I am adding the 2 perpetual preferred stocks from Enstar Group (ESGR) to my watchlist.
The 2 issues are the 7.00% Enstar Group perpetual non cumulative preferred (ESGRO) and the 7.00% Enstar Group fixed-to-floating rate perpetual non cumulative (ESGRP).
While non cumulative (I would prefer cumulative) both issues are now trading in the $23.80 giving them current yields just over 7% which is respectable for BB+ rated issues (1 notch under investment grade).
Enstar has had a rough year as insurance companies invest in both fixed income securities as well as common stocks and obviously these have both been losers. On the other hand the company has very modest debt (debt to equity of around 25%) and with a strong balance sheet they will do just fine over time.
It is likely I will ‘nibble’ a little this week, but will wait longer before making any significant purchases.
17 thoughts on “Adding Another Insurer to My ‘List’”
Over the last few weeks, I added a 50% position in AEL fixed to floating rate. My hypothesis is that in a rising rate environment, companies that in the fixed rate annuity market so get a tailwind on that portion of their business. Plus, I like fixed to floating rate issues that float off the 5-year treasury.
over 8% net. Good buy as long as the company is solid. Did you buy AEL-B with higher rates or AEL-A with more upside to par?
Went with AEL-A, which as you identified has more upside to par. Also is callable earlier.
I bid on AEL-B for the much higher float rate. I generally go for the higher rates pessimistically thinking less downside if they both fall the higher rate won’t fall as much.
Agree with your thinking. I should not call these floating rates since they are fixed rate reset
If you like AEL-a / AEL-B and such fix2floats, also look at ATH-A and ATH-C. Rated higher and attractive float terms
ATH-A is a long way off from floating. ATH-C is about 3% over par. This is why I passed on both of them.
Give me another 50-100 yield points and I’ll think about it. Good rating doesn’t matter if interest rates go up.
I have over 44 names on my wish list, esgrp definitely one of them. The Q is am I willing to buy any fixed coupon if inflation continues to go nuts? Or should we just buy fixed to float libor floaters and hope the float can bail us out?
I had a very strong 7% almost touch 25 and now it’s back over 27
Someone posted about this, can’t remember whom, sorry.
The point being that you would think that projected Fed rate increases have been well telegraphed and therefore would be baked into the market’s prices, but then the expected rate increase happens and prices go down. Therefore, until some more of these rate increases actually happen, I’m holding off on putting new money into perpetuals. I’m sticking with the lower credit quality, short maturity stuff (e.g., OXLCM, ATLCL, SBBA, SACC, etc.)
It’s such a messed up market on short end.
Fed d discount rate = 1.75
Fed funds =1.0
1 month US libor 1.5
Money markets = spit though there are some over 1
18 month cds 3.0
Im perplexed how the biggest mm funds can still be at equivalent to 0
I bought ESGRP in mid to late 2000 at an average cost of $24.75 = 7.07%. It doesn’t float for another 6 years and is rated BB+. At the moment, I don’t want to add anymore as I have a (very) full position.
I see that Enstar is based in Bermuda. Are there foreign taxes withheld or any adverse tax consequences for owning the stock? Thanks.
No and its qualified
Thanks for this one TIM
Tim, thanks. There is no doubt in my mind that you select the very best. I kicked myself for failure to follow your AIG-A. Sometimes, it is not YIELD alone, e.g. LUMN got decent yield, yet it is not well loved. I loaded up with the WBS- G. The old Sterling bank which seemed to be uploaded to IG per QNL. No, it gets cheaper probably until Ex Div by month end. Because California state tax collection failed to collect due to presumable their computer problem (probably great Early Retirement these days, Ha ha). I did buy a hundred shares of ESGRP. No wonder Barron’s mag is green with envy for your skill and your best website, making the Barrons and Wall Street journal look like amateur. THANKS.
Well in the meanwhile I’ve been loading up on 1 to 3 year issues with 0 credit risk, like treasuries . 3% no sweat monies coming back VS 6% with much principle risk in this environment …..