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Chesnara (CSN)

Practical discussions about equity High-Yield Portfolios (HYP) for income
Forum rules
Tight HYP discussions only please - OT please discuss in strategies
monabri
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Chesnara (CSN)

#247679

Postby monabri » August 29th, 2019, 8:42 am

Half year report issued today.

https://www.londonstockexchange.com/exc ... 05511.html

Favourable reaction from the market.


05 September 2019 Interim ex-dividend date.

06 September 2019 Interim dividend record date.

23 September 2019 Final date for Dividend ReInvestment Plan (DRIP) Elections

11 October 2019 Interim dividend payment date

Dod101
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Re: Chesnara (CSN)

#247688

Postby Dod101 » August 29th, 2019, 9:15 am

Thanks monabri. The share price has been hammered over the last year so any increase will help, but I do not see these results as exactly spectacular. Cash generation, something these companies stress, is well down and the other metrics seem to me to be OK but not great.

However the dividend is up 3% so I guess that shows some confidence. I hold and will continue to hold.

Dod

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Re: Chesnara (CSN)

#247719

Postby Stan » August 29th, 2019, 10:40 am

Dod101 wrote:Thanks monabri. The share price has been hammered over the last year so any increase will help, but I do not see these results as exactly spectacular. Cash generation, something these companies stress, is well down and the other metrics seem to me to be OK but not great.

However the dividend is up 3% so I guess that shows some confidence. I hold and will continue to hold.

Dod


Can’t always produce stunning results all the time but up so far by 4% which isn’t at all bad so far, may change before the end of play of course.

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Re: Chesnara (CSN)

#247935

Postby 88V8 » August 29th, 2019, 11:02 pm

The recent High Court judgement in re Prudential cannot be helping as it has negative implications for future business acquisition.
I did write a new topic about the case but it vanished, my error I suspect.
Same applies to Phoenix.

I hold both in my over-large collection of Financials.

V8

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Re: Chesnara (CSN)

#247954

Postby Alaric » August 30th, 2019, 12:25 am

88V8 wrote:The recent High Court judgement in re Prudential cannot be helping as it has negative implications for future business acquisition.


The judgement seems to be saying that if you have a product with a life time guarantee, which describes an annuity, you might wish it to be backed by a major financial services Company that everyone has heard of, with a century or more of operating experience. You don't want to be palmed off with some newly established organisation you've never heard of and whose past performance in the UK is limited.

That may not matter if it's possible to surrender or transfer the policy, but that's not allowed for annuities at an individual level.

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Re: Chesnara (CSN)

#247955

Postby PinkDalek » August 30th, 2019, 12:32 am

88V8 wrote:The recent High Court judgement in re Prudential cannot be helping as it has negative implications for future business acquisition.
I did write a new topic about the case but it vanished, my error I suspect.
Same applies to Phoenix.]


It is over at Company Share news (LSE Main Market) where there are a number of replies:

Prudential PLC (PRU)
viewtopic.php?f=94&t=16730&p=247525#p247525

Dod101
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Re: Chesnara (CSN)

#247963

Postby Dod101 » August 30th, 2019, 7:05 am

Alaric wrote:
88V8 wrote:The recent High Court judgement in re Prudential cannot be helping as it has negative implications for future business acquisition.


The judgement seems to be saying that if you have a product with a life time guarantee, which describes an annuity, you might wish it to be backed by a major financial services Company that everyone has heard of, with a century or more of operating experience. You don't want to be palmed off with some newly established organisation you've never heard of and whose past performance in the UK is limited.

That may not matter if it's possible to surrender or transfer the policy, but that's not allowed for annuities at an individual level.


Personally I think this is a rather unusual situation and it would be interesting to know why Pru chose a relative newcomer in Rothesay. Maybe some business quid pro quo but I wonder if the Court thought that there were not enough reserves being transferred or something like that or if it is all down to their judgement of the financial strength and experience of Rothesay. An Independent Examiner has approved it and usually it is a straightforward rubber stamping job.

As I have said I doubt that it will impact very much on future deals, but as 88V8 has said it will not have helped sentiment.

Dod

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Re: Chesnara (CSN)

#247996

Postby Laughton » August 30th, 2019, 10:09 am

I think that a similar situation (to that of Prudential) may be happening at Legal & General.

My wife has recently received communication from L&G regarding proposed transfer of pension business to ReAssure Limited. Yes they have been operating for a while but they dropped a plannned IPO not that long ago so, if they were to undertake one again who's to say who their ultimate owners will be. She took out an annuity with L&G partly because of the terms offered but also because they had been in business for over 150 years.

Probably won't make a difference but OT has written to L&G opposing the transfer - I suppose if enough policy holders feel the same and make L&G aware then maybe some notice will be taken when the process reaches The High Court.

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Re: Chesnara (CSN)

#248004

Postby Dod101 » August 30th, 2019, 10:45 am

The difference is massive to my mind. Reassure is owned by Swissre, one of the largest and best established reinsurance companies in the world.

There is just no comparison. Reassure itself has been established since 1963. The planned IPO was in any case only for a minority interest as far as I recall.

Your wife is of course absolutely entitled to object and if enough do so it may sway the Court. These are very long term undertakings so it is something that we all need to weigh up carefully.

Dod

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Re: Chesnara (CSN)

#248005

Postby Alaric » August 30th, 2019, 10:54 am

Laughton wrote:I think that a similar situation (to that of Prudential) may be happening at Legal & General.


This is the proposal

https://www.legalandgeneral.com/policytransfer/

The traditional players in life assurance and related business are all closing it and transferring to consolidators. Legal & General are a limited exception as they are staying in the business of insuring risk through bulk annuities.

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Re: Chesnara (CSN)

#248027

Postby Sacky » August 30th, 2019, 12:25 pm

Prudential entered a reinsurance contract with Rothesay last year which was expected to lead to the full transfer that the court blocked earlier this month. The only report I've read mentioning this deal said it remains in place despite the ruling, so effectively Rothesay are still taking on Pru's annuity risk despite the fact the assets and admin is not being transferred.

Another irony is that the annuities that were to be transferred were from the M&G arm of Pru, which is about to be demerged. These clients may have chosen their annuity partly on the basis of the Pru's reputation, longevity and scale, but they are going to be separated from that by the end of the year anyway.

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Re: Chesnara (CSN)

#248056

Postby Alaric » August 30th, 2019, 1:10 pm

Sacky wrote:The only report I've read mentioning this deal said it remains in place despite the ruling, so effectively Rothesay are still taking on Pru's annuity risk despite the fact the assets and admin is not being transferred.


I think it likely that the assets and probably the admin have been transferred. The assets in particular have been quoted as boosting Rothsay's assets under management. The difference is that in the event of Rothesay running into financial difficulties, it would be the Prudential or its M&G successor who would still be held liable to pay the individual annuitants.

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Re: Chesnara (CSN)

#248168

Postby Sacky » August 30th, 2019, 7:52 pm

Alaric wrote:I think it likely that the assets and probably the admin have been transferred. The assets in particular have been quoted as boosting Rothsay's assets under management. The difference is that in the event of Rothesay running into financial difficulties, it would be the Prudential or its M&G successor who would still be held liable to pay the individual annuitants.


Hi, maybe. My doubt about the assets being transferred was that Rothesay said they had entered an agreement to take on the annuity book which, if completed, would boost the Rothesay assets under management. The original press release said: "The transaction has been structured initially as a reinsurance contract and is expected to lead to a Part VII transfer of the underlying assets and policy liabilities to Rothesay Life subject to regulatory and court approval." But the court didn't approve, so I don't think the transfer can have happened.

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Re: Chesnara (CSN)

#248180

Postby Alaric » August 30th, 2019, 8:29 pm

Sacky wrote: But the court didn't approve, so I don't think the transfer can have happened.


I'd suspect the press release was when the implementation of the reinsurance deal was still in the future.

Consulting their "Solvency and Financial Condition" report finds various references to an increase of funds, particularly on page 9
https://www.rothesaylife.com/media/1310 ... r-2018.pdf

Net financial investments increased from £24.7bn at 31 December 2017 to £36.6bn at 31 December 2018, largely as a result of the Prudential transaction.


Another way of looking at it is that the deal with the Pru increased the size of Rothsay by around 50%.

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Re: Chesnara (CSN)

#248188

Postby Dod101 » August 30th, 2019, 8:53 pm

Alaric wrote:
Sacky wrote:The only report I've read mentioning this deal said it remains in place despite the ruling, so effectively Rothesay are still taking on Pru's annuity risk despite the fact the assets and admin is not being transferred.


I think it likely that the assets and probably the admin have been transferred. The assets in particular have been quoted as boosting Rothsay's assets under management. The difference is that in the event of Rothesay running into financial difficulties, it would be the Prudential or its M&G successor who would still be held liable to pay the individual annuitants.


No no no. A reinsurance contract does not in itself change the assets held nor the admin. The admin and liability remains with the 'front' party, in this case the Pru. The reinsured (the Pru) pays a premium to the reinsurer for taking on the liabilities which have been reinsured but nothing else changes. Sacky is right.

The Prudential is responsible for all the liabilities and the reinsurance contract is a 'behind the scenes' arrangement which the annuitant does not have to be concerned with.

No one (except the reinsured party)needs to be concerned about the reinsurance contract because that is a private commercial arrangement. The Prudential is still totally on the hook for the liabilities and any guarantees to the annuitant.

Dod

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Re: Chesnara (CSN)

#248209

Postby Alaric » August 30th, 2019, 10:18 pm

Dod101 wrote:[ The reinsured (the Pru) pays a premium to the reinsurer for taking on the liabilities which have been reinsured but nothing else changes.


How much do you think the premium would be? I'd reckon around 100% of the value of the annuity liability provided that Rothesay are taking the investment risk as well. Every indication in the description of the deal suggests that is so.

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Re: Chesnara (CSN)

#248219

Postby Dod101 » August 30th, 2019, 10:53 pm

I have no idea what the premium would be except that it is shorn of the liability that say something goes wrong with the invested assets. It might be 100% of the value of the annuity liability but that is a long way short of the assets that the primary insurer is required to hold against these liabilities. That is the whole point. A primary insurer is required not just to hold the value of the liabilities, but reserves well above that to cover problems from say a crashing market or maybe the calculation of morbidity being wrong or whatever.

Dod

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Re: Chesnara (CSN)

#248225

Postby Alaric » August 30th, 2019, 11:31 pm

Dod101 wrote:A primary insurer is required not just to hold the value of the liabilities, but reserves well above that to cover problems from say a crashing market or maybe the calculation of morbidity being wrong or whatever.


Define "well above that". It wouldn't be more than 5 to 15% in an annuity context. Excessively high reserve requirements mean there's no market as financing the reserves isn't affordable. Annuity reserves would be invested in fixed or indexed assets that closely matched the expected outgo. Market crashes in that context don't matter unduly since the liabilities can be valued at a higher discount rate and their reduction in value matches off against the asset losses.

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Re: Chesnara (CSN)

#248236

Postby Dod101 » August 31st, 2019, 12:07 am

Alaric wrote:[Define "well above that"


I m not an actuary and therefore cannot define 'well above that'. If you are you can do so. I was only making the point that it is bound to be beyond the simple calculated liabilities.

Dod

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Re: Chesnara (CSN)

#248245

Postby Alaric » August 31st, 2019, 12:54 am

Dod101 wrote: If you are you can do so.


My knowledge of the process of annuity reinsurance could be twenty years out of date. Essentially there were two methods. If the intent was just to remove the longevity exposure, the assets would stay with the original annuity writer and there would be an annual profit share of some description to match the actual longevity with that expected under the reinsurance. The other type was where the assets were transferred and the intent was that the reinsurer took on both the investment risk and the longevity risk. If, as in the Rothesay case, the process is stopped at the reinsurance stage, the original writer of the annuities still retains some solvency risk.

I believe Rothesay itself took on the business of failed annuity consolidator Paternoster.
This article from 2010 indicates a Prudential connection
https://www.independent.co.uk/news/busi ... 54421.html


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