A Quality Business in a Profitable Industry

2 replies to "A Quality Business in a Profitable Industry"

• Roger Greene

  April 4, 2016

  As of 4/4/16, this stock is down about one-third from the price in this article. The article states that the “bear case” is not specific to UVE. But since the original article was published, Anthony Bozza of Lakewood Capital argued that UVE is a great short. His claims include: (1) UVE has grown most by gaining market share in the most hurricane prone areas of Palm, Broward and Dade counties, (2) UVE has underestimated hurricane risk and does not have sufficient reserves, saying that competing insurance companies have much more equity per dollar of risk, and also arguing that under-reserving artificially inflates profits (3) the auditor, Plante & Moran, is a small firm that suspect for a large public company, (4) UVE is not rated by AM Best, and gets a D- from Weiss, and (5) CEO compensation since 2003 has been 23% of earnings, and (6) the CEO was arrested 5 times from 1990-2013, and perhaps is not trustworthy.

  If the value was solid when the article was written, it is even better now. If you have changed your view, that would be great to know as well. I think value investors know that they often must be patient to see results. But sometimes fundamentals change. Your updated insights would be appreciated.
• Sam McBride

  April 5, 2016

  We continue to see UVE as a strong business and a great value. The company’s growth in areas outside Florida, along with the fact that a number of other Florida-based insurers are not covered by AM Best, leads us to believe the risks discussed by short-sellers are overstated. The CEO compensation is a negative, but the company’s high ROIC and cheap valuation outweigh that concern for us. UVE continues to earn our Very Attractive rating due to its 42% ROIC and 0.6 PEBV

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