Legal & General (LGEN)

[BullDog]

I am significantly overweight in L&G. The key speculative move I made in the COVID market mini crash was to sell some Gold ETFs and buy a chunk of L&G at £1.50. I have been trying to determine what price I should top slice.
The sp feels like it still has some room to run, so I have been sitting on my hands.
Any thoughts?

Yes. Sit tight end enjoy the income stream which for your original investment is in double figures per centage terms. We'll done.

[Dod101]

I am significantly overweight in L&G. The key speculative move I made in the COVID market mini crash was to sell some Gold ETFs and buy a chunk of L&G at £1.50. I have been trying to determine what price I should top slice.
The sp feels like it still has some room to run, so I have been sitting on my hands.
Any thoughts?

If you bought at £1.50 you did very well as it was not at that level for long. However, just look what the share price has done since; not a lot and it has moved in a narrow band for a long while. You never know, the price could suddenly take off but it may not. You could be waiting for long enough, but the dividend looks secure.

Thus the dividend looks more secure than a further meaningful capital gain in the near future.

So

a) just sit tight and enjoy the high yield

b) set a price at which you will sell, or

c) set a percentage of your total portfolio above which you will sell.

If you want to cut back your holding a bit, then having set the latter two numbers, just sell if either of the numbers are reached at b) or c) with no further thought.

Obviously none of us has any idea where the share price will go although logically it should rise, but how often have we said that? There does not seem any particular momentum behind the price.

Dod

[TUK020]

I am significantly overweight in L&G. The key speculative move I made in the COVID market mini crash was to sell some Gold ETFs and buy a chunk of L&G at £1.50. I have been trying to determine what price I should top slice.
The sp feels like it still has some room to run, so I have been sitting on my hands.
Any thoughts?

If you bought at £1.50 you did very well as it was not at that level for long. However, just look what the share price has done since; not a lot and it has moved in a narrow band for a long while. You never know, the price could suddenly take off but it may not. You could be waiting for long enough, but the dividend looks secure.

Thus the dividend looks more secure than a further meaningful capital gain in the near future.

So

a) just sit tight and enjoy the high yield

b) set a price at which you will sell, or

c) set a percentage of your total portfolio above which you will sell.

If you want to cut back your holding a bit, then having set the latter two numbers, just sell if either of the numbers are reached at b) or c) with no further thought.

Obviously none of us has any idea where the share price will go although logically it should rise, but how often have we said that? There does not seem any particular momentum behind the price.

Dod

Thanks Dod.
I had decided to top slice back to a median holding when the price reached 295. It got very close (290) but then has drifted back down and meandered sideways. Dividend in the meantime is very welcome. Just wondering if anyone else has set a target sell price, and if so, what?
tuk020

[monabri]

I have no plans to sell. I bought shares in LGEN for the yield. What would I replace LGEN with?

[Dod101]

I have no plans to sell. I bought shares in LGEN for the yield. What would I replace LGEN with?

I have no plans to sell either. It was one of my early buys and I have held it for I am sure about 30 years. In that time I have traded it at times I have no doubt. It currently sits at about 130% of my median ( or I think more accurately at about 130% of my average) value. Logically its share price must rise in time and in the meantime I enjoy the dividend.

Dod

[77ss]

........
I had decided to top slice back to a median holding when the price reached 295. It got very close (290) but then has drifted back down and meandered sideways. Dividend in the meantime is very welcome. Just wondering if anyone else has set a target sell price, and if so, what?
tuk020

Surely any sell/top-slice target has to depend upon your overall portfolio, objectives and tax status - not to mention having a decent alternative home or purpose for the proceeds.

However, for what it is worth, looking at my records, I note that I top-sliced in November 2019 and December 2019 - just before Covid struck.

Coincidentally, my average sale price was your 295p!

I expect that should the share rise to 300p, I shall start thinking about selling some, depending on how my other holdings are doing.

In the meantime I am happy to sit pat on a 7.7% yield.

[simoan]

Sorry, I thought this was the LGEN company news board? And I thought these types of turgid, monotonous conversations about dividends were reserved for another place? Investing based on dividends only is like buying a car by judging what comes out the exhaust pipe without opening the bonnet to have a look at the engine.

[BullDog]

I have no plans to sell. I bought shares in LGEN for the yield. What would I replace LGEN with?

Same here. Probably the UK's best income stock, or one of them. No reason to sell if you're an income seeker.

[BullDog]

Positive reporting from Tempus in The Times, though that can be a mixed blessing. I am overweight LGEN and enjoy the dividend. I think patience will be rewarded in share price terms too, eventually.

Immaculate timing there by Tempus, as usual.

[idpickering]

RESULTS OF ANNUAL GENERAL MEETING HELD ON 18 MAY 2023.

Legal & General Group Plc announces that at its Annual General Meeting held today at the British Medical Association, BMA House, Tavistock Square, Bloomsbury, London, WC1H 9JZ all of the resolutions proposed in the Notice of the Meeting were passed by shareholders by means of a poll vote.

https://www.investegate.co.uk/announcement/7533408

Ian (I hold, and voted "yes" to all points by snail mail).

[idpickering]

LEGAL & GENERAL GROUP PLC ANNOUNCES THE APPOINTMENT OF ANTÓNIO SIMÕES AS GROUP CHIEF EXECUTIVE OFFICER.

Legal & General Group Plc ("Legal & General" or "the Group") is pleased to announce that António Simões is to be appointed to the role of Group Chief Executive Officer of Legal & General, subject to regulatory approval.

António will join from Banco Santander where he has been Regional Head of Europe since September 2020. In this role, he leads Santander's businesses in the UK, Spain, Portugal and Poland, working across retail and commercial banking, corporate and investment banking, wealth management and insurance. Prior to joining Santander, António spent 13 years at HSBC, including as CEO of UK and Europe, and latterly CEO of Global Private Banking, based in London and Hong Kong. He is a former McKinsey & Company partner.

António's appointment follows a rigorous, global, selection process managed by Sir John Kingman, Group Chair. He will succeed Sir Nigel Wilson as Group CEO. Sir Nigel has been Group CEO of Legal & General since 2012, and in January announced his intention to retire from executive life.

António will take up his post formally on 1 January 2024. Sir Nigel will remain as Chief Executive in the meantime, continuing to focus on delivering the strategy of the Group. Sir Nigel will work closely with António to ensure a comprehensive handover and a smooth transition. António will join the Board of Legal & General Group plc on appointment, at which point Sir Nigel will step down from the Board.

There are no other disclosures required under Listing Rule 9.6.13R in relation to António's appointment.

https://www.investegate.co.uk/announcem ... o-/7575843

Ian.

[idpickering]

Legal & General: IFRS 17 Transition Update.

Legal & General Plc ("Legal & General" or the "Group") today provides investors and analysts with an update on our transition to IFRS 17. Access slides here: link

No Change To Strategy, Solvency Or Dividends
IFRS 17 - a global standard implemented by the sector on 1 January 2023 - is an accounting change which does not affect our strategy, solvency or dividends. The Board's confidence in the Group achieving its 5-year ambitions remains unchanged. IFRS 17 does not change the underlying economics of our insurance contracts. It does not impact LGIM or LGC. It only impacts the reporting of our annuity and protection businesses (LGRI, Retail), changing the timing of recognition of earnings from these products but not the quantum.

On Track To Achieve Our Ambitions
We remain on track to achieve our 5-year ambitions. Over 2020-2024, we expect to generate £8-9bn of capital, to grow EPS faster than DPS[1], and cumulatively for net surplus generation to exceed dividends. As previously stated, the Board's aim is to continue to grow the dividend at 5% per annum to FY24.

IFRS 17 Recognises A £14bn Store Of Future Value For Shareholders
Under IFRS 17, L&G recognises a significant stock of value in the Contractual Service Margin (CSM) and Risk Adjustment (RA). At 31st December 2022, this amounted to £13.6bn: future value that will unwind into profits as experience plays out in line with expectations. Over the course of 2022, the CSM has increased from £11.2bn to £12.1bn as the contribution from new business and assumption changes has exceeded the release into profits.

LGRI accounts for c60% of this stock of value, and Retail for c40%. We have provided guidance in the presentation to help analysts and investors model IFRS 17 profits for these divisions.

FY22 IFRS 17 operating profit from divisions is estimated to be £2.1bn. Consistent with previous guidance, the main drivers of the change from IFRS 4 are the removal of new business profits and assumption changes, which are now added to the CSM and released over the lifetime of the contract.

Looking forwards, we expect the adoption of IFRS 17 to result in a more stable and predictable operating profit profile for L&G through steady CSM and RA releases. We expect the contribution to the CSM and RA from new insurance business and assumption changes (which impact the CSM only) to continue to exceed the run-off from our in-force insurance book. As a result, we expect insurance earnings to grow over time.

Indicatively, writing £10bn of UK PRT per annum would result in 6-7% CAGR in related operating profit over five years. We continue to see compelling investment opportunities across all our businesses, providing scope to deliver growth beyond this level.

https://www.investegate.co.uk/announcem ... te/7613216

Ian (I hold).

[Dod101]

Many thanks Ian, All of that sounds like good news and I cannot understand why the shares are not valued at a much higher level. They sound optimistic and I will certainly go along with that.

Dod

[monabri]

There seems to be a disconnect between the positive update, LGEN's general financial strength & outlook and the market's view of LGEN. The shareprice drop was one of the biggest in the FTSE100 this morning (albeit it in a generally falling market). All we can do is keep taking the dividend on offer, we can't influence the shareprice!

[idpickering]

Many thanks Ian, All of that sounds like good news and I cannot understand why the shares are not valued at a much higher level. They sound optimistic and I will certainly go along with that.

Dod

You’re welcome Dod, I don’t understand the shares’ weakness either. However, monabri’s view on this is spot on imho. Either way, I’m not going to let short term movements in the LGEN sp influence me. I will probably never sell my holdings.

Ian.

Ian.

[Dod101]

Down about 2% on the day and a yield of over 8%. What Mickey Mouse outfit is this? Just what is going on ?

From the L & G announcement this morning all the news was positive re their business. They have indirectly said as much, so I imagine that the new IFRS will delay the recognition of some profits and may therefore have a short term effect on declared profit at least during the transition year and possibly longer. The market is so short termist that that is likely to be the cause, notwithstanding that they have have said this will have no effect on dividends. Since we do not know what future dividends will be anyway, that will be difficult to assess.

Meanwhile all income seekers should surely be buying. Thinking of topping up myself.

Dod

[DrFfybes]

I bought LGEN after the "Truss drop" - my gut tells me they are still too cheap, and I don't have many (about 1% of portfolio).

I think they will recover when inflation/interest rates get back under control, this will improve Bond values and lower their future liabilities for annuity payouts. I don't even try to understand the details of financial institutions any more, but I do know a lot of linked annuities went up by about 10% last year, and that increase is a long term increase in their outflow for many years.

But 8% yield, it is almost too good to be true. And IME personal experience, when that happens it always is

Paul

[torata]

Lex in the FT explain the reasons why they are out of favour, and it's not IFRS, but ultimately like the company.

Search for "FT Lex: L&G/annuities: bulks end their sulks foreseeing £1.2tn opportunity"

torata

[BullDog]

Lex in the FT explain the reasons why they are out of favour, and it's not IFRS, but ultimately like the company.

Search for "FT Lex: L&G/annuities: bulks end their sulks foreseeing £1.2tn opportunity"

torata

And there was me thinking a growth in annuities would be very positive for the company. Funny old world.

[Dod101]

Lex in the FT explain the reasons why they are out of favour, and it's not IFRS, but ultimately like the company.

Search for "FT Lex: L&G/annuities: bulks end their sulks foreseeing £1.2tn opportunity"

torata

And there was me thinking a growth in annuities would be very positive for the company. Funny old world.

It is good for the Company do not fear, it is just that profits will be recognised over a longer period. We all knew that bulk annuities tie up capital for a long time and profits are spread in to the future. Indeed on the L & G website, they tell us that IFRS 7 changes the timing of recognition of insurance earnings, which is what I was trying to say yesterday.

What may be bugging the market is the equity reduction in the company 'by £5.6 billion to set up a CSM to reflect removal of margins and provisions under IFRS 17'. CSM: Contractual Service Margin' No I do not really understand that either, but according to the L & G website, it provides a view of stored value of our insurance business which is expected to unwind in to profits.

torata may have a point and it might have helped if he had finished his first sentence. It would be interesting to know what that point is.

Dod