Insurers

[scrumpyjack]

Note that the Pru's regulator is the Hong Kong authority not the UK regulator, according to The Times. Perhaps soon to be joined in that by HSBC

[monabri]

Pru - Possible .. but who knows..not without great expense.

I'm more concerned that judging by the share price action of PRU & LGEN the market is expecting a cancellation of dividend to follow the steps of the Banks.

(LGEN - currently the top FTSE100 faller today...even worse that PSON!).

edit:

https://www.standard.co.uk/business/sho ... 05631.html

"Fears over the insurance sector’s large exposure to corporate bonds has prompted one hedge fund to go on the hunt for short-selling profits
Marshall Wace, the well-known hedge fund, disclosed a £60 million short position in blue chip insurer Legal & General, worth 0.5% of shares.
L&G is heavily exposed to corporate bonds and if the economy tanks and firms default on their debts the company could take a hit.
It would have to be a doomsday-type disaster to have an impact — the company can withstand billions of pounds of defaults — but its exposure has prompted fear in the market, and Marshall Wace’s canny computer strategies hope to take advantage."

[Redhill]

A timely RNS announcement from LGEN. Their response to that PRA letter firmly responds to the points made. Hopefully Aviva will now follow suit.

RNS Number : 8004I
Legal & General Group Plc
03 April 2020

Legal & General confirms its current intention to pay final 2019 dividend

The Board of Legal & General plc has given careful consideration to the PRA's letter of 31 March.

The Board continues to pay close attention to the need to protect its customers and employees at this difficult time. The Board has carefully considered the need to act prudently in maintaining safety and soundness, and in so doing ensure that Legal & General plays its full part in supporting the real economy. It also recognises the importance of dividend income to many institutional and retail shareholders, particularly in the current environment.

The Board observes that, notwithstanding significant market volatility, the Group's Solvency position remains robust.

Whilst the Board will continue to monitor events, its current intention is to confirm its previous recommendation for a final dividend of 12.64p (2018: 11.82p) giving a full year dividend of 17.57p (2018: 16.42p), 7% higher than 2018.

[TwmSionCati]

20-Mar-20 “... Insurers that fall under Finma[Switzerland’s financial regulator]'s regulation have solvency ratios that are on average well over the required minimum, the watchdog said. Capital buffers built up over the years can also be used in case that’s required, Finma said. ... Munich Re ... doesn’t expect the coronavirus outbreak to have any overall material effect on annual results. ...” [Bloomberg]

1-Apr-20 “... the dividend of CHF 20 per share will be paid out as from April 7, 2020.”
[http://www.zurich.com/en/media/news-releases/2020/2020-0401-01]

TSC

[Redhill]

Piece in the Times this morning about LGEN's announcement yesterday includes this line:

It is thought unlikely that L&G would have put out the statement without the blessing of the Bank of England and the PRA, its supervisory division.

It will be interesting to see if Aviva quickly follow LGEN's lead - bit odd (and concerning) if they don't?

As mentioned elsewhere, Pru don't need to say anything about the PRA letter if they don't want to as they are outside U.K. or EU jurisdiction.

All else being equal, we can expect a rally in relevant share prices on Monday.

[TwmSionCati]

"The proposal to the Annual General Meeting on 29 April remains unchanged: that the dividend be increased to €9.80 per share. Implementation of the 2020/2021 share buy-back programme announced on 26 February 2020, however, will be discontinued until further notice ..." [https://www.munichre.com/en/company/investors/mandatory-announcements/ad-hoc-announcements/2020-03-31-ad-hoc.html]

[Redhill]

Should have added, LGEN confirming their intention to pay the dividend rather undermines that ES piece about short selling due to concerns over LGEN being "heavily exposed to corporate bonds" doesn't it?

If LGEN had concerns over their bond holdings they wouldn't be paying the dividend, but of course that article misses the real point - it is yields used in valuing liabilities that impact on life & pensions insurers solvency position far more than the actual capital value of bonds, etc held.

Reminds me of a piece in the ES a few weeks ago where the reporter made a big thing of the prospective negative impact on LGEN of life policyholders dying from coronavirus while completely ignoring the more pertinent fact that far more annuitants were likely to die which would release reserves, and have a beneficial financial impact.

[richfool]

Should have added, LGEN confirming their intention to pay the dividend rather undermines that ES piece about short selling due to concerns over LGEN being "heavily exposed to corporate bonds" doesn't it?

If LGEN had concerns over their bond holdings they wouldn't be paying the dividend, but of course that article misses the real point - it is yields used in valuing liabilities that impact on life & pensions insurers solvency position far more than the actual capital value of bonds, etc held.

Reminds me of a piece in the ES a few weeks ago where the reporter made a big thing of the prospective negative impact on LGEN of life policyholders dying from coronavirus while completely ignoring the more pertinent fact that far more annuitants were likely to die which would release reserves, and have a beneficial financial impact.

Yes, good points.

I noted also that SLA (though now an asset manager) also confirmed that it would pay its latest dividend (ex div 2/4/20).

[Dod101]

I am far from convinced that Legal & General will actually pay their Final div. It is not payable until June and anything can happen before then. Understandably we are all grasping at straws. I think I will probably sell half of my Phoenix Holdings shares if the price recovers a bit.

Dod

[idpickering]

I am far from convinced that Legal & General will actually pay their Final div. It is not payable until June and anything can happen before then. Understandably we are all grasping at straws. I think I will probably sell half of my Phoenix Holdings shares if the price recovers a bit.

Dod

I agree Dod regarding LGEN. It is tempting to buy more before this month’s ex div date, but as we have seen elsewhere, things change and nothing’s certain. In this market June is eons away. I shall hold, but not buy more of LGEN right now, although I did top up my holdings recently.

Ian.

[Dod101]

OTOH Ian, you are not drawing dividends. In that case now might be a good time to buy because the price is bombed out and I think could well recover quite a bit if they actually pay the dividend and if not, it may still; be a good entry point. There is now a significant difference between those drawing dividends and those building for the future and that is despite the academic arguments about taking an income by selling some shares (on the banking thread I think that argument rages)

But please do not be influence by me!

Dod

[idpickering]

OTOH Ian, you are not drawing dividends. In that case now might be a good time to buy because the price is bombed out and I think could well recover quite a bit if they actually pay the dividend and if not, it may still; be a good entry point. There is now a significant difference between those drawing dividends and those building for the future and that is despite the academic arguments about taking an income by selling some shares (on the banking thread I think that argument rages)

But please do not be influence by me!

Dod

Thanks Dod. Rest assured, i’ll make my own decisions, unlike what a poster here inferred the other day, which I didn’t appreciate. I didn’t rise to their bait and I don’t see their posts any more as they’re on my ignore list. I get what you’re saying about LGEN. We’ll see. I did mention if I were to go overweight in any share it would be them or RDSB. As for the banking thread, I’ve been taking a step back from this board recently, so as to not get dragged into the petty squabbling that seems to happen here, more so since the start of this crisis, in that thread and others too.

Ian.

[kempiejon]

Thanks Dod. Rest assured, i’ll make my own decisions, unlike what a poster here inferred the other day, which I didn’t appreciate. I didn’t rise to their bait and I don’t see their posts any more as they’re on my ignore list. I get what you’re saying about LGEN. We’ll see. I did mention if I were to go overweight in any share it would be them or RDSB. As for the banking thread, I’ve been taking a step back from this board recently, so as to not get dragged into the petty squabbling that seems to happen here, more so since the start of this crisis, in that thread and others too.

I have enough accumulated dividends in my ISA to make a top up before I free up the cash for a proper run at this year's big buy. The insurers currently look good to me. At 13%ish BT, Aviva, Standard Life and Imps come in above LGEN but as I have enough BT and Baccy, SLA is new in this form and LGEN has the better long term growth rate than Aviva I'd look at them seriously. There have been comments on this board that some yields are too high, is LGEN at 11% >twice the FTSE100 too high? Is the statement of honouring this dividend putting off a cut later on? RDSB are next on my yield list at 10.8%.

[idpickering]

I have enough accumulated dividends in my ISA to make a top up before I free up the cash for a proper run at this year's big buy. The insurers currently look good to me. At 13%ish BT, Aviva, Standard Life and Imps come in above LGEN but as I have enough BT and Baccy, SLA is new in this form and LGEN has the better long term growth rate than Aviva I'd look at them seriously. There have been comments on this board that some yields are too high, is LGEN at 11% >twice the FTSE100 too high? Is the statement of honouring this dividend putting off a cut later on? RDSB are next on my yield list at 10.8%.

Thanks for your input kempiejon. I hold all the shares you mention. As for LGEN, I get that their share price is weak currently, as is the whole market. Hence the higher yields. I do have faith in LGEN though, and might just follow my instincts on them for this months’ top up. Next month RDSB look like getting the nod, but we’ll see nearer the time. This month’s top up of LGEN isn’t set in stone either. We’ll see. With regards to BT.A, i’ll decide on them maybe for June or July.

Ian.

[idpickering]

We've chatted a lot about LGEN hereabouts, and they're certainly a popular buy today, with the share being up 16% as I type. That won't influence my investing decisions either way though.

Ian.

[Arborbridge]

We've chatted a lot about LGEN hereabouts, and they're certainly a popular buy today, with the share being up 16% as I type. That won't influence my investing decisions either way though.

Ian.

That's nice to see, so I thought I'd look at my prices generally - expecting a rally. The LGEN rise hasn't helped much as I'm 3% down overall on the snapshot I took on March 31st.

Oh well, back to sleep - and it will be a long one before the nigthtmare* has ended.

Arb
*I actually had one last night. It involved almost continuous hand-washing. Every time I washed my hands, I chanced to touched something which might have been contaminated and had to wash them again!

[Redhill]

Insurers romping ahead this morning with LGEN and Aviva up 16% and 14% respectively.

Perhaps the market has got the message that dividends are safe?

[Dod101]

Fact is that the dividends are not safe. Aviva has cancelled as has Direct Line. I suspect that Legal & General and the other life insurers will probably fall in line. I really do not understand why they were so quick off the block in the first place.

Dod

[Arborbridge]

Fact is that the dividends are not safe. Aviva has cancelled as has Direct Line. I suspect that Legal & General and the other life insurers will probably fall in line. I really do not understand why they were so quick off the block in the first place.

Dod

I heard a disturbing comment on Radio 4 this morning. Apparently some sections of the press are making it seem "unpatriotic" for companies to pay dividends at this time. We are being cast as pariahs, whilst other people can claim state aid. What nonsense is this?

I hear pressure is being put on Tesco not to pay a dividend on the grounds that they are receiving a handout in business rates relief. They have mounted a stout defence arguing that the extra costs they are incuring to help the nation will dwarf those reliefs. As of this morning, I think they are still proposing a dividend according to the discussion I listened to.

Arb

[Dod101]

This is what infuriates me about the subject. People like many of us here who are reliant on dividends are no burden on anyone whilst it seems at times like most others are getting State handouts. so far I only have two outright cancellations, HSBC and Gleeson but I expect the life companies to cancel. What about Admiral since Direct Line has fallen? meanwhile apparently those working from home can claim from their employers for expenses like using more electricity and so on and then get tax relief despite of course making savings for travel and so on.

I am disgusted with shareholder organisations like the UKSA who refuse to make any comment.

Dod