David Shapiro and Evan Vanderveer presented for their Vanshap Capital, which is very small but has received seed funding from Markel (MKL).
EGI Financial (EFH.TO, EGFHF pink sheets) is a small company in Missisauga, in property and casualty insurance in four segments — primarily non-standard auto insurance under the name Echelon General, but they also have some specialty and international lines.
One of the few high quality P&C insurers left that trades at a meaningful discount — without improvement in operations it’s worth 50% more than the current price, if they can improve the business it should double. It’s trading at about 80% of book value.
There are no analysts covering the company and it’s relatively illiquid, they overdiversified and became worse in recent years. The diversifivation has erased about 50% of the underwriting income, and Vanshap is urging management to stop this strategy. Personal lines has made money, their other niche, international and US businesses made 2012 a loss and the market is looking at those numbers, not at the dramatically better numbers expected.
They have a strong market share in their active areas, 30%+, and mostly from Ontario. Their loss ratio in the core business has outperformed the industry by about eight points annually, a benefit of the niche market and their specialty knowledge. They’ve also been consistently conservative in their reserving — so the book value of $14.40 per share is probably understated. They also did a big buyback and have just said they’ll buy back another 3.5% of the company.
Combined ratio has averaged 93% over the last decade, so for that above average performance they should get a premium price. The best comparison is Jevco, which was acquired by Intact at 1.4X book value and has superior systems. Some smaller ones have been acquired at 1.1-1.3X book in recent years.
Vanshap thinks the stock could get to a book value of over $20 a share in three years, which would be a dramatic annualized return of 25-40%, and they think risks are low at this valuation.
Eurobank Properties (EUPRO on Athens exchange, OEDZ in London) is a high quality, unlevered Greek REIT, Fairfax Financial is on the board, there’s a short-term opportunity for them to purchase distressed Greek real estate given current turmoil.
Mostly Greek offices, some retail and mized use as well — ...