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Warthog4 - I've not had a detailed look through the financials yet, so just a couple of general observations...

OPERATING PROFIT

You can't directly compare the 2020 results with the 2023 results.

2020's results were compiled under IFRS4, whereby insurance companies could (more or less) immediately recognise profits from the sale of life and annuity products.

2023's results were compiled under IFRS17. The new rules mean that those "profits" get "parked" in a Contractual Service Margin + Risk Adjustment "pot" (CSM+RA). Money goes into the CSM+RA pot until the liability has lapsed and the profit can be drawn down in future years.

The outcome is that this year's operating profit is reduced, but future years will be enhanced.

There's a good explanation in the (very good) results video at https://players.brightcove.net/6204867251001/823mowZpQ_default/index.html?videoId=6348388200112

You want from 14:00 onwards.

There has also been an adverse change in longevity this year, which is nicely explained in the video.

They have restated 2022's results in IFRS17 terms in the 2023 results - and those are directly comparable.

You also need to be careful that you compare like with like.

ASSETS

At first look there appears to be around £1bn of assets less on the books. I haven't had time to work through what I think is going on, but...

The IFRS accounting standards require that held assets are valued at 'market value' when the accounts are produced (you'll see the term "mark to market"). Any reduction in value is taken off the operating profit and the value of the assets reduced on the books.

So, if you've got 2bn of offices; the market for offices drops 20% then you've got to knock £400m off the operating profit and the same £400m off your asset value. Regardless of whether the loss has, or will ever, be realised.

Some of it will be that revaluation.

This is why a company that is profitable in absolute terms can appear to make a "loss" in the accounts.

COMPARING LIKE WITH LIKE

You also need to be a little careful with which "operating profit", etc numbers you compare.

Because of the above accounting requirements, it starts to become extremely difficult to manage a company using the IFRS numbers. As a result, almost all companies now use so called "Alternative Performance Measures" (APMs), which are typically the accounting measures stated in a way excludes the unwanted distortions of IFRS.

At the front of the Aviva results release you'll see a little symbol next to Operating Profit. A quick look at the footnotes on page 9 shows that this is an APM - i.e. management's view of Operating Profit.

The IFRS Operating Profit is further back in the document.

That front section contains a mix of IFRS and non-IFRS numbers, which is almost certainly why they don't add up.

It's worth saying that there is nothing dodgy about management using their own APM. The IFRS numbers aren't great if y

What TheTrosky says plus...

Whilst the dividends paid into your pension are free from tax; the money paid FROM your pension counts as income for tax purposes. Hence you pay tax at your marginal income tax rate.

You need to remember that dividends are paid net of Corporation Tax - so have been already taxed at (generally) 25%.

Labour supporters have Gordon Brown to thank for this. In the "old days" the pension fund could reclaim the corporation tax paid on the dividend - so that when the income was paid then it was only paid at income tax rates.

(Just to be clear - the Conservatives have a lot to "fess" up to. This one is on Labour though.)

If you hold shares in a general investment account then the dividends are taxed at either 8.75% (basic rate) or 33.75% (additional rate).

Thx for clarifying Mardler.

Aviva have a video results presentation at https://players.brightcove.net/6204867251001/823mowZpQ_default/index.html?videoId=6348388200112

There is a good explanation of CSM from 14:00 in the video.

There's an interesting comparison with L&G here:

- Aviva added 12% to the CSM against an "unwind" rate of 9.9% - so 2.1% net

- L&G added 18% to the CSM against an "unwind" rate of 8% - so 10% net

The presenter uses the term "operating value added" - highlighting a strong performance of +13%. L&G's equivalent performance was +37% (slide 6 of the slide deck I've linked to).

At 15:56 there's a good explanation of the effect of longevity impact on operating profit via "interest rate mismatch". AV.'s -£82m was LGEN's -£400m (ish).

I've only just started looking at the AV. results (I hold LGEN, AV., MNG and PHNX) and - in a similar vein to the L&G results not looking as *MEH* as they first appear - the AV. results don't look as *WAY HEY!* as they first appear.

It's certainly the case that LGEN could learn from AV.'s presentation approach.

My understanding is that Mondi need to have told the SMDS board whether they INTEND TO MAKE a formal offer. Not table the offer itself. Or publish it.

At the point where an offer is made then the Board would normally consider the offer before announcing it. This would take a few days.

Interesting RNS at 12:26 - both Amanda Blanc and Kenneth Blanc (presumably her husband) have bought shares on the market. Around £130k total.

/continued from my last post...

For me, the bottom line is that much of the operating profit flatness is driven by the accounting of £0.5bn of exceptional items (longevity, etc) that (hopefully!) won't be there next year.

The underlying growth in the business is good. The weakest areas of the business appear to be:

- LGIM

- Aviva seems to be taking market share of workplace pensions (new savings down 14% YoY)

- US PRT business is disappointingly down 18%

Whilst many are disappointed at the lack of an announcement of a buyback, I find the following more interesting than it looks:

"The Board believes it has considerable opportunities available to deliver attractive returns to shareholders by retaining and investing capital within the Group.

The Board will at the same time continually assess these investment opportunities against the relative attractiveness of returning capital to shareholders either through a buyback or a programme of buybacks.

If, at any point, the Board believes that capital would be best deployed in this way, or if the Board believed it had surplus capital, it would not hesitate to return capital to shareholders."

This is new language. It wasn't in last year's document.

To me, it says "We hear you on buybacks. We think money is better invested in the business for the moment, but we're not ruling out a buyback. Wait to listen to our plans."

Overall, not as *MEH* as it looks.

It's easy to try to compare LGEN, AV. and PHNX (and MNG, JUST, etc...). But important to remember that they have significant differences in the shape of their businesses. If you'll excuse the overly simplistic analogies:

- Aviva has a huge general insurance business that flatters performance when you premiums rise. It's much more of a gin business - you make it; sell it and take profit more or less immediately.

- LGEN is much more a whisky distillery - you make (actually sell) stuff that needs to mature (in the CSM+RA pot) and you realise profit later

- PHNX is more like a whisky dealer that's bought up lots of stocks that are slowly maturing can be incrementally sold over time.

I suspect that JATW is correct that Simoes is likely to trade sale the housing business. It makes more sense (to me) to have a strategic partnership with someone like Vistry for the affordable / social rent homes and someone like Barratt for the homes for sale.

I am a long term holder here and used to work in a senior role in the business - so I hopefully have a better understanding than most. But it's a complex business.

I can see arguments for selling and arguments for holding - so not a recommendation either way and please DYOR.

Being a holder of both LGEN and AV. then it's easy to get very excited about AV. and feel that LGEN's results were somewhat *MEH*.

They are *MEH*, but not as much as they look. In fact, there's more good news than bad if you look properly. The devil is - as always - in the detail...

The accompanying slide deck is good read - https://group.legalandgeneral.com/media/rd2hffbq/2023-full-year-results-presentation-slides.pdf is a good read

And the full release, instructive, but harder - https://group.legalandgeneral.com/media/1xad2pl1/2023-full-year-results-full-press-release-and-analyst-pack.pdf

The bottom line...

Where L&G did well was in the type of business where the new accounting rules (IFRS17) means that the profit attached to that business can't be recognised this year. It goes into the magic CSM + RA (Contractual Service Margin and Risk Adjustment) "pot" that L&G describes as a "store of future profits". This is money that - in principle - is profit, but can't be recognised as profit until the associated risks unwind.

New business added £1.4bn to this "pot" and increased the pot a net 10% after draw down of some that stored profit.

To put this in context, both the institutional and retail retirement businesses had significant bumps in new business with operating profits up 10%.

So why is profit flat? (i.e. what's gone "wrong").

Three factors.

LGIM's profit is down 20% with AUM down 12% and a staggering £38.4bn of net outflows "driven by UK Defined Benefit as clients adjusted their portfolios in response to improved funding ratios, with many now positioning for PRT.”

There is a P&L impact of -£1.5bn of "investment variances" that comprises four things:

- the need to value investments at market value ("mark to market") - regardless of whether those investments have or will be sold. This is around £1bn of the £1.5bn

- certain bits of the population are living longer - so longevity assumptions have needed to be changed

- L&G has done a pension risk transfer of its own internal defined benefits scheme, which has "cost" some money (although not explicitly stated and presumably to top up any shortfall)

- the cost of writing off the modular homes and Onto investments

The last three look to be £0.5bn - around £0.4bn of which is longevity.

/to be continued...

Sorry, Jatw, pressed “post” before adding “Otherwise completely agree”.

“… they had the LDI issues…”

It’s important to be clear that L&G did not have and does not have any balance sheet exposure to LDI as clarified here - https://group.legalandgeneral.com/media/v4pfidzi/oct-22-trading-update-final.pdf

You’ll find a largely wholly inaccurate report by the Evening Standard here claiming a £10m loss (https://www.standard.co.uk/business/business-news/legal-general-expects-ps10m-impact-from-ldi-pension-fallout-b1040892.html), which is more accurately reported by Reuters - https://www.reuters.com/business/lg-sees-12-mln-hit-ldi-pensions-fallout-2022-11-18/

Thanks for flagging Pokerchips.

IMV it’s a very positive move that brings the use of Gilts more in line with the US. I’ve always disliked the requirement to have to buy gilts on the secondary market.

Tambo210 - retail investors will pay the same price (the Average Accepted Price) as institutions.

“Analysts at RBC Capital Markets have estimated the car financing problems, which have echoes of the payment protection insurance scandal, could cost Lloyds £2.5bn, more than any of its rivals.”

As has Martin Lewis.

And/but the two rulings came nowhere near to the complete refund outcome of PPI on the basis that the customers got use of the car and took finance, so would have paid some interest.

The key difference between Lloyds and RBC is that Lloyds will be actively talking to the regulator about this and RBC don’t have a seat at the table.

All I’m saying here is that Lloyds almost certainly has the better view.

It’s also important to note that RBC are far from impartial here.

CBG WILL have a clue about the range of outcomes. They’re just not sharing it yet.

“Could saved yourself a lot of writing to do simply that.”

As could you had you checked your post before posting or when I posted my reply.

You sought to insult and belittle someone with what you posted.

You told me I was “confuses” - putting me down.

Any offence you take - and how you appear to others - is of your own making.

“Meconopsis

You are getting yourself confuses between 'captiatl returns' and 'dividends'.

They are not the same things at all and are treated totally differently, as stated, under taxation rules.”

You are correct only insofar that dividends (payments declared from excess, retained profit); capital distributions (most typically from the sale of an asset) and share buybacks are all a form of capital return to the shareholders.

Your example stated dividends. Dividends are taxed as income. They are paid after the payment of corporation tax to the shareholder who then pay tax on dividends based on their marginal tax rate - https://www.gov.uk/tax-on-dividends

If a company declares a capital distribution to shareholders then that is taxed via capital gains by adjusting the base cost of the shares - https://www.investopedia.com/terms/r/returnofcapital.asp and https://library.croneri.co.uk/cch_uk/hmrctaxm/cg-cg57800 (I can’t be bothered finding the HMRC bit).

My only point with all this being that if you’re going to call someone dumb then please be correct with what you’re insulting them with.

I make absolutely no judgement about anyone’s dumbness here :)

"Now, its not my fault a simpleton like you doesnt understand the taxation treatment of capital returns. Ive explained it to you plenty of times before, clearly you are too daft to understand.

So to make it easier for you, lets just suppose i bought a s8ngle share for £5 in 2017, for arguments sake. That share has received nice fat dividends twice a year for that period until the current date. Lets say 40p/year for 7 years. This would total up to a capital return of 7x40p= 280p.

What do you think the base cost price of that share is now for taxation purposes?

You'll probably say £5 because your dumb, but the answer is, and check with HMRC if you wish, £2.20."

I'm not wishing to call anyone anything. But this is manifestly incorrect.

Dividends received outside of a tax privileged investment vehicle (ISA, SIPP, etc) are taxed as income - even if reinvested.

Your capital gain (or loss) is based on your original purchase price.

On the subject of checking with HMRC then I'd suggest visiting https://www.gov.uk/tax-sell-shares/work-out-your-gain

This, from The Times…

“There remains significant uncertainty as to the extent of any misconduct and customer loss, if any, the nature of any remediation action, if required, and its timing,” Lloyds said of its motor finance charge. “Hence the impact could materially differ from the provision, both higher or lower.”

Presumably, they’ve taken a “most likely outcome” case based on what they know from engagement with the regulator and other affected organisations.

You would expect the financial services organisations to be working together on an “industry position” to at last some extent.

Looking at the Lloyds results, I’m inclined to agree with @liam1om - their forwards guidance doesn’t include any indication of the need for further provisioning.

“ Any writedown on an asset valuation will of course be non cash and just affect the Equity level”

It is non cash. But IFRS requires that investment gains and losses are now recognised in year and not when actually realised.

I leave it to the more eloquent Mr Buffett - https://www.berkshirehathaway.com/letters/2017ltr.pdf

The thing to be careful of with the reporting of the CITI note is that - almost certainly - none of the reporters will have seen the CITI note itself, just the associated new release.

In terms of headline EPS, it's important to remember that the IFRS requirement to account for unreleased investment losses means that headline profit numbers take a hit when the underlying investment value go down. Commercial real estate is in the doldrums and L&G will have taken a substantial paper "loss" on its investments in Cardiff, Bristol, etc - regardless of the fact that they're substantially fully let and L&G was not planning on selling most of the redevelopments.

"Negative investment variances" are only an issue if you need to sell the investment.

Personally, I regard that as fluff and noise.

It's also important to remember that this will be the first set of full year results using the IFRS17 accounting standard, which defers recognition of new business profits by pushing those profits into the Contractual Service Margin (CSM) and Risk Adjustment (RA) pots.

It might be that operating profit (broadly money in vs money out, ignoring unrealised investment gains/losses) is down 3%. But that needs to be read in the context of what happens to the CSM/RA.

It wouldn't be a surprise to see assets under management down again - although someone in the industry recently reminded me that all those pay rises have had associated pension contributions attached to them.

PRT and annuities will be both up. Substantially.

It might also be the case that the new CEO clears the decks by recognising losses on some of the pet projects of the former CEO.

“This is getting fxcked…..dividend will be cut or suspended, watch this space, its long term gilts are being decimated. 340 target, and Iv nailed it so far you 🤡🤡🤡‘s.”

Clown car for Porchy…?