Well let me try to create some upside to the $5.30. Herewith my...

Well let me try to create some upside to the $5.30. Herewith my issues with that valuation - its arithmetic based upon previous claims ratios I presume - That is my understanding of actuary processes - they have calculations for deaths that will cause x , the past history the average rate of claim etc. and they flex that via trends.

I know everyone always says but this time it is different - well the assumptions are different and Australia in now moving into a unique phase.

The people who crash and burn may be the same percentage but with housing rising, those that take out LMI are unlikely to be the $1.2 million home - far more likely those getting into the market. Well those prices seem to be rising far quicker than the top as a percentage. So I am in fact expecting the claims numbers to drop as the government guarantee has taken some off the table and then the actual amount of claim to drop as the property should fetch more.

So my view is that they change things as the actual process moves - so for example the expected life expectancy for some insurance policies would have changed as a result of Covid but they had to see it play out. If they took the first months experiences they would have declared all life insurers bankrupt.

So I look at it here and think that as long as the policy writing are lower than the claims each year we should have a bump in capital vs Reserves as we should probably need less reserves to settle claims in the times when house prices are expanding. I cannot tell you what it is but suspect that if they continue the share buybacks and the claims experience is as I think it may be then it is a lot north of $5.30. The negative to that argument is high interest rates for longer My view of HLI is that they are far more proactive and people would rather sell and downsize then let it all fall apart these days. Too hard to rehabilitate your credit rating after a failure on a house I would assume.

I would prefer they pay 30c fully franked and use the extra to do a share buyback. Retire the $190million subordinated dent. Buy more back etc. Should do far more for my future return.