Aviva Share Discussion Threads

[marksp2011] 27/2/2023 07:52

All of these relatively high dividend, relatively low growth stocks will struggle as bonds start to become investable again. They don't have a lot of pricing power

With earnings and dividend growth well below inflation and capital growth not really happening the investment case versus other assets has weakened. I hold LGEN AV PHNX and MNG but am questioning my investment in the sector.

The story with 1% inflation, negative real and at one stage nominal yields, versus a 7% yield with 5% growth was obvious - the story isn't so clear now I can get 5% with no riskand an opportunity for capital growth, 7-11% with FRNs even 6.5% on Aviva Prefs

I will take the full year divis and then decide what I am going to do but a global trust like JGGI is looking very attractive

[cjac39] 26/2/2023 13:31

Not sure 1rob - doubt it as core business is so low return. The real answer of course, like MNG, is it needs to be broken up to release fair value for the components

[1robbob] 26/2/2023 13:14

cjac39
As London is inreasingly becoming a peripheral Market, could a US listing help AV?
...we do have a decent sized Canadian business !!

[cjac39] 24/2/2023 20:28

F me you can lead a horse to water. Maybe try a different vocation tradejunkie

[tradejunkie2] 24/2/2023 19:34

Hopefully this donkey starts to rise next week.

[ianood] 24/2/2023 17:01

You've earned it cjac, have two!

[cjac39] 24/2/2023 16:47

1rob - its because its a great co and hugely underpriced! (ps ive got no clue either) but as my largest holding i think ill reward myself with a nice glass of wine...

[yf23_1] 24/2/2023 16:09

1rob
..read across from Jupiter ?

[geckotheglorious] 24/2/2023 12:53

"The vaccine is one but not the only one"

Vaccine is the most likely though.

Plenty of studies showing such - one of which was covered recently by John Campbell.

[edmundshaw] 24/2/2023 12:40

"Current excess deaths in the UK in 2023 (and many other high vaccine countries) are OFF THE CHARTS currently running at 30% actual over expected. Indeed the whole of 2022 excess deaths were almost uniformly every week over expected. I'm not making a covid comment but the data is there for all to see."

Excess deaths across western Europe and the Americas have also been broadly high. If it was one country, one regime, you might question a bunch of causes, but the ubiquity across western states leaves only a few likely causes. The vaccine is one but not the only one.

For this thread the interest perhaps lies in whether this is short term or continuing, and therefore the longer term effects on insurers (Life assurance payouts versus pension liability reductions).

[1robbob] 24/2/2023 12:24

M&G +9% today
.....Can't see why?

[cjac39] 24/2/2023 08:14

good qn 1rob. set aside the ifrs nonsense and think s2. when they write new annuities or BPA it generates a new business strain (which btw is why Just should be shut down and runoff; they can't afford new business really). if you write an annuity at best estimate liability then you receive assets equal to liabilities and have to set aside capital of c10%. PHNX think they've got this capital down to 6% which is impressive and only due to them hedging everything they can, ie the int rate and the longevity and just running credit risk.

personally, I think this approach is overly cautious as the trends in UK mortality are very favourable currently and longer term. ie I think longevity improvements, absent some game-changing genomic medicine, are turning from continuous improvements to declining improvements, especially in male mortality. BTW the current excess deaths in the UK in 2023 (and many other high vaccine countries) are OFF THE CHARTS currently running at 30% actual over expected. Indeed the whole of 2022 excess deaths were almost uniformly every week over expected. I'm not making a covid comment but the data is there for all to see.

Anyway, so you set up the required capital and this has to be funded and the risk margin set up as well (soon to be reduced) which all comes with a cost of capital charge.

Then, in time the insurers will find better assets to back the liabilities ie illiquid ER or property backed loans or similar rather than the basic credit bonds they would have bought or received from the BPA seeding scheme. This improves the matching adjustment and thereby reduces the liabilities and therefore creates reduced new biz strain or profits.

Each year you have the unwind of the prudent longevity assumptions and the default reserve you have to create on s2 (the fundamental spread). These are roughly speaking about 35-40bps each ie it runs off at 80bps pa. on top of this the capital runs off into cashflows. this is the difference between what aviva call OFG vs OCG. ie capital is in own funds whereas its appears as a postive in OCG.

[kirkie001] 23/2/2023 21:55

A little bit every year.

[1robbob] 23/2/2023 18:20

cjac39
When do BPA profits/losses impact the P&L Account?

[tradejunkie2] 23/2/2023 17:58

It's become a bit of howler this stock since Direct Line reported.

Huh?

[cjac39] 23/2/2023 12:10

i dont think the link i copied worked so herein the article:

BPA market poised to take off in 2023
By Kunal Sood | February 22, 2023
The pensions universe looks very different in 2023 to a year ago, especially with regards to the derisking market.

The rollercoaster end to 2022, as schemes navigated the liability-driven investment crisis, has resulted in sponsors becoming laser focused on finding solutions for their legacy defined benefit pension arrangements.

Schemes that successfully navigated that period may have a much improved buyout funding position, vaulting them forward on their derisking journey, with insurance remaining the gold standard for trustees, sponsors and members.

This sets up 2023 to be a record year for the pension risk transfer market, as schemes look to capitalise on their improved funding levels through insurance derisking.

Aside from data and benefits, it is crucial that schemes have clarity on their requirements and objectives, and strong governance to enable them to manage a fast-moving market
Volumes are expected to exceed £25bn for the fourth consecutive year, despite unprecedented market volatility during the second half of the year, which – adjusting for rising interest rates – is the second-highest annual volume to date.

As such, we expect to see a variety of themes at the forefront of the derisking market in 2023.

Accelerated demand for buy-ins and buyouts
For several years, market commentators have predicted surging bulk annuity demand as most trustees select insurance as their destination, and affordability comes within reach.

Funding level improvements for many schemes in 2022 appeared to have exacerbated that effect, as schemes expecting to reach buyout funding in three to five years suddenly found themselves within cheque-writing distance.

As a result, we expect an acceleration of short to medium-term demand for buy-ins and buyouts in 2023, with volumes topping the £44bn record.

The record annual bulk annuity volume, set in 2019, was buoyed by a handful of multibillion-pound transactions. Since then, we have seen relatively few buy-ins or buyouts of that magnitude, but such “mega” transactions seem set to re-emerge in the coming months.

Conversations are already happening with some of the largest DB schemes in the UK, which may have traditionally thought of themselves as targeting self sufficient run-off. Indeed, as buyout affordability has come within reach, these schemes are now focusing on buyout as their preferred endgame.

Dominance of full-scheme transactions
Over the past two years, we have generally seen an even split by volume of schemes looking to complete a pensioner buy-in or full-scheme transaction.

Increased focus on liquidity means pensioner buy-ins may no longer fit the investment strategies of some schemes, leading them to consider alternative derisking solutions ahead of buyout, such as longevity swaps.

Add to that many schemes being much closer to buyout, and the result is a dramatic shift in the mix of transactions. Indeed, over the past couple of months around 90 per cent of new quotation requests are for full-scheme transactions.

That said, pensioner buy-ins continue to offer an attractive solution for schemes looking to lock down risk and partner with an insurer on its journey to buyout, with strong insurer pricing and a competitive market.

Illiquid asset holdings to play bigger role in buyout planning
As many schemes have found themselves on an accelerated buyout journey, it is vital that trustees have a revised plan for how to manage illiquid asset holdings as they approach buyout. It is likely 2023 will see an increased number of schemes looking to buy out with a large portion of illiquid assets.

The market is looking to deliver solutions for schemes with illiquids to enable them to secure their liabilities. There are several options that could be explored to manage this dynamic, such as deferral of part of the premium to tie in with illiquid run-off or settlement timelines, or passing the assets to insurers in-specie.

Preparation remains key
In an even busier market, it is crucial schemes are well prepared to maximise insurer engagement. When thinking about preparation, data and benefits should be high on trustees’ agenda. These are the crucial building blocks of any transactions.

While data and benefits do not have to be perfect for a viable transaction, it should be internally consistent, with key pricing data complete to allow insurers to assess risk.

Equally important is a clear, easy-to-follow and unambiguous benefit specification, avoiding unnecessary back and forth, uncertainty and time spent dealing with queries.

Aside from data and benefits, it is crucial that schemes have clarity on their requirements and objectives, and strong governance to enable them to manage a fast-moving market.

The potential for the derisking market in 2023 is huge, with around £1.4tn of outstanding liabilities, only around 10 per cent of which are currently insured. As such, we expect to see market volumes grow significantly over the coming years.

[smurfy2001] 23/2/2023 11:34

Well it's how l CFD trade stocks short term with sound fundamentals, and l do OK. You can't be blindly jumping into stocks if you trade CFDs. So l follow a strategy that works for me.

[salver2] 23/2/2023 11:33

I’m amazed people still believe in wedges and trend lines and all that technical mumbo jumbo

[smurfy2001] 22/2/2023 11:46

Broken below the closing wedge and heading towards the lower trendline.

Gulp.

RSI not quite oversold as yet.

[cjac39] 21/2/2023 13:18

i thought the coverage was a bit harsh. if you read the speech i thought it was helpful - no back dooring of what they pushed for:

hxxps://www.bankofengland.co.uk/speech/2023/february/sam-woods-keynote-speech-association-british-insurers-dinner

changes to s2 were never going to be quick. most companies are on internal models and they are also simplifying these which is very well received as they are a bureaucratic nightmare.

for new asset classes they will need to put through a major model change and agree wiht the PRA the treatment under stress and in the MA for these.

nothing in insurance land moves quickly!

but the overall message is positive - a wider range of asset classes in annuities and lower risk margin (for those with net risk margin over tmtp).

[makinbuks] 21/2/2023 12:27

Isn't the point that they are seeking to avoid the next LDI style issue, or at least if not avoid the issue itself ensure that the industry is robust enough to cope with it.

What people fail to take into account in this "bonfire" of the EU rules is that we lobbied for many of them in the first place

[1robbob] 21/2/2023 12:20

It would appear that the unelected 'we know better' Civil Servants are
determined that there will be no benefit from leaving the EU!!
...Shame they failed to spot the potential impact of LDIs etc