RE: New CEO?19 Jun 2023 11:22
Nigel50 "Is this a slightly weird situation in that higher interest rates are good for LGen but if you can get 5% risk free on savings accounts/bonds, why would you buy ? And with interest rates going to rise, presumably this will get worse for the SP/despite being better for LGen."
Time lag is the basic argument.
The higher interest rates will allow them to replace bonds that have reached redemption with bonds that pay much better interest rates.
4% instead of 1% (example only)
More importantly is the government plans to reduce the amount of bonds they have to hold and replace them with infrastructure and housing (rental income).
Far far higher returns.
Now during COVID some of the bonds they held had their credit risk increased (investment grade company bonds) resulting in a £900 million loss BUT only if they sold them or there was a default (there was none).
So the £900 million was a paper loss as LGEN don't sell bonds they keep them to redemption, at which time they get the original price £100.
Now infrastructure and REITS are bond proxys, so they too have taken a kicking but the same applies as in they are only paper losses (if held by LGEN)
All that's important is the income received matches the requirements of the pensioners.
In fact due to life expectancy NOT increasing at the rate expected LGEN is removing money most years from the annuities pot.
Alas it could be quite sometime away before there is a significant increase in income.
As I bought at 166p. I may sell and come back later.
MAY