Phoenix Share Discussion Threads

[bluemango] 01/3/2021 09:19

The key would seem to be growing the Open/New Business side of the business to gradually dominate the run-off side, with many years (10 plus?) in which to gradually do it, yes? In the meantime while offering a superb yield.

[williamcooper104] 01/3/2021 09:09

They will - but there's about £1tn of pension liabilities on companies balance sheets. The main blocker to these moving is the cost of paying an insurance company to take them because of ultra low interest rates. So a general reflation/increase in long term rates ought to see more growth The value of an annuity book is measured as at a discount rate, so crudely any distribution above that yield is a return of capital and anything below it represents a normal return of profit

[fenners66] 01/3/2021 08:56

The annuities acquisitions would surely dry up over time. Since pensions were changed so that we do not have to buy an annuity there will have been a massive decline in people doing so. Therefore in say another 15 years will there be much annuity business left to actually buy?

In the meantime with declining volumes you could see why annuity providers would see decline in scale and be more prepared to offload what they still have.

[bluemango] 28/2/2021 20:54

And from last year's annual results:

"With circa GBP0.5 billion of incremental cash generation delivered from new business written in the year, we have demonstrated that our Open businesses and BPA bring sustainability to Phoenix, offsetting the run-off of our in-force business"

[bluemango] 28/2/2021 20:49

From the Company's website re their Open Business:

Our Open business comprises products that are actively marketed to new and existing customers and has five separate business units. Our Workplace pensions and Customer Savings & Investments (“CS&IR21;) units operate under the Standard Life brand and manufacture long-term savings and retirement products to support people saving for their future.

The Retirement Solutions unit within Open includes both vesting annuities and our Bulk Purchase Annuity (“BPA”) business, where we acquire annuities and deliver the financial stability required to secure pensions currently provided by corporates.

Lastly, the Open business comprises our market leading brand – “SunLife”; – which sells a range of financial products specifically for the over 50s market and our European business unit which spans Ireland, Germany and the International Bond segment in the UK and operates under the Standard Life brand.

[bluemango] 28/2/2021 20:44

Thanks, appreciate the explanation. Makes sense.

So yes, the closed books are in run-off, but every so often the business gets renewal boosts, by new acquisitions.

[jonwig] 28/2/2021 20:39

bluem - you can compare it with infrastructure trusts such as HICL. Each of its PFI investments has a finite life (20 - 40 years typically), so would generate income plus a final capital payment.
So the way it renews itself is by raising capital to buy new investments so lengthening its lifespan.

Similarly, when P buys a closed book of pensions or policies, that investment has a finite life, so it must make further purchases to continue the process. Fortunately there are plently of sellers, as they don't want the drag on resources.
When P wants to buy a closed book it raises new share capital as with the rights issue to buy SLA's books.

Actually P also has some open business, I believe, but I don't know the details.

There is another thing: UK insurers are lobbying to overthrow Solvency II owing to its complexity and the way it calculates capital adequacy. If that happens, profitability would get a boost.

[bluemango] 28/2/2021 19:43

A question for the bb. Sometimes when Phoenix is mentioned in comparison with other income stocks, people comment 'it's a business in run-off' with the implication that it's not sustainable long term. So, to what extent is this company actually future-proofing? What sort of timescale can we expect this sort of income from PHNX? 20 years? That would be fine for me, but I can just about see how this limitation, if true, might put others off.

[masurenguy] 28/2/2021 19:02

According to Richard Hunter, head of markets at interactive investor: “Intense competition and pressure on life and pensions providers to reduce costs has allowed Phoenix to grow via acquisitions and then strip costs. Pearl Assurance and Abbey Life are now both part of Phoenix.” With a 6.6% yield and dividend cover of 1.9 times. Hunter says the business model is proving a canny one.

[lauders] 28/2/2021 05:37

Only just over a week to go before results:

Look forward to seeing what results show. "Steady as she goes" is fine by me with this income holding.

[spcecks] 25/2/2021 13:05

bluemango thanks for the information.

[bluemango] 25/2/2021 11:59

Phoenix have helpfully clarified the situation.

Firstly they have now corrected their website to reflect the disposal of indirectly held shares on 24th Dec. The current combined SLA holding is 16.86%, same as announced on 24th Dec.

The 14.42% held directly is their strategic stake held directly at Group level. They have not disposed of any of these.

In addition they hold 2.44% held independently from this, through Aberdeen Standard Investments (ASI) on behalf of their clients. It is from this indirect, client holding, that they made a disposal back in December. So zangdook is correct in his post #4355; they disposed of some shares from this indirect holding in December.

[zangdook] 25/2/2021 08:43

27 July, after new shares were issued for ReAssure, SL held 144,114,450 directly and 34,686,092 indirectly, for 17.9%.


24 December SL held 144,114,450 directly and 24,345,899 indirectly, for 16.86%


So they disposed of just over 10m indirectly held shares - perhaps Claire H means they didn't sell any actual shares, just some derivative. Not counting the indirect holding would fit in with the "approx 14%" statement.

[bluemango] 24/2/2021 17:32

I shall email Claire myself and try to clear up the confusion.

It's not so much that SLA may have been selling, clearly that's up to them - it's simply a matter of confidence in management to be clear and transparent, and consistent with all the info in the public domain.

[bluemango] 24/2/2021 17:19

Thanks.

This is curious - perhaps she's going by the Company's website, which appears not to have been updated to reflect the holding notice of 24th Dec reducing from 17.9% to 16.86%, nor the info released yesterday to say that SLA's holding had dropped further to 14%?

Here's the current company website page stating 17.90%:



Which doesn't reflect this Dec 24th holding notice reducing from 17.90 to 16.86%:



Nor this extract from yesterday's news release:

"SLA became a leading shareholder in Phoenix and today has a strategic shareholding of circa 14%."

[panshanger1] 24/2/2021 16:53

Further response from Phoenix :SLA have not sold any shares this from Claire Hawkins (director of corporate affairs )

[ianood] 24/2/2021 16:13

Thanks all for the clarification

[bluemango] 24/2/2021 14:23

Thanks from me also. Although the Company's response doesn't explain the drop from 17.9 to 16.86% in December; nor the further decrease to 14% now.

[skinny] 24/2/2021 13:49

Reassuring(ish) - thanks for the update.

[panshanger1] 24/2/2021 13:48

Claire Hawkins e-mailed back to say the reduction to c 14 % was purely due to the dilution from the ReAssure acquisition.The implication being that SLA hadn't sold any although she didn't actually say that.

[look alive] 24/2/2021 10:20

Well if the holding is down to around 14% there should have been an announcement.

[bluemango] 24/2/2021 09:55

Agreed. Note that their percentage holding went down without selling, when PHNX issued more shares back in July on acquisition of ReAssure. Down to 17.9%.

Then on 24th Dec looks like they sold to go down a percentage point to 16.86%.

[panshanger1] 24/2/2021 09:50

Yes but we are at the beginning of a new 10 year strategic partnership!Be nice to have some clarification in the light of this

[bluemango] 24/2/2021 09:42

Thanks jonwig

Edit: 3 years since that agreement.

[jonwig] 24/2/2021 09:34

It's here possibly (23/02/18):

Phoenix and SLA have agreed the terms of a Relationship Agreement to be entered into once SLA becomes a holder of approximately 19.99% of the enlarged Phoenix, which will govern the relationship between Phoenix and SLA and ensure that the enlarged Phoenix carries on as an independent business and complies with its obligations under the Listing Rules. Under the Relationship Agreement, SLA will have the right to appoint two non-executive directors to the Board of Phoenix for so long as SLA holds 15% or more of the share capital of the enlarged Phoenix and the right to appoint one non-executive director to the Board of Phoenix for so long as SLA holds 10% or more (but less than 15%) of the share capital of the enlarged Phoenix. Subject to certain exceptions, SLA has agreed to a 12-month lock-up and a two-year standstill following Completion (except in respect of its shares under management).