Shrinking the Share Count
This post was prompted by this post from Avondale Asset Management on how the share count from The Travelers has shrunk since 2005 (two years after their merger with The St. Paul, a company that I once worked for).? Only 57% of the shares remain.? Way to go.
Now, buying back stock is not a panacea.? It is only good when the shares are trading below or not much above fair market value.? What’s fair market value, you ask?? Well, that’s not an easy question to answer in most places, but in insurance, it means around 1.3x book value, adjusting for intangibles that have no economic significance.
Now if a company has some proprietary products, technologies or methods that give it a sustainable competitive advantage, that multiple can rise — AFLAC might be an example of that.? But sustainable competitive advantages in a mature and competitive industry like insurance are rare.? Above the 1.3x book value hurdle, it would be better to do special dividends.
Avondale was spot-on to feature The Travelers.? They are in the upper end of those that bought back shares 2005-2012.? Here’s my list:
| Company | Ticker | Industry | % of shares remaining since 2005 |
| WellPoint, Inc. | WLP | 0706 – Insurance (Accident & Health) |
52% |
| Infinity Property and Casualty | IPCC | 0715 – Insurance (Property & Casualty) |
56% |
| Travelers Companies, Inc., The | TRV | 0715 – Insurance (Property & Casualty) |
57% |
| Aetna Inc. | AET | 0706 – Insurance (Accident & Health) |
58% |
| Employers Holdings, Inc. | EIG | 0715 – Insurance (Property & Casualty) |
59% |
| White Mountains Insurance Grou | WTM | 0715 – Insurance (Property & Casualty) |
60% |
| Torchmark Corporation | TMK | 0709 – Insurance (Life) |
61% |
| Assurant, Inc. | AIZ | 0709 – Insurance (Life) |
61% |
| Chubb Corporation, The | CB | 0715 – Insurance (Property & Casualty) |
67% |
| Erie Indemnity Company | ERIE | 0715 – Insurance (Property & Casualty) |
68% |
| RenaissanceRe Holdings Ltd. | RNR | 0715 – Insurance (Property & Casualty) |
69% |
| Endurance Specialty Holdings L | ENH | 0715 – Insurance (Property & Casualty) |
69% |
| Loews Corporation | L | 0715 – Insurance (Property & Casualty) |
71% |
| Allied World Assurance Co Hold | AWH | 0715 – Insurance (Property & Casualty) |
71% |
| W.R. Berkley Corporation | WRB | 0715 – Insurance (Property & Casualty) |
72% |
| Health Net, Inc. | HNT | 0706 – Insurance (Accident & Health) |
72% |
| Platinum Underwriters Holdings | PTP | 0715 – Insurance (Property & Casualty) |
72% |
| Allstate Corporation, The | ALL | 0715 – Insurance (Property & Casualty) |
73% |
| CIGNA Corporation | CI | 0706 – Insurance (Accident & Health) |
75% |
| UnitedHealth Group Inc. | UNH | 0706 – Insurance (Accident & Health) |
77% |
| Progressive Corporation, The | PGR | 0715 – Insurance (Property & Casualty) |
78% |
| Montpelier Re Holdings Ltd. | MRH | 0715 – Insurance (Property & Casualty) |
78% |
| Verisk Analytics, Inc. | VRSK | 0712 – Insurance (Miscellaneous) |
78% |
| American Financial Group | AFG | 0715 – Insurance (Property & Casualty) |
80% |
| StanCorp Financial Group, Inc. | SFG | 0706 – Insurance (Accident & Health) |
80% |
| Primerica, Inc. | PRI | 0709 – Insurance (Life) |
80% |
| Investors Title Company | ITIC | 0715 – Insurance (Property & Casualty) |
81% |
| Hanover Insurance Group, Inc., | THG | 0715 – Insurance (Property & Casualty) |
83% |
| Coventry Health Care, Inc. | CVH | 0706 – Insurance (Accident & Health) |
84% |
| RLI Corp. | RLI | 0715 – Insurance (Property & Casualty) |
84% |
| Kemper Corp | KMPR | 0715 – Insurance (Property & Casualty) |
84% |
| Axis Capital Holdings Limited | AXS | 0715 – Insurance (Property & Casualty) |
85% |
| First Acceptance Corporation | FAC | 0715 – Insurance (Property & Casualty) |
86% |
| Everest Re Group Ltd | RE | 0715 – Insurance (Property & Casualty) |
89% |
| Eastern Insurance Holdings Inc | EIHI | 0709 – Insurance (Life) |
90% |
| Prudential Financial Inc | PRU | 0709 – Insurance (Life) |
91% |
| Horace Mann Educators Corporat | HMN | 0715 – Insurance (Property & Casualty) |
92% |
| FBL Financial Group | FFG | 0709 – Insurance (Life) |
92% |
| AFLAC Incorporated | AFL | 0706 – Insurance (Accident & Health) |
93% |
| Cincinnati Financial Corporati | CINF | 0715 – Insurance (Property & Casualty) |
93% |
| Kansas City Life Insurance Co | KCLI | 0709 – Insurance (Life) |
93% |
| Kingsway Financial Services In | KFS | 0715 – Insurance (Property & Casualty) |
93% |
| HCC Insurance Holdings, Inc. | HCC | 0715 – Insurance (Property & Casualty) |
94% |
| Unum Group | UNM | 0709 – Insurance (Life) |
94% |
| EMC Insurance Group Inc. | EMCI | 0715 – Insurance (Property & Casualty) |
95% |
| eHealth, Inc. | EHTH | 0712 – Insurance (Miscellaneous) |
95% |
| OneBeacon Insurance Group, Ltd | OB | 0715 – Insurance (Property & Casualty) |
95% |
| Aspen Insurance Holdings Limit | AHL | 0715 – Insurance (Property & Casualty) |
96% |
| Unico American Corporation | UNAM | 0715 – Insurance (Property & Casualty) |
97% |
| Markel Corporation | MKL | 0715 – Insurance (Property & Casualty) |
98% |
| Safety Insurance Group, Inc. | SAFT | 0715 – Insurance (Property & Casualty) |
98% |
| Humana Inc. | HUM | 0706 – Insurance (Accident & Health) |
99% |
| Atlantic American Corporation | AAME | 0709 – Insurance (Life) |
100% |
| State Auto Financial | STFC | 0715 – Insurance (Property & Casualty) |
100% |
| A.F.P Provida SA (ADR) | PVD | 0718 – Investment Services |
100% |
| American National Insurance Co | ANAT | 0715 – Insurance (Property & Casualty) |
101% |
| Baldwin & Lyons, Inc. | BWINB | 0715 – Insurance (Property & Casualty) |
101% |
| Mercury General Corporation | MCY | 0715 – Insurance (Property & Casualty) |
101% |
| Marsh & McLennan Companies, In | MMC | 0712 – Insurance (Miscellaneous) |
101% |
| National Western Life Insuranc | NWLI | 0709 – Insurance (Life) |
101% |
| Brown & Brown, Inc. | BRO | 0712 – Insurance (Miscellaneous) |
101% |
| Selective Insurance Group | SIGI | 0715 – Insurance (Property & Casualty) |
101% |
| Sun Life Financial Inc. (USA) | SLF | 0709 – Insurance (Life) |
101% |
| Life Partners Holdings, Inc. | LPHI | 0712 – Insurance (Miscellaneous) |
101% |
| Aon PLC | AON | 0712 – Insurance (Miscellaneous) |
102% |
| ProAssurance Corporation | PRA | 0715 – Insurance (Property & Casualty) |
102% |
| Principal Financial Group Inc | PFG | 0706 – Insurance (Accident & Health) |
102% |
| First American Financial Corp | FAF | 0715 – Insurance (Property & Casualty) |
102% |
| China Life Insurance Company L | LFC | 0709 – Insurance (Life) |
103% |
| Genworth Financial? Inc | GNW | 0709 – Insurance (Life) |
103% |
| Navigators Group, Inc, The | NAVG | 0715 – Insurance (Property & Casualty) |
104% |
| National Interstate Corporatio | NATL | 0715 – Insurance (Property & Casualty) |
104% |
| Amerisafe, Inc. | AMSF | 0715 – Insurance (Property & Casualty) |
104% |
| Cna Financial Corp | CNA | 0715 – Insurance (Property & Casualty) |
105% |
| Donegal Group Inc. | DGICA | 0715 – Insurance (Property & Casualty) |
106% |
| Stewart Information Services C | STC | 0715 – Insurance (Property & Casualty) |
106% |
| Berkshire Hathaway Inc. | BRK.A | 0715 – Insurance (Property & Casualty) |
107% |
| Prudential Public Limited Comp | PUK | 0709 – Insurance (Life) |
107% |
| Willis Group Holdings PLC | WSH | 0712 – Insurance (Miscellaneous) |
107% |
| Crawford & Company | CRD.B | 0712 – Insurance (Miscellaneous) |
111% |
| Old Republic International Cor | ORI | 0715 – Insurance (Property & Casualty) |
112% |
| Molina Healthcare, Inc. | MOH | 0706 – Insurance (Accident & Health) |
112% |
| United Fire Group, Inc. | UFCS | 0715 – Insurance (Property & Casualty) |
113% |
| Partnerre Ltd | PRE | 0715 – Insurance (Property & Casualty) |
113% |
| Protective Life Corp. | PL | 0709 – Insurance (Life) |
114% |
| Manulife Financial Corporation | MFC | 0709 – Insurance (Life) |
114% |
| Independence Holding Company | IHC | 0709 – Insurance (Life) |
116% |
| ACE Limited | ACE | 0715 – Insurance (Property & Casualty) |
116% |
| Reinsurance Group of America I | RGA | 0706 – Insurance (Accident & Health) |
118% |
| Citizens, Inc. | CIA | 0709 – Insurance (Life) |
119% |
| Universal Insurance Holdings, | UVE | 0715 – Insurance (Property & Casualty) |
121% |
| Phoenix Companies, Inc., The | PNX | 0709 – Insurance (Life) |
122% |
| AEGON N.V. (ADR) | AEG | 0709 – Insurance (Life) |
124% |
| Symetra Financial Corporation | SYA | 0709 – Insurance (Life) |
124% |
| Arch Capital Group Ltd. | ACGL | 0715 – Insurance (Property & Casualty) |
127% |
| Fidelity National Financial In | FNF | 0715 – Insurance (Property & Casualty) |
128% |
| Hilltop Holdings Inc. | HTH | 0715 – Insurance (Property & Casualty) |
130% |
| Arthur J. Gallagher & Co. | AJG | 0712 – Insurance (Miscellaneous) |
131% |
| ING Groep N.V. (ADR) | ING | 0709 – Insurance (Life) |
135% |
| Argo Group International Holdi | AGII | 0715 – Insurance (Property & Casualty) |
136% |
| Seabright Holdings Inc | SBX | 0715 – Insurance (Property & Casualty) |
138% |
| Global Indemnity plc | GBLI | 0715 – Insurance (Property & Casualty) |
141% |
| Metlife Inc | MET | 0709 – Insurance (Life) |
143% |
| MBIA Inc. | MBI | 0715 – Insurance (Property & Casualty) |
145% |
| Hartford Financial Services Gr | HIG | 0715 – Insurance (Property & Casualty) |
146% |
| American Safety Insurance Hold | ASI | 0715 – Insurance (Property & Casualty) |
150% |
| CNO Financial Group Inc | CNO | 0709 – Insurance (Life) |
153% |
| Universal American Corporation | UAM | 0706 – Insurance (Accident & Health) |
153% |
| Radian Group Inc. | RDN | 0715 – Insurance (Property & Casualty) |
155% |
| American Equity Investment Lif | AEL | 0709 – Insurance (Life) |
159% |
| Hallmark Financial Services, I | HALL | 0715 – Insurance (Property & Casualty) |
160% |
| Validus Holdings, Ltd. | VR | 0709 – Insurance (Life) |
160% |
| Lincoln National Corporation | LNC | 0709 – Insurance (Life) |
161% |
| Enstar Group Ltd. | ESGR | 0715 – Insurance (Property & Casualty) |
169% |
| Meadowbrook Insurance Group, I | MIG | 0715 – Insurance (Property & Casualty) |
172% |
| Greenlight Capital Re, Ltd. | GLRE | 0715 – Insurance (Property & Casualty) |
173% |
| Alleghany Corporation | Y | 0715 – Insurance (Property & Casualty) |
191% |
| Tower Group Inc | TWGP | 0715 – Insurance (Property & Casualty) |
196% |
| Alterra Capital Holdings Ltd | ALTE | 0715 – Insurance (Property & Casualty) |
197% |
| CNinsure Inc. (ADR) | CISG | 0712 – Insurance (Miscellaneous) |
208% |
| XL Group plc | XL | 0715 – Insurance (Property & Casualty) |
215% |
| MGIC Investment Corp. | MTG | 0715 – Insurance (Property & Casualty) |
220% |
| Amtrust Financial Services, In | AFSI | 0715 – Insurance (Property & Casualty) |
259% |
| Assured Guaranty Ltd. | AGO | 0715 – Insurance (Property & Casualty) |
262% |
| American International Group, | AIG | 0715 – Insurance (Property & Casualty) |
1265% |
On the top side, and I did not see any of these, be aware of reverse splits, which can reduce the share count, are a sign of a badly run company, but do nothing for the economics of a firm, aside from keeping them listed on a major exchange.
On the bottom side, factor in large mergers paid for with shares.? Most large-scale mergers don’t work out well, so I don’t mind those companies being near the bottom of the list.
On a closing note, there is a weak positive correlation in most mature industries between stock price performance and relative decreases in share count, assets, and sales.? This sounds counter-intuitive, but good management teams know when to grow and when not to grow.? They don’t do acquisitions for scale.? They don’t grow sales if the sales growth won’t justify the cost of capital.? Building the assets of the company bigger does nothing for the bottom line; selective asset sales can free up cash for more productive uses.? Good management teams do not build empires — they add when it makes sense (grow), subtract when it makes sense (shrink), divide when it makes sense (spinoffs), and multiply when it makes sense (IPOs, JVs, new projects).
PS –? What does the WSJ have today?? An article on buybacks.? Enjoy.
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