Sohra Peak Capital Partners shared an intriguing research memo on the American Coastal Insurance Company (UIHC) spin-off. It’s an impressive business that investors are still sleeping on due to the recent messy Good-Co / Bad-Co deconsolidation. Although UIHC shares are already up +41% since the release of the report, there’s still potential for multi-bagger upside according to Sohra Peak Capital.
American Coastal dominates Florida’s catastrophe insurance with a 40% market share and has maintained a remarkable 23% average ROE over the last 15 years, staying profitable even during major hurricane years. Its leading market position and competitive advantages (pricing power, higher margins, strong customer retention, etc.) are bolstered by an exclusive partnership with AmRisc, the largest CAT-focused managing general agent in the US. The founder/CEO owns 48% of UIHC. Based on Stone Peak Capital’s projections the company currently trades at c. 4x FY24 PE and 1x FY25 BV. If you’re willing to dig deeper, also take a look at these interesting remarks made by Value And Opportunity on Sohra Peak Capital’s thesis.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.