Market Cap $250M
The almost worst-case scenario is $20M Net income 8% earnings yield.
Special situations- large claims in Q4 2021 led to sell-off + further sell-off from CEO and founder resigning.
Trean Insurance Group
is a specialty insurance provider. Majority of the premiums they write come from worker’s compensation, accident and health, and medical professional liability. The company has been profitable for 25 consecutive years.
They IPO’d in July 2020 at $15 per share at which point the founders, specifically the (CEO and Founder) sold about 20% of his holdings at $14. Then on the 9th of March 2022, the stock suffered further when CEO and Founder resigned to sit on the board- although he is 69 it’s about time.
The stock suffered from insider selling, and then the company got hit with some unexpectedly big claims in 2021 (last quarter- very recently). Even though they were hit with these claims, they still made a $20M net profit on their, now, $250M market cap. I like to think of this 8% earnings yield as an almost worst-case scenario.
In 2021 they also made $20min net income (excl a gain on revaluation) but this was on $480M revenue. 2021 revenue was at $630M.
The loss ratio was 66% in 2021, up from 48% in 2021 driven by these unexpectedly large claims. In insurance, especially specialty insurance (tongue twister) it happens. I rather buy-in after the fact. A loss ratio of 55% on their net earned premiums of $200m would give us a net income around $40M ~ 16% earnings yield.
The company is also growing very fast. They grew net earned premiums by 100% from 2020 to 2021. Price to book value around 0.86- the lowest I can find in specialty insurance. The next best (lowest) is trading at above 0.9 P/B but seems to be in way worse shape.
The stock will be volatile. But I don’t believe the business is as volatile. There has been a small amount of insider buying now too at these levels.
I am adding some shares.
This is not advice.