Admiral Plc (ISIN GB00B02J6398) – Short candidate or “Outsider” company with a Moat ?

Disclosure: The author might have bought the stock well in advance of publishing the post. In this special case, the idea has been presented already some weeks ago to a group of value investors.

Introduction

Admiral is a UK based P&C insurance company. A brief look into Admiral’s multiples would single it out as a potential short candidate (~15 GBP/share):

P/B 8,0
P/S 4,5
P/E ~14,5
Div. yield 3,7%

Especially P/B and P/S look overvalued if compared to other P&C companies. The average multiple for European P&C companies is ~2,1 for P/B, 1,6 for P/S and 11,6 P/E. So the company looks wildly overvalued.

Admiral – “The UK Geico” ?

Admiral is definitely no stranger for value investors. Metropolis Capital, a value investing shop with a good reputation presented Admiral as their pick for the London Value Investor conference some weeks ago.

The pitch is relatively simple: Admiral is the UK version of GEICO, the famous low cost direct insurer owned by Warren Buffet. Just look at the cost ratios of Admiral compared to its 4 main competitors:

Cost ratio P&C 2013
Aviva 32,8%
RSA 32,6%
Direct Line 22,3%
Esure 23,8%
Admiral 19,9%

Clearly, the cost advantage against “traditional” companies like Aviva and RSA comes from the fact that they don’t have to pay insurance agents. But even compared to the direct competitors, Admiral seems to have a cost advantage. Among other things, Admiral is the only FTSE100 company located in Wales which implies quite “reasonable” salaries.

However there is a big difference compared to GEICO:

GEICO’s business model as we all know, combines low cost / direct with investing the “float” Buffet style, so every premium dollar earned is kept and invested as profitable as possible, preferably in stocks. In principle, this is the strategy of all insurance companies, but very few are able to get “Buffet like” returns.

So I have compiled 3 statistics which show that Admiral “ticks” differently:

2013 Ratio Financial income /total profit Net retained premium “Other” in % of profit
RSA 116,4% 93,6% 0,0%
Aviva 72,9% 88,2% 0,0%
Direct Line 35,2% 101,6% 36,3%
Esure 11,3% 91,4% 40,1%
Admiral 3,3% 25,0% 85,0%

A quick explanation of those ratios: The net profit of an Insurance company is the result of 3 major components:
a) Underwriting result
b) investment result
c) “other” stuff

The first column in the table above shows what percentage of the total result in 2013 can be attributed to the investment result. RSA for instance actually makes a loss in insurance, so more than 100% of their profit comes from the investment portfolio. Admiral, on the other end, attributes only 3% of the total profit to investments. So what’s going on here ? Do they manage their investments so badly ?

The second column explains this “conundrum”: All the other players keep more or less all the insurance premiums they are collecting. Admiral, on the other hand only keeps 25% of incoming insurance premiums, the other 75% get “ceded” to Reinsurers.

Finally, the third column shows, that Admira is actually earning most of its money with “other” stuff whatever that means. To solve the puzzle, one has to look back into history of Admiral: Admiral was founded by a Lloyds syndicate to act as a kind of “Underwriting agency” in order to generate premium for the syndicate. So from the start, Admiral had a very lean structure, selling only direct etc. At some point in time they decided that the syndicate was too expensive and that they actually want to issue the policies themselves. Nevertheless, they kept their lean set up and lined up reinsurers to shoulder the majority of the risk.

Most people familiar with Insurance would say that the concept of Admiral doesn’t make sense. Why should you give up profits both, on the insureance side as well as in investments by passing 75% ? The answer is relatively simple: Capital efficency. Most insurance companies are notouriously capital inefficient. Long term ROEs for most major players are below 10% p.a. despite often significant leverage through subordinated debt. The main reason for this is the fact, that in many jurisdictions, the “GEICO” model requires to hold a large amount of capital to buffer capital market movements. Unless you are Warren Buffet, the returns on those investments are often below average so as a result, ROEs are bad. Plus the fact that growth often requires a lot of upfront capital as well.

For Admiral, the big structural problem of course is the following: If I pass most of my premiums and cash to reinsurers, how do I then earn money ? This is where the “other” column from my table above comes into play. Due to this business model, Admrial very early concentrated on making additional money by selling “ancillary” stuff.

This is what Admiral writes in its latest annual report (by the way: all annual reports since 2003 are highly recommended for clarity and insight !!!):

Other Revenue
Admiral generates Other revenue from a portfolio of insurance products that complement the core car insurance product, and also fees generated over the life of the policy. The most material contributors to net
Other revenue are:
> Profit earned from motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers
> Profit from other insurance products, not underwritten by Admiral
> Vehicle Commission (see page 25)
> Fees – a dministration fees and referral income (see page 25)
> Instalment income – interest charged to customers paying for cover in instalments

This additional income is extremely high margin with almost no capital requirement and drives the profitability of the company.

The result

This low capital requirement leads to ROE’s which are compared to its peers “from outer space”:

Name ROE FY ROE 5Y
     
Average 16% 17%
ADMIRAL GROUP PLC 59% 59%
TOPDANMARK A/S 26% 31%
TRYG A/S 19% 21%
LANCASHIRE HOLDINGS LTD 15% 17%
BEAZLEY PLC 21% 16%
GJENSIDIGE FORSIKRING ASA 16% 15%
SAMPO OYJ-A SHS 14% 14%
GRUPO CATALANA OCCIDENTE SA 13% 14%
EULER HERMES SA 13% 13%
ZURICH INSURANCE GROUP AG 12% 12%
ALLIANZ SE-REG 11% 12%
AMLIN PLC 19% 10%
MAPFRE SA 9% 9%
XL GROUP PLC 9% 9%
RSA INSURANCE GROUP PLC -11% 5%

Other unique aspects of Admiral’s business model

Comparison sites

Admiral runs in addition to its insurance operation, its own insurance comparison sites (e.g. Confused.com in the UK). Although those comparison sites themselves only contribute less then 10% of total profit, it gives Admiral a strategic advantage: Via their comparison site they can monitor in real time what competitors are doing and how they are pricing stuff. Other comparison sites also sell this kind of data but usually with a significant time delay. So running its own comparison site is clearly an advantage against a “normal” onilne insurer.

Capital allocation

With regard to capital allocation, again look at this statement from the 2013 annual report:

Admiral believes that having excess cash in a company can lead to poor decision-making. So we are committed to returning surplus capital to shareholders. We believe that keeping management hungry for cash keeps them focused on the most important aspects of the business. We do not starve our businesses but neither do we allow them the luxury of trying to decide what to do with excess capital.

Charly Munger would say at this point “I Have nothing more to add”. This is how it should be done but rarely found especially in the Insurance industry.

Managment & Shareholders:

The current CEO, Henry Engelhardt founded the company on behalf of the Lloyds Syndicate in 1991. He still holds ~12,8% of the company.

Co-founder David Stevens owns around 3,8%. Both founders only pay themselves ~400 k GBP per year salaries and no bonuses. The only exception is the CFO, who is relatively new. He earns around 1 mn GBP including a bonus and doesn’t have a lot of shares. There are quite some interviews available on Youtube with the CEO, among them this one is especially interesting:

Largest outside shareholder is MunichRe with 10%, who is also providing the majority of the reinsurance capacity. Other noteworthy shareholders are PowerCorp from Canada and Odey, the UK Hedge fund with a -0.79% short position. All Admiral employees are shareholders and there is a program for employes to purchase shares.

Stock price

Since going public, Admiral has performed very well:

Including dividends, Admiral returned 25,5% p.a. since their IPO against ~8% p.a. for the FTSE 100. Since 2004, EPS trippled and dividends per share increased by a factor of five. Interestingly, Admiral never traded at a level which one would asociate normally with such a growth stock, at the peak, the share had a P/E of 22 in 2006. I think this has to do with the general discomfort that many investors have with financial stocks.

Challenges for Admiral

Some of the additonal income sources for Admiral are clearly under regulatory thread. Referral fees, bundling etc. are currently investigated by UK regulators (see here and here) but especially Admiral seems to be quite creative on how to find different ways to earn fees.

Another and maybe the biggest strategic issue is that in theory comparison sites could start to sell additional products as well as we can see in the car rental market. However Admiral has the big advantage as they cover both, the comparison area and the insurance “sales funnel”.

I also think that for the comparison sites, it is not that easy to sell additional insurance products. Insurance policies are less standardized than rental cars, with very individual pricing so it is harder for a comparison site to actually close the deal intead of passing the client on to the insurer for a fee. Clearly comparison sites will try to get into this game as well but again, Admiral is the best positioned insurer.

Finally, the UK car insurance business shows almost a “brutal” cyclicality, for instance in 2013 premiums for the whole market dropped ~20%. Nevertheless, Admiral has shown that they are profitable over the cycle.

Opportunities

Admiral is currently trying to expand its business model into 4 other countries: Spain, France, Italy and the US. An earlier attempt in Germany failed a couple of years ago, mainly because the German market renews policies only once a year and Admiral was not able to really use its strengths (dynamic offers and pricing) on that basis.

If they succeed in any one of those markets similar to the UK, then there would be significant upside in the stock. If they suceed in 2 or more, Admiral could become a multibagger. If they don’t succeed at all, one could imagine that they might take additional market share in the UL, but then the upside is limited.

Although the subs are growing strongly, they still made a loss in 2013. Car insurance is however to a certain extent a scale business. You need a certain scale to become profitable. Clearly, just buying a competitor (and paying a lot of goodwill) would look better in the short term. Building up your own operations takes longer, but if you do it right, the value generation is significantly better than via M&A.

SUMMARY: Bringing it all together

Personally, I think Admiral has a very unique “outsider” business model. Reinsuring most of their business allows them to focus on the core product, car insurance underwriting and ancilliary services. They don’t have the complexity of traditional insurers with complex investments, expensive investment management and “asset liability management” departments etc. etc.

This keeps structural complexity low, lowers cost and allows them to scale up business much quicker than any “traditional” model and with very low capital intensity. Traditional insurance companies have always the option to realize investment profits in order to make results look good in the short term. In the long term, this often leads to a detoriation of the core business. Admiral doesn’t have this luxury. Additionally it insulates Admiral mostly from capital market volatility and enables them to move aggresively if other insurers are nursing their investment losses. Additionally, they don’t need to sell complicated subordinated debt etc.

Overall, I think the likelihood that someone succesfully copies Admirals business model is low, because for any Insurance executive, it is extremely counterintuitive to give premium away. Any insurance CEO would rather sell his grandmother than increase the reinsurance share and give away investment money. GEICO for instance in my opinion is not a “real” outsider company. It is a traditional insurer with a focused direct sales force. Admiral is really a very different animal.

Clearly, the thread of Google & Co is real, but on the other hand, Google & Co hesitate to to move into regulated areas. However if they would want to seriously move into this business, I would think that Admiral could be an interesting acquisition target for cash rich Google & Co.

Against the traditional competition, in my opinion Admiral has a 10 year headstart in understanding how to sell insurence and especially “others” over the internet. I think they will chuckle when they read how for instance AXA tries to become “digital” as they were already selling 70% of their policies over the internet in 2003.

I would go so far as calling the combined business model a “moat”. Yes, it is maybe not that difficult to start an online insurer and does not fit into the classical moat categories, but to scale up quickly and get the whole package right, this is another story and in my opinion very very unlikely. Even the direct clones like Esure only go “Half way” by keeping all the premiums and exposing themselves to capital market volatility.

I also think that this is still a “value investment” despite the optically expensive multiples. In my opinion, the value lies in the business model plus the headstart in online insurance. To put it into s short thesis: This is a high quality company at a “Normal company price tag” and an “above average” growth opportunity due to the cost advanatges.

For the portfolio, I had bought already a “half position” in April at 13,80 GBP per share as I have briefly mentioned in the April post. I know this is a little unfair but I just didn’t have time to finish the write up.

P.S. There will be an extra post for this, but I have sold the rest of my April SA position in order to keep the exposure to the financial sector (~20% of the protfolio including the bonds) constant

38 comments

  • licencetochill

    Hi there, Admiral has worked out very well. Good call.
    Last year a company called Hastings listed stock. They have a similiar asset light biz model, Gibraltar structure, focus on car, low loss ratio etc.
    Stock is rather cheap. ca 10x 17 PE for 20% RoE and growth in an improving cycle
    However track record is shorter of course and their reinsurance panel is much more diversified (hence likely less strict risk management by the reinsurers who take on Hastings underwritten risk).
    Have you taken a look?

  • Pingback: Why Admiral Group is my top rated stock

  • A very interesting business, and good writing!

    Some issues –

    1. What’s your take on 2013 and 2014 H1 reserve release which have been much-much higher than in any year before since 2001, and inflated the bottom line?
    (Do you think it’d be prudent to take an long term average figure of about £30m in annual resereve releases and use it instead of 2013 £94m sum?)

    2. How did you come by with the conclusion of the “other revenue”‘s margin being very high (some of it is made of insurance products, carrying insurance related costs)?

    3. Can you please address the £200m debt issuance for a company which is drowning in cash?
    (I guess the question is why distributing all these dividends, and in the same time raising a 5.5% debt, as the business doesn’t need much cash for growth capex, and it doesn’t tend to put money into work as other insurance companies do through investing in equities…)
    The management did address this issue on the last investor conference, but I felt as if they were a bit stuttering.

    Kind regards,

    Michael

    • #Michael,

      a few remarks:
      1. if you want to normalize reserve releases you should use an average percentage compared to gross premiums
      2. Because most of what they sell on top are 3rd party products, so they just earn a commission
      3. An Insurance company never issues a subordinated loan for cash. This mostly has to do with UK regulation and regulatory required capital. The FSA is known to be quite unpredictable with regard to insurers at the moment although I have no special insight why the were required to do so.

      mmi

      • Thanks for the comments.

        Regarding the normalized reserve releases figure, don’t you think it’s more proper to check the percentage of the releases against “net insurance premium revenue” as the company itself does, instead of using the gross premiums figure which includes premiums not held by the business but were ceded away..?

        And please help me understand your remark on “An Insurance company never issues a subordinated loan for cash”. As we know, many insurance companies who invest their premiums in the stock market use leverage. So I guess your emphasis in the remark is on the debt being ‘subordinate’. I’ll be happy if you could elaborate a bit on the matter.

        One last thing, would you please advise me on a good book or other way of understanding insurance businesses in a more profound way from an investor point of view?

        Kind regards,

        Michael

        • Michael,
          in my opinion gross premium is better as the reserve releases are also related to the reinsured part (see drill down for instance on page 22 of the 2013 annual report.

          My interpretation of the Admiral bond is as follows: Admiral always runs as closely to the minimum capital as possible. For some reasons the FSA changed their mind on some assumptions in the caital model and Admiral could have either skipped a dividend or issued a sub bond. I think they wanted to keep the dividend but the problem was most likely the regulator.

          Final advice: the Aleph blog has a lot of info on insurance companies, otherwise I would recommend to read a couple of different annual reports of insurance companies. There is also a good book about the AIG crisis (Fatal risk) and the book “Aganst the gods”. Maybe i do a post on insurance investing at some point in time.

          mmi

  • Morgan Stanley zu Admiral in Q2 report:

    “The team became more wary of Admiral (LSE:ADM) after the 2011 turbulence in the stock price, after a scare about the potential for large personal injury claims. While the 2011 claims ratio eventually turned out to be fine, it caused a revision in our view of the quality of the name. The combination of the stock’s recovery, and long-term concerns about the effect of autonomous driving on the motor insurance industry, caused us to reduce and then exit the position.”

    http://www.gurufocus.com/news/274723/ms-global-franchise-fund-second-quarter-2014-commentary

  • Für Deutsche vielleicht ganz interessant: 2011 wollte HUK-Coburg in Nachahmung von Admiral auch ein Preisvergleichsportal führen. http://www.versicherungsmagazin.de/Aktuell/Nachrichten/195/16255/HUK-Coburg-will-eigenes-Vergleichsportal-eroeffnen.html: “Trotzdem will der Versicherer nun eigene Wege gehen. Vorbild ist das in Großbritannien von der Admiral-Versicherung betriebene Vergleichsportal confused.com. ”

    Juni 2014 war Schluss, HUK Coburg resignierte: http://www.versicherungsbote.de/id/4795187/Huk-Coburg-Transparo-Vergleichsportal “Eine Weiterführung des Geschäfts zu vertretbaren betriebswirtschaftlichen Bedingungen war unter den bisherigen Gegebenheiten nicht machbar.”
    Dass HUK Coburg, immerhin deutscher Marktführer bei Autoversicherungen, nicht in der Lage war, so ein Portal perspektivisch rentabel zu führen, ist schon krass.

  • I would be much more concerned about Odey’s short. He’s quite sharp so I wonder what’s his beef with Admiral? Is it part of a pair trade or does he think there’s some deeper trouble?

    • Jerobeam,

      this is cut&paste from a JPM proposal:

      Long Direct Line, Short Admiral, JPMorgan’s Shaikh Says 91) ☆
      By Gaurav Panchal
      June 19 (Bloomberg) — Calculates the trade to generate
      ~3.03% by end of its mean-reverting cycle, JPMorgan’s Viquar
      Shaikh says.
      • Calculation based on current price ratio level between the two stocks and
      assuming historical mean reversion

      I think there is no need to comment this…

      • I did not see this answer when I wrote my last comment. that clears the picture. thanks

      • I don’t think Crispin Odey would go after a call from JPM. He ignores that kind of stuff.
        Besides, he has been short Admiral for at least 4 years I think, so there must be something more to it.

      • “My guess is still that this is a kind of pair trade”
        I guess so too. But I think it has to do with broader negativity towards the sector in Odey’s mind. He is very knowledgeable in insurance and reinsurance (at one point he held something like 10% or so of Converium before it was sold to Scor), and in his letters of years past he always had some good insights on the current stage of the insurance/reinsurance cycle. I think he’s tight with some of the Lloyd’s people.

    • I have no idea of what’s Odey’s short thesis, but I would like to know. I’ve searched for a while for what could go wrong, but I did not really find something that cries: don’t buy or short admiral.

      I don’t think it’s something with the balance sheet or similar. Even the sharp decline in stock price in 2011 due to concerns on provisioning was unjustified (whole market was affected, admiral less, and it created a buying opportunity that still lasts).

      the most concerning thing was a short thesis on progressive, building on self-driving cars in the future (which is not really a good short thesis in my eyes).

      • I do have my concerns against the overall sector as well, especially life insurance. However, I think chances are good that Admiral could be a winner. On the other hand, there are clearly a lot of risks as I pointed out.

  • Grandios articlke, great finding, just nearly as usual. I really think about bying an insurance – what I usually never wouldt do.
    It is really incredible how Admiral was able to decouple the income evben from the turnover.

    But there is one strange point: Analyst usually give way MUCH more “buy”-recommendations than sell-recommendations, more “outperform” than “underperform”-ratings. Taken that adjustment in mind their recommendations for Admiral as summarized in 4-Traders is surprisingly bad:
    3 x buy, 1 x outperform, 9 x hold, 4 x underperform, 2 x sell. In average thats a “hold”, slightly leaning toward underperform. For this profession (and such a number of analysts!) I see it as a warning sign.
    I really wonder WHY they take a so much more sceptical stance than you and TomB (whos analysis is great too)!
    Is it just the price of the share or are there other points that makes lots of them having doubts?

    • > Is it just the price of the share or are there other points that makes lots of them having doubts?
      I would argue that way. I have read so many analyst “reports” which do not even get the main points how a business model works. How should they know the subtle difference between Admirals BM and traditional insurers? Instead they throw around ratio numbers to “proof” their point. Their ignorance is the opportunity for value investors!

    • Hi Roger, I normally consider analyst opinions as “white noise” as they are usually very short term oriented. I guess that they are concerned about the UK car rate cycle which I am not.

    • At least for the short time the scepticism of many analysts seems to be proven qualified. The half-year-numbers don’t look really good: http://www.iii.co.uk/articles/179011/admiral-group-plc-drops-warning-reduced-earnings
      And I don’t know how to think about the bond-emission.

      • #roger,

        2 points here

        – the scepticism of the analysts started already at a stock price 20% lower than today’s close
        – anyone who actually read Admiral’s reports knew what was coming. Car Insurance in the UK is cyclical, I think I made that clear in the initial post. The trick with caclicals is to by them at or close to the bottom at relatively high valuations, not at the top with low multiples.

        Much more interesting btw will be the numbers from the other countries. This is what my investment case is based on.

        mmi

  • Excellent post. Have to take a look at the annual reports…

    I think the dividend yield is higher than 3,7 %. They’re paying dividends twice a year. So in the last couple of years the yield was more like 6-8 % (see http://www.admiralgroup.co.uk/investor/dividend_history.php). This is quite a nice extra income for Mr. Engelhardt 🙂

  • I’ve written a post myself, but it’s in german:
    http://commentsonpositions.blogspot.co.at/2014/05/admiral-group-ein-blick-in-die-business.html

    A few thoughts on the (by the way: great) post and commentaries:

    – Part of the low cost ratio comes from ‘going for’ young/risky crowd – higher premiums, higher claims, but less competition, more internet-affine – admiral has an edge there, as ‘intelligent’ underwriting is VERY important

    – Munich Re does NOT do reinsurance with admiral, but co-insurance (I think this is important – profit commission)

    – There is risk in these co- and reinsurance arrangements, but the partners seem to be financially very solid (at least to me)

    – Admiral recognizes that it has an edge in underwriting, not in investing – this is why they choose the capital light business model. Through the high dividend the investor can choose how to use the capital by himself – something I like

    – Other income (excl. profit commission): this is a threat to all motor insurers in the UK: if it gets wiped out for all (and it will, in case it is a regulation issue), the one with the best underwriting result loses the least: admiral, in my opinion

    – International: according to the last conference call Q&A-session (accessible on homepage), admiral is close to break-even in one of the four markets. Looking at customer-numbers, it has to be spain or (more probably) Italy.

    best
    TomB

    • Tom,
      thank you for your comment, I agree with all points . Sorry for not linking to your post. I have seen it and it was very good. One remark: Co-Insurance is economically similar to “Normal” reinsurance. Profit cmmissions have to be paid by the Reinsurer in both cases,

      mmi

      • Co-Insurance is economically similar to “Normal” reinsurance. Profit cmmissions have to be paid by the Reinsurer in both cases,

        Not sure on that. But ok, I will think about it… maybe you are right.

        • In technical terms a “proportional reinsurance” contract is pretty equivalent to a Co-Insurance agreement. As the reinsurer is entitled to a proportional share of the incoming premium, but has less costs, he has to pay back a “commission” to the insurer. Usally this is defined as percentage of the underwriting result, like 90% or 95%.

      • Ok, you’ve got me. thanks for clarification.

  • mmi,

    Thank you for this article.

    You already analyzed the possibility of others trying to copy the business model. You do not think this will be a problem because of Admiral’s head start. But as far as I understand they do not possess an advantage like a network effect. The online buyer of insurance chooses mostly by price and satisfactory service.
    Could a well capitalized company with experience in the business build up a competitor by offering the “other services” somewhat cheaper and still earn a good return? Should other insurers not try this instead of losing business to Admiral? Will it really be that difficult to organize a functioning low price online insurer?
    Will Admiral succeed in the US as there exists a low cost competitor?

    Milud

    • #Milud,

      I don’t know if you have read “inventor’s Dillema”, but this is exactly what is going on here. The large players were pretty much in denial for 10 years or more. It is the same story with disocunt stores (aldi against Tesco). If you want to do direct online insurance, you have to really concentrate on it to make it a success. I think it doesn’t work well within a large insurance group with a traditional business model. For instance you need very different IT systems. In a large company, there will be for instance a centralized IT department, setting standards for what to buy and those standards are based on traditionl insurance companies.Requests take ages to be approved, if at all. During this time, your 100% online competitor will have chnaged his strategy already 3 more times….

      US: We will see, I think chances are best in Spain, Italy and France.
      mmi

      • mmi,

        in hindsight strange that e.g. Sears and A&P let Walmart grow without copying it. The same may happen with Admiral. If copying Admiral would be easy it would already be done.
        Perhaps I will be able to think about probable outcomes and invest in Admiral.

        Milud

  • Any off balance sheet liabilities through the reinsurance contracts?

    • No, why should there be any ? The outstanding reinsurance claims are being commuted on a regular basis, so no problems there.

      • I’m wondering whether it’s possible to quantify the credit risks in reinsurance contracts if say Munich Re defaults. Presumably contracts would have to be commuted (brought back on the Admiral balance sheet) or passed on to another reinsurer? Would be interesting to hear whether there are any precedents to this happening.

        A more interesting question is: why is Admiral the only company running this asset light model (it’s obviously quite profitable/low-risk)? It is a high ROE business by choice, not because of barriers to entry.

        • #fritz, I think the credit risk is very manageable. Compared to the risk other insurers have in their investment portfolio, I think having exposure to MunchRe is not such an issue. The only problem would be if they were using questionable “bermuda cell vehicles” which they are not.
          mmi

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