Legal & General Share Discussion Threads

[thebutler] 07/3/2024 09:30

Aviva gone up following buyback announcement. Lgen dropped 'cos no buyback. 'Nuff said.

[spud] 07/3/2024 09:27

I disagree MC. They have just released a crackerjack set of results allied to an 8% dividend increase.spud

[mcunliffe1] 07/3/2024 09:25

Aviva's rise is on the back of speculation of a takeover by a foreign company (Intact).

[salver2] 07/3/2024 08:48

This dog has been left for dead by Aviva - I remember the Covid period when Aviva cancelled their dividend and jumped ship to Lgen - big mistake- I hold both shares by the way!

[mcunliffe1] 07/3/2024 08:41

Whilst still thinking of annuities (I must get a life) I recall that maybe 8 years back when I was starting to look at my retirement requirements the payouts were quite small. That was a period of low interest rates of course. Unsure what gilts were like - never really understood such and still don't.

However, lately, annuity rates have increased alongside the increase in int. rates and of course gilts.

So, those folk who bought annuities back in the low-rate days will still be getting, well, low rates. Meanwhile, the likes of LGEN need to pay higher rates now and presumably can afford to do so in order to attract new annuity customers.

Whilst still paying low-rates to the earlier crowd of 8 years and further back.

Strikes me LGEN must be making serious money on those old annuities.

Just a thought.

[lippy4] 06/3/2024 21:19

annuities are useful for guaranted income and they can be useful as i did as part of my pension requirements in the mix of my income,the majority being in equity..

[pj84] 06/3/2024 21:00

The following is HL’s view of the results: -

“Our view
Full-year results were a little mixed. While the headline result of flat operating profit disappointed against market expectations of a 5% rise, there were some positive takeaways. Digging deeper revealed that the group's contractual service margin (a measure of potential future profit) and capital levels both exceeded forecasts.

António Simões is new to the CEO seat. He may not have revealed his full strategy yet, but investors can expect more details at the announced capital markets day in June.

L&G is a beast by any standards, with operations across insurance and investments with pretty much every service you can think of in each of those buckets.
Higher interest rates have been causing some trouble for assets under management from the investment management division, though things are starting to stabilise. But at the same time, higher rates are benefiting the larger pension businesses.

Pension risk transfers (PRTs) are core to operations, these see L&G take on responsibility for paying some, or all, of the pensions from a company's final salary pension scheme (often called bulk annuities). In return, the group receives a lump sum. That's then managed by Legal & General Investment Management (LGIM) and underpinned with real assets developed by the Capital division (which includes UK housing and infrastructure projects). This circular flow within the business means L&G can deliver strong margins on its bulk annuity business and is a core benefit to the model.

The UK is the most mature global market, but L&G has its eyes set further afield. Activity in overseas markets like the US, Canada and the Netherlands is increasing. Including the UK, there's around $6trn of pensions liabilities floating about, with the percentage transferred to insurers barely touching double digits. That gives plenty of scope for L&G to keep growing.

We'd be remiss not to mention the group's formidable solvency II ratio, which is a core measure of capitalisation. Though there was a drop last year, at well north of 200% this offers the group some resilience. Plus, with capital generation exceeding dividend payouts, the prospective yield of 8.8% looks well supported. Of course, there are no guarantees.

There are a lot of strings to L&G's bow, but bulk annuities remain core and we see the market staying healthy over the medium-term. The valuation doesn't look too demanding to us but reflects sentiment toward the sector right now, which is a little weak.”

The dividend was good news but the asset management side being impacted by the higher interest rate environment put a dampener on the overall results.

Like others I am no fan of annuities and follow a similar strategy to dope007 with my SIPP but do so by drawing down tax free lump sums not quite annually but fairly frequently and using up my ISA allowance and remain hopeful that we aren’t too far away from interest rate cuts which I believe will be the catalyst for LGEN and other undervalued UK insurers and other solid companies to finally rerate.

[dope007] 06/3/2024 20:14

Same here building up HY shares and HY prefs. Picked up a chunk of prefs at 7.5% type yields 6 months ago so am very happy with them. Everything is in ISA's.

When I take my 25% lump sum I will ISa the max in my wife's and my name, max out Premium bonds and temporarily move a chunk into my spreadbet account with a view of moving that into ISA's each new tax year.

The rest of the pension will go into drawdown

[sailorsam1] 06/3/2024 19:46

Me too in an isa so tax free pension

[skinny] 06/3/2024 18:06

free stock charts from uk.advfn.com

[joey52] 06/3/2024 18:01

I am also using high yield shares as an annuity substitute for the same reason,and well explained Fenners66 and Mcunliffe1

[mcunliffe1] 06/3/2024 17:33

It's a clear explanation of an annuity fenners.
I decided years back that I would not go down that route. Because of that decision I have not looked at the tax implications of annuities - until now.

It transpires that all the income from your annuity is taxable.

So, using your £100k as a start point I could either use all the £100k to buy that annuity and hence forego my 25% tax-free cash draw - but consequently get, say, £5,940 for the rest of my life (single life and not rising with inflatuion). Or, I could take the £25k tax free and buy the annuity getting £4,455 a year, for life (single life).

These figures are from the L&G website - not made up.

Irresp[ective of the length of time I live that capital is gone and my kids see nothing of it.

However, if I keep the £100k in a SIPP and draw-down the £4,455 in year one whilst topping-up my additional needs from ISA's and Premium Bonds - all accessible without tax being applied, I will ultimately pay a hell of a lot less tax than going down that annuity route.

And when I croak the balance of the £100,000 will be there for my wife/kids.

My pot started at 198,800 in March 2023. I'm arranging a draw-down of £10k later this week (the first from this SIPP) and at the moment the pot is valued at £206,250. So, I am eating into my pension but next year I will take less as I will need to give my wife's Marriage allowance transfer back to her.

I guess we can safely say that the likes of L&G have remained in business because they do NOT pay out more than the take. OK, some will win but most will lose. I'd prefer to keep my share of LGEN and take their dividends rather than gift them my money and take the risk. The yield on that annuity is not large enough for that risk.

marktime: you wrote 'when the discount to value is so wide' in my SIPP I'm informed the discount to a Fair Value Estimate is currently 3%. Hardly wide. The 5 year graph (and the 10 year) show me we are at a mid-point in respect of the current share price Your belief in BB's clearly would have been better supported when the share price was at sub 220p.

[fenners66] 06/3/2024 16:57

Ok to clarify for you woodhawk , I confess I sometimes do not spell out what I am saying in a thousand words as I expect people on here to understand more about annuities...

But here goes...

You have a £100,000 to invest

You could:-
a, invest it in a bank and perhaps get £5k a year and at the end of a year you have £105k
or b, invest in a hi-yield share at say 8.4%
and if you are lucky at the end of a year have say investments and cash worth £108.4k

or c, (and this for you woodhawk since you cannot comprehend it )
Buy an annuity which pays say 7%
At the end of the year you would have say £7k in cash , no capital and a promise to pay you every year you are still alive.

Therefore returning you if you lived 14 years - your own cash back.

But by comparison and you may need a spreadsheet here you would get compound return on your reinvested excess income from the hi-yield + £100k assuming the hi yield investment did not collapse.
That is also assuming you spent all of the equivalent of the annuity income....

My reasoning is if I start with £100k I expect it to grow to a larger figure before I was to die
If I was to buy an annuity I am not likely to get anywhere near £100k + even the fixed bank rate return back on it

Hence No return on the annuity investment.

Of course the annuity industry is predicated on paying out far less than the capital + investment returns
and many will die far too early and see next to sweet FA of their original capital...

Too wordy for you?
Well I was expecting you to work that lot out for yourself.

[marktime1231] 06/3/2024 16:40

All very well but if LGEN had announced a buyback, with some of the £800M it teases is surplus to dividends, the share price would have snapped up 5%. If and when they do the market will respond because all solid steady UK stock is unloved. In the case of LGEN there may be better long term returns from investing in growth, but sometimes you have to act when the discount to value is so wide and shareholders are angling for action. Nothing wrong with that logic. The alternative, a special return, would create a bubble for speculating traders and undermine what long term investors want.

[netcurtains] 06/3/2024 16:39

superficially it looks like panic'ers sold in the morning and people who took time to
read the results in full bought in the afternoon..

So generally speaking I think this bodes well.

[luderitz] 06/3/2024 16:22

Dividend up 5 % will do nicely.

[woodhawk] 06/3/2024 15:50

Same applies - he doesn't know what will happen tomorrow, next month... or in five years time. So it's still a completely foolish comment.

[thrugelmir] 06/3/2024 14:56

Unexciting but a good solid performance and of course an attractive underlying yield. That's going to grow by 5% per annum for a while longer yet.

[mcunliffe1] 06/3/2024 14:55

Woodhawk: I suspect fenners may have meant to say

'unlikely you will ever get your full return' full rather than any.

I stand edit: (to be) corrected however. I see how easy it is to miss or change words to project a different view.

[woodhawk] 06/3/2024 14:20

"Unlikely you will ever get any return on your investment!"

What an utterly ridiculous comment. What prices, what time scale, what level of reinvestments? You have no idea, fenners66. You have no common-sense whatsoever, let alone any informed opinion on a share!

[fenners66] 06/3/2024 14:00

"The only caveat is"

No it is not there are loads some of which I referred to above....

Also using LGEN it needs to spend 11.76 times the dividend to buyback a share ....
That "the theory" suggests MAY increase dividends in the future.

Many on here will realise the similarity with Annuities - give us all your cash and if you live long enough you may actually get it all back !

Unlikely you will ever get any return on your investment !

[unastubbs] 06/3/2024 13:49

#4936 mcunliffe

"The share price is still worth £10 (£900m / 900m shares) but there's no cash pot left for the additional divi. It was spent buying the shares."

Obviously the cash pot is replenished through income from the underlying business. But now less cash is required to fund the dividend so the surplus can be used to increase said dividend or for more buybacks.The only caveat is of course that the share price has to be low enough to justify the repurchases. imho LGEN is cheap enough.

Anyways I'm out on this topic. GLA

[this_is_me] 06/3/2024 13:31

Buyback - in effect a tax free way to reinvest in the company. Unless your shares are in an ISA this is a big advantage for long term investors.

[tornado12] 06/3/2024 13:28

5k extra BRITISH ISA Bonus announced by Chancellor today !!