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National Western Life Insurance Company Message Board

  • BenGrahamMan BenGrahamMan Dec 21, 2011 9:23 AM Flag

    NWLI 13-F Filers - Westport and Tweedy Please Read

    Westport, Tweedy, Shufro Rose, Third Ave (if still a desired owner) and other institutional holders of NWLI.

    Just wondering if any of you, have in the past, or are considering discussing with management, the issue of a share buyback.

    I am merely looking for a logical explanation by management to explain their theory of not buying back stock at 38% of book value. I am clearly not asking that a buyback be put in place. I am asking that NWLI explicitly discuss their reasoning of not buying back stock to their shareholders.

    I can think of four possible reasons as to why stock is not being bought back. Perhaps there are other reasons that make total sense. If there are, I am not familiar with them.

    Here are my four potential reasons for lack of buyback:

    1. Perhaps NWLI is not operating as liquid as one would expect, and can not afford a buyback. I expect and hope this is not the case, but until discussed, to me, it is certainly a possibility.

    2. Perhaps there is a regulatory restriction.

    3. Perhaps it has been discussed with AM Best, and Best has suggested that if a buyback occurred, NWLI would be in danger of losing their A- rating.

    4. Perhaps Moody's (34%+ control of company) want the stock price to remain low for estate planning and valuation issues. This would make most sense to me as a reason. Yet, all officers have a fiduciary responsibility to the company and her shareholders, as opposed to personal estate optimization, via the valuation of a public company.

    Again, let me emphasize, I am merely requesting that NWLI publicly discuss the reasoning for deciding not to buy back shares. Perhaps, a discussion would lead NWLI Board of Directors to see that indeed a stock buyback would be excellent for the company, the shareholders and employees of NWLI. It is very possible that NWLI is avoding a buyback, and at the same time, just not fully comprehend the power of such.

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    • BenGrahamMan:

      Well, I can think of one more reason. That is that management may think that it is not proper for them to have any role in determining the market price of the stock. That is, that the market is the only proper entity to determine the price. I have some sympathy for this kind of reluctance to meddle in the pricing of the stock. However, when a well run, profitable company that does its accounting properly is priced at less than 40% of book value, I think it would be to the benefit of shareholders to buy stock back on the open market.

      It is much more common for managements to buy back stock at very high prices, relative to book value, during boom times in the economy. I would view the current situation to be a failure of public investors to price NWLI correctly. That is partly due to the market's fears of owning most insurers and other financial stocks. We are the few lonely, brave investors who are willing to risk our capital waiting for the rest of the investment public to come to their senses. May our wait not be too lengthy.

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