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Biglari acquires insurance company


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According to AM Best, First Guard's size is between $10 and $25 million using "adjusted Policyholder Surplus" as a measure.

 

 

Per http://www.1stguard.com/About.aspx :

"First Guard Insurance Company is rated “A” (Excellent) by AM BEST and underwrites the majority of the over 15,000 vehicles serviced by 1st Guard Corporation."

 

I have no idea what truck insurance premiums actually are, but if it's conservatively $150 per month, then 15,000 trucks @ $150/month, would lead to 27,000,000 revenue, or premiums, per year. Doesn't sound like an enormous acquisition, but seems like a better acquisition in terms of long term strategy than Maxim. Interested to hear more about this acquisition in the ensuing months

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http://www.sec.gov/Archives/edgar/data/93859/000092189514000600/form8k07428007_03192014.htm

 

Noticed this yesterday, new term loan facility. If i read this right, another $50 million for Biglari to use however he deems prudent.

 

" Approximately $118.6 million of the proceeds of the Term Loan Facility were used to repay all outstanding amounts under Steak n Shake Operations’ former credit facility and to pay related fees and expenses, $50.0 million of such proceeds were used to pay a cash dividend to Biglari Holdings, and the remaining Term Loan Facility proceeds of approximately $51.4 million will be used by Steak n Shake Operations for working capital and general corporate purposes."

 

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From selling fries to casualty insurance.  Raises a lot of questions.

 

How many investors or analysts want to deal with both fries and insurance?

 

They do at Berkshire.  I think a bigger concern would be if he may do something stupid and blow the company up with excess leverage or poor underwriting.  Cheers!

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From selling fries to casualty insurance.  Raises a lot of questions.

 

How many investors or analysts want to deal with both fries and insurance?

 

They do at Berkshire.  I think a bigger concern would be if he may do something stupid and blow the company up with excess leverage or poor underwriting.  Cheers!

 

Isn't that the point, we don't know since it is the first foray in conglomeration, if their skill set can successfully take them into a completely different business, especially one as idiosyncratic as insurance? 

 

And shouldn't the first question be, if fries are such a great business, why go into something so culturally and analytically different as insurance?  Why not the first step out acquisition in something similar, like a chain of retail stores or a chain of some other service?  Or in their case a chain of non franchised restaurants would seem to present sufficient new challenges for management to show their stuff.  Franchising obviously involves the least demanding skill set of almost any business.

 

Non insurance guys are not going to be sensitive to buying someone else's problems, hidden away by reserving practices.  The adequacy of reserves of casualty companies can be just as elusive as the long term reserves of life companies.  Not saying there are problems, just that the risks have gone way up when non insurance people buy into the industry.

 

 

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