Description

The MONY Group is the old Mutual of New York insurance company which converted to a stock company in 1998. The company has a very long history of providing insurance products to small business and high net worth individuals and has one of the largest "captive" sales forces, for a mid-size insurer, in the industry. The company began its transformation with the purchase of ADVEST, a regional brokerage firm, and recently purchased Lebenthal, a venerable New York City municipal bond broker. Their belief is that cross-selling opportunities and new distribution will boost sales of insurance and annuity products.

This investment falls squarely into the "cheap and safe" category. Profitability has been less than stellar over the past few years owing to a long history in a changing marketplace. Management has acknowledged this and has taken steps to expand business with their recent acquisitions. There has also been an announced restructuring with expense reductions and greater focus on profitability. The shares currently sell at better than a 20% discount to tangible book value and this hardly takes into account the real world or replacement value of those assets. Even the staunchest of critics can't deny the strength of assets.

The company has demonstrated that it can generate substantial free cash flow and the cost cutting should certainly assist in this area. This, along with the strong balance sheet, should provide management the tools to bring profitability to levels more rewarding to shareholders. This could certainly lead to share repurchases in the future. If management fails to achieve the profitability they are seeking, the aforementioned assets base and captive sales force provide margin of safety as they would be very attractive to a larger insurance company.

Catalyst

Management stated goals to increase profitability. Recent aquisitions, very strong balance sheet, considerable free cash generation, restructuring are all catalysts.