I just looked over at Scottish Re’s fundamentals (SCT) and was surprised. The company is trading right now with a market cap of $817m in market cap and has $690m in cash (as of their last quarterly report). If you buy SCT today at $15, you’re getting $12 in cash. Many value investors will back out cash like that to calculate the P/E ratio — which becomes ridiculously low if you do that with SCT.

What’s the downside or the risk? Scottish Re is a re-insurer, which means they write insurance policies for insurance companies. If State Farm or Allstate gets hit hard by hurricane season, they actually have an upper limit to the losses they can take — because they buy insurance from SCT or other re-insurers (not so much with hurricanes, SCT focuses on life insurance, but it’s the same concept). Last year’s Hurricane Katrina cause a couple of insurers in the same business to face significant problems. Insurance companies have large cash positions so they can respond to claims as they occur.

SCT looks like it has a very solid balance sheet and might be worth buying when the price starts to trend up again.