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miix has been a disaster of a company [many fbr clients may remember it well ] . it is a med mal insurer which is in solvent runoff [it's not broke , yet , but has stopped writing policies ]. this one came out at about 15 bucks , and has been killed by a combination of bad management , med mal trends , poorly thought out expansion , etc. . management has consistently underreserved. it is a type of a liquidating trust at present [it's not called that , that's my take on it ] and the question is whether anything will be left for shareholders when all claims are paid . what i like about it is the nature of limited liability in corporations . if they've underreserved and they work through their equity , shareholders are not expected to make up any shortfall . they can only lose their investment [it trades at a little under a buck per share ]. on the other hand , if by some miracle they've finally underreserved there can be substantial reversions to shareholders . their book per share now is $3.81 . they "estimate" it will be $4.06 per share in 2007 . their estimates have been bad in the past and may be bad again . i like this as a businessman's risk , based on probabilism . when you buy the stock at a buck , you get almost 70 bucks per share in reserves . if those reserves are in excess [and there is at least some chance that is the case ] the result can be striking . for purposes of analysis [and these are just guesses] i assume there is a 20% chance that the reserves are 10% or more underreserved , a 20 % chance that reservers are 5% short , a 40% chance that reserves are on target and a 10 % chance each that reserves are over by 5% and 10% . on that basis i get an "expected" value of about $3.39 per share [not present valued ]. at 20% x 0 + 20% x $ .34 + 40 % x $ 3.81 + 10 % x $ 7.28 + 10 % x $ 10.76 . for purposes of this analysis i have ignored increases in book due to net investment income . the company has a very large nol cfwd . so - although it is hard to make an intelligent judgement as to the likely future state of current reserves , if we assume some type of a normal distribution , even with a bias toward bad outcomes , we seem to develop significant values [albeit , with a significant possibility of a zero reversion to shareholders . full disclosure , i own this piece of crap .
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