One would have to think this next quarter is going to look a lot like the last quarter less the one time transaction of last quarter. Strengthening bond market leads to rising book value vs depreciating DAC. Operating earnings probably poor. Another issue is the debt has gained value which would partially offset investment gains. On the positive front, another quarter of killing Marky Mark's pipe dreams. Stock will trade between $1.50 and $3 IMO.
Still wondering what contributes to the need to keep everyone informed about the fishing conditions. Is there the delusion that others care? Is there the delusion that others are impressed? Is there a psychotic fixation with pre-reptilian life forms with which he/she feels some affiliation? Scary.
Can I throw something in? If you had a clue Mr. Mile and look into the future you will see that this sales company called PNX has no sales in the future either. It is not because of some sluggish economy it is because of two reasons. First if you look before March of 09 the sales started to decline because their product was way underpriced and was being sold to investors which was a bad thing. They had to reprice and nobody wanted it after the reprice. The downgrade made matters worse because the investors could not find loans to buy the products because the lenders would not lend to buy B rated policies. You might say OK now these policies will lapse since no investors will buy these policies. Problem is that they paid out in aquisition costs,(what it costs to put policy on street) probably around 150% or for your simple mind a buck fifty for every buck they took in. Even if they sold new products right now they would have to reinsure which would drive RBC down which in turn would result in another downgrade. Not looking to good for a SALES company to be selling no Products but this is the bubble they have put themselves into.
Earl came and went with no damage and great bluefin fishing to follow. Two bluefin over 200lbs., a 5 bucks a lb. had myself a good pocket change day.
A couple items....
1. I have some great qoutes from your post...
"They never made 100 million in the bond market, their assets might have increased 100 million, but this doesn't matter"
"BUT NO ONE WILL BUY because they have a small block of unprofitable business."
"you need to take mommy and daddy's money"- that is pretty sick.
2. Also, your projection of an imminent $1 billion DAC write down/paper loss leading to bankruptcy is not going to happen. Run-off on a life insurer would take 20 years. Furthermore, insurance companies in general can just capitalize subsidiaries, get licenses and move on. There is no bankruptcy, call off the troops. Ambac is still in business!
3. PNX cannot raise capital. This is flat out wrong. Doing it in the bond market at 10%, they would get investors in a heartbeat. FYI, the preferred trades up from $16.50 to $18 this week. They are yielding less on a market basis than 10%.
4. They have no money because they need every penny to contribute to RBC. I am guessing they will have a little more stat capital when this quarter is over.
5. I am not holding out for $11, I am in at $2.15. I am looking to beat the market.
Mark, your theatrics are not credible, for the following reasons:
1. The figures and revenue stats you cite are from the past. Smart investors on Wall Street and mainstream American are betting on the future, not the past. Forward P/E of PNX is only 4.8, one of the best in the entire stock market.
2. The sluggish sales over the past 2 years is not unique to PNX. Many companies have struggled during this recession. We're coming out of it, PNX will survive, and they have taken steps to boost their sales.
3. RBC and DAC issues are already priced into the stock price of PNX. Investors are not stupid, they're looking forward.
4. No company is perfect. Sure, there are some problems at PNX. But name me one company that does not have problems. Even AAPL is starting to have problems, according to some tech analysts. However, at PNX's current valuation, it's hard to find a more compelling investment.
I hope you will cease your denial of the positive aspects of PNX. Did you buy at $1.65? How about $1.75? How about $1.85? $1.95? If you did not seize the opportunity to purchase PNX shares at these low prices, you missed out. But it's not too late, shares are still very inexpensive if you're a long-term investor.
Dear Afro Investment Ninja,
I never said the RBC was dependent on DAC. I said the DAC was not recoverable, and their business is unprofitable. One source of unprofitability has to do with all the investor owned UL they sold.
They never made 100 million in the bond market, their assets might have increased 100 million, but this doesn't matter because the book value - assets minus liabillities is still lower then their market cap.
I have explained again and again 2 things. Why they will go bankrupt and why the book value is so high in relation to the stock price. I'll throw in the answer to number 3 as well.
1. The book value is so high because the DAC is 1.7 Billion (market cap is 220 million, book value is about 1 billion), and real investors realize that it is not recoverable because their business is unprofitable. SO the real book value is more like 0 or negative. As DAC decreases book value declines.
2. They will go bankrupt because they cannot sell any insurance, and have not since March 2009. This happened when they got downgraded. They tried a private label strategy, that didn't work, they tried selling to the middle market, that didn't work, now they are trying to sell other companies products through Saybrus, won't work either.
3. PNX cannot raise capital. Why because they have a junk rating, and would be paying about 10%. What they are TRYING to do to raise capital is reinsure their crappy business. Which gives them less risk but less future profits.
What you seem to misunderstand is that their capital position is completely capped out. They have no money because they need every penny to contribute to RBC.
They have no option now.
I'll throw in number 4. That is the ONLY way to save this company is through a sale, probably the remote possiblility is the only reason the stock is above 50 cents. BUT NO ONE WILL BUY because they have a small block of unprofitable business.
Big leagues? you need to take mommy and daddy's money and invest it elsewhere.
In your latest attempt to try to be big league, you intentially ignored three things. You always have dodged these arguments, which is why we believe you are a disgruntled employee. 1) The company's RBC ratio is not dependent on the DAC and is going to rise again this quarter (Yes, yes, yes, yes the DAC is going to keep going down). 2) Last quarter, the company lost $15 million in its core operations but made over $100 million from a rising bond market (which apparently doesn't count in your assessment). 3) You assume PNX cannot raise money in the capital markets which they can do anytime they want.
"We're afraid to go with you, Brother Bluto.
We might get in trouble."
Mark, it is becoming increasingly clear you a bitter ex-employee who was laid off or fired. Or, you lost big money on PNX during the financial collapse. Either way, you continue to browbeat investors on this board and show your lack of class, instead of moving on to another stock and board. You do not flatter yourself with your insults toward others, and you apparently do not understand how to analyze a stock.
The purpose of an insurance company is to collect premiums, earning investment income and underwriting expense?
You are a dumb fool. What What?, how old are you 16? Did you get 1000$ for your birthday from mommy and daddy so you could go play investment man? You make afro ninja man look like Warren Buffet.
Now shut up and listen.
PNX lost money last quarter on their core business. Their loss was 15 million.
Why was that? Well because their current block of business is not profitable. This is GAAP earnings were talking about here.
So GAAP earnings = -15 million is the sum of
Yields on bonds are declining, the 10 year rate is around 2-3%. This hurts the investment margin, any improvements on the stability of portfolio are unrealized capital gains, and do not count towards the income statement you see. It could held RBC but that's about it.
Expense Margin - declining, why because their business is old, and especially on UL the premium loads are loaded into the first 2 years. THey aren't selling any new business.
Mortality Margin - getting worse, why because their UL block is what people in the industry refer to as "lapse supported". This means they assumed a high lapse rate, and set COI's lower then the expected mortality at the older ages to make the product more competetive.
The problem with this strategy is that the ones buying their UL policies were investors, who do not lapse. Whoops! And they minimum fund the policies keeping the fund values low.
Now that the mortality margin is decreasing they have to come up with some way of paying off all the deaths.
What about reserves? These are about equal to the fund values, but since these are minimumly funded, the reserves will have to increase in relation to the fund values, forcing them to contribute capital, decreasing RBC.
Now what about DAC of 1.7 Billion, in relation to their market cap of 220 Million?
Since the basic contributers to their income are so low, DAC is not recoverable.
The 1.7 Billion DAC, THAT IS PART OF THE BOOK VALUE CALCULATION, is not recoverable, and will flow out of the book value.
DAC is being written down at a rate of 67 million per quarter.
There will be no positive quarters looking forward thing only get worse.
They have fixed expenses from employees and worse the death benefits that are coming. They will not be able to pay, because they are not selling any new business.
Sorry this is a dead duck.