The Benjamin Graham Centre for Value

Investing
Toronto
April 15. 2015

A Scandinavians Path to Value Investing

My history with value investing.
The Security I Like Best

A Scandinavians Path to Value Investing

1986

- Beginnings

1990

- Something called Value Investing

2002

- My own shop

2008-

- Concentration

Track record NCMF

INGV

MSCI W I

In cept ion : Ju l. 1 2 2 0 0 2

IPNGA

MSCI W I

NGV Lu x

MSCI W I L

In cept ion : A u g . 2 2 2 0 0 8 In cept ion : Dec. 4 2 0 0 8

2 002

(1 1 .2 6 )%

(1 1 .8 4 )%

2 003

4 1 .6 2 %

1 0 .9 5 %

2 004

2 3 .2 8 %

6 .3 5 %

2 005

2 8 .0 8 %

2 6 .5 1 %

2 006

1 .9 4 %

7 .3 4 %

2 007

(7 .5 7 )%

(1 .6 3 )%

2 008

(2 3 .5 7 )%

(3 7 .7 5 )%

4 .1 6 %

(1 8 .1 0 )%

4 .4 3 %

2 009

1 8 .2 3 %

2 5 .9 %

3 2 .3 2 %

2 5 .9 0 %

2 01 0

2 0 .0 5 %

1 9 .7 1 %

2 2 .4 0 %

2 01 1

(7 .0 7 )

(2 .6 4 )%

2 01 2

1 7 .3 4 %

2 01 3

BSC

MSCI W I L

MSCI W I

In cept ion : Ju n . 8 2 0 0 7

2 .3 4 %

(2 .4 8 )%

(7 .5 9 )%

4 .6 5 %

6 .0 9 %

(3 8 .6 9 )%

(3 7 .7 5 )%

2 3 .9 4 %

2 5 .7 3 %

3 9 .9 4 %

2 5 .7 3 %

2 5 .9 0 %

1 9 .7 1 %

4 .7 7 %

1 0 .0 1 %

1 2 .6 2 %

1 0 .0 1 %

1 9 .7 1 %

(3 .5 5 )%

(2 .6 4 )%

(9 .0 3 )%

(5 .4 9 )%

(7 .6 4 )%

(5 .4 9 )%

(2 .6 4 )%

1 4 .4 9 %

1 4 .7 5 %

1 4 .4 9 %

1 9 .4 1 %

1 5 .7 1 %

1 5 .9 8 %

1 5 .7 1 %

1 4 .4 9 %

1 9 .2 7 %

2 1 .1 9 %

2 7 .9 5 %

2 1 .1 9 %

1 9 .6 1 %

2 8 .8 7 %

3 3 .2 3 %

2 8 .8 7 %

2 1 .1 9 %

2 01 4

1 6 .2 5 %

1 9 .2 7 %

1 9 .5 1 %

1 9 .2 7 %

6 .8 7 %

9 .8 1 %

1 7 .2 7 %

9 .8 1 %

1 9 .2 7 %

2 0 1 5 /3

1 5 .6 1 %

1 5 .6 5 %

1 8 .8 7 %

1 5 .6 5 %

7 .6 3 %

4 .8 6 %

2 0 .8 3 %

4 .8 6 %

1 5 .6 5 %

10.46%

7.22%

20.31%

13.43%

11.82%

14.46%

16.60%

3.84%

6.33%

P.A .

Long term track record

jan. 1987 Mar. 2015
Ole Nielsen

Per annum

Accumulated

MSCI Index

13.44 %

10.07 %

2,743.12 %

1,174.91 %

The Security I Like Best

Admiral Group Plc
Operated by Henry Engelhardt since 1993 and created by Henry
Engelhardt in a management buyout in 1999, Admiral is a UK
direct auto insurer focused on low costs and high customer
service generating consistently high ROE with no debt employed.

Admiral Group Plc

History
Business model
Employee motivation
Insider ownership owner operated
Focus on building shareholder value

The numbers:

Admiral Group Turnover

The Long View
2,500

2,190 2,215
2,030
1,971

2,000
1,585
1,500
1,077
1,000

500

18

47

373 422
320
207 262
150
120
73 100

540

627

698

808

910

Admiral UK Auto Exp.- Claims- and Combined Ratios

91.4
82.0

84.9

87.8

91.3
84.7

81.0

84.9

83.5

89.7

83.0

84.9

74.1
67.7

[VRDI]

[VRDI]
[VRDI]

[VRDI]
[VRDI]

[VRDI]

[VRDI]
[VRDI]
[VRDI]
[VRDI]
[VRDI]

[VRDI]
[VRDI]

[VRDI]

[VRDI]

2001

[VRDI]
[VRDI]
[VRDI]
[VRDI]
[VRDI]
[VRDI]
[VRDI]
[VRDI][VRDI]
[VRDI] [VRDI]
[VRDI]
[VRDI]

2002

2003

2004

2005

2006

Exp. ratio

2007

2008

Claims ratio

2009

2010

Comb. Ratio

2011

2012

2013

2014

Expence Ratio, Admiral vs Market

30
28

27

27

27

27

31
29

28

27

27

26
23

19.0
15.6

15.4

15.0

15.1

15.8

2004

2005

2006

16.7

18.0
15.2

14.0

13.6

2011

2012

15.0

16.3

9.5

2001

2002

2003

2007

Admiral

2008
Market

2009

2010

2013

2014

Combined Ratio, Admiral vs Market

104

102

103

110
102

100

82.0

84.9

87.8

84.7

2004

2005

2006

2007

91.4
74.1

2001

2002

117

120

81.0

127
118

84.9

83.5

2009

2010

105

105

91.3

89.7

99
83.0

84.9

2013

2014

67.7

2003

Admiral

2008
Market

2011

2012

Group Turnover, Net Profit and Dividends

2,400

2,190

500.0

2,215

2,200

2,030

2,000

1,971

400.0

1,800

1,585

350.0

1,600

287

1,400

1,000
800

400

258

1,077

1,200

600

540
91

627
85

698
105

808
128

910
145

282

300.0
250.0

221
194

200.0

157
150.0
100.0
50.0

200
0

450.0

24

64

94

114

138

151

181

202

244

272

268

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Net profit

Dividends

Group Turnover

0.0

Return on Equity
100.0%
90.0%
80.0%
70.0%
60.0%

51.9%

52.2%

2005

2006

55.8%

56.5%

2007

2008

54.5%

59.4%

59.4%

60.4%

58.3%
51.0%

50.0%
40.0%
30.0%
20.0%
10.0%
0.0%

2009

2010

2011

2012

2013

2014

Admirals Potential
Premiums Written
Admiral

Market

1,453 mill.

13,200 mill.

UK Auto Insurance market

UK Household Insurance market

125 mill.**

7,000 mill.

US* -, France, Spain and Italy Auto Ins.

185 mill.

60,000 mill.

Total US, France, Spain and Italy Auto Ins.

185 mill.

154,000 mill.

*(Virginia, Texas,Illinois and Maryland)

**(Own guestimate)

Long Runway
[VRDI] bn

[VRDI]bn

Admiral Intl.

Total International Markets

Admiral Group Plc

Valuation
Average price of 13.28 per share equals a market cap. of 3,701 mio.
PE
Div. yield

:
:

Enterprice mult. last 3y

:
Enterprice mult. UK
:
Enterprice mult. Cykl. est. :

12.9
7.4%
9.2 times
8.1 times
7.1 times

At current market valuation, a poor period for the UK industry as well

as funding of subsidiaries overseas, it appears that no price is being
paid for the tremendous growth potential of Admiral Group.

17