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Re: use of funds……I am not expecting them to say anything beyond what they say in the circular (ie it is for progressing the pipeline and the new platform. That limitation also applies to the results presentation next week. However that should not stop questions being asked around the quantum of the investment, the returns expected and the level of reserves the Directors want to hold to fund the company. The forum for this is the financial results and potentially their R&D day.

When they needed to raise equity, their target seemed to be to hold two years of R&D expenses. That would be around US$800m. They will have $1.4bn when this deal completes.

If Beigene / Innovent and others start paying a dividend, then I think HCM will follow. It should be obvious with the 2025 results that they have excess reserves…..

Mystic - you were obviously right…..this is a disappointing market reaction that requires more reading…..while I cling to my longer term view that this will be seen as a buying opportunity.

Mystic - I cant tell what other companies you follow, so this advice assumes you are a novice with life insurance companies.

1 Life companies have big balance sheets in which their liabilities to customers should roughly balance out with the assets they hold. These are both big numbers so relatively small movements can cause large profit changes.

2 The companies are highly regulated and have to measure their capital positions and run their business so they are solvent at all times (or they run themselves down before they get to insolvent).

3 The measure of capital strength and their ability to pay dividends is expressed in the Solvency Capital Ratio (now 204%) generally companies like to operate in the 170-200 range. Below 150 and they tend not to pay dividends. Over 200 and they look like they have excess capital and will be pressed by the market to return that excess.

What do the latest results mean with that as context?

1 They had a really good year at an operational level and grew the capital base and future store of profits.

2 Economic effects (reduced value of assets on a mark to market basis) reduced IFRS profits. However these effects are one sided (reducing assets) in the accounting and in the capital positions are neutralised (offset as the assets are held to match liabilities).

The metrics are overall very strong, the only negative is the margin compressing which they explain as a return to expected margins after a period of excess margin which has drawn in new players to the market (MNG, RL and Brookfield announced this week). The DB market is expected to expand so there may be room for these new entrants with limited effect on margin. I would expect some margin erosion but the value added from volume x margin will stay roughly the same.

I would say they are managing expectations around the margin, but this is a long way from a profit warning.

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They are out….and they are good results apart from mark to market economic effects.

Solvency +7bps to SCR of 204%

Dividend +20%

Underlying operating profit up 34%

TNAV 254p (+30p)

IFRS PBT -30% (some may focus on this to argue poor results - but the business runs on capital position).

The Capital position will actually have improved more as it is after some amortisation of the Solvency II transitional measures which run from 2016 to 2032, so we have reached halfway towards eliminating this intangible element of the capital position)

The news we really want to hear is that AZ has completed the SAVANNAH NDA and it has been accepted for review by FDA (with a PDUFA date in 2025)

After being out of favour with both US and China investors and trading at about 25% of book value, CKHH may be about to be rediscovered…..there is certainly much more value locked in the company.

Anyway it may affect HCM if CKHH decides it should bulk up in the pharma business….or it may not. It means that CKHH does not need a cash realisation event with HCM for the foreseeable future.

In other news it is good to see that 453 now has a name and an end of 2025 read out expected for a possible NDA in 2026 and presumably conditional approval in 2027. There is a target market of 10k new patients pa in China - so additive rather than transformational and not a block buster.

From what is reported about the strategy…..it is of the NS Sherlock variety…..increase revenue, decrease costs.

So what should be business as usual.

All the signs are pointing to the asset gatherers having a good 2024. STJ, QLT, ABDN all positive results.

Not expecting MNG to buck the trend.

Good results and I think a positive outlook for 2025…..

CKHH will be flush with cash later this year…..it has announced an exclusive negotiations period with Blackrock, GIP and TiL to sell its ports division. The deal will generate about $19bn for the Group. It will also get £1.9bn from the Three/Vodafone deal. CKHH itself was valued before the deal at $20bn a deep discount to asset value so a revaluation is expected.

Parental funding means CKI will have no problem funding a bid for Thames or many other companies should it wish to.

CKHH has entered exclusive negotiations with Blackrock and GIP and others to sell its directly held ports. It will get about USD19bn from the deal…..plenty of cash if it wants to take HCM private or fund an M&A spree…..but it may splurge it on Thames Water!

CKHH was trading at $20bn before this announcement…..(a very deep discount to asset values)

Mgmt is incentivised to sell the tests in quantities that dont seem very large relative to the target market…..I would hope they would comfortably exceed those targets.

It seems there is a lot of inertia to overcome in the market with Drs preferring their trusted methods rather than embracing the new…..

My employer had a product that was a decade in the market and then its sales took off because market conditions changed in its favour.

I think word of mouth and real world experience will gradually increase sales and there will be a tipping point when sales growth becomes exponential…..my guess is that RENX will not be on the market when that happens.

One thought on poor take up rates is caution and litigation fears. Perhaps lawyers are both the problem and the solution, they will hold back adoption but if they switch to an approach that suggests the RENX product must be used that will flip the market.

Focus will be on what Windsor wants to do next. These results were bequeathed by Mr Brd.

II seems to be performing in line/as well as expected with good growth (but low margin).

The Asset Management business still needs work on cost control and performance improvement to win new business…….any early signs of some organic growth would be positive.

Gary

Paul detected that I was commenting that SJP has done well in 2024. I was expecting them to experience a downturn due to their reputation and the provision for repayment of non-services.

It does seem that AUM has grown in many companies due to market performance and this should benefit MNG…….there are also losers of AUM out there where clients have gone elsewhere (JUP, SDR). I suspect that AUM will be up at MNG, the composition of that in flows and performance will be interesting……growth in AUM is one of the critical measures for MNG - they have to overcome the natural outflow from the legacy life and pensions business and the annuity outflows to make any flow gain.

Quilter likely to have a good few years as the boomers look for advice about handing on wealth tax efficiently and the next generation struggle to manage increasingly sizeable pension pots.

Would not be surprising for Q to become the sales/advice offering for a large asset management group.

The stories around next weeks strategy announcements (with the FY results) are growing louder.

There is potential for a major restructuring with Reuters suggesting potential to sell the asset management business and focus on wealth management.

This is a tricky time for the family shareholders with effective 44% control. If they sell out it is a failure to preserve the business, if they do a large M&A deal themselves they will dilute their holding in the enlarged business which is also a failure if they lose control.

If they sell part of the business that is also a failure.

Soldier on and they are likely to continue to be under pressure to perform better.

However while the family may lose control, it could be good news for external shareholders if they can realise premium value from any M&A/disposals.

I think the days of wooing London investors are over for HCM. Before the HK listing became their primary listing the results and AGM were in London but no more. The volume of trading in London is much smaller than HK and US.

I wonder if the annual report will tell us where shareholders are based or the number of shares in ADS / CDI form. I am sure investor relations would have that data, but we may not like the answer……as it is an easy cost saving to delist from london.

StJames Place results were pretty good today claiming an average investment return after charges of 10.5% for clients in 2024.

MNG will be lower as a result of a higher fixed income % of AUM.

Market performance in 2024 should push AUM up significantly boosting fee income…..that’s the theory anyway….

Quite ugly numbers with negative like for like sales today.

Even with a more positive MNA outcome looking likely this is fully priced.

I asked them to include responses in the company presentation as that seemed a way they could impart news to the market and increase the chances of some sort of response.

I think it will need questions on the analyst call to get some proper answers.