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OneBeacon Insurance Group, Ltd. Message Board

  • snogreen snogreen May 22, 2012 1:53 PM Flag

    'nother possibility OB

    Theres another possibility for OB. A poster here threw out that WTM could maybe buyback the 21% OB they don't own, around $17 and take OB private OB book around $12. A $17 offer is about 1.4x book. I guess reasonable. But I throw out the flip side to that.......that WTM could be a seller, not a buyer. If they ever wished to do that, now is the time. Becauyse the TAX on divindends and Capital GAins are now the lowest ever, and I doubt will stay that way for long. It is rare to have divdends taxed at 15%, and LT capital Gains at 15%. With a $15 trillion Federal debt load, Div and CAp gains taxes have no where to go but up - some time. if WTM coudl get 1.4x to 1.5x book for their stake of OB, that would be gross to them of $1.3 to $1.4 BILLION. What WTM has slowly been doing is taking WTM closer to private by the very large buybacks. The last one was 1 million shares in a swoop. If I was WTM I woudl consider selling OB and take the $1.4 billion, after you suck out another dividend or two. Then pay the LOW 15% tax. But BEFORE you do all that you buy BACk another 1 millioin shares. And THEN you sell OB.....WTM couild easily rise 100 points on that. Maybe a lot more. WTM is tax smart and efficient. And mgmt owns a lot of stock. I'm watching how heavily they contginue to retire WTM shares this year. Odds are that if they do a deal with OB, they will be large buyers beforehand, but not too close.

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    • They will not sell it because;

      It is to cheap relative to BV for open market sales.
      They would have to sell privately to a stratgic.
      WTM is awash in excess capital and does not the money.
      They make the dividend whatever they wish.
      The average yield on OB has been over 9% counting the extras.
      The corporate tax rate on dividends will remain the same as there is dividend preference for corporations.

      OB is a great buy and very safe.

    • On February 2 OB was selling for $16.45. I posted around then I thought OB was expensive and WTM was a better buy. I couldn't figutre why OB was $16.45.....I thought it looked like a deal was coming for OB.

      So in the just over 100 days since Feb 1, and $16.45.......OB is now just above $13.00. I think it's a good point to buy some. The 21 cent dividend comes in a few that would put OB down to the high $12.80's. I think you get a lot of buyers at that price. At that price you push almost a 7% dividend!! Compare that to the Treasury that sold 2 years bonds today at 0.30%. OB looks okay. NOT at $16.45, but at $13.

      Also, just before the dividend, WTM is having it's annual investor conference and OB is also speaking. Things aren't that bad at OB to justify it dropping from $16.45 to $13.08 in 100 days or so.

13.20+0.05(+0.38%)Feb 12 4:01 PMEST