unperplex wrote:LG are my biggest holding and will continue to be.I think they will be much less adversely affected by the coronavirus lockdown etc.than many companies. Indeed it may be to their advantage in relation to their annuity business. I recollect at the start of the lockdown a senior LG officer was interviewed on the news and asked if his company would be badly hit.He replied, rather disingenuously, that the more people died, (“unfortunately, of course”), the better off a business like LG was.
I note above that the Directors have considerable freedom about when these “Windfalls”appear in their profit/loss accounts and they may well spread them out to bolster performance figures over time.
Crudely (all else being equal - which isn't the case) more deaths "suits them". In fact they don't need more deaths, but an adjustment (downwards) in longevity. So it isn't just deaths from Covid that "help" but also re-modelling such that a Covid type event is increased in likelihood, and severity, from say a mild 1 in a 100 year event, to a severe 1 in a 25 year event.
The Directors don't have "considerable freedom" in how this appears in their profit/loss numbers as the mortality tables will be produced with a degree of independence, but there is (actuarial) industry wide inertia, generally speaking, in ensuring mortality table adjustments are gradual and considered and not volatile. Even if it were generally accepted that both more people had died, but also that more would die sooner with potential repeat viral episodes, this acceptance wouldn't automatically be "modelled" in a "gap change" type way, but the change would likely be challenged and applied with an amount of graduation.
The end result may well look similar with profit "gains" from remodelling occurring over a number of years, not in one go, which resembles the kind of "reserving" you would see with Director "freedom".
