Insurance Stocks

Infinity Property and Casualty Corp Valuation – Initial Coverage $IPCC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Infinity Property and Casualty Corp (IPCC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Infinity Property and Casualty Corporation is a holding company that, through its subsidiaries, provides personal automobile insurance with a focus on the nonstandard market. The Company writes personal automobile insurance with a concentration on nonstandard automobile insurance, mono-line commercial vehicle insurance and classic collector automobile insurance. It also writes standard and preferred personal auto insurance, mono-line commercial auto insurance and classic collector automobile insurance. Personal Automobile is its insurance product, which provides coverage to individuals for liability to others for bodily injury and property damage and for physical damage to an insured’s own vehicle from collision and various other perils. Commercial Vehicle provides coverage to businesses for liability to others for bodily injury and property damage and for physical damage to vehicles from collision. Classic Collector provides protection for classic collectible automobiles.

IPCC Chart

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IPCC – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $982,855,480 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 17.08% Fail
5. Moderate PEmg Ratio PEmg < 20 25.33 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.41 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $3.53
MG Growth Estimate -0.79%
MG Value $24.40
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $51.12
MG Value based on 0% Growth $29.97
Market Implied Growth Rate 8.42%
Current Price $89.30
% of Intrinsic Value 366.06%

Infinity Property and Casualty Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.72 in 2012 to an estimated $3.53 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Infinity Property and Casualty Corp. revealed the company was trading above its Graham Number of $59.43. The company pays a dividend of $1.99 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 25.33, which was above the industry average of 18.78.

Infinity Property and Casualty Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Graham Number $59.43
PEmg 25.33
PB Ratio 1.41
Dividend Yield 2.23%
TTM Dividend $1.99
Number of Consecutive Years of Dividend Growth 14

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $273,538,000
Total Assets $2,460,217,000
Intangible Assets $75,275,000
Total Liabilities $1,757,416,000
Shares Outstanding (Diluted Average) 11,084,000

Earnings Per Share History

Next Fiscal Year Estimate $2.47
Dec2015 $4.51
Dec2014 $4.95
Dec2013 $2.80
Dec2012 $2.04
Dec2011 $3.37
Dec2010 $6.91
Dec2009 $5.09
Dec2008 $1.23
Dec2007 $3.87
Dec2006 $4.26
Dec2005 $5.09
Dec2004 $4.62
Dec2003 $2.83

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.53
Dec2015 $3.88
Dec2014 $3.71
Dec2013 $3.41
Dec2012 $3.72
Dec2011 $4.41
Dec2010 $4.71
Dec2009 $3.71
Dec2008 $3.28
Dec2007 $4.25
Dec2006 $4.08
Dec2005 $3.49
Dec2004 $2.29
Dec2003 $0.94

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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