Member Info for Meconopsis

@StrictlyZinc - 600% return, dividends reinvested, since 2012 - https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-group-plc-board-announces-the-planned-retirement-of-sir-nigel-wilson

That reward stands pretty well - despite being derailed by the events of 2020 and 2022.

LGEN was trading at 300+ in Feb 2020. That macro environment has been pretty cruel since to everyone in the life insurance sector.

It’s also easy to make hindsight investment comparisons with, say the L&G Global Tech fund (one I have/am still heavily invested in), but that sector has dropped 40% since peak and the L&G fund has only been insulated by the rubbish GBP/USD exchange rate, which has moderated that to a 25% drop.

Be careful with comparators. For every one that has beaten the 10 year return, I can almost certainly find you another five that have been worse.

Do remember that YOUR investment returns are, well, YOUR investment returns. They are annoying fickle depending on when you bought and sold.

@Andymilman - my perspective…

It’s not a growth stock.

It does, however, operate in an underloved segment (life insurance) whose P/E ratios are at least 30% below historical norms - largely driven by being in the wider “financial services” basket, which is suffering “somewhat turbulent” times.

In 2019 it traded at 300 on around 15% lower EPS and with no difference in fundamentals.

In my view, that 30% P/E will rectify itself within 2-3 years and come with 7-8% a year dividend whilst I wait. That’s a return on investment of 50-60% in my hypothesis.

I may well be wrong.

I may well be right.

This is a sentiment play. You either believe that sentiment will come good or not.

"That’s not what I said. Nor is it what I meant. Too many investors (not necessarily here) simply focus on dividends and ignore what’s happening to the value of their capital. I don’t. I focus on the total return ie capital value and dividend payments received. And I stand by my view."

Apologies for mis-reading the sentiment.

It's a good analysis and one I agree with. (I've re-run it and gotten very slightly different numbers, but nothing to quibble over.)

The issue with any investment analysis like this is that returns are so annoyingly individual.

I bought my shares in the September 2020 dip, so I'm lucky enough to be sat on a total return of circa 56% (dividends reinvested) against what would have been 27% if I'd stuck where I was.

With perfect hindsight, I should have been in that International fund over the same period, which would have given me an 83% return!

“At the end of the day total return is all that matters.”

Five years ago I would have said “absolutely”. Maximising return and ignoring risk was everything.

Now, as I position myself for retirement I disagree. Sequence of return risk has a huge effect on pension longevity.

Well, hello 2022/2023.

I’m taking a view that reliability of a base level of income with a limited(ish) downside to capital is a good place to be for a proportion of the portfolio.

Put another way, if I’m only invested in high risk/reward assets then it a great when it’s all heading north. But if I need to sell X units of a fund that’s down on its luck because I need the income then those X units will never recover - because I know longer own them.

If my LGEN, and similar, holding is out of favour, but still gives me a reliable income - then I have the chance of capital recovery and appreciation because I still own the shares.

My total return might be lower. But at least I’ll make it through retirement on a good income without running out of money. Hopefully.

Five years ago I would have called my current position “stoopid”.

But there again, if total reward was king then we’d all sell ours houses and cars and invest themnont he markets.

“Mr Math you say this will accelerate to £4, I sincerely hope that you are spot on but this has only just crept above £3 once in the last ten years & that was only for a short time.”

I mostly agree with you. And I’d be happy with a medium term price anywhere above 300 at the moment.

But/and the life insurance companies are being traded at historically - and probably unsustainably - low P/E ratios. LGEN is currently trading on a P/E of 6.4(ish) versus an historic 9.0(ish). Reversion to that longer term trend would take the share price to 350s.

400 would currently require a P/E of 10.5(ish), which isn’t outrageous. Though I suspect that it would require a much more stable world than we’re currently enjoying.

Interestingly, if the market did treat LGEN as a utility then the share price would be closer to 540 if it traded at the P/E of 14 that both National Grid and United Utilities enjoy.

Even a return to the 310+ prices of late 2019 would still be a de-rate as earnings have grown 15-20% since.

As I’ve said before, I’m here for the divis with a view that the asset value isn’t that material to me. I have plenty of my “wealth” (loose term - it’s not that much!) tied up in growth shares. What LGEN and my other dividend shares are doing is providing as reliable a base income as I think I can achieve without taking rubbish rates of return.

To be fair to MrMath, he was clear that this was JOINT income.

Two people could earn £50,270 each at the basic rate and be subject to tax at 8.75% - so £100,540 joint income.

Assuming the first £10k is income from another source (say savings income or pension), then the effective rate comes down to 6.7% (ish).

I can’t get down to 4%, but I suspect there’s a way of doing it through a carefully judged pension contribution.

There are also all sorts of more obscure tax allowances kicking around - for example, the “starting rate of savings”…

Zac0_4 - the FSCS covers you cash holdings in a SIPP/ISA/GIA.

""iWeb is owned by AJ Bell"
That's not right. It's its own PLC company although they may use the same setup. I suspect they don't though."

Apologies, partly my bad. AJ Bell certainly had an ownership stake in iWeb when I first started investing, but doesn't now.

HOWEVER, iWeb is owned by Lloyds Banking Group. I direct you to:
https://www.lloydsbankinggroup.com/who-we-are/our-brands/iweb.html

"IWeb joined the Group in 2005 and has over £3.1bn of assets under administration."

“No fees for drawdown with HL.”

HL’s management charges kill you, though, if you’re near or over the LTA.

As I said, there’s a “best value for you” option out there.

In truth, all providers have a sweet spot in terms of value in terms of whether it's SIPP, ISA, GIA and whether you're accumulating or decumulating.

For example, iWeb is extremely good value if you're accumulating into a large value SIPP as they have a flat rate charge of £45 a quarter for pots over £50k. But their drawdown charges are very uncompetitive. And their drawdown process is paper-based and horrendous.

Their ISA is £100 with no ongoing charges and a flat £5 dealing cost. I'm no longer on iWeb, but was for long enough to have gotten very good value out of that £100.

One consideration is who you're trusting with your hard-earned money too. iWeb is owned by AJ Bell, who are owned by Halifax, who are owned by Lloyds, which does give me some confidence in their underlying stability and their likely risk and cyber management. (The four platforms brands all use the same underlying management and dealing system - all that's different is the branding and charges.)

“ Meconopsis - who for shares in an isa?”

Lots of options. But iWeb is a good opener.

“ The usual INEPT use of shareholder's funds to 'buyback' shares with excess capital, supported by the BOD........ share buybacks are the best use of capital wealth because they will be maximizing value for shareholders.”

Warran Buffet is a great believer in buybacks.

Who should I trust, one of the most successful investors of a generation or some random person on a forum?

The fundamental issue with accumulating capital in a company whose P/E is limited by its market segment is that it becomes rich for asset stripping.

There are lots of other, much lower cost providers than HL.

It’s a bit perverse to say, but as a dividend reinvestor I’m happy with the price being depressed.

LGEN’s exposure to commercial property will be in one of two contexts:

1) It is held in a property fund that LGEN manages. LGEN doesn’t have exposure here as the fund investors are exposed, not LGEN.

2) LGEN holds a real asset as a mechanism for berating income to support annuity payments. A live example of this is the huge Cardiff redevelopment that LGEN is supporting. It may well have US commercial property for similar purposes. Whilst exposure here isn’t zero, it’s fairly limited. These are 25-40 year assets built for income, not speculatively-built for sale. The risk is the loss of income. If you look at the Cardiff announcement, you’ll see that LGEN likes to secure guarantees - in Cardiff’s case, from the council.

Thanks TheTrotsky.

So...

Avivia are proposing to make £5bn of share premium and capital redemption reserves to be "distributable", or potentially distributable.

A good explanation of the share premium side of things in this FAQ by Zurich Insurance - https://www.zurich.ie/-/media/project/zurichie/zurichmainsite/files/share_capital_reduction_faq.pdf

It's appears to be more technical than that...

"The Capital Reduction will not involve a return of capital to shareholders or any reduction in the Company's net assets. Nor is it being undertaken in anticipation of any specific future distribution or return of capital to shareholders. The impact of the Capital Reduction on the Aviva group's consolidated statement of financial position is presentational only and no money will leave the Aviva group as a result."

"Aviva are holding a General Meeting following the AGM to vote on a proposed capital reduction."

I'm pretty good on most corporate actions, but not this type.

Can anyone help with an explanation please?

"I understand the idea that you risk missing out on great days..."

This is worth a look - https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/timing-the-market-is-impossible.html

and

https://www.fool.com/investing/2019/04/11/what-happens-when-you-miss-the-best-days-in-the-st.aspx

Personally, I have neither the time nor commitment to try to time the market. And my experience is that I suck at trading.

I respect anyone who is better at it than I am. And that's most of you!