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Tower Group International, L.Ş. Message Board

  • snow.ball7 snow.ball7 Nov 7, 2013 6:13 PM Flag

    Book value will still be over $10 no matter what.

    last financials had over 1.2 Billion shareholder equity. Even if you subtract 600-700 million for all the #$%$
    (loss provisions, good will markdown, charge, lawsuits, business suffer, etc) that's still 500-600 million shareholder equity which is $10+ book value in a merger/buyout. There is a reason why the institutions have not sold down here. Plus JP Morgan is working for them. Barclays is giving them slack. If Lee will just walk away we should see a merger with another insurance co, an opp for acquirer to pick up $2B or darn close to it in premiums for say $500m value in a share swap, only 57 million shares here. $8 target !

    Sentiment: Strong Buy

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    • leetown Nov 10, 2013 10:23 AM Flag

      GNW ran from $ .84 at the financial melt down to $14 in one year. Some predicted BK and all BS. Earnings were delayed and terrible. But it survived no problem. Shorts and put holders have been spewing negativism all over but the company will survive and go back up. This is the level I also want to buy in especially looking at all the now desperate attempts shorts are trying to make. I see the latest 8k as a very positive change at this point for the new investors.

      Sentiment: Strong Buy

    • I'm long and would love for an acquirer to pay $8 a share, but I think this is probably slightly wishful.

      In my opinion, it probably isn't all that helpful to look at book value as a proxy for takeover value in Tower's case. I think you have to break out their Reciprocal Exchanges in that they are recorded on the balance sheet, but shareholders nor creditors have any recourse or liability for anything on the books of the reciprocal exchanges. Also, there is one line item (Deferred Acquisition Costs) on the balance sheet that I would argue the true value of.

      So if we go back to valuing TWGP from a conservative Net Asset Value Standpoint, I would assign a back of the envelope value of $1.50-$2.25 to Tower's interest in the Reciprocal Exchanges. I am assuming pre-tax operating income to Tower of anywhere between $10 mm-$15 mm per year. This value can easily be adjusted based on what value, if any, you think should be attributed here.
      The next step would be to find the book value adjusting for any value in the reciprocal exchanges, subtracting out part or all of DAC, subtracting out the goodwill (I believe it is wishful thinking that an acquirer would attribute any value here), and subtracting out $365mm-$400mm for increases to loss reserves. I also adjusted upwards for revenues earned since the last filing date (net premiums earned, etc.) and a conservative estimate for investment income on the non reciprocal exchange investments.

      I left most out the values in my assumptions because I don't want to come off as trying to scare the shorts or the longs on this board out of their positions like many other posters have tried to do on this board. If you agree with my take on how to arrive at TWGP's valuation you can use whatever values for various line items to arrive at a valuation. For TWGP's value I came to what I believe is a $6.00-$6.50 valuation ex rec. exchanges discounted by 20%, plus $1.75 for the rec. exchange's valuation. My PT for what it's worth is $6.50.

      Sentiment: Strong Buy

      • 1 Reply to abcdzyxw1113
      • Can't argue with the methodology or the line of thinking. Suspect you are thinking of SinkHole being taken out as a going concern and my view is such a likelihood is remote. If you assume the sale it be one of a melting icecube (runoff), then the valuation drops in view of the built in reserve discount, the degree of confidence a buyer might or might not have in the adequacy of reserves to begin with, and the trashy yield that the portfolio delivers. Add those figures to the hurdle rate of return of a buyer and the number comes in closer to my $3.85.

    • The institutions sold up there..