Price: 143.90
Obvious to most that financial stocks are in trouble becuse their quality balance sheets are getting a clawing from angry interest rate tigers. It is a bit facile to say liabilities don't match assets, yet it is true that long-dated guilts may have to be sold at below par to meet demands from depositors. Would you call this a liquidity issue? Or is it LDI? - Liability-Driven Investment strategy misfired?
I pity the Fed - hugely qualified, high IQs the highest, know their history and have their own massive experience, but cannot manage a multi-factorial world, so many moving parts, always get it wrong.
What did they do? For these regional banks, they will take on these good-quality bonds at par, so at zero cost theses banks can honour withdrawals, no more bank runs.
And yet ...
To continue ... the story so far ... We can now understand the macroeconomics and changing regulations at work in the insurance industry generally, but still there is opaqueness - some analysts advise the clouds will lift September-time. Six month investment strategy then...
The CEO made a special divi payout of 100m, when he should have been building his buffers post covid; and secondly, he thought lowering premiums would take market share enough to keep up his EPS. He was wrong on both counts and he's gone as a result.
DLG has a new advanced-pricing model. Not sure how it works but it is being trialed in car insurance then rolled out to other product segments.
There is a threat to the traditionally-run insurance industry, weighed down with heavy admin costs that come out of the premiums. That threat is a new business model, P2P, from insurance brokerage firms like Bought By Many, Friendsurance, Guevara, InsPeer and PeerCover. These new online Brorkers underwrite their own policies rather going to the Carriers.
The problem is that until now, there has been a fundamental conflict of interests between the insurers, with their massive reserves sufficient to cover the worst of rainy days, and the insured, protected by heavy regulation but always interested in bending their claims.
The CEO made a special divi payout of 100m, when he should have been building his buffers post covid; and secondly, he thought lowering premiums would take market share enough to keep up his EPS. He was wrong on both counts and he's gone as a result.
DLG has a new advanced-pricing model. Not sure how it works but it is being trialed in car insurance then rolled out to other product segments.
The problem is that until now, there has been a fundamental conflict of interests between the insurers, with their massive reserves sufficient to cover the worst of rainy days, and the insured, protected by heavy regulation but always interested in bending their claims.
Plus, to repeat, the premiums that are held against a rainy day are invested in low risk government bonds, but as we have seen this low risk turns out to be illusory in a fast-rising interest rate environment; and in any case the coupons are not enough to keep up with with inflation in repair costs, nor the rising numbers of claims.
But what if you could accurately segment the customers by risk profile - I imagine this part of the new advanced-pricing software - but also by social affiliation (friends, family, colleagues, clubs...), then pool the premiums in a transparent way and offer discounts to pool memebers, giving them an incentive to good behaviour? This is what we call a network effect.
Further, investors in the business, who provide the capital reserve, could now invest in any of the groups, and an organisation such as Uvamo would cover any claims that exceeded the total amount in the pool.
This would mean the insurers and the insured are one and the same group. The whole business to be managed on line by AI algos. Still a dream? See how a new outfit, 'Lemonade' (finding sweet solutions to sour problems) is a new organisation challenging the way that insurance companies work "with a peer-to-peer business model fueled by self-serve technology."
DLG interim results August seem too early to bring good news.
But a new CEO can bring clarity over the summer on the regulatory front (releasing insurance funds for equity investment?) and recalibrate DLG's new pricing model to support P2P insurance.
If this happens, we can expect sector-performance for next March's results and probably a great deal more.
With a poor view on the Fundamentals, I cling to a Technical trading analysis that suggests buy mid 140s, sell mid-180s, over next six months, for a 25% SP gain
Further, investors in the business, who provide the capital reserve, could now invest in any of the groups, and an organisation such as Uvamo would cover any claims that exceeded the total amount in the pool.
This would mean the insurers and the insured are one and the same group. The whole business to be managed on line by AI algos. Still a dream? See how a new outfit, 'Lemonade' (finding sweet solutions to sour problems) is a new organisation challenging the way that insurance companies work "with a peer-to-peer business model fueled by self-serve technology."
DLG interim results August seem too early to bring good news.
But a new CEO can bring clarity over the summer on the regulatory front (releasing insurance funds for equity investment?) and recalibrate DLG's new pricing model to support P2P insurance.
If this happens, we can expect sector-performance for next March's results and probably a great deal more.
With a poor view on the Fundamentals, I cling to a Technical trading analysis that suggests buy mid 140s, sell mid-180s, over next six months, for a 25% SP gain
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