Aviva Share Discussion Threads

[carpingtris] 29/3/2020 15:06

Suspended divis in short term is prudent.. plenty of opportunities for growth in meantime from these lows.

Divis can start again in the future.

[carpingtris] 29/3/2020 15:04

There will be an end to this if ppl do as told and stay away from each other.

We'll all need to be vigilant after but once under control hopefully easier to manage and we can all get back to normal.

[mountpleasant] 29/3/2020 15:03

ECB orders banks to suspend paying dividends.

[leedslad001] 29/3/2020 14:55

Just been watching cgtv Chanel on sky you get a better prospect of thing no all doom and gloom like sky news. China getting back to normal

[cjac39] 29/3/2020 14:49

although if this distancing etc works and holds this thing at bay then it could also be immaterial in the scheme of things

[cjac39] 29/3/2020 14:33

im not saying 20% of annuitants are>80 I'm saying at least 20% of reserves are held for those that are over 80. I've just done the maths and actually its much more than 20% depending on what you think the portfolio returns are. its slightly counterintuitive but definitely correct.

the annuity book is also £67bln having just checked.

so a slightly morbid discussion but I was just making the point that this could be meaningfully impactful for any annuity writer.

[wba1] 29/3/2020 12:03

thanks cjac39;
I think the main area where we disagree is in the 20% of liabilities being ascribable to the 80+ age group. The amount of reserves you need to hold for an 81 year old with a pension of £x per month is hugely less than that needed for a 65 year old with the same pension entitlement. So if 20% of annuitants are 80+ then their share of reserves should be much less, in single figures. You are right that companies do hold reserves to cover for lives to very extended ages (although when I was involved it tended to be to 100 or 105) but these reserves are a miniscule part of the whole.
If anyone out there is a life actuary it would be interesting to hear their views. I do agree with your views on the understanding of companies like Aviva and its competitors, although - in the case of Aviva - it has not helped itself with promoting truly awful talent in the past (especially Moss, and even earlier Snowball).

If only life companies were as easy to understand as general insurers.

[cjac39] 29/3/2020 11:32

75 is a big picture guess at annuities plus their staff scheme liabilities. i think its about 60-65 insured annuities and 10+ in staff scheme

20% I think if anything is slightly low. the actuarial av age of death is say 90 (I think its more like 87-89 male / female). however the probability of deaths run out definitively around 120 for reserving basis. so even though on average they expect people to die at 90 they still hold significant reserves for people who live to >100. an insured annuity on average starts at 65 say (in the p fund they will have younger deferred but I think on average 65 is prob about right). if you think of an annuity as a mortgage that depletes the capital balance overtime and runs out at age 120 you can back out in xls that is probably about 20-25% of the reserves being held for > 80 year olds. (assume that assets yield about 3% and annuity rates are like 4.5-5%)

they do have some longevity hedging but i don't think its uniform and i think more focussed on bulk pension business. i think in GI and certainly in mortality they systematically insure larger risks but i would expect they would retain a decent amount of longevity as its a good diversifier against credit risk and you can see the large reserve releases they have been making in recent years as longevity improvements have slowed down in the UK

I'm not trying to assert a definitive guess as to how much this changes the outlook for annuities I'm more trying to highlight its significant and in my mind it should more than compensate for the GI losses they will suffer for disruption balanced against lower claims in some personal and business lines anyway

stock markets don't really understand insurance companies as can readily be seen in l and g, Aviva, just , phoenix etc. they will suffer short term mtm losses on some assets but their balance sheets are rock solid as you can see in their solvency numbers slipping like 20-25% on extreme moves. of anything I've seen in this chaos these companies plus the US prop casualty companies and RGA etc are the most mispriced

[wba1] 29/3/2020 09:52

cjac39;
thanks for the clarification. Perhaps you can clarify one orr two other points;
* What does the £75 billion represent? I cannot find this specific figure in the Aviva report, although it probably approximates annuity liabilities allowing for recent bulk deals.
* Why the 20% attributed to over 80s? Many of the liabilities will be disproportionately weighted to younger groups as Aviva have built up this business over the last 10 years and (especially) individual contracts will typically be for people still under 80. Also, those over 80 will have lower liabilities (and reserves) attributed to their contracts due to their lower remaining life expectancy. 20% seems high as it should not simply be any unadjusted share of annuitants.
* Have you made any adjustment for other factors such as mortality reinsurance? I am not sure whether such contracts (which Aviva certainly do hold) also contain profit share clauses for positive movement (a common feature in GI reinsurance which is more familiar to me).
I am not trying to suggest you are wrong in saying there will be a boost to bottom line - just trying to understand your quantum, which looks too high to me.

[cjac39] 29/3/2020 07:32

WBA I’m only talking about the 20% of their reserves that are > 80yrs old...

[wba1] 28/3/2020 20:59

cjac39;
your calculation is based on some false assumptions. The most obvious is the mortality rate. The current UK rate is based on a known number of deaths divided by an official number of diagnosed cases. This latter number is based on restricted testing (no testing is done of non-hospital cases except in special circumstances - such as government ministers and NHS staff). A better estimate of mortality can be seen from those countries which have widespread testing, such as South Korea (1.5%)and Germany (<1%).

[cjac39] 28/3/2020 20:42

No I mean 75bln of annuity reserves. If you don’t get this you shouldn’t invest in life companies

[cjac39] 28/3/2020 20:19

You are joking. 75bln * 20% = 15bln. Times that by say 50% * mortality rate of 10% gets you to 750mln. Maybe it’s much better cause of vulnerable people isolating but these are proper numbers

[dr biotech] 28/3/2020 19:55

I don’t think annuities will impact at all.

There are approximately 20m people aged 60+ in the uk. Assuming 20k unfortunately die with Covid that’s 0.1% - not significant in my eyes (financially of course, 20k deaths is painful).

[spcecks] 28/3/2020 19:40

What do you guys think of housing stocks I have a few but thinking of moving them to Aviva.

[cjac39] 28/3/2020 16:05

There are two potential impacts. 1) annuitants might die earlier than actuarially expected which would release the annuity reserves. 2) with credit spreads higher pension scheme deficits have fallen which might encourage more bulk transfer

[careful] 28/3/2020 15:58

why will annuities impact?

[cjac39] 28/3/2020 12:34

Annuities will impact a lot. They have c£75bln of annuities of which c20% will be >80y olds so you can do the maths. They will take hits of travel and business interruption but equally gain on lower claims elsewhere across the book so I would expect an overall positive underwriting result

[milliethedog] 28/3/2020 12:22

Not been in the market since 2005, when I stopped to invest more in Buy to Let
But couldn’t resist when the ftse hit the skids the other week
So opened an iWeb account and been buying in chunks of £250/£500
Six previously high yielding companies
Aviva, BT, Glenmore, Imperial Brands, Legal & General & Royal Dutch Shell

Hopefully plenty of capital gain plus the dividend along the way

.....well that’s the theory

Millie

[spud] 28/3/2020 12:14

IMB is due a re-rating once the new broom lands. Also the dividend (14% currently) is nailed on for 2020 imo. spud

[milliethedog] 28/3/2020 11:53

Actually I posted a question on Lgen bb the other day as I thought Pension Annuities might impact on certain companies.(not sure which)

Got one reply saying it wouldn’t add up to much

But if most that sadly pass away are elderly, I would have thought it would

I’ve recently bought Av & Lgen, which are doing quite well for me at the moment.
Better than my recent purchases of BT, Glenmore & Imb anyway

Millie