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National Western Life Insurance Company Message Board

  • dsouth7777 dsouth7777 Jun 24, 2013 4:20 PM Flag

    Book Value

    How low will it go this quarter?

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    • the big portion of the bonds are HTM and therefor the book value hasn't benefited from the decline in rates.

      book value probably drops a bit though. but the profit outlook is considerably better with the 10 year at 2.50%. considerably better in my mind.

      • 2 Replies to batraa
      • This is an interesting question that I have looked into some. The big rally in the bond market that began ~2007-2008 has increased the value of many of NWLI's assets. However, since then the quarterly increase in NWLI's book value has tracked pretty closely with the quarterly earnings. (Book value on 12/3107 was $279.29. Since then, NWLI has reported total earnings of "roughly" $100/share -- $20/share per year for five years -- and the book value is about $380/share.) These quarterly earnings are also nearly always very close to the "operating earnings", and both have been very consistently about $5/share per quarter. If they were booking portfolio gains and losses in with these quarterly earnings, the earnings numbers would jump up and down much more, and NWLI's book value would have increased much more since 12/31/07.

        In the NWLI Annual Reports, in the "Notes to Consolidated Financial Statements" section reconciling the "carrying amounts" and the "fair values" of NWLI's assets and liabilities, you can see these differences. If NWLI corrected it's asset and liability values "to market" back at year-end 2010 (that is the Annual Report I scrounged up and have in front of me) its book value would increase roughly $600 million, or over $150/share. I think that same discrepancy still holds: if NWLI marked its "book" of mostly bond investments to market values, the current book value would be over $500/share.

        So I think NWLI has ignored most of the changes in bond market pricing the last 5-6 years, and probably will continue to do so. (They did write off one bad bond loss down to zero in 2008 and that loss did effect the book value, but that "total loss" was -- I think -- the exception that proves the rule.) My guess is that the recent mild sell-off in the bond market will not result in a drop in either earnings or book value

      • So if classified as HTM they don't mark-to-market?

250.00-1.00(-0.40%)Sep 17 4:00 PMEDT

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