Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
‘Antonio Simoes is likely to emphasise the insurer’s retail and asset management arms at a scheduled City presentation in the summer, analysts at UBS predict.
The capital markets day in June is likely to come with a new approach to capital management and consequent implications for shareholder returns, they suggested, specifically around continued growth of the dividend.
“We expect management organically to reduce dependence on L&G's capital-intensive pension risk transfer (PRT) business by emphasising the company's retail (particularly wealth) and asset management (particularly private assets) capabilities.”
UK wealth and private/real asset management are L&G's most likely growth areas adds the Swiss bank with investments being made to retain a greater share of existing clients when they retire or enter the "decumulation phase" of their lives.
On financial strategy, UBS added it expects to get a clear capital management framework with target solvency, leverage and liquidity ratios.
“A target a group solvency ratio range of 160-190% seems appropriate, with a leverage ratio target of c.30% and holding company liquidity range of £1-1.5bn."
Based on these ranges, UBS believe L&G can grow its dividend mid to high-single digits, around 7% per year is its assumption, and maintain a 25% share of the UK bulk annuity market.’
I would be happy for a 7% per year increase on the dividend, especially if the interest rates start to fall from May as predicted.
In the meantime happy to keep collecting the dividends.
Https://group.legalandgeneral.com/media/jzhpwov1/morgan_stanley_conference_march_2014.pdf
Hi Nimshy. Above link, page 13 confirms how much they paid for their stake. Also an Inside Housing article dated 18 March 2013 confirmed this as well.
L&G press release on 13 March 2018 confirms additional £315m + costs for full ownership of Cala.
In March 2013, Cala secured the backing of Patron Capital Partners and Legal & General, who put in place the necessary resources to provide the Cala with a secure financial platform from which to achieve the Group's future growth ambitions. L&G bought their 46% stake for £65m financed from its own resources.
Over the next five years Cala reached new heights, achieving record financial results every year during this period, doubling the size of the business in terms of new home volumes and becoming one of the fastest growing housebuilders in the UK. In March 2018 Legal & General increased its shareholding in Cala to 100%, acquiring the remaining shares for £315m, therefore total investment £380 and now the company is worth £1bn.
From the latest annual report I personally think it’s a good time to sell if they can get near the £1bn price. If not, keep hold of Cala.
What I would like to know on the Capital Markets Day is what their growth drivers will be? As per their latest Annual Report their current number 6 growth driver is ‘Addressing climate change’. Hopefully this will be one of the drivers they will get rid of and we get our stake back from ImpactA Global or at least Laura Mason can explain clearly where the profit from ImpactA global will come from.
Https://news.sky.com/story/amp/legal-general-lines-up-bankers-to-sell-housebuilder-cala-13097572
Looks like they are selling Cala Housing
Good article yesterday from proactive ‘ JP Morgan has upgraded its price target for Legal & General to 330p from 305p, reflecting its positive assessment of the insurer's future performance.
It has done so ahead of a capital markets event, set to unveil new CEO António Simões' strategy and to spotlight a simplified business approach, growth opportunities, and key financial metrics and targets, including L&G's new capital management policy.
JP Morgan forecasts the initiation of a £150 million per annum buyback programme by L&G, along with the presentation of metrics indicating potential for significant growth in assets, operating profit, and cash flow, surpassing consensus expectations.
In light of these projections, L&G has been placed on Positive Catalyst Watch, by the American investment bank, which reiterated its 'overweight' rating on the stock.
This follows an article last week from This is Money that suggests Simoes did not rule out scrapping the inclusive capitalism mantra, which embraced the idea of investing pension savings in areas where it can do good, such as the housing shortage or climate change.
I am hoping at the capital markets event they will continue to keep increasing dividends, start a buyback program. Sell their stake in Cala Housing, scrap investing in Climate change and invest more in America, China and Europe to help increase growth.
Operating profits before adjustments were largely stable at £1.66bn, with organic capital generation covering the cumulative dividend payment of £4.5bn, with £0.8bn to spare.
The security of the payout isn’t really in doubt as LGEN carries capital in excess of its regulatory requirements of £9bn. This helps underpin management’s confidence that the company can eventually pay out total dividends in the range of £5.6bn-£5.9bn.
Simões' ability to adopt a strategy that is radically different from his predecessor is limited, based on the fact that the pension transfer business, whereby the liabilities of company pension funds are transferred to the insurance industry, has rapidly become Legal & General’s biggest source of profit in the aftermath of significant interest rate rises and the maturing of many defined-benefit pension schemes.
Legal & General’s institutional business (LGRI), which handles the bulk annuities trade, contributed £886mn of operating profit, or 53 per cent of group operating profits, and showed growth during the year of 10 per cent, which was by far the best segmental result. With bulk annuities set for a least a few years of growth on the back of higher interest rates, and few serious participants entering the space, LGEN would appear to have the UK pensions transfer market largely sown up.
Thanks for taking the time Meconopsis to share the information - great summary on the results and the explanation of CSM + RA. So the Growing store of future profit up to £14.7bn is approx same as the current market cap.
Looking forward to the Capital markets event on 12 June to see what their priority is for growth. I am predicting it will be more of getting more of the £6 trillion PRT opportunities in UK, US, Canada and the Netherlands.
Would also like them to try and get a footprint in China as well as America.
Thriller - I would be very shocked if they reduced the dividend as capital generation is significantly above dividends of £0.8billion.
As per L&G half year results. 1H profit - impact of higher rates on their portfolio, the cost relating to Modular Homes closure and the write down of their investment in Onto.
However they have also stated they are confident to execute on their strategy and one is EPS to grow faster than DPS at 5% per annum to FY24. In the Q&A Jeff Davies confirmed looking at growth of 6 - 8%.
Citibank Andrew Baker is using H1 to estimate EPS to reduce by 27% and operating profit to decline by 3%.
However as per the IFRS17 report it confirmed they have £13.7bn of value expected to emerge as future profit, so let’s see how much profit they managed to unwind in H2.
Deutsche bank - Reah Shah has today gave LGEN a buy rating with a target of 300p. Let’s see which broker is closer on 6 March.
Can't find the FT article, but this is a piece from pensions age the other week.
https://www.pensionsage.com/pa/UK-pension-risk-transfer-market-volumes-to-reach-record-80bn-in-2024.php
I believe the share price dropped from the 7th March high was the failure of Silicon Valley Bank and then Credit Suisse. These catalysed fears of a new financial crisis and I guess a few Institutional Investors (more than likely some American II’s) sold out in LGEN, however no financial crisis happened.
As of 17th November the solvency ratio was 224% so we know the company is financially strong, so you would expect the SP to be higher than 7th March high when it gets to Ex-Dividend this year.
Once we get an update on the future vision and ambitions of the company from the new CEO Antonio Simoes in the middle of 2024, then we could see a further increase in the SP, especially if he keeps increasing the dividend going forward and if any talks of share buybacks as well.
If you check out the Full year results for 2022, presentation slides and the Q&A transcript they talk about PRT’s in more detail.
They are writing £8 - £10bn per annum as ‘business as usual’ as this level of business is capital light and self sustaining. Every £10bn of PRT that they write creates over £1.5bn of cumulative Solvency II OSG for the Group and Payback in 4 years.
As Sir Nigel Wilson said “When people look at our PRT business they only consider the PRT business, a lot of extra profits are flowing into LGIM and LGC, which improves our ROI and ROE to well above our industry peers”.
They also stated they can bid on additional larger, or very large PRT transactions over the coming years, subject to delivering on their key new business metrics.
They have deployed £270m of capital to write £12.1bn of UK PRT and expect to achieve self-sustainability on the UK annuity portfolio again in 2023.
In total they now have £13.4bn of global PRT to date, Group balance is strong and as of 17th November they have a solvency ratio of 224%.
The dividend is set to 2024 and on course to rise dividends 5% in 2024, however I’m looking forward to what the Strategic plan in 2024 will be as to whether they are continuing with the 5% dividend rise per annum or some other level.
Also looking forward to hear Antonio Simoes first presentation on 6 March regarding the 23 preliminary FY results and what their future plans are.
Are you the same David that told everyone here you bought HUM (AIM share) in April, price would have been approx 15p, now todays SP 10p = decline of approx 50%. Then posted on the HUM chat last month “Well maybe a company in heaps of debt, run by a management team with a history of errors doesn't help does it?”
Do you do any research on a share before you buy?
As per yesterday’s RNS ‘ The Group estimates its Solvency coverage ratio as at 30 June 2023 to be approximately 225%, principally reflecting the contribution from ongoing operational surplus generation, and after paying the 2022 final dividend’.
25% - 40% ratio is considered good and to be able to pay dividends. The higher the better. As of 30 June LGEN ratio was 225%. There is no strain on them not to pay dividends and financially they are in a strong position. Personally I hope they will keep increasing the dividend year on year rather than do buybacks.
John, it looks like it’s due to sanctions and counter sanctions from Russia. As per the RNS “Today, the Special Committee provides an update on the latest steps taken by the Company to ensure full and comprehensive compliance with all applicable sanctions based on a thorough review of the impact of the designation of JSC Polymetal on the Group and recommendations of the Special Committee on advice from external legal counsel.“
Also noticed nobody has mentioned accelerating the POX 3 HUB in Kazakhstan, so they don’t have to use the POX in Russia as this will now be blocked going forward.
As per the Analyst & Investor Day on the 25th Jan, page 26 Capex to build POX 3 $730m. Potential start up H2 2028. Without a POX for the mines in Kazakhstan it will not be as profitable as it currently is using the POX facility in Russia. Nesis stated in the presentation, it would still be profitable at current gold prices but only just until the POX is built (2028).
You need to think if they need to spend $740m on a POX, will they be able to pay a dividend this year or next year?
As per their Analyst & Investor Briefing on 10 May 2023 (copy of presentation is on their website) they have stated they hope 2nd half of 2024. However nobody knows for certain they will be allowed back on the LSE if they apply.
What we do know is that on the 17th July 2023 the company intends to seek a suspension of LSE trading upon the redom and will pursue an orderly cancellation of the London listing.
Https://seekingalpha.com/article/4605619-legal-and-general-stock-attractive-dividend-yield-significant-upside-potential
Another good article on the significant upside potential, this time from seeking alpha
Https://t.co/zOGU9kXKXg
Good write up from Proactive Investors on Twitter yesterday, not sure if this link will work.
It states ‘UK life insurers have underperformed the wider sector and the market so far this year due to investor concerns that commercial real estate (CRE) exposure will negatively affect capital positions, but analysts at RBC Capital Markets presented 10 reasons why this was wrong.’
David / Andy why did you invest in LGEN in the first place and has anything changed apart the share price that you are disappointed in?
The FY22 results showed a very strong solvency position and another year of good profit growth. It is also true that the share price has declined since announcing those results. The share price (and that of other life insurers and banks) has been impacted by investor concerns about the risks to credit portfolios, given the stress in the US banking system / Credit Suisse and, latterly, concerns about commercial property exposures.
However LGEN have consistently demonstrated the robustness of their balance sheet and their investing approach and will continue to do so.
The Board's preference is to continue to invest in the business in order to deliver future growth and support a long-term progressive dividend. (Note that their 1 year forward dividend yield is almost 9%).
It is certainly true that the challenges faced by SVB and some other banks has impacted the share prices of financial services providers more broadly, not only in the US, but globally. Investors have become increasingly concerned about credit quality, and the impact of rapidly rising interest rates on credit portfolios. However LGEN maintain a high quality credit portfolio. As such, the US banking crisis will have had an immaterial direct impact on their operations, revenues or profits.
Nobody knows where the SP will be by the end of the year, but I would guess that if they provide a trading statement in July (like they did last July) which confirms they still have a very strong solvency position and a good profit the SP should rise. If not the SP should rise on the 15 August (Half Year results). This will then give you the opportunity to sell up if that’s what you want. However this is a great company to have in your portfolio if you want less risk/reward. However if you want a higher risk, higher reward this is not for you. Personally I am happy to keep buying LGEN every month whilst the SP is under £2.50 and happy to reinvest my dividends next month when I get them.
Also please stop starting a new thread every time you post, just respond to the same thread you are reading.