Short cuts: Admiral, KAS Bank, NN Group
Some quick updates on preliminary numbers form 3 of my financial stocks:
Admiral
Admiral released “preliminary annual” numbers yesterday. EPS declined slightly which was not a big surprise. My take aways at a first glance:
Negative:
– UK car still tough, UK comparison some issues due to competition, however cycle might turn in 2015
– slowing growth in Italy
Positive:
+ Italy at break even, break even in Spain expected for 2015
+ US growing strongly
+ Intenational comparison sites profitable
The CEO letter is again a must-read for anyone who is interested in Admiral and/or insurance. These guys are really different.
KAS Bank
Kas Bank came out already a few days ago with a press release on preliminary 2014 numbers. EPS almost doubled to 1,65 EUR due to the already mentioned one time effect. “Normal” earnings would have been around 0,74 EUR per share.
On the negative side, KAS Bank’s equity has been siginficantly reduced by an increase in the pension liability due to lower discount rates. Additionally they announced that they will expense 5 mn or so p.a. of the one-time gain as “investments”. Top line income acually fell but they were able to cut costs quicker. Overall, if low or negative rates will remain for a lnger time, the upside potential of KAS Bank now seems to be limited.
NN Group
Finally, NN Group came out with their 2014 results already 4 weeks ago. As with any life insurance company, they are quite difficult to interpret. What I found quite intereting is the fact that they said that their Solvency II ratio under the Standard model is 200%. Normally, most internal models show much higher solvency ratios than the standard model. In my opinion. NN Group remains the best (and only !!!) European Life insurance company to invest in despite the overall extremely difficult environment.
In any case, I will need to analyse all cases in more detail once the annual reports come out, especially with regard to KAS Bank and the pension issue.
value and opportunity 
Off-topic:
I was wondering if there is effectively the chance for, almost certain to be secure, arbitrage right now with the German 10 year bund. Couldn’t you just sell them short, buy a stock like Nestle and pay it back at pari in 10 years? Do you have to buy the bond back or is sufficient to replace it with money at maturity date?
I am well aware that negative interest might prevail for a while but a bond is a determined financial instrument and ought to match pari eventually.
Following such a strategy, everyone in need for a low interest, long enduring credit could borrow immensely cheap.
Is it possible?
well, shorting the bund and buying a stock is buying a stock on margin but no arbitrage.