Will Kansas City Life Ever Go Up?

Kansas City Life Insurance (KCLI) is a conservatively family-run company that has been in business for over a hundred years. The company does mostly life insurance and annunities with some health insurance.  It has paid $1.08 in annual dividends for the last two decades.  Currently it is trading at $37.65.  So its  dividend yield is almost 3%, a full 50% higher than the 2% of the S&P500 as a whole.

I've added to my position significantly in the past two years because of its attractive price to book ratio.  In other words, this is the classic 50 cent dollar.

During the market crash this spring, the market braced for a wave of corporate defaults. Life insurance companies were considered really vulnerable because of their large corporate bond holdings. KCLI had $2.1B of investment grade corporate bonds out of $3.9B in investments on its balance sheet. The stock cratered to $23 and I feared the company was going under. The yield on investment grade corporate bonds was usually a little over 2%, but it doubled to almost 5% at the worst time of the crisis. Thankfully, though, the Fed pulled out all the stops and declared it was going to purchase investment grade bonds to prop up the market.

Since that announcement in march and the massive market trough and peak, the company's book value now is at its highest ever. The tangible book value per share is $88, but the stock price is $37.65. Go figure!

The following chart shows the relationship of the book value per share and the share price for the last 15 years. Note that right now the spread between the book value and the price is the biggest ever. I am simply hoping (or better yet praying) that this spread will return more to "normal".

But how is it possible for a company  to be this cheap in such a raging bull market? There are some obvious explanations. This is a value stock which is very much out of favor.  The company is a private smallcap in a very boring industry. It is also very much a value stock in a time when value is out of favour.

But I think the most convincing reason for the depressed valuating on KCLI is its poor earnings performance. The company consistently earns no more than 4% on equity in the past decade. I feel this is in part the result of a very conservative investment strategy. The investments in turn earn ever lower returns due to ever lower interest rates.  To illustrate, the following chart shows the total annual insurance revenues and the dividend and interest income.  Note the underwriting is fine but income has steadily declined. Note also that when company's book value appreciates due to the big unrealized gains on investments. However, such appreciation is not counted as regular earnings but as comprehensive income. Therefore, it doesn't count as part of earnings per share.

So what to do with KCLI? Recently, I have leaned more towards diversification and taking a more long term view of my holdings. I can afford to be patient with safe companies like KCLI because the company's dividend payout is about the same as my borrowing costs. So, for now, I will just sit and wait for some company surprise or market sentiment to change.

Lastly, before I conclude, I want to give a shot out to the provider of tikr.com. The website is the best fundamental research tool for the retail investor that I've come across. It provides very detailed financial data for every market worldwide going back 15 years.  The above two charts was made possible with data from the website. The site is beta and I am a trial user. If you want to be a beta customer like me you can search around or contact the website.

Update on My Insurance Holdings

Kansas City Life Insurance (OTC:KCLI) is a smallcap life and health insurance company with a long and stable history. In the company's Q1 earnings report their investments were down $38 M due to the market downturn. Consequently the company equity dropped $3 per share but book value is still $81 per share.

	KCLI	EUPIC
Price	$29.4	€ 3.69
Marketcap M	$282.24	€ 101.47 ($ 114.97)
ROE %	2.6	11.8
PE	14.11	6.55
PTBV	0.36	0.78
Div Yield %	3.67	6.5

KCLI makes 30% of its revenue from investments, therefore investment income is critical to be profitable. But in this low interest environment the company must sacrifice safety to get decent yield. The company has more than half of its assets in corporate bonds. Virtually all of its bonds are investment grade, but there is still a lot at the bottom tier of investment grade. When the downturn happened, there was a big fear that we would see a wave of corporate downgrades and defaults. Fortunately, the Fed pulled out the bazooka and said it was willing to buy up corporate debt to shore up the market.

In the report, the company still has $779 M of equity, even after factoring in Q1 losses. That may seem like plenty but the company's capital and surplus (equity) for statutory regulation purposes is only $260 M at 2019 year end. This $260 M amount is used by regulators determine if the company is solvent and can do more business. So a deep downturn in the bond market can be very scary for the company. But they dodged a bullet, maybe, as the bond market has been quite bullish recently.

KCLI is a really conservative old insurance company. The Bixby family has run it for four generations! Philip Bixby CEO has run the company for the last two decades. Because the company is so stable, past data can be very useful to understand the company and its management intentions.

In the last 15 years, their overall book value has gone from $692 M to $779 M. Over the same period, their shares outstanding have gone from 11.9 M to 9.6 M, as they have consistently tried to buy their shares back, mostly in the $40-$50 range. So the net result is that their book value per share has gone from $51 to $81 in 15 years. That's a paltry 3.13% return.

Along with equity growth, shareholders also get a steady dividend. Sadly, since the current CEO has taken over the company twenty years ago, they have never increased the dividend, although one year, they did distribute a special dividend of $2 per share.

The stock is right now at $29.40 after the recent market drop, but at this level it still hasn't recovered like the favoured US large caps. If the company could return to around $36, that is a 3% dividend. Add the dividend to the 3.13% equity growth and overall, shareholders can expect around a 6.13% return.

This isn't a great return, but I just live with KCLI as a steady source of income. If I have spare cash, I can put it to work at KCLI. Or if I want to get adventurous, I could borrow money to buy KCLI. With interest rates so low, I can pocket the spread between the dividend and the interest cost.

My second insurance holding is European Reliance (ATH:EUPIC). This company is similar to KCLI. It does life, health and auto insurance for the Greek market. EUPIC had a great 2019, the company earned € 17.5 M, and € 22.4 M pre-tax. Of the pre-tax profit, € 7.3 M was from underwriting, and all other was € 15.1 M. As expected however, Q1 2020 was bad news. The company's book value dropped by € 13 M. Again, it was better than I feared, because I saw that they have downside exposure to € 30 M of Greek mutual funds. The ratios in the table are as of Q1 2020, so they still aren't bad. If that is the worst of it, EUPIC is a good company selling for really cheap. And it is very generous with the dividends. I added to my position during this downturn.

That's the second update of my holdings. Next post I will update my cigarette stocks.

2015 Year End Results

By March every year all companies with fiscal year end on Dec 31 should have announced their annual results. Six of my holdings are summarized below. Overall all results are reasonable and make all six stocks overvalued. But I don't know why the market trades these stocks so cheap. I am not one to think too much of catalysts so I have no clue when will it end.

	EUPIC	PFHO	SEC	KCLI	Soundwill	KARE
Price (April 1)	€ 1.49	10.15	CAD$ 125.70	9.20	HK$ 9.20	€ 240.00
Marketcap M	€ 40.98 ($ 46.71)	8.12	CAD$ 354.47 ($ 270.59)	384	HK$ 2616.20 ($ 337.57)	€ 662.40 ($755.14)
PE	3.66	4.84	loss	13.15	loss	12.40
ROE	0.14	0.33	-	0.04	-	0.15
PTBV	0.51	1.58	0.53	0.58	0.16	1.89
Div Yield %	0.00	12.32 (one time)	0.00	2.70	2.17	3.54
Vol (basis)	0.51	6.89	1.06	5.52	2.41	4.13

The table summarizes the key metrics. I mostly focus on PE and PTBV. And for each company, one or the other shows the company is cheap. The last row gives the average daily volume divided by the total shares. The fraction is showed in basis points units. So PFHO daily volume, which is 6.89 basis points, is actually 0.0689% of total volume. I have found most companies with healthy volumes should trade at about 20 to 30 basis points (0.2% to 0.3%). The table shows that all the six companies trade at extremely low volumes. None are at 20 or 30 basis points. This may explain why the stocks trade so cheap, they have extremely small interest.

European Reliance Insurance (ATH:EUPIC) continued its growth streak by increasing pre-tax profits by 6.6%. Even better is equity growth at 13.3%. The stock is still super cheap. I presume the reason is the ongoing crisis situation in Greece. Warren Buffett used to say he could find stocks that trade at 2 or 3 or 4 times earnings. They exist now and you just have to look. Well, I found one here trading at less than 4x earnings! On top of that it is trading at half of book. Now if only the market can cooperate.

Pacific Health Care Organization (PFHO) had a rough third and fourth quarter. The stock went from the high twenties to as low as $6.50 after announcing that they will lose their biggest customer Amtrust in Q4. But after their official annual report, the stock managed to recover to $10.15. Q4 results show that subtracting Amtrust's waning revenues in the quarter, the company still did $1.2M in business. So at that conservative trend, the company can do $4.8M for 2016. At their current profit margin of 20%, that is still more than $1 a share. The company said in the report that they employed 36 people in mid-March. That is still more employees than they've ever had except for their record year in 2014. And the company is continuing its IT expansion. I am cautiously bullish on PFHO.

Senvest Capital (SEC:TSX) reported FY15 EPS CAD$(35.39), which is pretty much expected. However, the book value per share increased because of a 19% rise in the Canadian dollar relative to the USD throughout the year. That would give per share book value of CAD$271 at year end. And also with estimated hedge fund losses from the company's 13F and its website, we can expect expect book value after Q1 to be about $237. Today it trades at $127. So the stock trades at 53% of book. That is too low even by Senvest standards. And one big reason for the huge discount is the market's view that the company charges excessive fees. This year has been kind of flat, and so there is little if any incentive bonus. The salary drawn should be all the employee expense on the books which is $12.5M. Other operating expenses, which may include costs for expanding their New York office is $16.8M. I am not thrilled about the expense. But for a company that manages about $1.4B in net money for common shareholders, minority interests and hedge fund holders. One can argue the cost is reasonable.

Kansas City Life Insurance (KCLI) reported for the first time after delisting from NASDAQ. The company revealed it bought back 1.1M shares for an average price of $51.13. The shares included normal buybacks and the odd-lot tender offer of 906,500 shares at $52.50. There are now 9.6M outstanding shares. The company earned $29.2M for the year, which is flat compared to the previous two years. However comprehensive income was $(9.0)M due to unrealized losses in fair value of securities. The comprehensive loss along with the 1.1M reduction in shares, minus the dividend, meant that the book value per share was flat from 2014 to 2015 at $68.55. I anticipate that unrealized gains will be much higher in 2016 because interest rates will be lower than expectations at late 2015. Lower interest rates mean a higher valuation on the company's stock portfolio, with the drawback that the company may receive less revenue as people avoid the company's products due to their low yield.

Soundwill Holdings (HK:878) is a real estate company that renovates and develops buildings as well as lease properties, primarily in Hong Kong. It is dirt cheap on a price to book basis. But last year it turned a small loss mainly due to fair value adjustments on its investment properties and almost no property sales.

Soundwill owns some of the best retail properties in Hong Kong. But rents were ridiculously high. I heard some of their properties were the highest retail properties in the world! But now that less tourists are coming from China, rent prices have fallen. Along with rents the fair value of Soundwill's properties have also fallen.

In 2014, the company sold HK$2.5B worth of properties for a $1B gross profit. But last year they had virtually none. But that could be a simply a quirk of timing. The following table shows the company's yearly property sales as well as the total money held as deposit on properties under development. The sales seem to oscillate every two years, with a high amount on year followed by a low. But the amount under deposit on the low years does seem to foreshadow good sales the following year. So, I expect 2016 to have significant property sales as in 2014.

	2015	2014	2013	2012	2011	2010
Property Sales (HK$ M)	10.40	2466.00	199.00	1310.60	483.20	591.20
Deposits	735.00	421.00	1277.00	482.00	529.00	422.00

Karelia Tobacco (ATH:KARE) reported year end earnings of € 19.35 versus € 22.44 a year earlier. Revenues were up 15% and gross margins, net of excise taxes, were up to 14% from 12.7% a year ago. The difference in the bottom line is from a previously mentioned € (14M) adverse tariff decision. The appeal is ongoing which, if successful, would return € 14M to income.

Buying the Correction: KCLI

I first bought Kansas City Life Insurance (KCLI) almost three years ago simply based on cheap price to book ratio. The stock has yoyo'ed between 38-50 for about 2.5yrs that I owned it. I bought and sold it twice but in July last year they did a odd-lot tender so anyone with less than 250 shares will be bought out for $52.50. It was selling at $44 around the time of announcement. Management did the tender to reduce the number of investors so that they could delist from the NASDAQ. The company began trading OTC on January 1. The company generated a lot of buzz on the blogsphere because it was an easy way for a trader to make up to an $8 spread on 249 shares in short time. That is up to $2000 on each open account. I failed to do so because I was out of my KCLI position and failed to notice it until it was too late!

I am sure many who took advantage of the tender thought it was a really neat trick they pulled on a big corporation. But I bet KCLI management thought they got the last laugh. They were consistently buying their shares back last several years and getting a whole bunch at $52.50 was a steal.

The management hasn't revealed how many share were tendered but their estimate was for about 600,000 shares. That would bring down the outstanding shares down to 10M shares, and raise equity per share to about $70.50. This is an 3.5% annualized growth over the last five years. In addition the company pays 1.5% of equity as dividend. Which brings a total 5% return on equity. And Berkshire Hathaway grew equity by only 4% last year. Still that is pretty sub par for a business but then again, life insurance is like that. KCLI operates with a 6.5% after tax margin. I think KCLI is an average performer. But the stock recently traded in the $36-38 range, which is just 52% of equity. That was the catalyst for me to jump back into KCLI for the third time. If feel the current price is just too cheap. Clearly the management feels the stock is worth more than $50. And there is no reason for it to fall so much lower than before the tender. The company is basically still the same. It now trades on OTC and in its first month there, the trading volume is actually higher than before on NASDAQ. So liquidity is not an issue. The company no longer files with the SEC, which was to save about $1M a year, or about $0.10 per share. But I am sure the quarterly reports and shareholder communication will be the same quality as before.

The half price share discount means the 5% per share equity return is 10% shareholder return. Admittedly this is helped greatly by stock buybacks. The company has reduced share count by 13% in the last 5 years, so it isn't shy about using cash for buybacks. But at 50% of book, buying back shares is getting even more effective.

Deciphering the risk of the company's insurance policies is difficult for me. But I sense the company is extremely conservative. The company is run by the fourth generation of Bixby's. The company separates their policies into two types. The first is premiums on traditional life insurance and immediate annuities, plus a small portion of disability and dental. These have guaranteed payout. The immediate annuity, which has longevity risk, is historically less than 10% of yearly premiums. The second is deposits type insurance such as universal life, variable life, variable annuities which have a surrender value and depend on market conditions. These have guaranteed interest rates which may cause KCLI losses if interest rates change violently. But that is a very unlikely scenario.

The company's investment portfolio is also very conservative with 77% in fixed-income.

Overall, this is a very conservative company that is at the virtual bottom of any reasonable valuation. So, I think of this as a very safe investment with upside, almost like cash with benefits. Such an alternative for cash is very useful in this down market where I want liquidity handy to buy really depressed stocks in case the markets drop further.

IEHC Q2 Update

	IEHC
Price	$ 4.910
Market Cap	11.31 M
P/E TTM	9.0 x
Div yield	0.0 %
P/BV	1.04
ROE	11.5 %
ROIC	15.6 %

IEHC reported Q2 earnings that I felt was quite reasonable. The company EPS for the 6 months this fiscal year is $0.35 versus $0.44. Revenues fell slightly (3%) but the bigger reason for the earnings drop is that margins fell from 63% to 61%. But last year earnings petered out in the second half and year-end EPS was $0.63. I expect earnings this year will be at least as good. So this is a long-term growth stock that is trading at 8x forward earnings. Apparently, other shareholders didn't agree with me and sold off the stock after the earnings. The stock dropped 10% on the news and I used this opportunity to double my position.

In other news, I closed my KCLI and ITIC positions. KCLI has run up a bit and it is a cigar butt that probably has one or two inferior puffs left. But I think I can better deploy my capital elsewhere. And I sold ITIC because I felt my original thesis was a mistake. The company had great margins in 2013 due to unusually low claims, and not surprisingly, this is not looking to be the case in 2014.

2014 Good Year for Insurance

My insurance holdings are all doing well in 2014. I am not a swing-for-the-fences type of guy. I'd much prefer staid consistent returns. And insurance companies give me that — for now. Insurance companies are strictly regulated in the US. An insurance company requires a license from state regulators in whatever state it wants to operate. The regulators set guidelines for drawing up the liabilities, i.e., the reserves. This is especially true for life insurance companies. People's life expectancies are very well understood, and when a company combines thousands of policies together, the result is a very predictable income and payment stream. Life insurance is also a commodity because there is little room for innovation. For these reasons, life insurance companies are in a competitive low-margin business. On the other hand, many trade considerably below book. Kansas City Life (KCLI) is a case in point. The company's 3 month and 9 month earnings so far this year are in line with last year. But this is just a 4% return on equity! This is a paltry return for a company with no top line growth.

I also own AIG. AIG specializes in both life and property and casualty (P&C). The company's third quarter results was pretty much inline with a year ago period. AIG is now in its first quarter without Benmosche as CEO since 2009, when he steered the company out of the financial disaster. AIG's return on equity is better than KCLI but its relative market to book value is about the same, as shown below. But AIG is a more dynamic company and has much greater potential to improve results despite its larger size.

For comparison purposes, I have also included in the table two life insurance companies that I do not own. Independence Holdings (IHC) sells life and health insurance, and National Western Life (NWLI) sells life insurance along with a lot of annuities. The final insurer in the table is European Reliance (EUPIC). This company sells life, health and car insurance, among other services. It looks better than the others by all metrics. The downside to the company is that it is in Greece. But I bet few would know that after four years of negative GDP, the country is poised to be positive again in the coming quarter. And in my opinion, the dirt cheap stock price gives me ample margin of safety against the company's risks; I EUPIC is a much better stock to own than KCLI. And therefore, I plan to close my KCLI position and use the proceeds to add to my EUPIC position.

	KCLI	AIG	IHC	NWLI	ATH:EUPIC
Price	$ 50.000	$ 54.000	$ 14.220	$ 271.970	€ 1.440
Market Cap	548.40 M	75.60 M	249.96 M	988.88 M	€ 39.60 M ($ 49 M USD)
P/E TTM	19.5 x	8.5 x	10.9 x	9.4 x	3.9 x
Div yield	2.2 %	0.9 %	2.5 %	0.1 %	0 %
P/BV	0.72	0.70	0.85	0.64	0.60
ROE	3.7 %	8.2 %	7.8 %	6.9 %	15.5 %
ROA	0.62 %	1.68 %	1.95 %	0.94 %	3.25 %

ITIC also reported earnings. The company earned $7.0M for the first 9 months versus $13.0M last year. This dramatic drop was not because of a drop in revenue, which was only slightly down, but due to positive effects of claim provisions last year. ITIC sells title insurance; however, I don't really think of it as an insurance company like the other five mentioned in the earlier table. Title insurance claims are a tiny fraction of the premium — less than 10% — and they don't take long to occur. If a claim is made on a policy it usually happens within a few years after purchase. Also, part of the cost of the title insurance policy is the title search that the insurer must perform. So, ITIC can be considered a service company as much as an insurance company.

And my fifth and final insurance company, Wellpoint, reported Q3 revenues up 4% and income up 3%. And most importantly, year end EPS guidance is now around $8.88, up from $8.81. The stock has gone up almost 40% year-to-date. Even the midterm elections last week couldn't drag it down. The Republicans now control both houses of Congress and now can ram through legislation to repeal Obamacare. Their rhetoric says they will too. Of course if they do president Obama will veto it and the Republics do not have the votes to override the veto.

Still, I was pleasantly surprised at the lack of reaction from the market. But I am really not at all concerned by the election results. Obamacare is most widely know for the individual mandate, which is mostly provided by the public exchanges. But the public exchanges only provide 750k customers out of 37M. Wellpoint is doing well now mainly because of better management and the benefits from medical insurance expansion through many aspects of Obamacare. If the Republicans do succeed somehow in changing healthcare, it will only be to tweak this system of private insurance with subsidies for the poor. But the spirit of Obamacare is here to stay. So Wellpoint will benefit no matter which party runs the government after Obama leaves in 2017.

Summer Quarterly Updates

Tachibana Eletech reported Q1 total income increased 18.9% yoy; revenue increased 6.7% yoy. This improvement was partly the result of strong industrial demand in Japan. The results are even more impressive because the market presumed that last quarter's results were good because customers moved forward purchases to avoid the impending consumption tax increase. Q1 results were the first that included the consumption tax increase, and the results would have been impressive even if there was no tax increase!

The company also upped its year end EPS guidance from ¥161.41 to ¥170. The stock has rallied recently but it is still selling for only 8 times EPS guidance.

Riken Keiki reported earnings increased 19% yoy. Revenue increased 6.6% yoy. This company is firing on all cylinders. Last year its earnings increased 14% and the year before it increased 22%. This is my best performing Japanese holding, increasing by 90% in the 18 months that I've held it. When I initially bought the stock 18 months ago, the fact that it was a netnet was my margin of safety. Now it has risen 90% and is no longer a netnet. The market has priced it more as a earnings growth engine. But the stock still trades below book and and at 11x EPS guidance. This is Ben Graham's value investing at work: buy a good cheap stock, and usually something good happens!

Fujimak reported a ¥ (38.39) loss per share versus ¥ 3.5 a year ago. Revenue decreased 5% yoy. This was a surprise...no... a shock! The company said much of this was the result of a natural pullback from its knockout Q4, when it earned ¥ 99 a share, and to a lesser extent the consumption tax increase.

The company gave an EPS guidance of ¥98, which I hope is true but I also fear may not be met. The company trades at 8x EPS guidance.

Now on to US stocks. Seaboard Corp had one of its best quarters in history. Because of record pork prices, EPS was $79 versus $33 a year ago. H1 EPS was $119 versus $81 a year ago. The stock didn't budge after the earnings reports. In fact it dropped a bit because of plunging pork futures. Pork meat was regularly around $0.80/lb for the last several years, then it suddenly jumped to a high of $1.30. Today, futures for delivery in the next several months is back at $0.90s. Next year delivery dropped but now is back in the 90s also! So the weak stock performance is understandable.

Kansas City Life Insurance reported Q2 earnings slight down. Q2 EPS was $0.77 versus $0.98 a year earlier and premium revenue was down 5%. Book value has grown steadily and now the stock trades at 2/3 book. It also pays a 2% dividend. I feel this is one undervalued and neglected company.

Investors Title Insurance Company reported earnings were down 20% yoy. Premium revenue was flat yoy, which is encouraging considering the exceptional refinancing activity last year. The decrease in earnings was primarily the result of increased commissions. The company now trades at 1.1x book.

Putprop pre-announced that the company's earnings will be approximately ZAR$1.50 vs ZAR$0.86 a year ago! That is a 75% increase and even after the stock jumped by 30% from my initial purchase, it is still trading at 6 times earnings!

IEHC reported Q1 EPS $0.17 versus $0.23 a year ago. Sales was down 4% yoy. I would've liked to see better yoy results, but last year's Q1 was exceptional. I don't really know what to make of this tiny company. I had hoped based on my reading that this company's sales would take off in the last several quarters. But this hasn't happened. The company's sales are quite erratic. I'll pay close attention to this one in the coming quarters.

Installux and KCLI Report Good Earnings

KCLI
Price	$ 42.00
Market Cap	$ 460.66 M
P/E TTM	15.4 x
Div yield	2.6 %
P/BV	0.62
ROE	4 %

Installux (STAL) recently reported preliminary year end results for 2013. Revenue was € 108.4 M versus € 113.2 M the previous year. The company earned € 8.1 M versus € 6.7 M the previous year. Revenue decreased 4.3% due to a struggling French economy. But remarkably, earnings were up 20.8% due to much improved margins. The company has not published the full annual report so I don't have the balance sheet numbers. But at this rate the company probably trades slightly above book and at 9 times earnings. The stock is up more than 50% since I bought it a year ago.

Kansas City Life Insurance (KCLI) reported Q1 2014 results. Revenue was $70.6 M versus $78.8 M the previous year quarter. The company earned $5.5 M versus $5.2 M the previous year quarter. The earnings increase was primarily due to realized gains. The company earned $0.50 per share.

Most interestingly, however, is that the company increased equity by $20 M due to unrealized gain and earnings. That is four times the reported earnings! I do wonder how they did this. I read in their 10K that every percentage rise in interest rates causes a $150M drop in equity and vice versa. Their equity is about $750M.

I mentioned KCLI because I just bought back some stock after closing my position a few months ago. I initially bought a year ago at $37, and then sold recently at $48 and now re-bought at $43. So, I have shown that a trader can buy low, sell high, and buy low again. And I can do this indefinitely with KCLI.

Ok, ok, I couldn't resist a tongue in cheek reference to short-term trading.

WLP Sells Division

Wellpoint has announce that it will divest its eyeglass business in order to focus on its core business. The company said that this will cause an approximately $0.55 charge in the coming quarter.

So, Obamacare has begun and we have 2.1 million people enrolled. The initial goal is 7 million by the March deadline for enrolling without incurring a penalty. I think worse case is 4 million and if it is significantly above that I expect WLP will easily hit new highs.

So I'd like to, once again, summarize my thesis for WLP serving Obamacare.

1. Obamacare does not socialize or nationalize health care
2. The public, the politicians for Obamacare and the politicians against Obamacare are all either neutral or very sympathetic to insurance companies who are simply caught in the middle of this issue.
3. Obamacare is adding 7 million to the insured pool. Insurance companies like WLP know the risks and are voluntarily going in with their eyes wide open
4. I feel Obamacare is part of an overall consumer trend towards more "luxuries" as our standard of living rises.

In other news about my portfolio, I have closed my KCLI position. I feel Kansis City Life is a well-run company with minimal exposure to risky annuities. However, it has run up along with the rest of the stockmarket, and the price is now 75% of book. Still, if the market corrects and KCLI drops, I will certainly consider buying.

Why I Own Kansas City Life Insurance

I have been watching Kansas City Life Insurance (KCLI) because it is a profitable company that trades at 55% of book value. KCLI is a insurance company that offers life insurance and annuities. It is a hundred year old company.

The first thing I ask myself is why is it so cheap. To me, it is cheap because it is a boring company in a very regulated industry. Life insurance companies are long-term businesses with little growth prospects. The following chart shows the growth in book value per share with and without dividend reinvestment.

Period	Annualized Equity Growth	Annualized Equity Growth w/ reinvested Dividends
Last 5 yr	3.4%	5.5%
Last 10 yr	3.4%	5.7%
Last 14 yr	2.7%	4.8%

The data shows the company also does not have ambition to grow beyond its area of competency. We all know that Berkshire Hathaway touts it's own equity growth at more than 20%, while KCLI is growing at 5.5%. But the plus side is that it trades at 55% of book. So the growth relative to market cap is 10% ( 5.5% / 55%). That's the earnings yield.

Other than the above, there is not a lot of noteworthy things about KCLI. KCLI is a small cap company with a market cap of about $400 mil. The company is run by the Bixby family. The company trades with a very little volume.

The company has a large balance sheet and so I was concerned about the consistency of its earnings during a downturn. Looking back, the company only had one losing year in the last 15 years: in 2008 it lost $1.50. This consistency makes KCLI a very defensive stock for downturns. And this is the biggest reason I am holding this stock now.

As a final note, the following table compares KCLI with some of its competitors.

Company	Ticker	P/E	Dividend Yield %	Price / Book
Torchmark Corporation	TMK	11.66	0.97	0.72
Assurant Inc	AIZ	9.09	1.77	1.41
MetLife Inc	MET	19.67	2.92	1.41
American Equity Investment Life Holding Company	AEL	14.28	0.95	1.71
Citizens Inc	CIA	81.97	0	0.83
FBL Financial Group Inc	FFG	11.99	1.03	1.21
Kansas City Life Insurance	KCLI	16.08	2.86	1.85
Unum Group	UNM	8.77	1.85	1.13