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Cameron: Welcome back to QAV America, Tony, 9 0 0 9. License to talk about investing.

Tony Kynaston: Well, we are.

Cameron: It’s not, not sexy like oh seven is a license to Kill oh oh nine is a license just to talk about investing and we don’t have a license to talk about it.

Tony Kynaston: oh 0 in one of the movies, wasn’t it? I think from memory.

Cameron: he was, yeah, yeah, yeah.

Yeah. so Tony this week on QAV America, I mean, lots of chaos happening again over just in the US market. knows we don’t need to talk about that again. I do have a pulled pork to do this week on a company called Jackson Financial. Uh, this is apparently, um, Tito and uh, the rest of the Jacksons after Michael died.

They. Turn themselves into a, um, annuities, uh, business. [00:01:00] Yeah.

Tony Kynaston: him.

Cameron: yeah. Can you feel it is the, uh, motto of the company. Have you got anything else though before I get into Jackson’s? Uh, do you got anything else you wanna talk about Tony?

Tony Kynaston: well, I, we just talked off air quickly about it. I’ll just mention in case there are any overseas investors listening to this, that part of the big beautiful bridge bill that’s going to the Senate being passed by the lower house, there is a 5% tax on dividends and interest if you’re an overseas investor you come from a country that, uh, America doesn’t like, um, and Australia is one of those.

Because

Cameron: Which is all of them pretty much at the moment, I think. Yeah.

Tony Kynaston: yeah. Um, uh, it rises by 5% for the next four years, every year for the next four years until it gets to 20%. So, um, just be aware of

Cameron: on dividends?

Tony Kynaston: Mm. There, there

Cameron: no.

Tony Kynaston: [00:02:00] Apparently there are a lot of people upset about this in the US, in in the institutional area who are lobbying like crazy, uh, lobbying their senators like crazy.

They have that bit taken out, but may well get passed. And if you think about all the people who are foreign investors in the us, it’s a large chunk of the us. Um. Economy and market companies like Shell, who I used to work for, um, you know, are domiciled in the Hague and in the UK and they’re, uh, investing and operating in the us So they’ll be, by this, if they pay a dividend back, if they pay a dividend example, or receive dividends from investments.

Um, then you think about all the big. Investment banks, um, HSBC, for example. in the other European ones, they’ll be facing problems. And of course the Australian super industry is trying to work out what to do. ’cause they have large investments in the US the, in the Mag seven. And um, I know they don’t always pay dividends, but if they dividends and they’ll be taxed as well.

So they’re trying to work out what to do. [00:03:00] So, um, I’m merely raising it for people to be aware of it if they’re investing in the us if that bill gets passed.

Cameron: I did see that talked about in the financial review, the Australian uh, finance newspaper,

Tony Kynaston: Mm-hmm.

Cameron: lots of gnashing, his teeth and lots of different fronts with the big beautiful bridge Bill I.

Tony Kynaston: We should say to our US who may not have been along the journey with us that we’re referring to Kelly’s Heroes. When we talk about the big, beautiful bridge,

Cameron: I figure that

Tony Kynaston: out and

Cameron: any, yeah, like any, anyone who is uh, cool,

Tony Kynaston: Hmm.

Cameron: what we’re talking about there, and if they don’t

Tony Kynaston: we, we talked

Cameron: God wasn’t cool. You made me cool so early in the. Think that bridge will be there. Mm-hmm. And it’ll be there. It’s a mother beautiful bridge it’s gonna be there. There you go. RIP, [00:04:00] Donald Sutherland. So, so the Jacksons, let me get into the Jacksons. Tony and I have questions for you in, uh, this pulled pork because best, as much as I tried to get my head around this and think it through

Tony Kynaston: questions for you as well.

Cameron: Oh, you’re pointing at something. Oh, okay. You have questions for me? I wonder if they’re the same questions.

Tony Kynaston: Sorry, just before we start on that, did you wanna do a performance update quickly? I.

Cameron: Oh yeah. Portfolio report. Thank you for reminding me. So, uh, let me talk about our US portfolio. I had a look at it this morning. Uh, our US portfolio for the last seven days was up around 4.65% versus the s and p 500, which was up 1.18% for the last. Uh, 11 months, which is the Australian Financial Year. Our [00:05:00] US portfolio is up about 28% versus the s and p up about 10%. And since inception, which is September, 2023, our US portfolio is up 54% versus the s and p 500, up 35% You know, that’s a little bit over a year and a half.

Tony Kynaston: Hmm.

Cameron: 35% is insane. I mean, our 54% is, is better, but e even 35% for the s and p 500. Now I know a lot of that, well, I dunno how much of that is Maga MAGA seven?

The MAGA seven as I call them now. but, uh, a big chunk of it would be that none of ours is MAGA seven though. I wanna point that out. It’s all boring shipping and financial stocks mostly.

Tony Kynaston: Yeah. Catalogue retailers.

Cameron: By the way, I also wanted to say, mention to you, um, somebody on our [00:06:00] YouTube channel, uh, questioned, uh, last time we, we did a pulled pork on this couple of weeks ago.

I talked about Ford Motor Company and somebody took issue with that on our YouTube channel and talked about the amount of debt that Ford is carrying and how he didn’t think Ford was a good investment because of the amount of debt that they’re carrying. And I said, well, look, you know, if that’s a concern to you, then you shouldn’t invest in it.

But said that, from my perspective, usually look at debt levels. We don’t really look at debt to equity levels or anything like that. And just to, I wanted to check this with you, but my thinking on debt for companies like that is we look, we have a bunch of metrics that we do pay attention to where debt is part of it, they financial health and those sorts of things. But at the end of the day, I figure that if it’s a well run business and has been well run for some time, and the management seem to know what they’re doing and a lot of [00:07:00] our metrics companies based on things like that, I. Then, uh, they know what to do with debt. They’re gonna manage that debt well, debt is a tool that can be used to grow a business if it’s used strategically and tactically know how to use it wisely.

Um, and so I, I’m not really concerned about that as a major factor. I mean, it’s one of the things that we’re gonna score a business on, but I don’t get caught up. In how much debt they’re carrying as a business. Uh, what would you have to say about debt and fraud?

Tony Kynaston: Yeah. Well, I, I agree with everything you’ve said. It’s part of our checklist in terms of the quality metrics that we use. I can’t comment on the debt with fall. I never looked at it, um, by itself, but the comment I’ll make. Is that for be on our buy list, it must be throwing off truckloads of cash, pardon the pun.

And um, the biggest down you dote to debt is cash. So as long as they’re throwing off cash, they can [00:08:00] usually service a lot of debt. So, um, that would be my comment

Cameron: been a great, where were you two weeks ago?

Tony Kynaston: Ford.

Cameron: would’ve been a, that would’ve been a great name for that episode. Truckloads of cash. ’cause it is coming outta the trucks division from memory is where their cash is. Yeah. All right. Let’s talk about the Jacksons. Um, Jackson Financial is a life insurance company in the United States.

They’re the seventh. life insurance company ranked by total statutory assets. for like me who dunno what a statutory asset is, it’s uh, you know, all the, sort of the assets that they report under their accounting rules, bond stocks, real estate, cash loans, recoverables, uh, et cetera, et cetera. So they’re pretty big market caps around about 6 billion. USD [00:09:00] revenue is about seven and a half billion USD. They, um, they’re a a sizable business. They’ve been around a long time. I. But here’s my first question before we get into the history and all that kind of stuff. The prop calf, the price to operating cash flow for these guys is really low.

It’s a one,

Tony Kynaston: Wow.

Cameron: which is pretty low in our metrics, but I know you and I have talked over the years about. Pr/OpCaf and banks and finance companies, and I’m sure we’ve even talked about it on a US show, but they’re not, like when you’re looking at price to operating cash flow with a financial services company because they’re, their cash flow is sort of, uh, copy often and they’re fi if they’re doing refinancing or depending on what kind of business they’re in, it can go up and down. Uh, and I know with insurance companies and premiums and policies and how they [00:10:00] invest and how they borrow, it can be up and down. Um, is Pr/OpCaf something that we should be scoring it on, or how would you be thinking about Pr/OpCaf with a life insurance company?

Tony Kynaston: Yeah, good question. I mean, um, I. I don’t think I have any life insurances in my portfolio. QBE, Australian Australian stock, which operates a lot in America, is basically property and casualty, but um, their prop cap is gonna be like any other prop cap. It’s gonna be the difference between, um, the premiums that they generate.

Um, I guess in the life insurance case, it would be any underlying profit from the float as Warren Buffet calls it. Um, less the cost of. Providing that. So I think it’s probably okay. Um, I did have a question about, about that issue though myself, because I know that stock Edia give it a low ranking for quality it often is the case with, um, with the financial services [00:11:00] companies that, uh, the, the metrics are seen differently to industrials.

So, I, I, I dunno the company well enough to say any more than that, but I, I wouldn’t have a problem using. The prop calf from a life insurance business. But I agree with your comments that they can be lumpy depending on, know, what their investments are and, what, uh, you know, what they’re paying out at the time.

Cameron: Right. I mean, I asked GPT to sort of analyze it for me when, when I was talking to it about Jackson Financial had a long conversation and it said. Jackson’s cash flow from ops includes changes in reserves, big swings based on actuarial assumptions, and reinsurance balances, unrealized gains or losses on annuity liabilities, derivatives, cash flows, and timing effects on premium flows, which means operating cash flow can be massively distorted by [00:12:00] non-recurring or accounting driven line items. It’s not like a widget company selling 10,000 units a month, and then it talks about. Modified co-insurance mod co deals reinsurance costs. says what matters when you’re looking at an insurer is statutory surplus and free cash flow. Capital generation after reserve changes and RBC ratio maintenance Jackson’s is 585%, which is strong. But gap cash flow used in Pr/OpCaf doesn’t tell you how much cash they can return to shareholders. So it’s not a good standalone valuation metric. I know. Well, this is, this is above my pay grade, so I’m not even gonna try and pretend that I understand how all this works. And Pr/OpCaf is only one thing that we score these businesses on.

I mean, we, we know that it’s a pretty important one that we score them on traditionally. But going through this business it, it scores well [00:13:00] on quite a few metrics in terms of value for us. So I decided I would, you know, do a Paul, we don’t own it. I’ll say that upfront. It’s not in any of our portfolios, but it is. I ran a new US buy list yesterday and it did turn up at it, so talk about it anyway. And people could make their own decisions. So the nature of their business, uh, they specialize in retirement services, uh, selling annuity products, variable, fixed, indexed, and fixed annuities. in 1961 in Jackson, Michigan, which is 65 miles east of Kalamazoo, Tony, which I learned is a real place.

Um, I thought it was a. Um, a, a, a wind instrument that you played with your mouth that made a twanging noise, but I, I guess that’s else. Um, miles west of Detroit. was originally called [00:14:00] Bronson the founder of the town, Titus Bronson. And honestly, I’m not sure which is a cooler name, Kalamazoo or Bronson.

I mean, they’re both pretty cool names, but I, coming from Bronson, it’s pretty badass coming. I, I live in Kalamazoo. It doesn’t, it sounds more like a Looney Tunes character. It comes from Kalamazoo. I dunno if I could take that seriously. Apparently the name Kalamazoo comes from a. Word that first found in a British report in 1772.

So there you go. Native American name, Kalamazoo,

Tony Kynaston: They weren’t thinking about Bronson

Cameron: think. No, but I think all cities should be, um, talked about based on how far away they are from Kalamazoo. So I worked it out Brisbane, where I live approximately 14,900 kilometers or 9,260 miles for our American listeners, uh, by air. From [00:15:00] Kalamazoo. So there, you know, that’s where I live is 9,260 miles away from Kalamazoo.

About half a planet away from Kalamazoo. Roughly speaking,

Tony Kynaston: you can’t get a direct flight from Brisbane to Kalamazoo either. So that’s probably a little bit longer than that. A bit further,

Cameron: not yet, but we’re working on it.

Tony Kynaston: I.

Cameron: Um, Jackson, the, uh. of where this place was founded. This company was founded, it was named after act. Andrew Jackson, the seventh president of the United States States best known for being a racist and signing the Indian Removal Act of 1830. Which has been described as ethnic cleansing, displacing tens of thousands of Native Americans from their ancestral homelands east of the Mississippi, and resulted in thousands of death from what has become known as the Trail of Tears.

Tony Kynaston: Hmm.

Cameron: there you go. Bronson, and Kalamazoo Jackson is also [00:16:00] historically regarded as the birthplace of the Republican party. Because a meeting was held there in 1854 during which political figures gathered to oppose the expansion of slavery, and that was the beginning of the Republican party. Uh, more interesting things about Jackson, the town.

It was a big early center for the car manufacturing business before it all moved to Detroit. And it was the center for corset manufacturing. Dunno if those two things were in any way, but, uh, railways had a lot to do with the corset manufacturing business being based there. I, uh, I learned because you could, you could ship corsets out from anywhere.

And so somebody decided, yep, there was like 20 different corset manufacturers in Jackson at one stage. Anyway, none of this has anything to do with Jackson Financial, [00:17:00] which unfortunately I’m sad to say, has got nothing to do with the Jackson Five or the Jacksons or anything like that, which is, in my opinion, a sad mission.

3. Uh, it’s, it’s, uh, they should have done some sort of, you know, brand sponsorship deal with the Jackson family. Um, I want you back, could be one of their campaign commercials, a, B, C, uh, o of, of annuity business. Easy as 1, 2, 3. Like it just writes itself. If they had done, if they had merged with the Jackson.

Five, just untold opportunities for marketing here.

Tony Kynaston: that why you picked Jackson to talk about today? Did you think there was a link?

Cameron: is. I did, I thought I was gonna be talking about the Jacksons and, uh, I was greatly disappointed. gonna reach out to Laura pre corn, who is the president and CEO, and suggest to her that have this great idea of what they, where they, she should take [00:18:00] the company next. She’s been with the company for 30 years and.

Tony Kynaston: Wow.

Cameron: tell me she has at least once or twice thought about should we do an alliance with the Jacksons? Wouldn’t, would that make sense? Would that be a good idea?

Tony Kynaston: And if she

Cameron: was running her marketing,

Tony Kynaston: if she

Cameron: be putting that.

Tony Kynaston: does she ever say, I blame it on the moonlight?

Cameron: You can’t blame it on the sunshine. You can’t blame it on the moonlight. Tony, that’s the rule number one of Jackson Financial. blame it on the Boogie. Every time I. the financial company apparently, as I said, been around since 1961. They were an early adopter of what is known as the independent distribution model.

They got rid of their agency sales force in 1970 and started selling their products through independent agents. By 1984, they’d grown to a billion dollar in assets, and then in 1986 they got acquired by [00:19:00] Prudential, PLC, of the United Kingdom. And then by the early 2020s, a decision was made that the Prudential business, which was more focused on high growth, high margin insurance in Asia and Africa, really fit well with a stodgy life insurance business out of the us. So they spun it out in 2021 and it listed on the New York Stock Exchange. So it’s only been, you know, uh, publicly listed for the last, uh, four years. I. And activist investors and analysts had been pushing Prudential to do this for a long time. They said it was undervalued, misaligned with Prudential’s other story. So they announced in January, 2021 that they were gonna demerge [00:20:00] and it floated in September, 2021. And, um. It is done. Okay. It iPod at $31 in September, 2021. Currently trading around $83. if you got in on the float, that’s not bad. Nearly 200% in four years, I’d take that. Not, not bad at all. Um, in terms of the business, so this is another question I wanted to. Pick your brain on. ’cause I try and get my, I tried to get my head around it this morning and uh, mostly ’cause I was tired from kung fu and, uh, and I just to get my brain to work and not enough coffee, too much kung fu this morning. One of the, one of the risks, uh, uh, ChatGPT was talking to me about with a business like this is fluctuating interest rates.

Tony Kynaston: Mm-hmm.

Cameron: And how that [00:21:00] impact a business that’s involved in selling annuities. And I, I tried to drill down into it and couldn’t get my head around it. So I understand that when somebody buys an annuity, they give the company money. You have a lump sum of money, you give it to a company and they guarantee you they’re gonna pay you X amount of money. Every year for 10 years, 20 years, 30 years, takes that money then they invest it in a bond or a range of securities, but primarily, I guess a large percentage of it would go into bonds. I. And I understand that then, you know, they’re, the company’s trying to survive on the margin between what they’re paying the customer and what they’re able to make by investing it in a bond. But Chate was telling me, but you know, interest rates go up and go down and that can create risk. And, and I was like, but hold on a second. If, if you give me a hundred thousand dollars and [00:22:00] I say I’m gonna pay you on that, and then I can go. Invest it and get 4% on it, and I buy something that’s locked in for 20 years. Uh, and, uh, isn’t that secure? Uh, and it is like, yeah, it’s not that easy. And if, if interest rates are low and somebody’s getting 3%, they can get out of their annuity product, there’ll be a penalty fee. But I might say, well, interest rates have gone up to 7%. Now I want to get more. So I can get out of that and go buy something that’ll pay me a higher annuity and I’ll, it’s worth paying the penalty because it’ll, gonna make more money out of it.

And then the company’s a bit screwed because they’re locked in and they can’t get out as easy. know a lot more about how these things work than me. Can you explain it to me in terms that I asked Chachi Tee to dub it down for me? It couldn’t dumb it down enough. I said, really, I need to go to the original Chachi PT Tony.

Tony Kynaston: Oh, look, I, I did a little bit of research on this [00:23:00] company before. Um. We recorded. So first thing to say is it’s, a fairly complex business, so annuities are simple. Traditionally, you, as you say, you take, you take someone’s money for 20 or 30 years while they’re working and then pay them a guaranteed income when they retire you back to back the payment with an asset that produces more.

So whether that’s a bond or the stock market or commercial property is, is, um. In the mix, I guess. There’s a company in Australia, um, called Challenger Financial, which has done that for many years. And um, over time I think they’ve put, they’ve worked out, if they put more of their, um, investments in commercial property, they can, um, get a less volatile yield, which is enough to cover the promises they make to people.

I think looking at this company, from what I can tell, it looks more like the superannuation. System in Australia or superannuation fund in Australia. So there are some [00:24:00] tax rules which are being used by investors or people who take out these products, um, which come into the mix. So it looks like the way it works, um, if people take advantage of the tax laws in the States as you can contribute or, It’s a bit like a life insurance policy. You are, you are paying, making a payment your working life, paying no tax on the profits of that payment, but then paying tax when you start to draw down in retirement. I. And, and looking at, at, um, various product offerings. And there are lots and lots and lots of annuities that they offer.

there are some which are fixed, so you, you guaranteed 4% a year or whatever for 20 years after a, after a retirement date. And I think from memory, the tax law was after 59 and a half, you can start to, draw down without penalty or, or start to pay. Um, you, you can’t, I think, make tax free contributions after that.

Anyway, that [00:25:00] was so the sixties about, is about the magic number. Um, or you can, um. Put your money into some other funds that operate more like an index fund or more like a bond fund or, or you can put money into a whole blend of funds and then use that to fund your retirement. But that’s a variable type annuity.

So yes, you are receiving a payment when you retire, but it is going to fluctuate depending on the underlying investments. so when I have a look at, at, um, Jackson, it seems like it’s much more like a fund manager. So, there are. Dozens and dozens and dozens of funds, um, operated by different managers on behalf of Jackson.

some in conjunction with Jackson. And um, I guess they have them products on top, which can give you a blend of all those different things. So you kind of have like an index type fund across different assets as well. Uh, and I guess that they have people who advise you on, on what your blend should be, whether you should be getting more of inter.[00:26:00]

Gold or less to commercial property or whatever. So it’s a bit of a, a bit of both. So I’m not sure whether interest rates are going to, they will have effects on all of those products. If it’s purely a bond fund, as the interest rates go up, then it’s easier for Jackson to pay out a fixed annuity if the rate is lower than the interest rate.

Um. It, I couldn’t see too many of those style funds in what I saw. So it’s more likely that as interest rates go up, it tends to have a negative correlation with companies who have to pay more for borrowings and therefore the stock market. Um, and, and it, and as interest rates go up, funds can often get diverted from buying shares to buying.

Bonds because of the, the guaranteed high return in a bond as the interest rates are high versus the risky higher return in the stock market. And the difference is called the risk premium. Um, it, it can have a negative effect on the fund. So it’s kind of a, that’s a convoluted answer, but yes, rising interest rates will impact [00:27:00] this company, can be good, can be bad.

um, it’s, it’s a mixed sort of result I would think.

Cameron: So it comes down to their ability to all of that and still make a profit.

Tony Kynaston: Yeah. And look, you know, I’m gonna make a very glib sort of statement. Um, the company’s been around for a long time doing a good job. But again, if you look, when I looked across all their funds and various offerings, if you took the average of all of those, and I’m, you know, I think I. People would tend to buy some of each fund rather than going all in on one.

Um, which is kind of the wise thing to do in the long term. You’re getting a kind of index like return. So then you question whether you should be just putting your money into an index fund or whether you should be, going with these people. And that’s a fairly superficial analysis because, um. You know, they’re gonna guarantee a payment for a period of time.

So, uh, that’s gotta be taken into the mix. And like I said, there are tax benefits and contributing to them over your working life. So that’s gotta be taken into the mix as to what you do. But yeah, [00:28:00] um, if I looked at. You know, my sort of high level assessment was maybe you as a customer, you might consider putting money into an index fund rather than money into these kinds of products.

But, but you know, they’re big, they’re successful. There’s probably something more to it than that, but, um, that was my overall sort of takeout from looking at this company.

Cameron: Yeah, and we know that, you know, people don’t always make the most rational decision when it comes to investing, and particularly if they have a. Financial services provider, to them, who’s getting paid a commission on selling them this product or that product, you know?

Tony Kynaston: but definitely, um, yeah, the, the, I guess the caveat for all of that is, you know, if you are close to retirement, you don’t want to be all in on an index fund if the market drops 30 or 40%. Um, so there are some where it is much more suitable to be in this kind of product.

Cameron: Yeah, it’s more prudent. [00:29:00] Well, um, well, that’s, you know, my level of understanding of their business. I did note in their Q1. 2025 report, they noted they had a loss, net income loss 35 million or 48 cents per diluted share, partially driven by a loss on reinsured business. And I don’t understand what that means.

So I tried to get my head around how reinsurance works. GPT tried to explain it to me and um, I spent a long time trying to get my head around it. I understand the concept. That they, the insurance company insurance on their insurance it’s reinsurance. And, uh, they sort of offload some of the risk, uh, to another company and they share the premiums and the claims, how that works out as a loss for them.

In the first quarter. I couldn’t [00:30:00] kinda get my head around that, so I gave up trying after a while, and again, it was one of those things that’s way beyond my pay grade. But what GPT assured me is. Don’t it? It’s just, it’s a paper thing. It’s an accounting thing, it’s an on paper thing. It doesn’t really have any impact on the day to day of their business and how well or not that they’re doing.

It’s just, it’s just accounting stuff. Forget, don’t, don’t get caught up in it. So I didn’t.

Tony Kynaston: Yeah, look. This, I guess goes back to your first question about operating cashflow. Look, there’s a lot of, um, assumptions and, and paper write ups up some write downs that go into these, uh, decisions. So I agree. It’s a, it’s a very convoluted, thing to try and work out the, the cash profit of a insurance company.

Um. It should be simple. It should just be, I’ve charged these premiums and I’ve made these payouts. But then of course the insurance company looks great in the early years when it’s getting money in and not paying out until people reach [00:31:00] certain age when they’re making claims. Um, but you for companies that have been around for a long time, it should be in the wash.

It should be at a stage where you kind of as a steady state where getting premiums in, but you’re also paying out ’cause you’ve got customers who’ve been around for a long time. So it should be a simple thing, Convoluted with, um, the asset valuations and then the reinsurance risks that you are taking out, um, which should just be a cost of doing business really.

Um, getting less of the income, but I’m paying ’cause I’m paying a premium to another insurance company to go jointly with me into this situation. So, but again, um, there are actuarials involved in, I’m taking out this policy for 10 years and suddenly that area looks really then you know, I’ve gotta write it down.

So I understand that, but it gets convoluted.

Cameron: You know, one of the things I like about doing these pulled porks is it gives me, uh, an excuse or an opportunity to learn a little bit about businesses that I dunno much about and how they work. And, [00:32:00] at at this one I go, yeah, this is way too complicated me for me to understand how, how this stuff’s going on in the background. just ’cause I know you’re, you, you’ve gotta go soon. So I’ve gotta rush through this. Not much to report in terms of government governance and leadership. As I said, the president, CEO has been there for 30 years, not in that role. She’s worked at different roles in the business, but lots of stability there

Tony Kynaston: She started

Cameron: with the,

Tony Kynaston: She was the organist and then the, bass player. Yep.

Cameron: Backup dancer?

Tony Kynaston: Yeah.

Cameron: yeah, no, nothing in terms of audit problems or transparency issues. Nothing really exciting in corporate activity, apart from the fact that they demerged from Prudential four years ago did announce a big share buy back Last year, 2024, they announced $125 million share buyback as part of a $300 million repurchase program. Broker coverage is sort of a consensus of hold. Price targets range from a low of [00:33:00] 80 to a high of 108. As I said, it’s about 83 at the moment. The average, uh, broker price target is around $94 80, so you know quite a bit of, uh, upside from where it is at the moment. In terms of the risks, uh, fluctuating rates that can impact all of these things that I don’t understand, but apparently that’s a thing. Regulatory changes, again, which I’m not gonna pretend to understand, and volatility, which I understand economic downturns can reduce demand for retirement products and things like that, as people aren’t really sure what’s going on. And of course I would add to that AI and robots are gonna eat the world in the next few years, and who the hell knows what that means?

But that’s true for every business on the planet these days. So I can’t score it on that. I. In terms of the scoring, uh, let me run through the numbers quickly. The average daily trade’s about 74 million, [00:34:00] so it’s pretty big. As you mentioned before, the quality rank from stock edia is pretty low. It’s a 52. Our quality rank is a bit higher. But, uh, stock edia is is pretty low, so I couldn’t score it on quality rank. We score it if it’s over 60 or 60 or better, it didn’t get a score for that. The stock rank in stock Edia is 72. We only scored if it’s 90 or better, so it didn’t get a score for that either. However, it did get a score for its F score. Its actual F score is six. We scored if it’s four and. 4.5 or better. And that’s its financial health score. So getting back to the prop calf and its ins and outs and all that kinda stuff, it has a pretty good F score. So, um, I was comfortable with that. Now here’s another one for you.

Um, IV one our, in our intrinsic value number one is $5 26. [00:35:00] The share price is $83. Um, so um, the current EPS, the earnings per share, TTM is 1.03. So that’s why ’cause our, for. Uh, $1 0.03. Yeah. So our, our formula for our first intrinsic value is the current EPS over the hurdle rate, which we have at 19.5%. So our IV one is quite low when you do it on a $1 earnings per share. Now, the earnings per share normalized for 2025. Um, expected is actually 19.6. When you do the, if I do the IV one based. If I do the, well, I, I think it’s because of the, the way that they state their earnings and it goes up and down.

It’s all over the place. [00:36:00] you look at that first quarter, it was for the TTM, right? It was, they lost money in the first quarter. If you look at it over the course of the year, it’s gonna be a lot higher. So if I, if I’d done the IV one based on uh, anticipated EPS for the year, it would be more like a hundred bucks, which into our IV number two, our second intrinsic value, which uses the future EPS. If I take the 2025 future EPS, um, it’s positive. If I take the 2026. Earnings per share, which is actually $21. Um, uh, it comes out at, uh, our hurdle rate for IV two is the cash rate plus 6%, so it’s about 10.33% IV two comes out at. $189. So the price is currently less than our second intrinsic value, and it’s less than double our second intrinsic [00:37:00] value.

So, uh, we score it for that as well. So it’s, um. You know, it’s, it’s pretty good. Um, if you look at the full earning in both of those, it would’ve scored for the first one as well, if I looked at the full 2025 EPS, but not at that first quarter. Anyway, um, moving right along. The book price is 136. $6 equity per equity per share, $136. again, the price is $83. So I did give it a score for price being, um, less than book. I wrote higher than book here. Less than book. And uh, it’s obviously less than book plus 32. Um. So, uh, what else have I got it? Ha does have a three point uptrend. It’s been in a three point uptrend for quite some time.

It passed its byline back in [00:38:00] 2023, but it has. Been had a falling share price since late 2025, but it’s just gone over its second byline as well. So I, I, it didn’t score it for a new upturn, but it, um, has just gone above its second byline, so it’s broken through that seems to be turning around. Growth over PE is greater than 1.5.

So I scored it for that book. Value growth is not consistent though, um, and it, but it’s like, it’s one of these weird ones. If you look at Wikipedia, it’s got book value going back to 2019, but it only got spun out from Prudential in 2021. That was, its sort of peak year for its book value at around, uh, 10 and a half billion.

It’s gone to, [00:39:00] uh. 9.7. Now it’s gone up and down over the last five years, four or five years since it got floated out. Couldn’t score it for that. PE is not less than the yield. The yield’s 3.47 PE is 4.13. The yield is not greater than the bank rate, which I’ve got at 6.9 in the us. But as I said before, I did score it for prop calf being less than seven ’cause the prop calf is one um, number of items I could score it on was 14.

It got a score of 11. Quality score from our perspective was a 79%. But understanding that the prop calf is, is maybe applicable, maybe not. I went with it anyway. Um, uh, versus the edia quality rank of 52, ended up with a QAV score of 0.79 at the end of the day. So

Tony Kynaston: Yep.

Cameron: [00:40:00] it is high, although not for our US. Well our us, a lot of our US buy list stocks have quite high QAV scores compared to Australian QAV scores. Um, and probably ’cause a lot of them are kind of weird prop calfs to I think a lot of the financial services companies that end up on our buy list. But I’ve done very well. Again, Willis Lease Finance Company. The, what you’re talking about Willis. It goes with the Jacksons. Um. I mean, it’s still up 200% since I bought it

Tony Kynaston: Yeah, right.

Cameron: a year or two ago, 18 months ago.

So it, uh, I, I dunno what its prop calf was at the time. I can’t remember, but it was probably a weird one at the time as well.

Tony Kynaston: Yeah. But p if times earnings, so even if the prop cap is lumpy, um, or based on uh, you know, r up some write downs that the. And the PE will have that [00:41:00] same issue, but four, still very low a pe.

Cameron: Yeah, very low pe. and you know, there’s other metrics like it’s f score is good, but it’s, uh, like the IVs good. Um, you know, it’s price is less than the book. Um. So it, it stacks up well on the value side of things, quality side of things, maybe not as great as we would want sometimes, but we, you know, it’s a, it’s a balancing act for us usually, right?

Combination of quality and a combination of value, which is why Q QAV

Tony Kynaston: Yep. And momentum

Cameron: that is JXN. Do your own research. Um. Complain on YouTube if you think it’s got too much debt or something or whatever. But, um, score well on our buy list,

Tony Kynaston: if you’re an

Cameron: we don’t own it because

Tony Kynaston: specialist or an insurance analyst, come on the show and tell us about Prop C for an [00:42:00] insurer so we can learn.

Cameron: Please, please do. All right. Well that’s QAV America for this week, Tony.

Tony Kynaston: Thank you, cam. investing everyone.

Cameron: Izzy.

Tony Kynaston: Yes,

Cameron: Izzy. Everyone.

Tony Kynaston: yeah,

Cameron: Happy MAGA seven come. If you’re living in la, stay safe.

Tony Kynaston: please.

Cameron: I was telling Tony in our last show, my son who lives in LA these days is back in Brisbane at the moment, and I’m trying to convince him not to go back. He’s supposed to go back to LA at the end of this week, and I’m trying to convince him not to do that until we know which way the wind is blowing in la I don’t like the looks of things there at the moment, but, uh, if you are in LA stay safe and stay calm.

Tony Kynaston: Yeah.

Yeah. Thanks Cam. Talk to you next week.

Cameron: Thanks, Tony.