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Andre Kostolany July 18, 2019

Kingstone: A simple New York homeowners insurer

Kingstone Insurance

Kingstone Insurance (KINS) is a multi-line provider of personal and commercial insurance. The company distributes predominately through independent brokers and agencies with a high touch model. The vast majority of premiums underwritten today have been in the state of NY in home property insurance. More recently, the company has begun branching out into neighboring states such as Pennsylvania, Rhode Island and New Jersey.

What is unique about Kingstone is their willingness to operate with smaller rural agencies. While most insurance companies require significant minimum premium volumes for an insurance agent to qualify for commissions, Kingstone’s minimum for agents is 50k. This gives Kingstone a sticky and loyal base of independent insurance agents who originate new business for them year after year.

Kingstone transitioned from a mutual into its current form in 2009 and has since been growing premiums at 25% a year while producing a return on equity of 15-16% in years without hurricanes. When hurricane Sandy hit the New York area in 2012, they experienced mild losses but were still able to maintain a return of equity of 4%.

This streak continued up until the first quarter of 2019, when Kingstone had to restate reserves in its commercial lines business, where it was writing property insurance for small businesses. While commercial lines formed a minor part of their business, Kingstone clearly mispriced the risks here and had to restate its reserves, taking substantial losses. Fortunately, Kingstone has acknowledged its past mistakes, reorganized its claims management department and pulled back on new commercial business. The market however has reacted as if Kingstone’s business model is fundamentally broken. Over the next several quarters Kingstone should show that their core home property insurance business is just as profitable as it used to be and that it can continue its history of profitable growth by growing into adjacent states.


Kingstone has for a long time maintained a mix of roughly 80% personal and 20% commercial policies. As they have experienced reserving issues in the commercial segment, Kingstone will stop growing commercial policies and instead focus on its core homeowner and dwelling coverage business. Approximately half of their policies are written in Long Island / Westchester, with another 43% written in NYC. Long Island / Westchester is a particularly interesting market for Kingstone as major insurers pulled out of the market in the wake of Superstorm Sandy.

Thanks to an Ambest upgrade to A- in 2017, Kingstone is well prepared to continue its growth as this allows Kingstone to access a greater number of insurance agents to sell its home insurance product through (many insurance agents limit their insurance writing with companies that are rated A- or better). Kingstone has been growing premium at 25% per annum for the last several years and is likely to continue to grow premium by at least 20% per annum through a combination of growth in New York and Long Island / Westchester as well as expanding its agent base in upstate New York, Connecticut, …

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Geoff Gannon July 15, 2019

Truxton (TRUX): A One-Branch Nashville Private Bank and Wealth Manager Growing 10% a Year and Trading at a P/E of 14


Truxton (TRUX) is an illiquid, micro-cap bank stock. TRUX is not listed on any stock exchange. It trades “over-the-counter”. And it does not file with the SEC.

The bank has two locations (one in Nashville, Tennessee and one in Athens, Georgia). However, only one location (the Nashville HQ) is actually a bank branch. So, I’m going to be calling Truxton a “one branch” bank despite it having two wealth management locations.

The company doesn’t file with the SEC. But, it is not a true “dark” stock. It has a perfectly nice website with an “investor information” section that includes quarterly earnings releases.

Still, if Truxton doesn’t file with the SEC – how can I find enough information to write an article about it?

Truxton – as a U.S. bank – does file reports with the FDIC even though it doesn’t file with the SEC. So, some of the information in this article will be taken from the company’s own – very brief – releases to shareholders (which are not filed with the SEC) while other information is taken from the company’s reports to the FDIC. Truxton also puts out a quarterly newsletter that sometimes provides information I might talk about here. Those 3 sources taken together add up to the portrait of the company I’ll be painting here. Some other info is taken from Glassdoor, local press reports, etc. But, that’s mostly just color.

So, it is possible to research Truxton despite it being a stock that doesn’t file with the SEC.

But, is it possible to actually buy enough Truxton shares to make a difference to your portfolio?

It depends. Are you an individual investor or a fund manager? Do you have a big portfolio or a small portfolio? And – most importantly – are you willing to take a long time to build up a position in a stock and then hold that stock pretty much forever?

No shareholder of any size would have an easy time getting out of Truxton stock quickly. But, if you intended to stick with the company for the long haul – it is possible, if you take your time buying up the position, for individual investors to get enough TRUX shares.

The math works like this…

Truxton shares are illiquid but not un-investable. In an average month, there might be around $300,000 worth of shares trading hands. Let’s round that down to $250,000 to be conservative. Let’s say you can buy 20% of the total volume of shares traded in a stock without much disturbing the price. That’s one-fifth of $250,000 equals $50,000. So, let’s say you can put $50,000 a month into Truxton stock without anyone noticing. That’s $150,000 per quarter, $300,000 every six months, and $600,000 over a year. Most investors don’t put much more than 10% of their portfolio in a single stock. So, if you’re willing to take up to a year to buy it – Truxton is investable for anyone with an account of …

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Geoff Gannon July 12, 2019

Jubilee Holdings Ltd: East Africa’s Largest and Most Profitable Insurer is Hidden Behind a Thinly Traded Stock

Jubilee Holdings Ltd: East Africa’s Largest and Most Profitable Insurance Company Is Hidden Behind a Thinly Traded Stock

By John M. Kamara

JUBI(Ticker Symbol – “JUBI” in Nairobi) is an insurance holding company listed on the Nairobi Stock Exchange since 1985 that owns and operates an 82 year old insurance operation across the East African region. As of June 28, 2019 the company has a market cap of US$290million (Ksh29 billion). In my view, the stock offers a decent investment opportunity for a buy-and-hold type investor because of the businesses quality combined with the discounted price the shares seem to trade at. I believe this price is available because of an “illiquidity discount”.

Incorporated in 1937, Jubilee Insurance was the first local Insurance Co set up as one of the initiatives by the then Imam of the Nizari Ismaili to revive the East African economies following the world recession of 1932. Sir Sultan Mohamed Shah Aga Khan III was the 48th heteridtary Imam of the Nizari Ismaili which is a branch of the Islam faith commonly referred to as the Nizari’s. The “Nizari’s’’ are a global, multi-ethnic community whose members are citizens from many parts of the globe.

This ‘group’ is involved in development, social and economic work through the Aga Khan Development Network (AKDN) that in turn carries out its activities through a multiplicity of its agencies. Its agencies are involved in sectors ranging from education to health, finance and even investment.

The AKDN is currently under the leadership of His Highness Aga Khan IV, the 49th Imam of the Ismaili Muslims who is the grandson of the Sultan.

The insurance company was one of the many business interests the AKDN would establish or invest in as part of their wider goal to improve the “quality of lives of the people/community” through its agency, the Aga Khan Fund for Economic Development (AKFED). This agency has been investing in for-profit businesses over the decades with potential to improve the lives of the members of the communities the businesses operate in. This type of investing has been more recently been termed Social Impact Investing (SII).

So in 1937, the Aga Khan called together a few prominent Ismailis from all over East Africa to join him start a local insurance company. The Company began with a small office in downtown Mombasa and today is now the largest composite insurer in East and Central Africa with annual premiums of $US 260million and $US670 million in float as of year 2018.

The listed company is an insurance holding company, Jubilee Holdings Limited (JUBI: NAI) which underwrites general, life and pension business through majority owned subsidiaries in Kenya, Uganda, Tanzania, Burundi and Mauritius. Its subsidiaries, whose businesses are split into General (what is more commonly referred to as Property & Casualty in many parts of the developed world) and Life Insurance companies, all rank in the top 3 or 4 in market share in their respective jurisdictions. In addition, JUBI began operations in …

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Geoff Gannon July 1, 2019

United Plantations: A Low-Cost Palm Oil Producer with 11 to 17% Returns on Equity and Excellent Capital Allocation


United Plantations Berhad (KLSE:UTDPLT, UP for the sake of brevity) is an integrated palm oil plantation, milling and refining company (plus a small coconut plantation). It’s currently too expensive for me to buy but it is a company that I would like to own if the price ever drops to an acceptable level.

Superficially, there are a lot of reasons why palm oil companies look like a bad investment. Like all agricultural commodities, the price of palm oil fluctuates a lot. There’s the risk of pests, disease or unfavourable weather events. A significant amount of palm oil is used for biofuel so there is some regulatory risk associated with reduction of biofuel subsidies or an outright ban of biofuel. Many people have concerns about the health impact of consuming palm oil. And the industry has had a lot of bad press regarding forest clearing, peat fires and loss of wildlife habitat.


I have some pretty strong views on these areas. For full disclosure I previously worked in the vegetable oil industry (including palm oil milling) and still do a small amount of work for a palm fruit milling machinery company. So you could say that I’m biased but I have at least seen what goes on at well managed mills in Malaysia, Indonesia and PNG. My opinion is that most of the bad publicity is undeserved and that unless people everywhere decide to accept a major downgrade in their diet and standard of living, palm oil is going to be part of our diet for the foreseeable future.


Previously, most of the hard fats in our diet came from animal fats such as tallow, lard and milk fat. Vegetarianism (and also halal and kosher requirements) made the first of those two unacceptable for many consumer products and veganism reduced the addressable market for the third. For a period, hydrogenated seed oil (mostly soy) provided an acceptable alternative. Unfortunately, health concerns regarding trans fat meant that hydrogenated oils became unpopular. That left palm. For a large food manufacturer or restaurant chain seeking an oil which makes baked goods fatty (but not oily) or fried food crispy, the oil which will offend the least number of customers from a dietary and religious point of view is palm.


Palm oil (and palm kernel oil) are also very versatile (compared to the main industrial oils) in terms of producing specialty products. The oil can be fractionated simply by chilling it until part of the fat solidifies and filtering the solids out from the liquid. The wide range of fatty acids in the oil make it useful for oleochemicals such as soaps and emulsifiers. It’s currently a very cheap oil – that might not continue in the future. But it will probably always be the easiest oil to manufacture many specialty products from.


In terms of the environmental impact, palm has much less impact than other oils when managed correctly. Palm oil uses a fraction of the area …

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