Just Share Discussion Threads

[eumaeus] 06/9/2019 11:49

1113 the IFRS rule for level 3 (model based) valuation is that the method must be based on the assumptions that a rational market participant would make.

The PRA has firmly established that the valuation method used by most, if not all ERM firms, is completely wrong, because it does not conform to the level 3 expectation. They have unequivocally stated this in the series of consultation papers. That is for the purposes of regulatory balance sheet. However, because we run into the same issue on the statutory balance sheet, the FRC now seems to be looking at it from the same point of view as the PRA.

[cjac39] 06/9/2019 11:33

i think the point is that these are complicated illquid assets with no transparent market price and some people have taken spread into upfront values which is allowed under IFRS. any subjectivity like that is suboptimal from accounting perspective and therfore unsurprising its being looked at. if they tell people they dont and they in fact are then i would think that is accounting fraud and their auditors plus the directors could rightfully be sued.

[eumaeus] 06/9/2019 11:14

1110 What if the FRC found they were taking an considerable day 1 profit hidden in the accounts? I am not saying they are, but what if it turned out that way? Would that change your view?

Why do you think FRC investigating at all? FRC is a gigantic slow moving tanker, takes a lot to change their course.

[cjac39] 06/9/2019 11:11

write them up..

[cjac39] 06/9/2019 11:02

Because they don’t right them up day1. They hold them at loan plus accrued adjusted for int rates and don’t pv any of the spread day 1 which others do

[eumaeus] 06/9/2019 10:53

1108 "that discount to NAV is one of the biggest I have seen"

I am sure it is, but as the InsuranceERM article explains, the reason the Financial Reporting Council is reviewing ERM accounting is to understand whether the reported NAV is the correct NAV.

What makes you so certain the accounting is correct?

[nav_mike] 06/9/2019 09:51

The overblown share price reaction on results day now fully reversed.

Yes there is significant uncertainty, yes profitability is so/so but that discount to NAV is one of the biggest I have seen.

The lack of write downs in the interim accounts was the reason I added on the day, and looking on the chart I can see 55p and 72p as being reasonable targets

(Cue a share price plunge lol)

[eumaeus] 05/9/2019 13:28

For those with a subscription, an article in today's InsuranceERM about equity release accounting issues

"FRC begins review into equity-release mortgage accounting Action follows Prudential Regulation Authority’s reforms on regulatory approach"

The question is whether the book value of ERM insurers properly reflects their true value.

[lovat scout] 05/9/2019 08:12

Value buyers and any potential bidders probably holding off until CP7/19 clarity in Q4. If all ok and share price the same at full year results I don’t see how the board can avoid run off and delivering value back to shareholders, as the market either doesn’t understand or believe what’s in front of it.

AIMHO

[cjac39] 04/9/2019 19:55

id keep away from profits as they get distorted by ifrs and nb. ie down 27% today is great news as they are stopping new biz strain. but elephant in room here is cost base. they need to sack loads of costs and im not sure public environment is right place. so i reckon they will limber on (and share price will accrete anyway as surplus emerges) or more likely priv eq takes them out. there was no bad news in todays announcement that changed anything or was unexpected. indeed the surplus emerging profile on last page should have doubled share price if anyone knew what they were doing which sadly most fund managers dont

[nav_mike] 04/9/2019 19:08

Well to my (admittedly not super-skilled in this sector) eye, what I get from the accounts is a £100m after tax profit and no impairment write-downs or other nasties.

Yes there is no dividend, but that has happened is the gap between NAV and share price has widened even further.

At what point does a major with no capital issues step in to exploit this massive £1bn+ gap?

[topvest] 04/9/2019 19:02

The market is really odd at the moment. This could do bounce to £1+ if they get the strategy or exit sorted.

[scrapheap] 04/9/2019 08:22

Sanity returning ... I've got too much sunk in here already and deep red so not averaging down again BUT would be tempted if money was spare!

[nav_mike] 04/9/2019 07:48

Think market reaction is a total anomaly so I topped up SB with another 200ps at 40.6

At least that ones in profit lol

[cjac39] 04/9/2019 07:47

Killer page is last one with surplus emerging above 100%scr. Discount that and tell me it’s not 3x mkt cap

[nav_mike] 04/9/2019 07:26

Really heavy AT selling this morning....income funds bailing out?

[robsy2] 04/9/2019 07:19

"All options under consideration point struck my attention."
Good spot , I saw that as well. I mean this was a 100p less than 6 months ago.Talk about margin of safety.

[robsy2] 04/9/2019 07:16

good news for buyers though. looks like one you can buy today and sell out for a profit inside a week, possibly a day....
wish i didn-t have so many already bought at 70p....

[topvest] 04/9/2019 07:15

No Chairman's statement as he is being kicked out. FD not joining to January. Acting CEO. The company needs new management. Interim CEO sounds sensible. All options under consideration point struck my attention. Lots of potential value at this level. Something will happen.

[scrapheap] 04/9/2019 07:06

I must be missing something for this mark down. Lack of interim divi is only thing I can think of.

[topvest] 04/9/2019 07:04

Yes, there is a different tone. I do get the feeling this might be heading for some form of run-down. Obviously still a lack of capital risk, but seem to be doing more to solve.

[nav_mike] 04/9/2019 07:01

Jeez - they are smashing this down in the opening auction (38p!) why??

[robsy2] 04/9/2019 06:58

Yes, they seem to be succesfully grappling with the problems.
No int dividend , maybe one at year end...
Adjusted H1 EPS ajusted 6.2p.
Tangible NAV 162p at 30.06.19.
They seem to have a plan in place to deal with the expected new capital requirements.
This looks very good value.

[nav_mike] 04/9/2019 06:58

Struggling to see negatives in those results but awaiting market reaction.

A Net profit after tax only widens the disparity between share price and NAV