Ridiculously Good Life Annuity Rates

Ridiculously Good Life Annuity Rates

I sat down with a client this week, who is 72 years old and only has R1,43 million left to live on for the rest of her life. She is drawing R9,500pm from her living annuity and the picture does not look good for her money to last as she is drawing 8% of her capital each year.

I then went to a few life insurers to see what income I could guarantee her for the rest of her life so she never ran out of money. I was shocked that we could now get R11,700pm, which will grow by 5% each year until she dies. We also built in a 10-year guarantee term so even if she passes away in 5 years her beneficiaries will keep on receiving that income for another 5 years. That is an income of almost 10% of her capital! 

So if you have elderly parents that don't have enough capital to sustain their income requirement for the rest of their lives please let me know and we can see what we can guarantee for them. 

Are the Magnificent 7 Valuations Justifiable 

Next week sees the first of several consecutive short working weeks around the public holidays and Easter.  And before we know it, we will already be at the end of the 1^st quarter of 2024.

There has already been much news flow this year, where last week we found out that SA’s national growth in the last quarter was enough for us to escape a technical recession (defined as two consecutive quarters of negative growth), that followed the Budget Speech that balanced SA books.

Looking offshore, US inflation is looking fairly “sticky” in coming down from the very high inflation rates we saw last year, which was exactly the sentiment we shared as the expectation with our clients last year.   

Lower inflation is always overall good for investment markets, and offshore market conditions this year have started strongly, largely again revived a few weeks back when Nvidia’s earnings results were much stronger than expected. The general market sentiment around demand for Artificial Intelligence capabilities, therefore increased.

At the beginning of this year, I highlighted that for the most part, global stock markets were mostly flat over the last two calendar years.    

Emerging markets in turn, by the start of this year were still far behind over the past three years, largely impacted by their lag in coming out of COVID-19, and then the unsavoury Russian invasion of the Ukraine.

Then in February, we saw various momentum swings with large investment flows back into Emerging Markets, specifically China.

For only the monthly of February, stated in $US terms, the offshore markets that benefitted the most over the month were;

(The CSI300 is the share market in Shanghai mainland China, Hang Seng is Hong Kong, the Nikkei225 is Japan, the S&P in the US, the Dax is Germany, and the FTSE100 is the UK)

Going back to US Markets, while overall they were flat over the last two calendar years - it would have been far worse for them if the largest seven companies had to be excluded.

US markets in the past decade have been dominated by their largest seven companies (M7 companies). Over the past 11 years, the collective market capitalisation of the M7 companies has grown from just over US$1 trillion, to well over $13 trillion.

This represents a remarkable compounded annual return of 24.3% – doubling the S&P 500’s capital return of 12% over the same period. Unsurprisingly, this growth has seen the M7’s contribution to the S&P 500’s market capitalisation soar from 10% to over 30% of the total market.

The valuations of the Magnificent Seven (M7) have drawn significant attention, with the companies’ share prices surging since late 2022. Critics contend that these valuations are unjustified, drawing parallels to the vitality of the Dotcom era.

In the latest Portfolio Watch attached here, Andrew Dittberner from our PCS Stockbroking team. offers a more balanced perspective by evaluating the fundamentals of the M7 companies and examining the market's growth expectations for the coming years.

While some expectations may seem ambitious, Andrew argues that they may not be entirely unattainable.

From my side, patience we all know is needed when investing, and professional scepticism is usually a welcome additional arrow in the quiver. Us having the upcoming holidays to consider, possibly similar to the M7 counters - maybe we in SA too need to reflect that with so much bad news already in SA’s prices - maybe being too pessimistic at times can also be questionable.

Old Mutual wins this year's News24 Long-Term Insurer of the Year

"We have many wonderful and dedicated people in our organisation doing their absolute best, every day to make a difference in the lives of our customers and strive to build a better future for our nation," said Richard Treagus, the group's chief risk officer. "This award tells us we're on the right track."

The News24 Business Awards were designed to recognise companies who are doing excellent work in building their businesses, while also going above and beyond in client service, communication, and their contribution to South Africa.

A unique set of criteria was designed for the awards. News24 surveyed more than 4,100 of its readers and subscribers on their experience with their long-term insurers, asking clients to rate their satisfaction with client service, premiums, and communication. 

Old Mutual received high satisfaction ratings from its clients in the surveys.

The News24 Business team also gave it high marks for how easy it is to understand its product offering, for its contribution to South Africa and for transparency in media communication.

Source:  News24 Long-Term Insurer of the Year award goes to Old Mutual | Business

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