anyone think the recent price fall is an over reaction ?
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anyone think the recent price fall is an over reaction ?
Things on the radar at the moment are the well earthquakes which are looking like a nothing at the moment. There is the reserve bank capital minimums review but tower was always way over the minimum anyway. There is a capital return which will likely be a buy and cancel like the last one.
Devon did the buy and jaw bone a few months back but seem to be back buying again which can't be a bad sign.
I think the parts were worth more than the whole when I got in at 180ish ....haven't seen anything to change my mine.
On the www.scoop.co.nz today:
It looks that Tower has to increase its minimum solvency margin by $41m. Would it be equivalent of a reduction of capital return to share holders of the same amount?
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Tower shares fall to 2-month low as licensing requirements may weigh on capital returns
By Paul McBeth
Aug 7 (BusinessDesk) - Shares in Tower fell to a two-month low after the insurer gave more guidance on its licensing requirements, raising concerns it may have to hold more cash on its balance sheet.
The stock fell 3.2 percent to $1.79 after the Auckland-based company yesterday said it needs a minimum solvency margin of $80 million above minimum solvency capital from Aug. 16 to meet the terms of its insurance licence under new prudential supervision laws.
Chief executive David Hancock said the insurer has the funds available to meet the minimum margin due to the sale of most of its life insurance to Fidelity Life Assurance, and is now reassessing its capital management plan.
“The feedback is that they have to hold more capital on the balance sheet,” said Rickey Ward, head of equities at Tyndall Asset Management. “They’ve sold a number of assets and most investors expected the proceeds to come back to shareholders, so it’s created another level of uncertainty.”
Tower made the statement after the close of trading yesterday after concluding discussions with the Reserve Bank over its licensing conditions.
In its first-half report, Tower said it will have more than $127 million in capital above minimum solvency requirements after repaying its bonds and making a capital return. As at Sept. 30 last year, Tower Insurance had a solvency margin of $39 million, according the company’s annual report.
Guinness Peat Group is looking to sell its third-stake in the insurer as the investment firm liquidates its portfolio, and rebrands as UK threadmaker Coats, its biggest asset. GPG shares rose 0.9 percent to 56.5 cents.
NOt to sure - will have to investigate in more detail.
I assume it is a return on equity issue. If your return is the same but you have more equity, then your RoE as a % is lower. I dont expect Tower to be any more profitable just because it has to keep an extra $50m in the bank.