Let me admit a little weariness with pension stories, this being the first week in August. It is time for insurers to release their numbers and for “non-stories” to make up for “no stories”.
Yesterday we had L&G telling us it was doing rather well at transferring pensions into insured annuities.
Gordon Aitken has a slightly less optimistic view of L&G’s results
There is a story waiting to get out but we don’t get to hear it . Gordon Aitken has the answer.
UK life insurers used to rise on the day they reported results. Now they fall, through good numbers and bad. In the results season just gone, all five UK-listed life insurers fell on the day, and one of them extended a run of eight consecutive results-day falls stretching back to 2022.
I back-tested 65 results announcements across Aviva, Legal & General, M&G, Standard Life and Chesnara over seven years to find out when the pattern flipped, and why. The break lands in one specific place in the calendar, and it was not where I first looked. Six European insurers tested the same way show no break at all, and the difference between the two groups points at something specific about UK balance sheets.
The answer matters beyond results day. It explains why the market keeps calling well-covered dividends uncovered, why private capital has been paying premiums for businesses the listed market marks down, and what I would do about it, both as the companies’ problem and the market’s.
L&G is no longer our provider of workplace pensions but a supplier of “UK PRT”. UK PRT is pension risk transfer from invested pension funds to the capital held by insurers. There is a big cost to the transfer which is born by surpluses in the pension fund to get rid of liabilities. We are supposed to be pleased that we are getting rid of risk, of course we are not.
There is no sense to the person insured by L&G in either L&G’s share price fluctuations or in what’s going on to pay their pensions. The insurer is caught up in the confusion around who owns what. L&G’s future remains a matter of speculation
