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Photo Credit: U.S. Geological Survey
This will be the last of my institutional error pieces. It is not that I have not made any other errors, but these were the big ones.
National Atlantic Holdings [NAHC]
I was wrong yesterday. I actually do have a lot available that I have written on this failure, since I wrote about it here at Aleph Blog. More than you can shake a stick at.
Let me start at the beginning. NAHC was an insurer with a niche presence in New Jersey. They competed only in personal lines, which usually is easy to analyze. New Jersey was a tough but not impossible state to operate in, and NAHC was a medium-sized fish for the size of the pond that they were in.
Chubb was not in NewJersey at that point in time, and so they wanted to insure autos, homes, and personal property, particularly that of wealthy people.
I thought it was an interesting company, trading slightly below tangible book, with a single-digit multiple on earnings, good protective boundaries, and a motivated management team. The CEO owned over 10% of the firm, which seemed to be enough to motivate, but not enough to ignore shareholders.
In 2005, we bought a 5%+ stake in the company, which in 2006 became 10%+, and eventually topped out at 17%. We might have bought more with the approval of the NewJersey Department of Insurance, which was easy at lower levels, and harder at higher levels, which was an interesting anti-takeover defense.
The company showed promise in many ways, but always seemed to have performance issues — little to medium surprises every few quarters. The stock price didn’t do that much bad or good. When I left Hovde at the end of July 2007, the position was at a modest gain. Hovde had a hard time finding long names in that era, so the performance up to that point wasn’t that bad.
