Analysis of Lancashire

Company: Lancashire

ISIN BMG5361W1047 | WKN A0HM5W

Business: A Bermuda insurance and reinsurance company. They are especially focused on four segments: Property, Energy, Aviation and finally Marine. 

Active: World Wide 

P/E: 8.0

This company was analysed due to a request via email. 

the P/E for Lancashire is excellent with 8.0 and the P/B is very good with 1.4 which gives a clear buy signal from Graham. The earnings to sales are extreme with 30% and the ROE is also very good with almost 17%. The book to debt ratio is so, so with 0.8.
In the last five years they have had a yearly revenue growth rate of 1.8% which I find to be bad and this then gives a motivated P/E value of 9 to 12 which means it is almost fairly valued today by the market.
Due to that they pay a very high special dividend they ended up at 10.9% which on the other hand correspond to almost 90% of their earnings so more likely then not that special dividend will not be that high next year. Without the special dividend it was only 0.05 USD or 0.5% in yield.
Comment: Since their report was in USD I converted also their share price from GBP to USD. Generally I do not like companies that have their HQ in tax havens. I do not like when companies report profits and still get tax money back year after year. That just looks strange to me. Additionally there were other little things in their financial statement that left me with a bad feeling. Oh, and for 2015 until Q3 they are down by around -16% in revenue.

Conclusion: Graham says yes to Lancashire but I do not. The P/E and P/B looks excellent and with the special dividend that is also looking great but there were too many things that disturbed me. Additionally... why would I want to go for this little company when I could get for instance Swiss Re (old analysis of Swiss Re) at a P/E of 9.0, P/B of 0.95 and paying a non special dividend of around 4.5%?

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