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.
With ANAT, he gave up the CEO position to a non-family member, so it is not just about him trying to set up his son. Plus, the Brazil thing is only for NWLI, so wouldn't have affected his ANAT stepdown.
Maybe I'm being overly optimistic, but my impression is he is moving out of the business. Could be for health, mental capacity or just personal reasons, but either way, I see it as a potential positive.
Hopefully Batraa is still around and can clarify.
But if you search this board for "had a nice call with the company" dated May 22, 2012, Batraa indicated the son understood some of the issues and it was just the father standing in the way.
The one example I would point to is EVT and E-L Financial in Canada. It was founded by Hal Jackman and run for many years like NWLI has been run. About 2 years ago, Hal retired and the son took over. Since then, they changed the dividend policy to pay out much more, the sold one of the 2 main divisions, Dominion Insurance to the Travellers and the stock has gone up quite a lot.
Not saying the same will happen here, but I would think the father is only stepping down because he has to for health, competence, etc. reasons. If he was doing it for the son, he would have done it long ago.
I think the son will want to put his own imprint on things and he has shown indications that he would like higher income by his usual selling of stocks bought through exercised options. Perhaps he will make some changes which we all think make sense like a share buyback at discounted levels and an increased dividend.
Decided to take a bit of a flyer that this will be meaningful and added to my position. Maybe this is the start of some good changes and, if not, stock is near the bottom of the range it has been in for the last year, so downside should be limited.
From today's SEC filing - maybe this could get things started to make the company more shareholder friendly. Can't remember who here (batraa?) was talking with some board members about this, but Robert Moody was seen as the roadblock to doing some things:
On June 19, 2015, the Board of Directors of National Western Life Insurance Company (the "Company") appointed Ross R. Moody ("Mr. Moody") as President and interim Chief Executive Officer of the Company. Mr. Moody (age 52) has served as a member of the Company's Board of Directors since 1981 and as the Company's President and Chief Operating Officer since 1992. Mr. Moody will serve as the Company's interim Chief Executive Officer until the Company appoints a permanent Chief Executive Officer. Mr. Moody will not receive any additional compensation while assuming the duties of interim Chief Executive Officer. Robert L. Moody, Sr., who served as Chief Executive Officer until June 19, 2015, will continue to serve as Chairman of the Board, at an annual salary of $100,000, as determined by the Company's Compensation Committee, plus benefits currently provided to him as a Company director.