One of the big things driving WTM, and giving you a sort of free "put", was that WTM was so aggressive in buying back shares.and that boosted book. But they now are putting $600 million into this new bond insurere, and thats a big chunk. Soi I think the big buybacks are going away. They'l just chip in bit by bit. But I like the new group. Good time to start one. All these CA cities going bankrupt. WTM's is all clean, and rates will be firm. And WTM owns 89% of the new firms equity....so I woudl be thta in a handful of years, once sales and profits grow, WTM offers some shares to public. But thats a ways off. So I thik WTM will be more boring and range bound. I'm pretty much out....but I did buy some OB around $12.80. Nice dividend to support the stock and hopefully it's book can grow slowly.
Another thing about this new Bond insurer. I think it's a good idea. The market is there. But the issue is that their management and pricing of policies has to be spot on. There is NO ROOM for error....I know they want busines ASAP, but they can't underprice. The problem is when they take the money in from the municipalities/states...........there is NO interest to be earned. You'd have to be insane to buy a 10 year at 1.40%..so you buy 1 year and get almost 0 interest. Which means their investment income will be pitiful ,until interest rates rise. This is where other bond insurers have an advantage. They have bonds that pay 3-4% (or even higher)....but these guys also may have risk on what they underwrote before (Calif).
So if WTM's new $600 million company gets no interest imcome..... the P& L will be soley made on underwriting capabilty and hope they price right.
Long term I think it's a great move for WTM.......But they spent about $550 million last 12 months in buybacks..and $600 million in this new deal.... That is $1.1 BILLION....so I just don't think WTM can buyback 500,000 to 1 million anytime soon. And I think the buybacks and increased book V is what kept us here.