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White Mountains Insurance Group, Ltd. Message Board

  • snogreen snogreen Feb 14, 2012 3:26 PM Flag

    Obama raise taxes; WTM effect

    I see in Oblama's budget he is out to nail investprs big time. He wants to raise that tax on dividends from 15% to 30%. And he wishes to raise the capital gaons tax rate from 15% (LT) to 30%. Both moves will significantly affect WTM, but it is a long shot Obama get's 30%....but it will not surprise me to see taxes raised on both dividends and cap gains to 20% - 25%. but if Obama ever got 30%? diaster. Because WTM is smart enough to see that OB pays a huge dividend to them. OB already pays a 35% tax rate. THEN? if OB pays dividends (at an 80% payout ratio) to WTM...and then WTM is forced to pay another 30% dividend tax on TOP of that? NO WAY! WTM is too smart. They will slash the OB dividend by 80% and use that saved dividend money to buy back OB shares....because OB will likely sink - cuz' people are bidding up OB soley for the fat dividend. No fat dividend, they sell OB.

    The other thing is that the long term cap gains rate of 15% may not be here in 2013. Obama wants a 30% rate. But it will not surprise me to see it go back to Clinton era 20%. So if one ever thought of selling a company, now is the time. The 15% rate tax may never be this good again. John Byrne is in his mid 80's. He alone controls 9.5% of WTM. He might want to sell and cash out. And his old and good friend Warren Buffet is the perfect choice of buyer for WTM. Buffet would get the 21% stake (same as he owns) in SYA....he would get a great specialty insurere in OB.....he get's a $36 billion money management firm in White Mountain Advisors...and he get's the WTM reinsurance company of Sirius....which is pretty big and based in Europe (good diversification for Buffet). IF WTM could ever get Buffet to pay 1.1 times book for all of WTM......that would be close to $600 a share. It depends on how many shares they have bought back in Jan and Feb..and the stocks owned are way up in Jan & feb too.

    I'd take 1.1 times book in a second...$600. Would John Byrne and WTM mgmt? I think they would. The max tax is only 15% now.....and Buffet woudl let them do exactly what they do now anyways!

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