingency line of business brings their total lines up to 19.
Source: https://www.iginsure.com/media/2057/48180igi-brochure-web-nov-2020.pdf
Growing their book value consistently while their share price remains deep undervalued
Since my first article to the time of this article we've seen an increase of IGIC's stock price of ~15% relative to the overall markets return of ~0.5%. This increase has only bridged the growth of their book value in the last quarter, but has yet to even scratch their deep discount relative to others in this sector.
“Having completed our first full year as a U.S. listed company, I am very pleased with our progress, having grown our book value per share by 15.1% from March 31, 2020. We look forward to continuing our long track-record of success in generating value for our shareholders.”
Book value per share was $8.71 at March 31, 2021, representing a marginal increase from $8.69 at December 31, 2020, and up 15.1% from $7.57 at March 31, 2020.
IGIC trades at a measly .87x P/B. Whereas its direct competitors enjoy valuations of 4x+ P/B (Pricing IGIC at $30/share).
Source: https://www.iginsure.com/media/2089/igi-first-quarter-2021-investor-presentation-final.pdf
Valuations
This quarter we have seen a dramatic increase in TAM, conscious and wise expansions into new markets with new lines of business, a dramatic increase of book value, and consistent beats on earnings.
IGIC has maintained an ever strong combined ratio, still outpacing their industry competitors dramatically. We've still not seen a fair valuation of their common shares and subsequent warrants.
Source: https://www.iginsure.com/media/2089/igi-first-quarter-2021-investor-presentation-final.pdf
In Conclusion
I remain ever-bullish on International General Insurance. I was heartened to see a strong Q1 from them as well as an increase of 15% in share price since my first article. Despite market dynamics that have dramatically hampered their market debut (covered in my first article). I still see IGIC as the single greatest value investment in the market today.
Analyst's Disclosure: I am/we are long IGIC.
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.
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