Jeff Ubben is a hedge fund manager who doesn't hedge. As
a result, he sets a very high bar for investments at ValueAct
While he's an activist investor, Jeff's focused on building
relationships with management and influencing positive change.
Unlike other activist investors, ValueAct doesn't use proxy
contests or public threats toward their investments.
That's one of the reasons that his partner was recently asked
to join the board of directors at
Microsoft (Nasdaq: MSFT)
. ValueAct invested $2 billion in Microsoft several months ago,
and sees value.
But Ubben wasn't at the Value Investing Congress to discuss
Microsoft (it's the one thing he refused to discuss.
Instead, he was here to talk about an insurance company called
Here are the notes from that presentation.
Recommends Willis (
- Stock price: $41.64, Market Cap $7.3 billion
- Dividend $1.12 or 2.7% yield
- 2012 EBIT Margin: 21.6%
- Pure play insurance broker, not a consulting business
- Pricing environment is improving
- New CEO
- North American market is growing, company taking global
- Capital spending is flat, and free cash flow is
- 90% recurring sales
- Helps clients manage risk
- Total insurance market growing 5.9% per year from 2012 to
- 2012 Revenues of $3.5 billion
- Organic, sustainable growth of business
- 2011 and 2012: North American business was
- Created an opportunity to get in at a depressed
- Has lots of emerging market exposure: 32% today, growing to
45% by 2017
- New CEO is focusing sales force through incentives to
- Global reinsurance broker market has three players: Aon
Benfield (AON @ 38%), Guy Carpender (MMC @ 26%), and Willis Re
- Insurance brokers perform well in periods of inflation
Outcome: 12% earnings growth + 3% dividend = 15%
return without multiple expansion