Trade idea #4: U.S. insurer trading at steep discount to conservative SOTP

This small cap insurance company recently announced a sale process for a valuable subsidiary that could unlock the discount to its sum-of-the-parts valuation

This trade idea is a compelling special situation with the potential to deliver significant returns in the near term. The opportunity centers around a company with a market cap of ~$700M, which holds a majority stake in a valuable subsidiary. The subsidiary recently announced they are actively preparing for a sale, yet the broader market has not fully grasped this—creating a window of opportunity.

The subsidiary in question has pursued an IPO twice, once in 2021 and again in 2024, but withdrew both times due to unfavorable market conditions. However, with an exceptional growth trajectory (a ~+40% YoY increase in adjusted net income) and the backdrop of a potentially more favorable M&A environment under evolving political and economic dynamics, the situation now seems more favorable.

If you're intrigued, let's delve into the details.