National General Holding Corp Notes Cheap

In this low interested environment, National General Holding Corp. Subordinated Notes (NGHCZ) are really attractive.

National General Holding Corp. Subordinated Notes

  • Symbol: NGHCZ
  • Principal Amount: $25
  • Coupon Rate: 7.625%
  • Call Date: 9/15/2020
  • Mature Date: 9/15/2055
  • Distribution Dates: Quarterly
  • Current Price: $25.17

“National General Holdings Corp. is a specialty personal lines insurance holding company. Through its subsidiaries, the Company provides personal and commercial automobile insurance, health insurance products and other niche insurance products. It operates in two segments: Property and Casualty and Accident and Health. Its property and casualty insurance products protect its customers against losses due to physical damage to their motor vehicles, bodily injury and liability to others for personal injury or property damage arising out of auto accidents. Its accident and health business provides accident and non-major medical health insurance products targeting its existing P&C policyholders. The Company is licensed to operate in 50 states and the District of Columbia, but focus on underserved niche markets.”

NGHC (the parent company) is in a stable insurance business:

  • It is pretty safe company. It has a market cap of $2 billion+ and a tangible book value $1 billion+.
  • It is profitable and earnings are growing.
  • Manageable debt at $528 million.
  • It is growing both organically and acquiring companies.
  • Their investment portfolio looks conservative and does not fluctuate widely to interest moves.

The risks with a longer term debt maturity is that when interest rates go up – the price of the security will go down. However, at nearly 8% interest a year – this security seems underpriced.

Disclosure: I am long NCHCZ