When I bought shares in Tower Group (Nasdaq: TWGP), a small specialty insurance company, I thought that the Street was basically overlooking a growing insurance company that had significant expansion potential and a record of savvy management. As it turns out, maybe the Street wasn't missing so much – delays in integrating a major acquisition and surprisingly large underwriting losses have definitely eroded some of the value in this name. Although it remains a respectable value idea, the story has shifted from waiting for the Street to discover it to waiting on management to re-establish its bona fides.
A Tougher Landscape
It may not even be relevant to think of Tower as a specialty insurance company like W.R. Berkley (NYSE: WRB) anymore. From a business base that was once centered around small business casualty policies in the Northeast, Tower has expanded more and more into property, individual lines, and new regions like Florida, Texas, and California. Accordingly, it's more like a small P&C insurer competing for business with the likes of Travelers (NYSE: TRV), Allstate (NYSE: ALL), Berkshire Hathaway's (NYSE: BRK.A) GEICO, and Progressive (NYSE: PGR), but with a more focused attention on business customers.
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Tower Group Has Plenty To Prove
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