We came across a bullish thesis on International General Insurance Holdings Ltd. (IGIC) on Johnson Equity Analysis’ Substack by Kyler Johnson. In this article we will summarize the bulls’ thesis on IGIC. International General Insurance Holdings Ltd. (IGIC) share was trading at $18.28 as of Sept 18th.
A woman in a business suit in an insurance office, analyzing a policy.
International General Insurance (IGI) operates as a specialty insurer, providing coverage for long-tail and short-tail risks while offering reinsurance services. These specialized lines of insurance position IGI to focus on complex, niche markets with fewer competitors, giving it an advantage in underwriting profitability. The company’s disciplined approach to risk selection has consistently resulted in outperforming industry averages, with a combined ratio well below 100%, ensuring long-term profitability. IGI’s emphasis on underwriting quality over volume has allowed it to avoid common industry pitfalls, making it a high-quality player in the sector.
The broader property and casualty insurance industry is forecasted to grow at an annual rate of 6.5%, with IGI poised to outpace the market due to its selective approach. Over the next decade, an 8% revenue growth rate for IGI seems achievable, given its ability to grow faster when market conditions are favorable and its willingness to scale back during softer pricing environments. This long-term growth outlook is supported by the company’s strong balance sheet, with a conservative approach to risk and capital allocation. IGI’s specialty focus provides a buffer against industry headwinds, ensuring steady earnings growth in the foreseeable future.
Financially, IGI has delivered solid results, with a free cash flow (FCF) margin averaging 26% over the past six years. This profitability is underpinned by its disciplined underwriting, resulting in lower claims ratios and higher margins than many of its peers. With a consistent combined ratio well below the industry average, IGI has demonstrated an ability to effectively manage its risk portfolio while generating strong returns on equity. The company’s solid capital position allows for continued investment in growth areas while maintaining shareholder returns through dividends and share buybacks.
IGI’s current valuation reflects its high-quality business model but trades at a discount relative to its long-term potential, likely due to concerns over its headquarters in the Middle East and perceived exposure to regional instability. However, only 9% of the company’s exposure lies in this region, with the bulk of its policies written in Europe and North America, mitigating geopolitical risks. Assuming IGI achieves its 8% annual revenue growth target, maintains a 26% FCF margin, and receives a conservative 12x FCF multiple, the company’s share price could reach $72.68 over the next 10 years. This valuation implies a market cap of $3.34 billion, representing a 345% return from current levels and a 13.2% compound annual growth rate (CAGR), highlighting significant upside potential for long-term investors.
International General Insurance Holdings Ltd. Is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held IGIC at the end of the second quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of IGIC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IGIC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.