Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
I very much doubt there will be much gain from reforming solvency II…..the pra has already said that solvency II being based on a one year model of risk does not take account of the climate change risk adequately and they are considering whether another capital regime might be needed……the treasury may give with one hand but the regulators will take it away and more with the other……while I am supportive of improving the environment I do think regulators need to be careful to not create a monster of a capital model that will produce spurious results.
It’s highly likely that the solvency 2 ratio’s will be eased in the future. The reason being to free cash for more likely for domestic infrastructure investments.
A policy change like that will lift all insurers a tad as cash is just in interest accounts not really working, well actually loosing out to inflation so has to be topped up!
Usual caveats
Trek
Brilliant, valuable analysis from Jatw, as always. If I understand correctly, you are saying that IFRS accounting puts a more simplistic emphasis on asset values and liablities, compared to Solvency II capital ratio, which is concerned with the relationship between the two. The discounting aspect means SCR takes a more long term view, arguably a more realistic view of M&G's true position, whereas IFRS is more hard nosed, nailing down what the business is worth if sold right now, in order to make it comparable with all businesses everywhere, regardless of their particular niche.
Jatw, you have great understanding of this company. Thanks for your insights.
Market is voting up today, looking at fund flows showing the business is growing and the promise of growth through Wealth Management and promoting PruFund and variants in new markets. Mr Market also likes the capital position dividend position and continuing buy back programme.
Next 12m the sp will broadly track the UK markets and economy, medium term growth aspirations should result in modest outperformance……
Dividend provides some relief if there is a downward lurch…Hold
^ Thanks for that - very helpful!
IFRS requires assets to be revalued using market values where available and market consistent value where there is no market. Insurers carry assets to back liabilities and have to have further assets to ensure their ability to pay claims under adverse conditions.
The asset values are volatile and the unrealised gains and losses go through the P&L.
The solvency II capital position shows how these assets relative to the assessed liabilities which also move because of the interest rate used to discount them as they fall over the next 20+ years for annuities.
The IFRS result recognises there is a loss of value….which if the business were wound up would be crystallised….but we can view that as somewhat transient, asset prices may recover in future but they are not something the management can influence much hence they focus on operating profit before these economic and market movements.
The capital position is critical, as regulators have to approve dividends and capital returns, they can also require recapitalisation if the solvency capital ratio falls too low. For MNG and SCR of 160-180% would be the expected operating range, so the capital position is strong which indicates the dividend is supported for the time being.
Others may care to add…
Jatw, you have a much better understanding of the business that I do. Can you explain how Financial Reporting Standards (IFRS) could result in a loss? Is this merely a reporting variance or does it reflect a real loss? Either way, market seems upbeat on results.
AUM down, but not as much as others…..net client cash flow for open business is positive, at first glance the heritage outflow was not clear, but should be in line with expected policy maturities.
Solvency remains strong, dividend up and benefitting from buy back which can now resume at full throttle…
Positive notes about M&G Wealth.
And a whopping IFRS loss of 1bn. Can’t see the market liking this aspect, it’s size is worrisome.
BTW The term wholesale funds refers to funds sold to retail customers by third parties (ie what we can buy from platforms like HL, AJB, etc), what they provide to banks/ pension schemes are called institutional funds.