Phoenix Share Discussion Threads

[aleman] 24/5/2012 09:56

Been doing a little switching of late. Been mopping up insurers as so many seem to be on near-10% yields. I don't pretend to understand them well as they can be very complicated businesses but I'm spreading it around a bit so I won't be too bothered if European regulators or Greece mess it up a bit and odd ones have to cut their dividends (although I'm not expecting any to at the moment). Phoenix fit the bill nicely and seem to have a big cushion against mishaps in financial markets, looking at their own risk assessments and strong cash position. Others I've got are AV. and CSN and I've been looking at AML. My favourite for a fat dividend and decent potential growth (from exposure to Scandinavia and healthy growth in Latin America) is RSA. Now lets see Europe try mess me up!

[scburbs] 23/5/2012 15:03

They have around £900m of cash in the holding company. Surely they must be in a good position for some form of opportunistic discounted debt buyback?

MCEV and more importantly the Phoenix Life surplus will be taking a pounding at the moment and cash generation targets will be hard to meet until the market turns due to the low surplus in Phoenix Life. However, they are sitting on lots and lots of cash already!

[jonwig] 23/5/2012 14:24

This can't escape the wider market - its assets are the market, and so are a slice of its liabilities.
As for the debt, I do think a lot of holders are worried.

A pity really, as the management seem to have managed well enough!

[scburbs] 23/5/2012 14:02

I have added a few more, but it still looks like there maybe further falls on the way.

[zcaprd7] 23/5/2012 10:57

Buy triggered, bounce damn you!

[zcaprd7] 18/5/2012 17:18

Very weak, will try to top up at 450p

[scburbs] 08/5/2012 16:00

zcaprd7, A gradual approach might be best. I have added a small chunk today, but will look to add further as/if it falls further. The one thing you can see from the previous low points is it falls and rises very quickly around the bottom.

[zcaprd7] 08/5/2012 12:06

Hmm, looking to top up - suggestions for entry points please?

[jonwig] 05/5/2012 09:49

The podcast adds a bit - not much - to the bare statements and numbers in the IMS.

The phrase "are confident of" replaces "on track to" in describing the £500m - 600m of annual cashflows, and no market assumptions are built into this forecast. Again they reiterate that it's H2-weighted.

A questioner asked why the ongoing debt discussions were taking so long. No clear answer was given ... discussions on this "complex" business remain "cordial" and we want to reach a solution in the interests of "all our stakeholders". Meanwhile we are comfortable with the level of debt.

Wouldn't comment on Solvency II issues - like, I imagine, all insurers they are frustrated at the lack of clear guidance from the EU panel.

I'm encouraged by the fact that they have a track record of meeting their targets, and my own view has always been that the debt level and discussions are what is holding the share price down.

[skyship] 04/5/2012 13:11

Bt a few @ 509p - too few, so need to add now that I've raised some cash from a sale elsewhere. Chart suggests we may visit 500p....

[scburbs] 04/5/2012 12:31

Fenners66, My response was just an observation that it wasn't very useful. The cupboard was emptied at year end to get above the mid-range of cashflow target. The most useful information would be at Phoenix Life level, i.e. how much is in the cupboard (Phoenix Life free surplus), how is core underlying profitability and where is MCEV.

Not surprising that the market is disappointed with cashflow in year to date, but it was clearly flagged that it would be H2 focussed and the bare cupboard was there for all to see.

[fenners66] 04/5/2012 10:43

Any response to the interim statement?

[robsy2] 19/4/2012 18:57

I have been a buyer under 600p for a while now. There has been plenty of opportunity! The yield is convincing at 7% ish, thats good enough for me.
I would like some reward for my patience but continue to believe that the value will out...
Lots of upside maybe and lots of capital protection.Low risk, therefore good value.

R2

[zcaprd7] 18/4/2012 12:51

Faded away quite badly since the dividend?

[hugepants] 26/3/2012 15:41

Ex-dividend on 4th April

[jonwig] 25/3/2012 07:47

lynton - I think PHNX are acutely aware that the Ombudsman is watching their treatment of policyholders rather closely! Judging by some of the stories appearing in the weekend "Your Money" pages in the press, there have been quite a lot of complaints. My own feeling is that these are getting fewer, and they are addressing the problems.

As for the dividend, there are restrictions imposed by their debtholders which cap the current year at a total payment of £72m, which is 42p/sh.
(Last year it was £55m, also 42p owing to fewer shares.)

I really don't know when the cap will be relaxed - broker forecasts imply 42p for the next two years. Even without the cap, I don't think they would be increasing the dividend to any extent.

[lynton3] 24/3/2012 19:41

There was lots of nice stuff in the results announcement about customers / people / the phoenix way etc, etc .. but I didn't see any mention of shareholders and their dividends .. and what the group's strategy is to increasing dividends - or did I miss something?

[jonwig] 23/3/2012 12:54

scb - re post #369. Apart from the main facilities you mention there also seems to be unsecured debt (from 2010 AR). The whole debt business is pretty complicated!

Thanks for the presentation link.

[scburbs] 23/3/2012 10:36

Presentation has long term cash forecasts (P22). Reiterates £3.2m from 2011-2016 and has £9bn for 2011 onwards (undiscounted).

[scburbs] 23/3/2012 10:32

Holding company cash now up to £837m (£4.80/share). Does anyone recall the extend to which borrowings are secured on holding company assets?

The main facilities seem to be secured by PGH (LC1) Ltd, PGH (LC2) Ltd, PGH (LCA) Ltd and PGH (LCB) Ltd and Impala shares.

[hugepants] 23/3/2012 10:24

thanks. Happy to hold while aware a 7.5% yield can't be risk free

[jonwig] 23/3/2012 10:08

H P - a 42p dividend costs £73m, and debt interest £122m. That gives them plenty of room to retire debt (as they are doing) provided their capital surplus isn't eroded by factors out of their control. And that seems to be going in the right direction.

[hugepants] 23/3/2012 09:55

This is the only bit I understand, the rest is Chinese. Sounds good enough. Are people expecting the dividend to be maintained next year?

Commenting on the results, Group CEO, Clive Bannister said:

"Phoenix has continued to make considerable progress in 2011, despite the volatile market conditions. We have achieved or exceeded all of our 2011 financial targets including cash generation, gearing and MCEV enhancement, demonstrating the resilience of the Phoenix business model.


"We have a clear strategy to harvest value for our shareholders through the release of the stable long term cashflows inherent within the business. The generation of £810 million of cash, above the mid-point of our target range, and our improved group capital position reinforces our confidence in our ability to progress discussions with our lenders, as we look to align the maturity of our debt to the profile of our long term cashflows."

[jonwig] 23/3/2012 09:46

I suppose we all home in on different parts of the results. I was particularly looking for evidence that a deal on at least some parts of the debt structure was close to signing. But it seems this isn't even a clear target for 2012.

We have a clear strategy to harvest value for our shareholders through the release of the stable long term cashflows inherent within the business. The generation of £810 million of cash, above the mid-point of our target range, and our improved group capital position reinforces our confidence in our ability to progress discussions with our lenders, as we look to align the maturity of our debt to the profile of our long term cashflows.

And:

Reterming our debt is our top priority in terms of corporate activity, as we look to align our debt profile to our longer term cash flows. The more tranquil market conditions since year end, and the improvements in our cash position and in our IGD headroom during 2011, reinforce our confidence in our ability to progress these reterming discussions.

And:

Our estimated IGD surplus was £1.3 billion at 31 December 2011, up from £1.0 billion a year earlier, with headroom over our IGD capital policy of £0.4 billion. During 2011 we undertook several management actions to strengthen our IGD position through the simplification of the Group's structure. The headroom over our IGD capital policy allows us greater flexibility in the repayment of our bank debt and we have identified additional actions that will improve this surplus further in 2012.

[jonwig] 23/3/2012 09:06

scb, this will be the item you refer to, in Phoenix life IFRS breakdown:

Investment return variances and economic assumption changes on long-term business: £(338m) at Dec 2011 vs £18m at Dec 2010.

With the reason given:

Overall, the Phoenix Life business had unfavourable investment return variances and economic assumption changes of £338 million in 2011. This reflects the widening of credit spreads and the falling yield curve as the increase in liabilities calculated on a prudent basis was not fully offset by a corresponding increase in assets.

So it's ultra-low bond yields which appear to be reversing (post #362).

The fact that the capital surplus is now back to more 'normal' levels suggests that the accounting methods they used were well-controlled: ie. they knew what the outcomes would be post the year end.