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B.P. Marsh & Partners (LON:BPM)

  • Share price: 308p (pre-market)
  • No. of shares: 37.4 million
  • Market cap: £115 million

Final Results

(Please note that I have a long position in BPM.)

This is a private equity vehicle specialising in the insurance industry. It has a great track record and my positive impression of management led me to make it a smallish position in my portfolio last year.

Indeed, I've added to my position this morning, using some of the proceeds from my disposal yesterday. 

Key points

NAV per share has increased by 3% to 350p. It should have done better than that, but it was held back by a large placing at 252p last June. The dividend is also a headwind to NAV growth.

The June placing brought in an Australian insurance group called PSC (ASX:PSI) as a strategic investor. The relationship with PSC is said to be progressing well.

As for its investments, the underlying portfolio seems to have worked hard for BPM during the year. Pre-tax operating profit is £12.2 million, boosted by £14.1 million in unrealised gains on its portfolio.

That's a 16% improvement in unrealised gains compared to last year, if we strip out the effect of a change in valuation methodology which artificially increased 2018's results.

The method

Most of BPM's assets are valued using a multiple-of-earnings method. So when the investees become more profitable, this translates to higher valuations on BPM's balance sheet and unrealised gains on its income statement.

This is a source of significant uncertainty: the NAV is a matter of opinion, basically. Investees have to be separately valued based on BPM's view of what the appropriate earnings multiple for each…

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