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Hallmark Financial (HALL)


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I became very intrigued by HALL after reading about it in prior posts on here and I thought we could dedicate a discussion of its own to the company. With book value of $10.79 at the end of September, and the current PPS of $7.69, this automatically looks very attractive to me. Someone please play devils advocate and convince me otherwise.

 

Scott

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I went through their filings. It seems their underwriting is decent as is their investment portfolio. A few things I found not so attractive in light of other insurance companies going for a song in the current market.

 

1. The book value discount is overstated. A good portion of equity is good will and I am not sure the management didnt overpay.

2. They have got stock options while companies such as WSC, BRK and FFH dont have stock options. Thus the buy back will not have the same impact as it would otherwise would.

3. The insurance market will be soft this year and next.

4. There are three analysts following this company. There are none following WSC and none following BRK. They don't share the excitement of the author in VIC.

 

I think the stock is fairly valued in light of the industry as a whole. It is not as deeply discounted as the VIC author implies.

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Given all the facts, it is not clear to me why I should my investment dollars in HALL as opposed to BRK which is trading at a historically low P/B value right now with better prospects for next year.

 

A few things I found not so attractive in light of other insurance companies going for a song in the current market.

 

I agree. Just look at WTM which is selling at less than 80% of stated book value at 2009-09-30.

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I was kicking the tires on HALL, but can't find any good reason to justify buying it at this time.  Neither the current share price or the PB ratio are attractive enough.  As previously pointed out by somebody (sorry) management owns a big percentage of shares, so a take-off offer would have to be on their terms.

 

Somebody also mentioned AHL.  They at have a catalyst that could justify a purchase (share buyback program).

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I was kicking the tires on HALL, but can't find any good reason to justify buying it at this time.  Neither the current share price or the PB ratio are attractive enough.  As previously pointed out by somebody (sorry) management owns a big percentage of shares, so a take-off offer would have to be on their terms.

 

Somebody also mentioned AHL.  They at have a catalyst that could justify a purchase (share buyback program).

 

 

Yes!  And the salient feature of their 9% buyback is that most of the shares will be repurchased in Q1. :)

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HALL does have a buyback in place with 250,000 more shares to purchase. Clearly not as powerful as the AHL buyback, but there is a buyback in place.

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As I was reading Value Line, I saw Chubb.  Then it was featured in this week's Barrons.  Thoughts?

 

 

Chubb, HALL, HCC: all excelent Cos.  If you have a diversified portfolio, buy 'em all now when the price is low.  However, if you like to concentrate, it's hard to do better than the outstanding "Bermuda Re" Cos because they have competitive advantages not enjoyed for the most part by other INS Cos: no Corp. taxes -- this by itself , ceteris paribus, will increase the value of the Bermuda Co enormously over several years, compared to a Co that is subject to taxation.  Get your compound interest calculator out and share with the board what the comparison would be over 20 years for a Co with a 20% annual pretax return that was then taxed at 42% state and federal rate VS a twin Co that was not taxed at all! :)

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Thanks for the tip. They have had a solid few years and I bought my first slug early this month.

 

 

It's more than a few years of best results if you include their CEO's record at Lloyds of London before he was tapped to run Lancashire.  His first fifteen  years of underwriting were nonpareil.  Check it out. :)

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  • 2 weeks later...

Did a bit of research on HALL.  Does anyone know much about Mark Schwarz and Newcastle partners?  I had a hard time finding anything too specific regarding their equity portfolio.  But the fact that they didn't implode in the last couple of years in and of itself was semi interesting.  They have a couple of interesting presentations here:

 

http://www.hallmarkgrp.com/CompanyPresentations.asp

 

They definitely say a lot of the right things in the slides.  In the annual report Mark mentions Buffett and Value in passing but doesn't say much else.  I'm just curious what their equity portfolio will look like going forward.  Still, if they can keep making money on niche underwriting and grow book value at the rate they have been, it looks kind of interesting.

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