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An Undervalued, Profitable Insurance Company – Investors Title (ITIC)

 April 08, 2011 01:00 PM


Whopper is a deep value investor and the founder of whopperinvestments.com. He can be reached at whopper@whopperinvestments.com

Currently trading for 70% of tangible book despite a history of consistent profitability and relatively strong ROE, Investors Title Company (ITIC) is a potentially significantly undervalued insurance company.

I first stumbled upon ITIC from when it was posted on the rational walk (see here for the initial write up andhere for a quick follow up on some potentially hidden assets that could (slightly) increase value). Insurance is much more his forte than mine, so I encourage you to read his write ups. This post is very much my attempt at starting to get familiar with the insurance industry and valuing insurancecompanies by writing up a company that I think has interesting value characteristics, so take everything with a grain of salt.

Anyway, ITIC sells title insurance. The are a bit player in this industry, which is dominated by four large players. Most (between 40-50%) of their business comes from North Carolina. I like this for a couple of reasons- 1) NC was not one of the "centers" of the housing bubble like California, Florida, etc, so while business is down in the recession, it hasn't been absolutely crushed and should recover to normal levels as the economy continues to recover. 2) it gives them something of a niche in that they should know the market and be able to price/understand the risks in it better than the giant players.

As you might expect, business has been hard hit by the recession and housing crisis.


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