Maiden: Bermuda Buy in Insurance

06/21/2016 10:00 am EST


Even though the stock market is approaching all-time highs, there are still plenty of stocks selling at bargain prices, suggests Roy Ward, editor of Cabot Benjamin Graham Value Investor.

Maiden Holdings (MHLD), based in Bermuda, is a holding company focused on serving the needs of regional and specialty insurers in the US and Europe.

Maiden’s reinsurance segment consists of its property and casualty reinsurance business focused on regional and specialty property and casualty insurance customers.

Management is focused on building international Maiden’s US workers-compensation business., which is running smoothly and profitability, and is expanding.

International operations have been weak, but a turnaround could develop soon. Management plans to implement several new programs in Europe to take advantage of new opportunities.

The loss of a large auto reinsurance customer in the US will be offset by the by the recent purchase of Tower Group; the lost customer was acquired by a larger firm, which no longer required reinsurance capital from Maiden.

Meanwhile, a new partnership agreement with Allianz in Europe will also bolster revenue and earnings in future quarters.

Sales and earnings have been erratic, but the recent improvement in revenue should continue into the last half of 2016 and into 2017.

Revenue will rise 4% and EPS will advance another 13% during the next 12 months ending June 30, 2017.

At 9.2 times current earnings, 1.07 times book value and 0.40 times revenue, MHLD is deeply undervalued. The dividend yield stands at 4.3%, which is quite attractive.

Recent acquisitions and disciplined underwriting standards will help Maiden rebound in the second half of 2016.

MHLD will likely rise 51% to my minimum sell price target of $20.19 within two years. Buy at $13.39 or below.

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By Roy Ward, editor of Cabot Benjamin Graham Value Investor

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