Ann: Update on CBA contract, page-66

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20/06/24

11:25

Post #: 74405817
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Originally posted by joewolf: ↑

I dont think the value is $6.00 but think I understand the prinviple. the valuation isnt based upon income but just on the premise that property has been going up so fast and faster at the bottom end of the market so this investor is saying that most if not all ofbthe provions in the balance sheet are unlikely to be needed so you have to add the provisions to the NTA of the share thus creating a value around $6.00 - from their post.

Essentially a shrinking business cannot often control cost effective processes. However I believe that insurance is one of the areas that it is possible to run pretty effectively as long as you can afford the executive salaries. I would presume as the assets remain invested they would service the return needed to satisfy the discount rate during run-off . Thus as long as continued business cover the overhead a run-off is often very profitable. Not often a logical investment strategy but as long as the players dont start trying to diversify outside of their expertise and try to create new jobs, it is very often z very profitable process. I have held a few investments in run-off and the discount on the price wss duch that I did very well.

I am not suggesting that this is the case here. CBA would probably do a lot better by making an offer to purchase the business especially now the have Unloan as part of their offer. If they made an offer of say $4.75, most would accept as the threat of loding their business has everyone panicking.

Right now this is a unique set of circumstances in that house prices are and have gone up substantially. This has probably made the provisions far too high, as long as the marketplace remains short of stick. With any amount of migration it probably srays this way for a few years.

I personally would not be buying more as I have enough exposure but I think yesterdays downdraft was overdone. I am also fascinated that they did not do any buyback yesterday... Ir so it seems at 11am.

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why would CBA buy? they can simply underwrite themselves similar to Macquarie Bank.

HLI Price at posting: $3.75 Sentiment: None Disclosure: Not Held
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