Member Info for Meconopsis

In case anyone is interested, the effect of IFR17 was to move 2022’s performance from -£1,619m to -£2,055m with corresponding IFRS EPSs moving from -64.5p to -83.1p.

‘ "Even so," to quote Investors Chronicle last September, "the value trap risk is still a concern.", so one must be wary and check the IFRS versus the share price on a regular basis.’

Which just shows how little Investors Chronicle understands life companies.

IFRS 13 (Fair Value Measurement or “mark to market”) and IFRS 17 (Insurance Contracts) make the headline IFRS earnings number meaningless for life companies.

IFRS13 requires held assets to be revalued at market value and a gain or loss recognised *even if* the asset hasn’t been sold or never will be (for example, a bond that will be held to maturity). So, if you hold a £100m in bonds that you intend to hold to maturity, but you could only sell them for £80m today - then you have to book a £20m “loss” to the P&L and knock £20m off your asset base. EVEN THOUGH you haven’t sold them or ever intend to do so. At some point, the idea is that this all “unwinds” over time. Next year you might have to book a £5m “profit” because valuations have risen.

IFRS17 requires profits from insurance contracts to be recognised over the life of the contract rather than up front (as was done previously). In particular, the deferment of the profit now results in that profit being shown as a liability, rather than becoming an asset. It moves from liability to asset when it is incrementally released.

IFRS17 was only introduced in 2023. Whilst the 2023 annual report restated 2022’s figures, it means that you can’t compare the annual report figures prior to 2023 with subsequent reports because they were produced on a different accounting basis. Financial web sites only provide data from the original 2022 figures - not the restated ones.

Operating profit, EPS, NAV, etc based on the IFRS figures are consequently all “broken” and non-comparable in the way you’ve used them.

What you have to do is use the Adjusted Operating Profit and associated numbers as these strip out the effects of IFRS13. Even then, reports prior to 2023 aren’t comparable because of the effects of IFRS17.

To compare EPS IFRs vs Adjusted:

2022 -83.1p (restated) vs 25.3p

2023 13.1p vs 33.9p

2024 -14.5p vs 35p

The headline is that the company is making money, not losing it and the amount of money being made is going up.

None of this is to have a go. None of it is easy to get a grip of.

This is what Gemini says about the proposed changes to the Articles…

On February 10, 2026, Games Workshop (GAW) published a circular convening a General Meeting for March 5, 2026. The primary purpose is to update the company’s "rulebook"—the Articles of Association—and to resolve a specific issue regarding director pay.

The key changes can be broken down into three main categories:

1. The Director Fee "Cap" Increase

The most immediate driver for these changes is a technical breach of the existing Articles.

The Issue: GAW revealed that they had inadvertently paid non-executive directors (NEDs) fees that exceeded the total annual aggregate limit set in the current Articles.

The Fix: Resolution 1 seeks to ratify these past payments and prospectively increase the limit for the future. By updating the Articles (Resolution 2), they are building in a higher "hard cap" to ensure the board has the flexibility to pay for high-caliber directors as the company continues its growth as a FTSE 100 entity.

2. Modernisation of Governance

The new Articles are designed to bring GAW’s "internal laws" in line with the 2024 UK Corporate Governance Code and general 2026 market standards. Key administrative updates include:

Hybrid & Virtual Meetings: Clearer provisions for holding "hybrid" General Meetings (where shareholders can attend either in person or electronically), ensuring the company is prepared for future digital-first engagement.

Electronic Communications: Streamlining how the company communicates with its nearly 33 million shares worth of holders, shifting further toward default electronic distribution of reports and notices.

Regulatory Alignment: Aligning the language with the major overhaul of the UK Listing Rules and the new UK Prospectus Regime that came into force in January 2026.

3. Administrative Flexibility

As the business scales—particularly with the ongoing Amazon TV/Film deal and expanding global manufacturing—the board is seeking broader "housekeeping" powers:

Allotment Powers: Updated wording regarding the board's authority to allot shares and disapply pre-emption rights, reflecting the latest investor guidelines.

Remuneration Flexibility: While specific pay is governed by the Remuneration Policy (voted on in 2025), the new Articles provide the underlying legal framework to support more complex share award plans.

“Dead cat bounce methinks.”

Listen to what I say - then do the opposite!

Very happy to be wrong in this case.

Also, very impressed by their response.

BTW I will declare that I currently don’t hold HGT. I did for three years until December.

A great trust, but the share price has been going sideways for a while and I’ve been nervous about AI valuations, so exited all my tech holdings.

I will be buying back in when I (think I) know what’s happening.

Dead cat bounce methinks.

The Wall Street Journal notes a lack of dip buying on US markets, which has previously turned around similar drops.

SAASmageddon was used in one article.

Most commentators are calling it irrational. But commentators aren’t the market.

"and it broadly makes no sense..."

As does that bit of sentence now I read it back...!

"But HGT are good stewards of capital, so maybe just keep buying unless there’s been damage to the NAV."

I completely agree and it broadly makes no sense...

AI tools need trusted data on which to make decisions - so the drop in the share price of trusted providers like RELX and Experian isn't rational. Their client(s) may change, but the need for the data persists.

And the Anthopic "legal junior" AI just shows the opportunity for services companies. People are somehow forgetting that company data needs to get onto an IT system somehow...

"I can make no sense of this recent jump in SP. Rotation out of US tech stocks? Build-up to April ex div date? Can anyone enlighten me?"

It's sometimes best not to overthink it as what the market giveth it often taketh away.

I'd like to think the Life sector of a whole is benefitting from a general re-rate; the sector, as a whole, is less exposed than banks to easy government criticism; that L&G's been left behind on that rerate; and that it's got the good news story of having a £1.2bn buyback on the books.

But the market's not that rationale.

I suspect that there's an element of people getting their money out of potential AI losers and putting it into "safe havens" and potential AI net beneficiaries.

But what do I know :)

“Question is how much of this is already priced in. I suspect a fair bit of it, as it’s already assumed by most that SpaceX will IPO before long.”

SMT is trading at a discount to NAV and currently carries SpaceX at an enterprise value of $800bn.

If they IPO for the rumoured £1.5tn then there is still upside. Being overly-simplistic (because IPOs are dilutive, as will be the XAi acquisition) then we’re probably looking at a 12-15% bump in NAV.

The purchase of XAi will have changed some of the calculus. Musk will almost certainly want to use the IPO to raise additional funds for the money-pit that is AI development.

XAi was bought at $250bn, so it’s easy to see $0.5tn added to the IPO value. But, again, the acquisition is dilutive - so for simplicity’s sake I’m taking it as neutral.

Given the SpaceX holding is already over the typical 12% max investment size for SMT then it’s reasonable to assume that if the investment is IPOing for double the carrying value then SMT might well make half or more of the stake available in the accompanying secondary sale or a parallel placing.

That would crystallise the profit at a known figure and would reduce the SpaceX holding back down to a reasonable level.

Just my view.

Anon3 - I both agree and disagree with you on buybacks.

One-off buybacks rarely drive shareholder value and have been used in the past to meet remuneration targets. Although I do think remuneration committees are wise to this now.

Done consistently and well, though, they can drive real shareholder value. A friend recently reminded me how effective Next has been at driving real shareholder value from sustained buybacks.

Whether L&G can sustains this is will be the key.

Given Nigel Wilson’s frustrations with the share price when he left, I suspect that Simoes was chosen because - when interviewed- he presented a plan for the driving the share price. And that his target will be tied to that, rather than EPS.

One thing that is clear is that - like Aviva - L&G is driving towards capital light business that doesn’t require as much money to be tied up covering the Solvency Capital Ratio.

The US deal is interesting when you look at the structure. They’ve sold the capital “heavy” protection business, but will make money through capital light reinsurance. They’ve also kept the capital light PRT business.

In principle, a buyback is for life (because of the ongoing uplift in EPS), whereas a special dividend is just for Christmas.

In principle, the buyback *should* always be better *if* it’s sustained.

One interesting thing in one of the recent event Q&As was that the L&G CFO mentioned that the buyback reduces the cost of dividends, which can then be used for further buybacks. This contrasts with Aviva, whose stated aim (prior to the DLG acquisition) is to keep the cost of dividends constant when shares are bought back.

It’s worth saying that the company is full of people who do long term cash flow planning. They’ll have modelled this and will have a plan.

RNS has just been posted.

£1bn buyback reiterated.

There most certainly IS pressure on PRT margins, which is what you’d expect as the market matures.

But don’t take that as any sense that “the dividend is threatened”.

Barclays are joint broker for LGEN - so bear that in mind when considering their price target.

You can take one of two views on house brokers:

- they are close to management and have a degree of sight of plans and execution - as such they are best placed to assess future prospects

- their job is to pump up the share price by taking a singularly positive view.

You choose :)

“I'm more interested in people's thoughts on the actual article”

The article is inaccurate and - consequently - misleading.

It should be titled “Increased competition for PRT squeezes margins”.

The writing seems very sloppy…

“The company’s shares trade at 265.10 pence, well below RBC’s 205 pence price target.” demonstrates either a basic inability to proof read - or numerical illiteracy.

“Chesnara doesn’t write pension risk transfer business.”

Guess who the house broker is for Chesnara? Oh yes, that’ll be RBC.

The article trashes the CSM futures of everyone except Chesnara despite and predicated on “razor thin margins” despite:

- PRT not being the only source of future profit, which goes into the CSM

- taking no account of management actions and innovation

Unsurprisingly, the prospects for Chesnara’s future CSM are waved away with the “Chesnara doesn’t write pension risk transfer business.” statement. Chesnara is an insurance business. All insurance businesses have a CSM. As a closed book consolidator, Chesnara is makes money from those same spreads.

In reading this stuff you have to look at how the broker is positioned. RBC turned bear on the sector in July of last year and now sits with a price target of 205 against the next lowest target of 255 (Peel Hunt) and highest of 345 (Barclays).

Consensus is 263.

Unsurprisingly, RBC are somewhat “perky” on Chesnara’s outlook.

Again, from Gemini…

“The removal of Banner Life and William Penn from "CreditWatch Negative" by S&P is one of the most reliable indicators of an imminent close. Rating agencies generally only resolve a CreditWatch status when:

- They have received the final deal structure and capital commitments.

- The likelihood of the deal falling through is considered negligible.

- The regulatory "hurdles" (like those from the New York DFS and Maryland Insurance Administration) have either been formally cleared or have reached a "no objection" status.

By reiterating "early 2026" in the January 28 announcement, management is essentially telling the market that the delay from the original "late 2025" target is over. They have cleared the S&P review, which was one of the last major external variables.”

There was a joint statement on 28 Jan that all is on track - https://group.legalandgeneral.com/en/newsroom/press-releases/update-on-banner-life-from-l-g-and-myl

And in 27 Jan S&P Global Ratings changed the credit rating of Banner Life and William Penn.

From Gemini…

“S&P noted the rating reflects the entities' new status under Meiji Yasuda. The removal from CreditWatch typically happens only when a transaction's completion is imminent and its impact is clearly understood by regulators and rating agencies.”

Final post - before my wife tells me off...

One thing to note about the sale of the US protection business is that, whilst L&G are selling the business to Meiji Yasuda they are retaining an 80% economic interest in the business through a reinsurance arrangement with Meiji Yasuda.

This impacts the SCR because L&G will retain the longevity risk (people dying later than expected) of the business, but be no longer liable of the mortality risk (people dying sooner than expected). L&G is much better at managing (and hedging against) longevity risk.

[In the life insurance world, think of longevity risk as burglary risk for house insurance. It's there and may go up or down, but - outside of a riot - it's manageable. Mortality risk is more prone to sudden shocks (like COVID), so is more like a natural disaster - much harder to plan for and manage.]

Essentially, the deal is "re-profiling" L&G's risk. They are trading a high-capital, lower-growth protection business for:

- £1 billion to give to shareholders

- £400 million to specifically fund the new US PRT partnership

- a stronger, leaner solvency ratio that is less vulnerable to US insurance market swings

Overall, they've estimated that the deal will add +7% to the SCR.

"That would have been Gordon Aitken’s article. Blackfriars posted it on the PHNX chat.

...

I’d love to hear Strictly and Meconopsis’ views on it."

I completely agree with the article and I've expressed a similar point of view previously on the board here.

A Solvency Capital Ratio of 100% is set to ensure that a financial institution can meet its 1 year solvency requirements in the event of the realisation of a 1 in 200 year risk. The current ratio of 217% would (in theory) cover at least a 1 in 10,000 year risk. (This latter statement is a simplification - go with the idea.)

So why would you want it to be higher? Because in the event of 1 in 50 year risk being realised you still want the institution to have a SCR or 100%. So we want absolutely want it to be above 100% - the question is how much?

At which point it's useful to look at its peer group:

- MNG last reported a SCR of 230%, although its historically been 210%-220%

- L&G last reported a SCR of 217%, although its historically been around 230% and the results clearly stated that the dip down to 217% was temporary due to the £500m buyback

- PHNX last reported a SCR of 172% with a stated target of a 140%-180% SCR

I'd argue that if PHNX can target a SCR of 180% and the market be happy then so could L&G.

In absolute terms L&G's current SCR is around £7.5bn. So releasing 37% (217% to 180%) excess would free up around £2.8bn.

(And there again you can see what would make a takeover attractive to a US firm - buy at UK prices; get the asset revalued at US prices and drop the SCR to release nearly £3bn back.)

The biggest block on this is probably the expectation created by L&G itself. Having set the expectation of a 230% SCR, the market now expect it.

"For anyone looking at a long term hold in LGEN and intending to keep the shares and just take dividends, why on earth would you want the share price to rise..?"

Buffet on hamburgers springs to mind - https://ritholtz.com/2015/06/buffett-on-stock-prices/

Unfortunately/ fortunately (depending on your point of view) the board of LGEN look dead set on trying to drive the share price higher through buybacks.

There was a clear indication that this was becoming a topic of Board conversation in one of Nigel Wilson's final results presentations where he expressed frustration at L&G and (IIRC) Blackrock are valued. (IIRC it's in the analyst presentation pack of his last results.) I suspect that one of the questions asked of prospective CEOs was how they would get the share price rerated.

It's important to recognise that being cheaply value and having too much capital on the books tends to make a company a takeover target. Being overly simplistic, an American company trading off a 20x PE can buy a UK company trading at 10x PE and then double the value of the acquisition just by having the combined entity valued on a US rather than UK basis.

This is one reason you don't see many UK companies acquiring US ones - the valuation differential kills you.

I know that it's been a longstanding worry in several UK life companies that they have been - and still are - sitting ducks for a foreign takeover (look at Just as an example).

Which is how we've arrived at the switch in approach to include buybacks.

I know that amongst many they're not popular as they are perceived to not work. And that's certainly true where companies mess around with 1-2% buybacks.

But we're heading into 15%+ buyback territory, which (IMV) will have the desired impact.

Unfortunately for Strictly, I wouldn't be optimistic about the saved money going into the dividend though. When Aviva announced its buybacks it announced that it would hold the total value of the dividend - meaning that dividend per share would increase. However, on one of the market briefings L&G held, the CFO clearly stated that a benefit of the buybacks was that it "saved" dividend payments - allowing more buybacks. (IIRC this was in the Q&A session of the second or third market briefing .)