Gable Hldgs Share Discussion Threads

[escapetohome] 30/5/2016 07:56

Thanks very much , another piece of excellent research to add to the growing body of research and Garbets , which potrays what seems to be really going on here.

To put it all in laymans terms, and at the level of many investors, this can be summed up: A bit of a con job , smoke and mirrors par excellence.

[effortless cool] 30/5/2016 07:26

I came across Gable by accident the other day and have had a quick look this morning. Like Garbetklb, I know the industry well and like him, I view Gable as uninvestible.

With regard to Gable's current situation, it would seem that the Board is highly culpable. They have been signing off internal estimates of claim provisions that are significantly below external best estimates. The company only seems to have stopped this practice due to regulatory intervention.

Additionally, the latest announcement says:

"The new capital requirements are determined through a risk based analysis of expected future gross written premiums. As Gable writes small niche lines of business its Solvency II capital calculation does not receive material benefits from diversification of risk and this together with the rapid growth profile of the business leads to a capital requirement which is a multiple of that under Solvency I. Gable's own capital base is also risk weighted under Solvency II with certain material balances such as deferred acquisition costs (amounting to some £13 million) being disallowed under the new rules.

Having completed this assessment, the Board has concluded that raising sufficient additional capital for full Solvency II compliance is not possible for the existing business, its growth profile and structure as Solvency II appears to be incompatible with small niche European insurance business models".

The basis of the Solvency II Standard Formula that Gable uses to calculate its capital requirements was established years ago, yet the new capital requirements seem to be a surprise to the company. This is inexcusable. However, it is interesting to look at the 2014 results:

"... the Board is confident that sufficient capital will be in place in advance of the commencement of Solvency II to support its ambitious plans".

What changed? Again, the text suggests that the Board has only faced up to this issue due to regulatory intervention.

Also, the Chief Executive is ludicrously over-remunerated. This is a tinpot little business, yet he had a basic salary of £440k in 2014 and the RemCo managed to set performance conditions on his bonus that led to a full payout of £440k whilst shareholders incurred a £5.4m pre-tax loss. How does that work? Further, he owns a company that is picking up almost £2m each year through a delegated authority arrangement. One question shareholders may wish to ask is how much profit commission Gable has paid to HUAL over recent years, and how much less this would have been if Gable had booked external best estimate reserves?

Finally, the business is incorporated in the Cayman Islands and regulated in Lichtenstein. This simple facts ought to have rung alarm bells for investors long ago.

[the stinger] 28/5/2016 15:44

battlebus, I feel honoured. Can you point me to it please.

[battlebus2] 28/5/2016 15:31

I see Directors talk have posted the stingers post.

[battlebus2] 28/5/2016 10:58

Just to clear up any confusion the Hardman note is an old one from October 15.

[battlebus2] 28/5/2016 10:39

Sorry yes it should have read Hardman Garbetklb's, link is at the bottom of my previous post but here's it again.

[garbetklb] 28/5/2016 10:29

Does anyone have a link to the Hartman (?Hardman) research note? Might make interesting reading.

I really really wouldn't place too much faith in the best estimates for 2012 onwards..... Actuaries can be pretty good where they are looking at large numbers of homogeneous risks / policies / claims. But that ain't the case here.

[the stinger] 28/5/2016 08:30

battlebus - that's my point, as of today who knows which side of the tunnel.

That article may be too positive, who knows, however the statements below maybe the key for a partner/restructure.

'All reserves for business written since 2012 have also been on the external best estimate basis. If Gable’s underwriters are correct then this will lead to surpluses emerging from reserves in future years'.

'In short, if Gable’s underwriters are correct then some of the extra provisioning may
emerge as profit over the life of the book'.

Like I say, no point being too pessimistic now as its already happened. The time to do that was 1 or 2 yrs ago. Less of a risk now the share price is at 4p and not 90p, 50p, 30p, 20p....

[battlebus2] 28/5/2016 08:17

Yes that's of course very possible if you want to risk a few pounds day trading..

Hardman in October issued an article which reads almost positive, if I was a newbie here I'd almost be foolish enough to buy a few. Projecting a pre tax profit of 10.4 million for y/e 2016, just shows how you can be fooled by articles from credible sources which aren't worth the paper they're written on. Titled the End Of The Tunnel, trouble is it may not come out the other side. Anyone looking at these read back through all garbetklb's post before you buy.

[the stinger] 28/5/2016 07:38

topvest - Amazing really, only 2 yrs ago 90p per share, projected to go to over £1 per share etc etc value to CEO's stake then £17m or so...now his stake value,,£1m...lol, therefore I'm sure that will motivate him somewhat, and there's the other large II holders who'll no doubt will want to see some kind of restructure. Why right off the business now when there's the possibility of a restructure and thus retain some value.

And there's still the probability of some kind of value in gable as the £70m reserve for claims may not be fully used, and no one really knows the answer there? what if its over reserved by £10m-£15m!! and there's still the £6m latest provision which may be claimed back.

They are in business here with Gross Written Premiums of over GBP100m!! ,who knows, the review may bring in a partner, start afresh and just grow again....if so then its a game changer.

Too late to be very negative here, its already happened. Its been suggested that there's a 8.5p NAV on this without the £6m possible return. If that £6m is recouped then its a 15p NAV,,, then there's the reserve calculations on top of that.

Time will tell here however there's scope for a recovery at these levels. At 4p per share £6m MC could be a bargain.. Predictions of 4p a share 2yrs or even 1yr ago would have been seen as madness..

Maybe there's too much pessimism now?,,,just like there was too much optimism 1 or 2 yrs ago?.. Just have to wait and see now. Bust or a possible recovery play.

[topvest] 28/5/2016 06:56

This will go to zero...no doubt in my mind. It's an eventually bust business with a very poor business model and a highly dubious management team at the helm. Red flag.

[woodcutter] 27/5/2016 19:06

bb2 i gave up long ago trying to analyse the insurance sector i only ever invest in this sector now using my charting skills.

FA is great for conventional businesses but you need a strong set of TA skills to invest in this sort of stuff.

i've held and traded LRE over the years which is real long tail and very specialised insurance products but unless your knowledgeable of the sector like Garbet it's best to stay away without the TA skills imho.

you're a canny investor, you'll recover

wc

[battlebus2] 27/5/2016 15:10

Cheers woody and all, another lesson learnt.

[woodcutter] 27/5/2016 13:31

bb2 sad to hear of your loss here i recall we rode the price for a while some years ago making a decent return. Although i feel from an investment perspective my accounting knowledge of insurance companies, particularly long tail claims business side, has improved immensely from my novice days back then, it's still pretty limited.

I'm inclined to follow the advice of Garbet and draw attention to my post 1668 some years ago when i was learning the ropes on insurance investment. You have got to look at the claims history report to get anywhere near understanding whether there's sufficient reserves and even then there's quite a bit of guesswork involved imv.

good luck to any continued holders.

woody

[solarno lopez] 27/5/2016 10:50

hxxp://www.insurancetimes.co.uk/gable-unveils-plan-to-offer-solvency-ii-compliant-and-a-rated-capacity/1418457.article

[luckymouse] 27/5/2016 08:52

Some shorters do specialise in co's that have announced they are not viable

[eezymunny] 27/5/2016 08:42

No, you're wrong waldorf. You say "All stocks regardless how far they have fallen can still go down another 50%". That should be 100%, not 50%!!!!

:)

[waldof] 27/5/2016 08:39

....and a lesson i have learnt ( and wish i had learnt earlier)is when you buy a stock at say 30p...and you see it go down and down to say 5p, you tell yourself it cannot go down any further instead of saying it can easily go down another 50% from here.
Then it does and you wish you had at least sold at 5p.
So its now 2.5p and you tell yourself the same..this is a ridiculous price now, it cannot go down further.
And it does.

Must be plenty here who have been saying that all the way down.

All stocks regardless how far they have fallen can still go down another 50%.
I have preserved capital since i have taken this on board.

[solarno lopez] 27/5/2016 07:58

If I recall some 12/18 months ago GARBET mentioned he met William Dewsall and on the strength of that would not buy this stock

[garbetklb] 27/5/2016 06:52

I don't see anyone in their right mind wanting to buy Gable. What would they be buying?

- A heap of reserves with a huge amount of uncertainty
- The staff that got them into this mess - and looking on the internet, I can't find many staff with insurance expertise. An underwriter & an actuary - both young and relatively inexperienced. I'm not criticising them, just pointing out their age/experience. I suspect WD dominated the organisation - and who would want to take him on?
- A licence in a pretty lightweight domicile - and one where the regulation has, pretty much by definition, been hopeless. I wonder why they chose it in the first place??!!

As I've repeatedly commented, reserves & reserving are absolutely key. Fast growing, long tail insurers are incredibly vulnerable to getting the reserving wrong. If they inadequately reserve, they have a problem there but, more importantly, delude themselves into thinking that they understand the business and are charging the right rates. It's a snowball effect.

With such a mixed account, it would take a very brave company to think they understood Gable's liabilities. And forget all the speech about selective underwriting etc - it's what all insurers say.

[the stinger] 27/5/2016 06:19

Garbet, fair comments and NAV assessment. The £6m ATE provision may be recouped by somewhat?, therefore if a 3rd party was interested in purchasing the whole coy there may be a NAV of around 12p-15p,, that's still me losing 50% of my investment.

Excellent share price for a trader starting off though, as could treble from here, if taken over that is. Then again, as you know, if a restructure occurred satisfying solvency11 then its a different game here all together.

Good comments Garbet, Cheers

[garbetklb] 26/5/2016 21:36

Hi Stinger

I admire your optimism, but fear it's misplaced.

The cash is spoken for - it's the claim reserves to pay for the claims as they mature.

The client base is worth zero - because they are NOT Gable's clients, but the clients of the brokers who put their business into Gable. I doubt any of the clients chose Gable - Gable were chosen by the brokers because they offered the right mixture of low premiums, wide cover, high commissions to the brokers. Bearing in mind that brokers have a big problem if an insurer they recommended goes bust, why would they choose Gable over RSA / Allianz / Lloyds? The 3 things I've mentioned.

And bear in mind that these clients' business has generated losses greater than expected - would anyone want them? Doubtful - at least at the terms Gable took them on.

The option of carrying on is likely to disappear - if they can't meet the solvency requirements, they will be told to stop underwriting. Unless the regulator is hoodwinked, dim or blind.

Why do you feel the NAV is correct? The latest claimed NAV I can find is 18.47p from June 2015. The latest RNS talks about the expected loss of £7m to £8m being increased by a provision against the ATE policy of £6m. To make the maths simple, let's say £7.5m + £6m = £13.5m. With about 135m shares in issue, that's a hit of 10p. Taking the NAV down to 8.5p - before any more stuff comes out of the woodwork, which I'm sure it will.

I've also had some horrors in areas where I had no/little experience. I'm pretty hopeless at selling - it's horrible seeing your investment drain away.

Personally, AS AN INVESTMENT, I'd not entertain Gable at ANY price following the latest RNS. I'm not a trader, so have no idea if there could be an opportunity there.

I'm sorry to paint such a grim picture - but the writing has been on the wall for ages.

[adyfc] 26/5/2016 19:56

I'd take the 5p and run if i were you. No-one will take this over it's not a viable business model.
When Gable was orginally set up it was to write selective high end profit policies, after a couple of years they realized the market was too small and they started writing cover for everything. That's why the underwriting growth rapidly expanded.
It appeared for a couple of years as if it was doing well but in reality the tail was getting bigger and closing in.
Under reserving paid for fat wages.
I've spoken to the company on the phone before (02073 377460 if you wanna chat to them) and sent an email to Dewsall of which he never responded despite being told he would. Don't think he liked my questions.

[the stinger] 26/5/2016 17:28

Garbet, appreciate your input. My ave here is 35p!!! and thought i was getting in at a good price...

There's still value here though, £70m of cash and a good client base is worth something more than 5p per share..

Takeover for me at around 12-15p per share and probably already been discussed. If not then there's still a carry on and gain more market share business to go at.

However i believe there's a deal of somekind already on the table here...

The 15 - 18p NAV is correct and i'm hoping i can recoup some of my losses...more than 5p per share worth anyway!!