Insurers

[monabri]

Letter from Sam Woods

"Dear CEO,
We are writing today to UK insurers about distribution of profits.
When UK insurers’ boards are considering any distributions to shareholders or making decisions on
variable remuneration, we expect them to pay close attention to the need to protect policyholders and
maintain safety and soundness, and in so doing to ensure that their firm can play its full part in supporting
the real economy throughout the economic disruption arising from Covid-19.
Through their provision of both general and life insurance products, insurers provide an essential safety
net for individuals and businesses. They also have an important role as long-term investors in the UK
economy. In the current situation of high uncertainty, it is therefore critical that insurers manage their
financial resources prudently in order both to ensure that they are able to meet the commitments they
have made to policyholders in a way that is consistent with the expectations of the Financial Conduct
Authority, and to enable them to continue to invest in the economy.
Firms are also reminded, in the current exceptional situation, of the PRA’s existing expectation (set out in
Supervisory Statement 4/18) that when deciding on distributions boards should satisfy themselves that
each distribution is prudent and consistent with their risk appetite.
Please share a copy of this letter with your Board. The PRA intends to publish this letter."


We need to complain about this !

[monabri]

How long before LGEN and Aviva toe the line? Their share price has reacted badly this morning.

[scrumpyjack]

Dear Mr Woods

Thank you for your letter. The board confirms that it is of course very much aware of its responsibility to all stakeholders in the business, of the need to ensure that any distribution is only made on a prudent basis and after ensuring that the company can meet all its liabilities in the future as they fall due, and that policyholders interests are fully protected. It is also mindful of the need for shareholders, who have provided the capital to support policyholders’ security, to receive a fair reward for their support.

We have always decided on our distributions in the light of all these factors and will continue to do so. We confirm that the dividends we have proposed meet these criteria.

We trust that the PRA will similarly base its advice on a rational assessment of the situation.

[richfool]

And the we wish to continue to support the many pension funds and pensioners that/who rely upon our dividends to maintain the health of their future pensions and pension provision.

[Julian]

Sadly this is no surprise. When I saw the news about banks last night the first thing that occurred to me was insurers might be next.

I suspect that insurers will have been considering dividend suspensions already rather than being about to be coerced into it with a gun to their heads as the letters to banks suggest e.g. the HSBC letter here - https://www.bankofengland.co.uk/-/media ... 8852FED99D ...

...
I am also writing to ask you to cancel payments of any outstanding 2019 dividends.
...
Please confirm to the PRA by 20:00 today whether or not your group is prepared to agree to this request.
The PRA stands ready to consider use of our supervisory powers should your group not agree to take
such action.

We would expect you to make a statement by 21:00 and the PRA would issue its own statement at that
time. ...

Ouch!

In light of the probable huge outflow of claims payments from insurers in the near-term I suspect that most or all will actively jump at the PR cover being given by the crisis, the banks having already done it, and the PRA request and will suspend dividends with no pushback.

Insurers are very well represented in my portfolio so I don't like what I'm saying but I'm saying what I think and preparing myself for the worst. I might even go and temporarily zero out all dividends from insurance companies to see how much income that loses me if it happens.

- Julian

[scrumpyjack]

Can't really see why there should be a blanket cut to insurers dividends. It depends entirely what they are insuring and what reinsurance they have. Some may be better off as a result of COVID-19. eg Car insurers are likely to have much lower claims as traffic has reduced, annuity insurers may have lower than expected claims etc etc

Major international insurers such as Munich Re have already stated they don't think it will have a major effect.

Insurers are not being asked suddenly to loan lots of extra money without security.

Nevertheless I wouldn't put it past our incompetent financial regulators once again to shoot the wrong horse!

I hope insurers generally are carefully reviewing their position so they can provide an evidenced based response to the regulators

[Wizard]

Letter from Sam Woods

"Dear CEO,
We are writing today to UK insurers about distribution of profits.
When UK insurers’ boards are considering any distributions to shareholders or making decisions on
variable remuneration, we expect them to pay close attention to the need to protect policyholders and
maintain safety and soundness, and in so doing to ensure that their firm can play its full part in supporting
the real economy throughout the economic disruption arising from Covid-19.
Through their provision of both general and life insurance products, insurers provide an essential safety
net for individuals and businesses. They also have an important role as long-term investors in the UK
economy. In the current situation of high uncertainty, it is therefore critical that insurers manage their
financial resources prudently in order both to ensure that they are able to meet the commitments they
have made to policyholders in a way that is consistent with the expectations of the Financial Conduct
Authority, and to enable them to continue to invest in the economy.
Firms are also reminded, in the current exceptional situation, of the PRA’s existing expectation (set out in
Supervisory Statement 4/18) that when deciding on distributions boards should satisfy themselves that
each distribution is prudent and consistent with their risk appetite.
Please share a copy of this letter with your Board. The PRA intends to publish this letter."


We need to complain about this !

What would your complaint be?

[richfool]

Letter from Sam Woods

"Dear CEO,
We are writing today to UK insurers about distribution of profits.
When UK insurers’ boards are considering any distributions to shareholders or making decisions on
variable remuneration, we expect them to pay close attention to the need to protect policyholders and
maintain safety and soundness, and in so doing to ensure that their firm can play its full part in supporting
the real economy throughout the economic disruption arising from Covid-19.
Through their provision of both general and life insurance products, insurers provide an essential safety
net for individuals and businesses. They also have an important role as long-term investors in the UK
economy. In the current situation of high uncertainty, it is therefore critical that insurers manage their
financial resources prudently in order both to ensure that they are able to meet the commitments they
have made to policyholders in a way that is consistent with the expectations of the Financial Conduct
Authority, and to enable them to continue to invest in the economy.
Firms are also reminded, in the current exceptional situation, of the PRA’s existing expectation (set out in
Supervisory Statement 4/18) that when deciding on distributions boards should satisfy themselves that
each distribution is prudent and consistent with their risk appetite.
Please share a copy of this letter with your Board. The PRA intends to publish this letter."

We need to complain about this !

What would your complaint be?

(My bolding above), - and what about those insurers offering pensions, the very policyholders that the PRA wants the insurers to protect? Many may well be holding insurance company shares within their pension policies/plans and will be relying upon the benefit of the dividends accumulating in their pension funds.

[OwenSwansea]

So, the many pensioners relying on their dividends to make ends meet can take a running jump can they?

Owen.

[monabri]

I emailed investor relations at Aviva and LGEN about the PRA's letter.
Replies received.

AVIVA

Currently there is no change to the position with the dividend announced on 5 March. On 17 March, Aviva made an announcement regarding our solvency position.

https://otp.tools.investis.com/generic/ ... 75&cid=759

This confirmed that Aviva remained well capitalised near the top of its working range at 175%, after allowing for payment of the proposed final dividend. However, these are exceptional circumstances and we will continue to monitor our capital and cash position closely. Any change to the position with the dividend will be announced to shareholders.
Kind regards


LEGAL AND GENERAL

Thank you for your email, and I do understand the reliance that many retirees have on dividend income.
I am not sure I read in the PRA’s letter to insurers a specific request or instruction to cancel dividends. Rather, the letter requested that Boards, “should satisfy themselves that each distribution is prudent and consistent with their risk appetite”.
In respect of Legal & General, the Board recommended a final dividend of 12.64p on 4th March. We have not announced anything to the contrary since then. For your information, the stock goes ex-dividend on 23rd April, and the record date is 24th April.
Yours faithfully,
Edward Houghton

[Wizard]

I emailed investor relations at Aviva and LGEN about the PRA's letter.
Replies received.

AVIVA

Currently there is no change to the position with the dividend announced on 5 March. On 17 March, Aviva made an announcement regarding our solvency position.

https://otp.tools.investis.com/generic/ ... 75&cid=759

This confirmed that Aviva remained well capitalised near the top of its working range at 175%, after allowing for payment of the proposed final dividend. However, these are exceptional circumstances and we will continue to monitor our capital and cash position closely. Any change to the position with the dividend will be announced to shareholders.
Kind regards


LEGAL AND GENERAL

Thank you for your email, and I do understand the reliance that many retirees have on dividend income.
I am not sure I read in the PRA’s letter to insurers a specific request or instruction to cancel dividends. Rather, the letter requested that Boards, “should satisfy themselves that each distribution is prudent and consistent with their risk appetite”.
In respect of Legal & General, the Board recommended a final dividend of 12.64p on 4th March. We have not announced anything to the contrary since then. For your information, the stock goes ex-dividend on 23rd April, and the record date is 24th April.
Yours faithfully,
Edward Houghton

Ex-dividend dates do not seem that significant at the moment.

[monabri]

Ex-dividend dates do not seem that significant at the moment.

Granted..but one can travel in hope! It could all change quickly and it only counts once it is paid in our account. I've actually zeroed the divis in my spreadsheet.

I thought I'd ask both companies but I realise that any response would be "cautious".

[Dod101]

I emailed investor relations at Aviva and LGEN about the PRA's letter.
Replies received.

AVIVA

Currently there is no change to the position with the dividend announced on 5 March. On 17 March, Aviva made an announcement regarding our solvency position.

https://otp.tools.investis.com/generic/ ... 75&cid=759

This confirmed that Aviva remained well capitalised near the top of its working range at 175%, after allowing for payment of the proposed final dividend. However, these are exceptional circumstances and we will continue to monitor our capital and cash position closely. Any change to the position with the dividend will be announced to shareholders.
Kind regards


LEGAL AND GENERAL

Thank you for your email, and I do understand the reliance that many retirees have on dividend income.
I am not sure I read in the PRA’s letter to insurers a specific request or instruction to cancel dividends. Rather, the letter requested that Boards, “should satisfy themselves that each distribution is prudent and consistent with their risk appetite”.
In respect of Legal & General, the Board recommended a final dividend of 12.64p on 4th March. We have not announced anything to the contrary since then. For your information, the stock goes ex-dividend on 23rd April, and the record date is 24th April.
Yours faithfully,
Edward Houghton

Sadly I think if you had emailed HSBC a week ago they would have said much the same as Aviva so these reassurances do not mean a great deal. In any case things can change so quickly at the moment with or without bullies like Sam Woods that anything can happen. As you have said it only counts once the dividend is in your bank account.

Dod

[monabri]

Sadly I think if you had emailed HSBC a week ago they would have said much the same as Aviva so these reassurances do not mean a great deal. In any case things can change so quickly at the moment with or without bullies like Sam Woods that anything can happen. As you have said it only counts once the dividend is in your bank account.
Dod

Mine is just a voice in the wind but if enough people shout then maybe they will listen? The alternative is " do nothing "...an email takes 20 minutes of my time .

As I've mentioned above, I've already zeroed out divis from both Av and LGEN for the whole of this year.

[Wizard]

I emailed investor relations at Aviva and LGEN about the PRA's letter.
Replies received.

AVIVA

Currently there is no change to the position with the dividend announced on 5 March. On 17 March, Aviva made an announcement regarding our solvency position.

https://otp.tools.investis.com/generic/ ... 75&cid=759

This confirmed that Aviva remained well capitalised near the top of its working range at 175%, after allowing for payment of the proposed final dividend. However, these are exceptional circumstances and we will continue to monitor our capital and cash position closely. Any change to the position with the dividend will be announced to shareholders.
Kind regards


LEGAL AND GENERAL

Thank you for your email, and I do understand the reliance that many retirees have on dividend income.
I am not sure I read in the PRA’s letter to insurers a specific request or instruction to cancel dividends. Rather, the letter requested that Boards, “should satisfy themselves that each distribution is prudent and consistent with their risk appetite”.
In respect of Legal & General, the Board recommended a final dividend of 12.64p on 4th March. We have not announced anything to the contrary since then. For your information, the stock goes ex-dividend on 23rd April, and the record date is 24th April.
Yours faithfully,
Edward Houghton

Sadly I think if you had emailed HSBC a week ago they would have said much the same as Aviva so these reassurances do not mean a great deal. In any case things can change so quickly at the moment with or without bullies like Sam Woods that anything can happen. As you have said it only counts once the dividend is in your bank account.

Dod

The decision on bank dividends was made above Sam Woods' pay grade, I am 100% sure of that. It will have been Bailey and Sunak who agreed that. They are just using Woods as the fall guy.

[Arborbridge]

Ex-dividend dates do not seem that significant at the moment.

Granted..but one can travel in hope! It could all change quickly and it only counts once it is paid in our account. I've actually zeroed the divis in my spreadsheet.

I thought I'd ask both companies but I realise that any response would be "cautious".

It was worth asking the question, but the response was bound to be along the anodyne "currently we have no plans...." etc etc. "Or don't call us, we'll call you."

As for being well capitalised - so are the banks, and it made no blooming difference. With dividends being cancelled, it is highly likely that insurance companies, being "prudent" might conserve cash by putting the screws on us.
They'd probably argue - "well, you should have bought an annuity from us"!!

Arb.

[Arborbridge]

The decision on bank dividends was made above Sam Woods' pay grade, I am 100% sure of that. It will have been Bailey and Sunak who agreed that. They are just using Woods as the fall guy.

And we were worried about state direction under the Corbynistas

[scrumpyjack]

The difference between the banks and the insurers is that the banks are being asked to increase loans to businesses on a very large scale. The insurers merely have to ensure they can meet valid insurance claims on existing policies.

[Wizard]

The difference between the banks and the insurers is that the banks are being asked to increase loans to businesses on a very large scale. The insurers merely have to ensure they can meet valid insurance claims on existing policies.

I wonder whether the ask of insurers is to meet a large number of claims that are not actually valid for political expedience.

[monabri]

The difference between the banks and the insurers is that the banks are being asked to increase loans to businesses on a very large scale. The insurers merely have to ensure they can meet valid insurance claims on existing policies.

I wonder whether the ask of insurers is to meet a large number of claims that are not actually valid for political expedience.

Wouldn't it be prudent of the CEO to ask the owners of the company before splashing out on claims simply for political expediency? I wonder if the managers of IT funds would agree when they see the dearth of divis from other companies into their funds?