Arborbridge wrote:Indeed - but if morningstar gets something that wrong, what chance do I stand?
On the general principle, I reckon quite a good chance: yes, you're only one person compared with a good-sized organisation and only have very limited resources compared with theirs, but you can focus on the one company you're interested in while they have to spread their efforts across thousands of companies. Furthermore, you can focus on the specific questions that you're interested in, while they have to provide answers to a much wider collection of questions, and the manpower they put into the job almost certainly isn't top-class analysts - they're
much too expensive and sought-after. It may well not be much more skilled than the minimum needed to find a 'tick list' set of numbers in annual reports and enter them into the computer, which then calculates various derived numbers from a set of formulae...
But more specifically, I also reckon that insurance company accounts are particularly hard to get to grips with, and I've basically given up trying. That doesn't mean that I've given up on owning insurance companies - they're too major a sector IMHO for that - but it does mean that I tend to judge them by what comes out of them (in the direction of shareholders, that is!) rather than by trying to delve into what's going on inside them. And of the two you've mentioned, Legal & General wins hands-down on that count: their
dividend history isn't perfect, but it's shown good growth for the last 20-odd years, apart from cutting between 2007 and 2009 (as a cut to the 2008 final, then the 2009 interim, which I count as a single cut, just implemented in two stages because the company pays twice-yearly). That cut was quite deep at about 50%, but that was one of the better financial company outcomes of the financial crisis, especially as they then recovered from it quickly, exceeding the 2007 peak in 2011... In contrast,
Aviva's dividend history (click the "All" button just above the chart) is very uninspiring, with two cuts between 2008 and 2013 and still not having exceeded the 2008 peak (*).
In short, it seems clear to me that Legal & General knows how to do something right that Aviva doesn't. I could speculate about what that something is, but such speculation is pointless unless it gives useful clues about how to get a better idea whether it's right or not. And at least for me, trying to hack my way through the jungle of insurance company accounts would take too much time and effort to qualify as practical - so I'll content myself with merely noticing that whatever the something is, it does seem to really exist.
By the way, I do have both companies in my HYP, and plan to keep both of them. But if push came to shove and I had to choose one or the other, it would be Aviva that went.
(*) As even more of an aside than footnotes usually are, it's also shorter, but I don't regard that as especially significant: the difference between 15 and 21 years of history is fairly minor, and Aviva does have a history before 2004 - in fact, more than one, because it's the result of a merger. That always complicates looking at dividend histories, as
I recently posted about Standard Life Aberdeen:
Gengulphus wrote:... E.g. if you look at Standard Life Aberdeen's 2017 annual report, it says the dividend was 21.30p, up 7.5% from Standard Life's 2016 dividend of 19.82p. And that's an accurate assessment from the point of view of a HYPer who originally owned Standard Life - and the company's 5-year dividend history for 2013-2017 is 15.80p, 17.03p, 18.36p, 19.82p, 21.30p, and 2018 has since added 21.60p to that, but that's been announced recently enough that either the 2013-2017 history or the 2014-2018 history might have been used by someone who looked at the company's 5-year record recently. A nice increasing record in either case.
On the other hand, from the point of view of a HYPer who originally owned Aberdeen Asset Management, there was an effective 1-becomes-0.757 share consolidation involved in the merger, so each SLA share they have now results from 1/0.757 = about 1.321 ADN shares before the merger. Multiplying by that factor of about 1.321 and rounding, Aberdeen Asset Management's 16.0p, 18.0p, 19.5p, 19.5p dividend record for 2013-2016 becomes 21.14p, 23.78p, 25.76p, 25.76p, making 21.30p for 2017 and 21.60p for 2018 a distinct cut to their dividend income ...
Gengulphus
The HYP pond is populated by the biggest companies which will hardly likely to be hidden. 