LICOA Annual Statement for 2021 $LINS $LINSA

Life Insurance Company of Alabama (LICOA) published its regulatory financials ("Annual Statement") for 2021 with the NAIC yesterday. Both the Annual Statement and the Investment Schedule are embedded below.

LICOA has significant unrealized gains in its investment portfolio. If you look at page 5 of the Investment Schedule below, you will see that the "Fair Value" of the common stock and bond investments is $113.7 million but the "Book/Adjusted Carrying Value" is only $105 million. So the regulatory financials understate the book value by $8.7 million, although you could haircut this for a tax accrual, and have a net number more like $6.9 million.

The regulatory financials also have certain reserves ("Interest Maintenance" and "Asset Valuation"), which total $4.4 million. When estimating LICOA's book value per share, it may be appropriate to add back these reserves, and also make a market value adjustment (less a reserve for deferred taxes) to the investment portfolio, in order to better approximate the GAAP book value. 

Our understanding is that there are approximately 86k voting (LINS) shares and 382k nonvoting (LINSA) shares with one-fifth the economic interest, for a total of 813k LINSA equivalents. The company's total assets less liabilities are $38.8 million, or $47.73 per LINSA equivalent share. Making the adjustments described above gives an adjusted book value of $50 million (mostly the market value adjustment to the investment portfolio), which is almost $62 per share.

The implied market capitalization of LICOA at a $26 LINSA share price is $21 million, or 30x the reported net income of $690k for 2021. The net income was a paltry 2.1% return on statutory equity. However, the adjusted book value per share grew by much more than the paltry ROE suggests, because of the accretive repurchase as well as the investment portfolio gains that do not flow through the income statement.

It is noteworthy that LICOA is profitable, overcapitalized, bought back 20% of its outstanding shares last year, is being sued by minority shareholders, but the nonvoting shares last traded for only 42% of adjusted book value per share.

LICOA Annual Statement 12 31 2021 by Nate Tobik on Scribd

LICOA Investment Schedule 12 31 2021 by Nate Tobik on Scribd

Previously, regarding Life Insurance Company of Alabama:

Be sure to check out the Concerned Shareholders of Life Insurance Company of Alabama website as well. We will have more about LICOA in the upcoming March 2022 Issue of the Oddball Stocks Newsletter.

1 comment:

  1. Any idea on why the large drop to $12 as of today on $LINSA?