6:02 02/12/2016 Re: Legal & General boosted by Barclays upgr...
Barclays has upgraded Legal & General (LGEN) as the insurer puts concerns about capital requirements and the risk of recession behind it. Analyst Alan Devlin upgraded his recommendation from ?equal weight? to ?overweight? and increased the target price from 194p to 276p. The stock closed 4p up at 240p was trading at 240p at the time of writing. 239.90 +4.10 (1.74%) ?We upgrade L&G to ?overweight? as we believe the risk of a UK recession has faded while the Solvency II capital requirements of writing bulk annuities is much more efficient than expected,? he said. ?We believe the analyst day on 5 December could be a catalyst for the stock as the company addresses investor concerns, particularly the capital requirements for bulk annuities and the opportunities at L&G Capital.? Devlin added that the insurer was also ?one of the prime beneficiaries? of the growing trend in passive investing. ?L&G is trading on 10x our revised full year 2017 estimates with a full year 2016 estimated yield of 6%. Our revised price target of 276p, equivalent to 12x our full year 2017 estimates and a 5% full year 2016 estimated yield, implies a 23% total return,? he said. http://citywire.co.uk/money/the-expert-view-landg-wolseley-and-aggreko/a975797?re=43606&ea=293868&utm_source=BulkEmail_Money_Daily&utm_medium=BulkEmail_Money_Daily&utm_campaign=BulkEmail_Money_Daily#i=2
21:31 01/12/2016 Golden Cross
Usually one of the more reliable BUY signals for a stock, and LGEN has just posted one where the 50 day ma crosses upwards through its 200 ma. Sometimes a false signal is given where the cross is made but shortly reverses. With Trump mania sweeping through the US markets I don't think that we will have a swift reverse, so hopefully we'll see 280 within a few months. LGEN has been one of my best performing shares which I bought after the referendum, and I'm happy to continue holding. http://tinyurl.com/horbrfe AT
17:37 01/12/2016 Legal & General boosted by Barclays upgrade
By Renae Dyer Date: Thursday 01 Dec 2016 LONDON (ShareCast) - (ShareCast News) - Legal & General shares gained on Thursday as Barclays raised its rating on the stock to 'overweight' from 'equal weight' and lifted the target price to 276p from 194p. "We upgrade Legal & General to Overweight as we believe the risk of a UK recession has faded while the Solvency II capital requirements of writing bulk annuities is much more efficient than expected," the bank said. Barclays said the UK economy has proven more resilient than its economists had initially feared. Economists at the bank recently increased their 2017 fiscal year gross domestic product forecast to 0.4% growth from an initial estimate for a 0.5% contraction. "L&G's investment leverage of 6x its net assets is among the highest in Europe, and a recession is the one environment in which we would be uncomfortable owning a UK life insurer." Another concern for the bank was the potential impact of Solvency II, a regulation on capital requirements for insurers. Barclays thought it would be the "death knell for bulk annuities" but recent evidence has suggested otherwise. L&G has written #6.3bn of annuities in the year to date, at a capital cost of #200m at 3% of premiums. While it was supported by the #2.9bn acquisition of Aegon's annuity portfolio, Barclays noted that underlying net capital requirement is only about 5%, as L&G uses longevity reinsurance, direct investments and equity release mortgages to improve capital efficiency. Barclays estimates the Solvency II ratio has improved to 166% at 28 November, versus 158% at half year.
17:13 01/12/2016 Re: Interims and stuff : My thoughts
BB, Thing is interest rates have been low for so long we have forgotten the sharply effect they can have on financial company profits. Don't sell to soon. M
16:13 01/12/2016 Re: Interims and stuff : My thoughts
Back when the Interims came out, and also a fair bit since, there's been a lot of angst on here about L&G's business model. The sp back then was 207p, and, probbaly down to an upgrade from Barclays, the sp has gone up 6.5p today to 242p. Add in the 4p divi, and that's a rise of a bit more than 18%. I wish I'd bought at those levels You're waffling Bernie I here you say. Aye, tis true, I am. Anyway, sentiment seems to have changed, so the question I guess is, at point do you start to take some profits ( I appreciate some will hold for ever just for the divi ), or, to put it another way, at what point do we start to look more than fully valued. I'm going to say 280p, mainly because it's a nice round number. BB
16:08 24/11/2016 Re: Vickers (Rolls Royce)
Asand, "hope you haven't got your kidnap insurance with l&g" LOL. Socotra is far safer than the mainland. A beautiful island. Long may it continue thus. LKH on the flybridge, at anchor, off Hadibu ... just in case
12:43 23/11/2016 Re: Vickers (Rolls Royce)
en route for Socotra hope you haven't got your kidnap insurance with l&g
10:59 23/11/2016 Re: Vickers (Rolls Royce)
Bowman, "The regulatory authorities then use these calculations" Hah! Useless pencilnecks, most of 'em! One thinks of the Pensions mob and Sir Shifty's shunt of BHS off to that Chappell feller ... you only have to look at him to know that he's a count your fingers merchant ... It should have been crystal clear to the pencilnecks that the sale was entirely driven by Shifty's desire to get shot of the pension deficit. If regulators are to be any good you need 'em to step in BEFORE dodgy deals like that are done. Oh ... and, word of advice ... Do NOT even think of taking Shifty's yacht as part payment towards the deficit. Make the scoundrel pay in cash. Anyone with personal experience of yachts ... and I count mesen among that select crew ... knows FULL WELL that, enjoyable as they are to be onboard as one sails the seven seas, their second hand value tends to be sweet fa. The regulators should not be concerned with humiliating Shifty ... enjoyable as that would be for chust about every citizen in Blighty ... but they should be concerned with extracting every penny for the benefit of the poor old BHS pensioners who didn't deserve this treatment from the appalling Shifty. LGEN's down a bit. LKH on the flybridge, tracking steadily east, en route for Socotra
20:33 22/11/2016 Re: Vickers (Rolls Royce)
To me this is insurance at its purist - risk transfer. Companies like RR. transfer a risk off their books to LGEN for a price and are then free-er to operate without the pension trustees' sword hanging over them. LGEN hopes it is using its expertise to price that risk transfer appropriately. Because it is life assurance it is an actuarial exercise rather than a classical underwriter. But the principle is still the same. If you think LGEN does/should know how to price this then you would think they will make money from this. They do appear to have timed their move near to the bottom of the market (albeit bottom picking is for monkeys imo). There is always the potential for insurance catastrophe (e.g. massive collapse in yields that push deficits to eye watering levels and trustees suck every penny out of the company to cover the liability). But you take on enough of this stuff and it buys you time to ride out storms. Not sure if LGEN has been able/ can offset some of the risk it is taking on (i.e. reinsurance). Bottom line, if you don't like risk then don't get involved in insurance cos that is exactly what it is! But it is far less risky than some people think compared to other industries, and other parts of insurance/reinsurance. To put it in context, I deal with financial crime reinsurance which involves many of the same players (not LGEN though). So if you think this stuff is risky, take a look at Mexican bank risks and "ATM jackpotting"! Don't go overboard on LGEN or others, but it is a sensible part of a portfolio in the opinion of Guitarsolo - about to fly off to Peru to sort out a couple of their banks!
12:54 16/11/2016 Re: Vickers (Rolls Royce)
When looking at yields for pension schemes, remember to focus on real not nominal yields. I agree nominal yields have moved out - 10 yr gilts at c. 1.3% prior to referendum, dropped to 0.55% afterwards, now 1.4%, but inflation has risen during this time meaning real yields haven't changed. Just look at linkers if you need confirmation. Most pension schemes will hedge inflation risk, easiest way is holding linkers. My point being don't just look at nominal yield movements and assume this automatically feeds into increasing/decreasing deficits. Personally I like what L&G are doing - using their scale and expertise they can hedge out way more risk than your average pension scheme trustee.
8:12 16/11/2016 Re: Vickers (Rolls Royce)
Games, The much discussed pension deficits are not actual, they are the result of complex calculations (guestimates) of future liabilities, with many factors being estimated. The regulatory authorities then use these calculations to determine the capital buffers required to cover the liabilities, and this will result in sponsoring Companies being required to provide extra capital. The extra capital provided is then locked into the Pension Scheme, and cannot subsequently be returned to the Company when the deficit turns into a surplus. All the Company can do in these circumstance is to request a contributions holiday. I tried to find an explanation of the link between yields and pension deficits and came across the following statement, which might be of some use. This discusses the effect of falling yield, but obviously the converse would be true for rising yields. "The sensitivity analysis shows that every one percentage point fall in long gilt yields will increase the average pension fund?s liabilities by 20%, while its asset values will only increase by around 7-10%. Therefore, as gilt yields decline, pension deficits increase and any rise in asset prices is less than the rise in the liabilities or annuity costs." In addition, the following might provide some interesting reading on the subject. http://tinyurl.com/jyozufg
12:46 15/11/2016 Re: Vickers (Rolls Royce)
I take the point Games that there is an inverse relationship between bonds and yields. However any fund manager worth his salt would have protected the gains with hedging positions. The losers here will be those who have not. Yours truly will not be buying anything over ten years until the top of the cycle. Way off yet. M
10:20 15/11/2016 Re: Vickers (Rolls Royce)
Games, I tend to agree with you. At the same time I feel intuitively that (A) bond yields are trending upwards (B) this reduces the PV of pension fund liabilities so (C) any company ... such as LGEN ... which has taken on a great pile of such liabilities is likely to benefit therefrom. And that's about the full extent of LKH on the flybridge's knowledge of the subject
8:42 15/11/2016 Re: Vickers (Rolls Royce)
"very clever very boring actuarial pointyheads" LK -- It's hard to be reassured innit? I mean when it comes to "experts" and those that profess to be clever, at least as far as financial matters (especially about the future of!) I'm having this distinct tendency to say thank you, shake hands with the one(s) in question, and head for the nearest exit. Games
7:57 15/11/2016 Re: Vickers (Rolls Royce)
Games, "does it appear that LGEN are now the favourites to be the owners?" I think so. If I were an RR pension fund trustee (before the LGEN deal) there is no way on God's green earth that I'd agree to hand over the assets and the liabilities of the scheme, plus a huge wodge of extra cash, to LGEN unless it was CRYSTAL CLEAR that the parcel had been passed in toto to LGEN with no possibility of anything coming back to bite RR in the ahse. "It surely is of no benefit to see the bond value falling, building up a weaker position on the pension asset side." Agreed. One assumes that LGEN's very clever very boring actuarial pointyheads are not leaving all the assets in bonds (which are virtually guaranteed to fall in real terms, ain't they?) but are creating a sensible asset mix of equities, infrastructure assets and what have you designed to meet the liabities to the dotards as they become due while, at the same time, leaving summat over for the only thing that matters, namely LKH on the flybridge's divis