Member Info for tichtich

@Lending. I think you're right in so far as much of LGEN's future profit will come from its store of future profit (based on existing policies), which presumably has little or no ability to rise with inflation. On the other hand, asset management fees on existing assets under management should broadly rise with inflation, as asset values rise. And they also have the possibility of growing through gaining new business (faster than they lose old business), as they've done in the past. Maybe we should expect a modest level of nominal dividend growth, largely independent of inflation, like LGEN has had in recent years. That could be enough to keep up with a modest level of inflation, but not a long period of high inflation.

Although I said that I hoped dividends would rise with in line with inflation over the long term, making for 9% real returns, I'm certainly not counting on it. I would be very happy with 7% real returns, and content with 5%.

@StrictlyZinc. Your compounding calculation seems to assume that people can earn a 9% return on the dividends they receive, for the remainder of the 8 years. Are they supposed to do that by reinvesting the dividends in more LGEN shares? In that case the LGEN share price must remain low enough to keep the yield up at 9%, but not so low that they can't cash in those shares for a decent price at the end of the 8 years.

Also, people want to get their money back after adjusting for inflation. So you are implicitly assuming that the dividend and share price rise with inflation. That's what I'm hoping for, but it's by no means guaranteed.

The way I look at it is that, IF the current dividend rises with inflation over the long term, that's a 9% real return (on current price}, which would be an excellent return, higher than the long term stock market average.

@MattTheBrave

Thanks. That's good to know. I'm a worrier, so I can't help feeling there must be a catch with such a high yield. But I've actually doubled my LGEN position over the last couple of weeks, having sold a couple of more risky stocks. It's now about 10% of my portfolio, and my third biggest position.

"In early *Year 2020* the sp was trading at over 330p...."

In the year 2525 ... It might be up to 335.

A word of caution. I'm not an expert, but as I understand it, store of future profit is not certain profit. It has to be recalculated as circumstances change, such as returns on assets being lower than expected.

Also, profits from the SOFP could be offset by losses in other areas of business.

And I wonder whether the SOFP takes overhead costs into account. I suspect not, as I think it's basically just expected premiums plus returns on invested premiums minus expected payments to policy holders.

Where did you get a "massive debt pile" from? According to the latest results, the net debt to adjusted EBITDA is "1.0x – 1.5x".

DividendMax does not give an accurate dividend yield. My guess is that it's based on a robotic estimate of next year's dividend, and the robot usually seems to be overoptimistic.

DivvyDiary.com generally gives an accurate yield, based on the last year's dividend. It also gives the % increase in dividend over previous years, which is interesting. According to DivvyDiary, LGEN's dividend roughly halved in 2009, and took about 3 years to recover. But over the long term it's done well.

I keep telling myself that you can't expect to buy right at the bottom, and any cheap price is a good price. But those falling knives still hurt!

Hmm. Disappointing that LGEN has fallen over 8% since I added last week. Bad timing! At least I've kept back some money in cash and bonds to take advantage of a correction. The difficult is knowing when to deploy it!

"Flight back to bonds might actually be good for us"

I'm not sure it makes much substantive difference, as LGEN probably holds most of its bonds to maturity, so their market price doesn't matter much. Still, if it helps to keep the solvency ratio up in the short term (or at least offsets any paper loss on other assets), that might be good for sentiment.

"I admit to very limited knowledge, however I'm still struggling to understand why a blue chip company of this status, can perform so badly for so long."

Is the company performing badly, or is the share price failing to reflect the company's performance? If the company's current dividend is sustainable long term (in real terms) then I would say the company is performing well. The question for me is just whether the dividend is sustainable.

Low price is good unless (a) you want to sell, or (b) you think the fall in price is due to a worsening of the company's prospects.

Https://www.dividendmax.com/united-kingdom/london-stock-exchange/life-insurance/chesnara-plc/dividends

Not much change in this update, but that's OK.

Just one thing struck me:

 " 7 properties sold and 16 under offer (total sold or under offer is equal to 1% of the portfolio commanding a 19% premium to prevailing book value)."

As I recall, at the time of the last update, they'd only exchanged contracts on one property. So 7 sold is progress, though still slow. And I don't remember them mentioning before that they were selling at a 19% premium. That's good. However I don't understand how the total sold or under offer can be only 1% of the portfolio, since the proceeds are supposed to be paying off all the floating rate debt. Perhaps that's a typo.

The electricity price has been going up again:

https://tradingeconomics.com/united-kingdom/electricity-price

I expect that accounts for some of the recent share price increase.

With most shares having gone up over the last couple of months, I'm finding it hard to find anything I want to buy. So I just added a bunch more LGEN. At least there's one share that I can rely on to be cheap!

"Maybe the(distorted ) low PE will benefit those of us who've understood the effect of the new standards."

You've understood the effect of the new standards? Wow. Kudos. 😉

@Conger2

The effect you're talking about may increase the share price temporarily. But, if people don't change their mind about what the shares are worth, the share price will fall back to where it was before once UKW stops buying. And even in the short term the effect will be limited, because, as the prices rises, other potential buyers (who now think the share is overpriced) will drop out of the market and additional sellers will come in.

@Conger2

I can't see why share buybacks would get the price back to NAV. Share buybacks below NAV increase the NAV per share. And if Mr Market thinks that the shares are only worth 88% of NAV before buybacks, then logically he will just price them at 88% of the higher NAV after buybacks (other things being equal).

I think that elimination of the discount will require some material change in circumstances, and not just buybacks. Or maybe (less likely) UKW will change some assumptions in its NAV calculation to make the NAV more pessimistic, and reduce it to what Mr Market thinks the shares are worth!

At the moment UKW says they prefer buybacks and debt repayment to new investments. So presumably they don't think investment in new assets is very attractive at the moment. I'm happy to just enjoy the proceeds from the current assets until the time is right.

It's still very unclear to me what the govt's policy is. The media talk as if GBE is going to be a big owner of wind and solar farms. But I don't think it's going to have the money for that. So presumably it will be relying on businesses like UKW to do most of the investing. That means making investment sufficiently attractive. But who knows what this means in practice.