The other thing you have to remember is the reason we all have been able to buy it so cheap is because of its lack of dividend, the Moody ownership, etc.
AT some point this will change and, whoever owns it then, will benefit, but in the meantime, it seems to be trading in line with most lfeco's.
Re FFG, they a,so have a P&C division, so maybe that is why the higher ROE and P/E. I know when I used to sell software to insurance companies and they were still called Farm Bureau Mutual, they had a good reputation as well.
Look at it compared to the TLT - 20 year bond and there is a pretty strong inverse correlation.
Reality here is a small, family controlled company will trade at a lower valuation to a widely held large cap. SO run a chart compare of MET to NWLI and NWLI looks pretty good.
The other reality is, no-one will pay up for life insurers in the current rate environment as the risks are too high and ROE's too low. People remember the troubles the Japan insurers got into a few decades ago from low rates and are worried about reinvestment risk.
You either need to be patient and wait for rates to rise, or I'd just move on and find other things.
It's not a NWLI thing, it's a life insurer thing. Look at small cap KCLI at 58% of book. Even large caps like MET at 71% of book.
The market went up, because rate and the expectation of higher rates went down. Unfortunately, that has the opposite effect on life insurers.
Reality is, when rates rise, life insurers rise. Been that way for a few years now. And when rates finally do move up for real, life insurers will be one of the price beneficiaries.
I tend to agree. The father had no need for money and wasn't interested in pushing through a lot of changes, but the son has often been a selling of his option stock implying he needs the money to support his lifestyle. Sure, he will get a raise, but a dividend would help him as would an increasing stock price
At its regular meeting on March 14, 2016, the Board of Directors of National Western Life Group, Inc. (the "Company") appointed Ross R. Moody ("Mr. Moody"), the Company's President and Interim Chief Executive Officer, as Chairman of the Board, President and Chief Executive Officer. Mr. Moody's compensation will not be changing as part of this appointment. The Board also appointed Robert L. Moody, Sr. to the newly created employee position of Chairman Emeritus, for which he will receive monthly compensation of $1,000.
The big difference is AEL and NWLI are life insurers, where MKL and WTM are P&C insurers.
The stock market has been continually worried about the life insurers since the financial crisis due to their long time period of liabilities and corresponding investments, whereas the P&C insurer valuation has rebounded nicely as it is a simpler business with shorter term funding requirements and the ability to adjust premiums yearly as conditions change.
All lifeco's from the the big MET, PRU, MFC are valued cheaply, so it is not just a small company thing, but an industry concern. If rates stay low for 20 years like they have in Japan, there could be some serious issues for some of the life companies.
It's not the company that's an issue. it's the market and the China factor. I think at this price and value, it is hard to go wrong, but I would keep it a fairly small part of your portfolio as part of normal risk management.
What's the issue with KCLI? Were at $4. Announced a buyout of small shareholders and stock jumped to $47. Stock got over $50 as buyout approached (buyout was for $52.50). Buyout ended and stock moved to OTC Market, so has fallen back past $44 to $37.
Book value is around $70 and they have a good dividend.
Could be a good buy - probably temporary pressures of selling after the buyback and over market weakness causing problems.
Personally, I think NWLI is a better run company and it does use more conservative accounting, but KCLI is fine too.
If you go back through their quarterlies, Brazil has been a much larger portion of business in the past. I'm not sure what percent of their block of business would be Brazil, but it would be significant.
"Anbang Insurance Group Co., Ltd. ("Anbang" or "the Company"), a leading global comprehensive insurance group based in Beijing, China, and Fidelity & Guaranty Life (FGL) ("FGL"), a leading provider of annuities and life insurance in the U.S., jointly announced that they have entered into a definitive merger agreement on November 8, 2015 pursuant to which Anbang will acquire FGL for $26.80 per share."
Industry consolidating fast - NWLI has the majority share ownership, so nothing happens without the Moody's, but good time to be selling and tough to compete if all the other players have much deeper pockets.
Yeah, sounds like there's some pressure to get this resolved , probably the US and Brazil governments are telling them to get his worked out without going to court.
The ideal solution would be to sell of the Brazil business to a global insurer who is licenced in Brazil for 100% of the book value of that business, then a special dividend for all of us with the proceeds!
From a business persepctive:
Year-to-date, the Company has accepted new business from residents outside of the United States in over thirty different countries with Venezuela (21%), Peru (17%), Taiwan (11%), and Brazil (10%) comprising the regions with contributions of 10% or more of total international sales.
For the nine months ended September 30, 2015 and 2014, sales of new policies issued to residents in these countries, including Brazil, were approximately $3.8 million and $5.8 million, respectively, which represented 25% and 36% of total international life insurance new business placed for such respective periods.
In the latest quarterly, this is a new statement:
"Nonetheless, the Company has entered into preliminary discussions with SUSEP in an effort to resolve this matter. No conclusion can be drawn at this time as to the outcome of these discussions, or whether they will continue, or how any such outcome may impact the Company’s business, results of operations, or financial condition. However, in light of the pendency of discussions with Brazilian authorities, the Company has determined to cease accepting new applications from residents in Brazil."
The following was in the previous and still states that it expects no liability:
"Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from such other potential, pending, or threatened legal actions will have a material adverse effect on the financial condition or operating results of the Company."
Been thinking about this some more and I think the big bump in NWLI is probably money coming out of SYA, SFG, PNX as these are getting taken out and investors in these other small lifeco's are probably looking to redeploy into another small lifeco that is undervalued and leveraged to rising rates.
Plus KCLI is going semi-private and will be trading on the OTC market, so many funds won't want to hold that.
We may actually see a scarcity premium in NWLI soon - too bad for the family ownership, could otherwise be a good takeover candidate as well.
Quite a move from under $220 and trading in the $215's on Oct 5th to almost $245 today, the 7th - that's over 13% in less than 3 days.
And that's without a bump in rates - any ideas?
I think you are being conservative. Back in 2006/2007 it often traded above 90% of book value and was above 100% for several quarters I recall. The ROE back then was around 8% or 9%. During prior market cycles, it had also traded up into this range.
When I look around the industry, pretty much all life insurers are trading at substantial discounts to their mid-2000's valuations. Most charts are similar to NWLI's as well. As the overall interest rate and financial market environment improves, I really believe investors will pay higher multiples across the industry, so getting back above a p/b of 0.9 seems pretty realistic.
I think, being optimistic, would think we could get to book value this cycle. All lifeco's are trading at a discount because of interest rate concerns and general financial stock avoidance. Once the financial markets normalize, this industry discount should fade and, NWLI, with it strong track record, excellent balance sheet, and now (hopefully) better capital markets management, should get a much better valuation.
You see the large Japanese lifeco's coming in with their excess capital and buying up many of the smaller life insurers. By the time the market for life insurers gets better, there will be many fewer choices than there were say 10 years ago.