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A Ben Graham deep value play

A cash-rich investment company is priced 44 per cent below book value even though it has delivered double-digit NAV compound annual growth since 1990

Aim-traded insurance sector investment company BP Marsh & Partners (BPM:215p) has increased its year-end net asset value (NAV) by 8.5 per cent to a record £137m (380p per share) and maintained annual pre-tax profit of £12.2m. Valuation gains were broad based as only two of the 17 investees companies recorded downward movements.

BP Marsh’s 18.1 per cent stake in Nexus Underwriting, an independent speciality managing general agency (MGA) that has been scaling up through organic growth and acquisition, increased by a third in value to £40m. That’s almost four times the £11.1m net investment made since BP Marsh purchased an initial 5 per cent stake for £1.5m in 2014, during which time Nexus has grown both gross written premium (GWP) income and cash profit by 550 per cent to £325m and £15m, respectively. The holding accounts for 30 per cent of BP Marsh’s NAV and the likely end game is a buy-out from a Bermudan rival attracted by Nexus’ geographic and portfolio spread – the group has offices across nine countries, underwriting over 500,000 policies across 15 classes of business.

I can also see further investment upside in CBC, a retail and wholesale Lloyd's insurance broker that has just recruited a smart international team to expand overseas. BP Marsh first invested in 2017 and has a free carry on a 38 per cent equity stake that was marked up from £4.9m to £7.1m after CBC deliver a cash profit of £2.5m. BP Marsh’s well connected team also got in on the ground floor, too, when they backed start-up MGA, Stewart Speciality Risk Underwriting, in 2017. It is now a trusted and profitable insurance partner to the Canadian Property and Casualty sector, and one in which BP Marsh has a free carry on its 30 per cent stake worth £2.5m.

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