NATIONAL GENERAL HOLDINGS CP NGHCO
March 20, 2020 - 1:03am EST by
david101
2020 2021
Price: 14.48 EPS 0 0
Shares Out. (in M): 6 P/E 0 0
Market Cap (in $M): 87 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0 0

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  • Preferred stock
  • winner
  • Insurance

Description

 

Another market meltdown, another puke-fest of insurance preferred shares. This is actually a basket idea with 8 names but the one that caught my eye initially was NGHCO, so that is what I put it under. NGHCO was trading above par of $25 a month ago but is now at 58% of par and a current yield of 13%. The common got whacked as well but at points on Wednesday and Thursday, the preferred was trading below $10. I would have written this up earlier but I was busy buying. Fish gotta swim, birds gotta eat.

 

 

 

I am not going to go into a lot of detail about the companies because this is more of a special situation. Plus, there are VIC write-ups and Street coverage on the names. These insurers don't have to do great for this to work, they just have to muddle through.

 

 

 

The National General common stock has been written up twice on VIC and both provide good information:

 

 

 

https://www.valueinvestorsclub.com/idea/NATIONAL_GENERAL_HOLDINGS_CP/2388229637

 

 

 

https://www.valueinvestorsclub.com/idea/NATIONAL_GENERAL_HOLDINGS_CP/4445448629

 

 

 

The biggest risk with NGHC is the Karfunkel family that controls the company. You can read about their shenanigans with another insurer that they own, AmTrust. Last year, the family took AFSI private with help of a PE firm. AFSI had issued a slew of preferreds over the years but in order to get approval for hte deal, the family needed consent from the preferred shareholders, who were promised that the company would maintain NYSE listing for the preferreds. A month after the deal closed, the company delisted the preferreds, which sparked its own puke fest. I made some quick money flipping those but was happy to take a profit and run. Anyway, the AmTrust preferreds traded into the $7's but had recovered to the $18's not that long ago. The crazy part about this week was that the NGHC preferreds that were trading 30-35% higher than their cousins a month ago were trading for less than them this week. It was nuts, as the preferreds were trading as if the main company was going out of business whereas the common was not.

 

 

 

After buying NGHCO, I started rummaging around and bought some ACGLO and AXS-PE. There are some similar issues, as well as some for Aspen Re that was bought by Apollo.

 

 

 

Here is most recent VIC write up for AXS: https://www.valueinvestorsclub.com/idea/AXIS_CAPITAL_HOLDINGS_LTD/8218406804

 

 

 

There are some old write-ups on ACGL but the company has morphed over the years from being a Bermuda reinsurer to more of a US-based insurer. Here is presentation from last month:

 

 

 

http://ir.archcapgroup.com/Cache/IRCache/1036b3ed-127e-f435-f232-71accb60106c.PDF?O=PDF&T=&Y=&D=&FID=1036b3ed-127e-f435-f232-71accb60106c&iid=103577

 

 

 

You will note that all these shares are non-cumulative. That stems from regulators who classify non-cumulative preferreds as equity and cumulative preferreds as debt for capital purposes. 

 

 

Here is a table overview of the preferreds:

 

 

Security Price Par Pct of Par Stated Yield Current Yield Par in 1 Yr Return w/Div Shares (mm) Common Common M/C
NGHCO $14.48 $25.00 57.90% 7.50% 12.95% 86% 6.0 NGHC 1,500
NGHCN $14.59 $25.00 58.40% 7.50% 12.85% 84% 7.0 NGHC 1,500
NGHCP $14.61 $25.00 58.40% 7.50% 12.83% 84% 2.2 NGHC 1,500
ACGLO $16.81 $25.00 67.20% 5.45% 8.11% 57% 8.0 ACGL 11,150
ACGLP $16.40 $25.00 65.60% 5.25% 8.00% 60% 18.0 ACGL 11,150
AXS.PE $16.55 $25.00 66.20% 5.50% 8.31% 59% 22.0 AXS 3,000
AHL.PC $15.19 $25.00 60.80% 5.95% 9.79% 74% 11.0   Part of APO
AHL.PD $13.57 $25.00 54.30% 5.63% 10.36% 95% 11.0   Part of APO

 

Below are more details on each issue.

 

Ticker Symbol: NGHCO

National General Holdings Corp., 7.50% Dep Shares Non-Cumul Pfd Shares Series B

CUSIP: 636220808    

Exchange: NGM

Security Type:  Traditional Preferred Stock

Description: National General Holdings Corp., 7.50% depositary shares each representing 1/40th interest in a share of Non-Cumulative Preferred Stock, Series B, liquidation preference $25 per depositary share, redeemable at the issuer's option on or after 4/15/2020 at $25 per depositary share plus declared and unpaid dividends, and with no stated maturity. Non-Cumulative distributions of 7.50% per annum ($1.875 per annum or $0.46875 per quarter) will be paid quarterly on 1/15, 4/15, 7/15 & 10/15 to holders of record on the record date that will be 1/1, 4/1, 7/1 & 10/1 or such other record date fixed by the board, not more than 60 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) and are also eligible for the dividends received deduction for corporate holders (see page S-36 of the prospectus for further information). This security was not rated by Moody’s or S&P at the time of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

Prospectus: http://www.sec.gov/Archives/edgar/data/1578735/000119312515105054/d892698d424b2.htm

 

Ticker Symbol: NGHCN

National General Holdings Corp., 7.50% Dep Shares Non-Cumul Pfd Stock Series C

CUSIP: 636220857    

Exchange: NGM

Security Type: Traditional Preferred Stock

Description: National General Holdings Corp., 7.50% depositary shares each representing 1/40th interest in a share of Non-Cumulative Preferred Stock, Series C, liquidation preference $25 per depositary share, redeemable at the issuer's option on or after 7/15/2021 at $25 per depositary share plus declared and unpaid dividends, and with no stated maturity. Non-Cumulative distributions of 7.50% per annum ($1.875 per annum or $0.46875 per quarter) will be paid quarterly on 1/15, 4/15, 7/15 & 10/15 to holders of record on the record date that will be 1/1, 4/1, 7/1 & 10/1 or such other record date fixed by the board, not more than 60 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) and are also eligible for the dividends received deduction for corporate holders (see page S-37 of the prospectus for further information). This security was not rated by Moody’s or S&P at the time of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company

Propsectus: https://www.sec.gov/Archives/edgar/data/1578735/000119312516637976/d139092d424b2.htm

 

Ticker Symbol: NGHCP

National General Holdings Corp., 7.50% Non-Cumulative Preferred Stock Series A  

CUSIP: 636220709    

Exchange: NGM

Security Type: Traditional Preferred Stock

Description:  National General Holdings Corp., 7.50% Non-Cumulative Preferred Stock Series A, liquidation preference $25 per share, redeemable at the issuer's option on or after 7/15/2019 at $25 per share plus declared and unpaid dividends, and with no stated maturity. Non-Cumulative distributions of 7.50% per annum ($1.875 per annum or $0.46875 per quarter) will be paid quarterly on 1/15, 4/15, 7/15 & 10/15 to holders of record on the record date that will be 1/1, 4/1, 7/1 & 10/1 respectively or the record date fixed by the board, not more than 60 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) and are also eligible for the dividends received deduction for corporate holders (see page 36 of the prospectus for further information). This security was not rated by Moody’s or S&P at the time of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

Propsectus: http://www.sec.gov/Archives/edgar/data/1578735/000119312514242409/d741300d424b4.htm

 

Ticker Symbol: ACGLO

Arch Capital Group Ltd, 5.45% Dep Shares Non-Cumul Preferred Shares Series F

CUSIP: 03939A107    

Exchange: NGS

Security Type: Traditional Preferred Stock

Description: Arch Capital Group, Ltd., 5.45% depositary shares each representing 1/1,000th interest in a share of non-cumulative preferred shares series F, liquidation preference $25 per depositary share, redeemable at the issuer's option on or after 8/17/2022 at $25 per depositary share plus declared and unpaid dividends, and with no stated maturity. Non-Cumulative distributions of 5.45% per annum ($1.3625 per annum or $0.340625 per quarter) will be paid quarterly on 3/31, 6/30, 9/30 & 12/31 to holders of record on the record date that will be 3/15, 6/15, 9/15 & 12/15 respectively or a date fixed by the board, not more than 60 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. Except in specified circumstances relating to certain tax, regulatory or corporate events, the Preferred Shares are not redeemable prior to 8/17/2022. At any time within 90 days following the occurrence of a capital redemption trigger date on which the issuer has reasonably determined a capital disqualification event has occurred, or anytime following a tax event the issuer will have the option to redeem the shares at $25 per depositary share (see prospectus for further information). Dividends paid by these preferred shares are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) but, since they are issued by a foreign company, are NOT eligible for the dividends received deduction for corporate holders (see page S-6 of the prospectus for further details). This security was rated as Baa3 by Moody’s and BBB by S&P at the date of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

Prospectus: http://www.nasdaq.com/aspx/infoquotes.aspx?symbol=ACGLO&selected=ACGLO

 

Ticker Symbol: ACGLP

Arch Capital Group Ltd, 5.25% Dep Shares Non-Cumul Preferred Shares, Series E

CUSIP: 03939A206    

Exchange: NGS

Security Type: Traditional Preferred Stock

Description:  Arch Capital Group, Ltd., 5.25% depositary shares each representing 1/1,000th interest in a share of non-cumulative preferred shares series E, liquidation preference $25 per depositary share, redeemable at the issuer's option on or after 9/29/2021 at $25 per depositary share plus declared and unpaid dividends, and with no stated maturity. Non-Cumulative distributions of 5.25% per annum ($1.3125 per annum or $0.328125 per quarter) will be paid quarterly on 3/31, 6/30, 9/30 & 12/31 to holders of record on the record date that will be 3/15, 6/15, 9/15 & 12/15 respectively or a date fixed by the board, not more than 60 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. Except in specified circumstances relating to certain tax, regulatory or corporate events, the Preferred Shares are not redeemable prior to 9/29/2021. At any time within 90 days following the occurrence of a capital redemption trigger date on which the issuer has reasonably determined a capital disqualification event has occurred, the issuer will have the option to redeem the shares at $25 per depositary share (see prospectus for further information). Dividends paid by these preferred shares are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) but, since they are issued by a foreign company, are NOT eligible for the dividends received deduction for corporate holders (see page S-6 of the prospectus for further details). This security was rated as Baa2 by Moody’s and BBB by S&P at the date of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

Prospectus: https://www.sec.gov/Archives/edgar/data/947484/000104746916015674/a2229812z424b2.htm

 

Ticker Symbol: AHL-C

Aspen Insurance Holdings Ltd, 5.95% Fixed/Float Perp Non-Cumul Preference Shares

CUSIP: G05384154    

Exchange: NYSE

Security Type: Traditional Preferred Stock

Description: Aspen Insurance Holdings Ltd, 5.95% Fixed-to-Floating Rate Perpetual Non-Cumulative Preference Shares, liquidation preference $25 per share, redeemable at the issuer's option on or after 7/1/2023 at $25 per share plus declared and unpaid dividends, and with no stated maturity. Fixed non-cumulative distributions of 5.95% per annum ($1.4875 per annum or $0.371875 per quarter) will be paid quarterly through 7/1/2023 on 1/1, 4/1, 7/1 & 10/1 to holders of record on the record date that will be 12/15, 3/15, 6/15 & 9/15 respectively (NOTE: the ex-dividend date is one business day prior to the record date). On and after 7/1/2023 floating rate distributions will be paid at a rate equal to the three-month LIBOR plus 4.06%. The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. This security is possibly subject to an early call as a result of the occurrence of a capital disqualification redemption event (see the prospectus for further information). At any time prior to July 1, 2023, the Issuer may redeem the Preference Shares, in whole but not in part, if the Issuer submits to the holders of the Issuer’s ordinary shares a proposal for an amalgamation or merger or if the Issuer submits any proposal for any other matter that requires, as a result of a change in Bermuda law, for its validation or effectuation an affirmative vote of the holders of the Preference Shares. Dividends paid by these preference shares are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) but, since they are issued by a foreign company, are NOT eligible for the dividends received deduction for corporate holders (see page S-41 of the prospectus for further information). This security was rated as Ba1 by Moody’s and BBB- by S&P at the date of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

Prospectus: http://www.sec.gov/Archives/edgar/data/1267395/000119312513182424/d523803d424b5.htm

 

Ticker Symbol: AHL-D

Aspen Insurance Holdings Ltd, 5.625% Perpetual Non-Cumulative Preference Shares

CUSIP: G05384162    

Exchange: NYSE

Security Type: Traditional Preferred Stock

Description:  Aspen Insurance Holdings Ltd., 5.625% Perpetual Non-Cumulative Preference Shares, liquidation preference $25 per share, redeemable at the issuer's option on or after 1/1/2027 at $25 per share plus declared and unpaid dividends, and with no stated maturity. Non-cumulative distributions of 5.625% per annum ($1.40625 per annum or $0.3515625 per quarter) will be paid quarterly on 1/1, 4/1, 7/1 & 10/1 to holders of record on the record date that will be 12/15, 3/15, 6/15 & 9/15 respectively (NOTE: the ex-dividend date is one business day prior to the record date). The dividends are non-cumulative and if the board of directors does not declare a dividend or the company fails to pay a dividend declared by the board for any quarterly dividend period, the holder will not be entitled to receive any dividend for that quarterly period and the undeclared or unpaid dividend will not accumulate. At any time prior to 1/1/2027, the company may redeem the preference shares in whole at a redemption price of $26 per preference share, plus declared and unpaid dividends, only if they submit to the holders of their ordinary shares a proposal for an amalgamation or merger or if they submit any proposal for any other matter that requires, as a result of a change in Bermuda law after the date of this prospectus, for its validation or effectuation an affirmative vote of the holders of the Preference Shares. In addition, following the occurrence of a tax event, they may redeem the preference shares, in whole or in part, at a redemption price of $25 per share, plus declared and unpaid dividends (see prospectus for details). Dividends paid by these preferred shares are eligible for the preferential income tax rate of 15% to a maximum of 20% depending on the holder's tax bracket (and under IRS specified holding restrictions) but, since they are issued by a foreign company, are NOT eligible for the dividends received deduction for corporate holders (see page S-31 of the prospectus for further information). This security was rated as Ba1 by Moody’s and BBB- by S&P at the date of its IPO. In regard to the payment of dividends and upon liquidation, the preferred shares rank junior to the company's senior debt, equally with other preferreds of the company, and senior to the common shares of the company.

 

Prospectus: https://www.sec.gov/Archives/edgar/data/1267395/000119312516711066/d241376d424b5.htm

 

Risks: For the NGHC preferreds, the Karfunkels. Companies suspend the dividends. 

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

Thinks calm down and prices return to normal.

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