Phoenix Share Discussion Threads

[jonwig] 08/1/2013 07:59

Sorry - should have been clearer.

The only significant thing about the PGH companies, as far as I can see, is the legacy of debt (about £500m out of a total of £3000m).
This seems to have a complex structure (AR 2011 p118) which might have to be sorted out before Solvency II.

The only reason the Group FD should be on the boards, as I see it, is to oversee a restructuring of these debts.

[jonwig] 07/1/2013 19:04

Scburbs - I'd go along with your thoughts, but I do have a slight niggle about rising UK gilt yields: the 10-yr is about 50 bp above the low of last spring.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This page might be visible without registering (it's free anyway and a good resource);

https://www.brokerforecasts.com/companies/PHNX

Notice the amazing variation in target prices!
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Might today's RNS be significant?

In compliance with Listing Rule 9.6.14, the Company announces that Jim McConville, Group Finance Director, has been appointed a director of Pearl Group Holdings (No.1) Limited, which has debt securities listed on the London Stock Exchange.

In addition and also in compliance with Listing Rule 9.6.14, Jim McConville has been appointed a director to PGH (LCA) Limited and PGH (MC2) Limited, both of which have debt securities listed on the Channel Islands Stock Exchange.

All appointments were effective from 7 January 2013.

Why would the group FD want to (need to) join the boards of subsidiaries unless corporate actions were imminent in the subsidiaries?
And there's only one meaningful corporate action I can think of.

[scburbs] 07/1/2013 12:51

The deal to reduce the level of bank reserves is also very good news for companies looking to refinance and could hopefully see margins start to fall (as more banks may have capacity to lend).

[zcaprd7] 07/1/2013 11:59

Maybe. I think the wall of gilt/bond money is looking for safe havens...

[philo124] 03/1/2013 16:44

I think it's the general rally on top of a good run.

[zcaprd7] 03/1/2013 16:34

Looks to be breaking out?

[philo124] 03/1/2013 16:27

560p, target 600p.

[zcaprd7] 24/12/2012 13:03

So Xercise has been a seller?

[jonwig] 20/12/2012 11:54

Thanks ... but haven't credit spreads narrowed too, with the rush down to zero?

In any case, those numbers on p37 don't suggest a wipeout of MCEV figures - even under pretty sudden conditions.

[scburbs] 20/12/2012 11:34

Jonwig,

Page 37 shows the MCEV impacts of interest rates/longevity etc. The most sensitive are credit spreads (not interest rates) and longevity. IMV the sentivity is fairly low given the MCEV discount.

[jonwig] 20/12/2012 11:01

Yields on 10-year US corporate bonds have fallen to the lowest levels in history as a result of central bank liquidity, halving from 4pc to well under 2pc since early 2011.

Fitch said investors could cope with a gentle reversion to higher rates, but a "sudden rise" would devastate the portofolios of life insurers, pension funds, and other fixed-income institutions.



Reading the comments to the article, some were actually looking forward to this with some relish.

PHNX life cos have over 50% of assets in bonds so a sudden rise (not US-specific) would certainly impact MCEV through MtoM adjustments, while a gradual rise would let re-financing of maturing bonds at higher rates take up the tension.
And then there's rates for new annuitants.

The last couple of weeks have seen a lot of corporate bonds make substantial gains, for example Provident Financial 7% 2020 from 107 to 112.

Should we worry?

[jonwig] 19/12/2012 11:16

Scburbs - yes, those are the hopes.

A think a retail bond issue would need to be too large to absorb, and the market here seems to be getting saturated.
A larger size issue could get away if it were debentured, maybe?
Secured loans would look a lot better on banks' balance sheets too.

I read the recent Telegraph article on longevity and immediately thought of the Actuary article - good that you posted it on TMF.
The argument suggested, that under-90s aren't filling in the forms works only if that's a change of behaviour. In any case, they are more likely to fill them in than younger people - I filled in three for whom I have PoA (done online, so easy).
For anyone interested, the TMF thread is here:

[zcaprd7] 19/12/2012 10:42

Certainly perky - is it a frothy Christmas rally?

Still, pretty safe dividend and positive news on the horizon...

[scburbs] 19/12/2012 10:39

Jonwig,

Good to see these (along with RSL) starting to move up. I still think PHNX remains well behind events in the market and there is plenty of moving up still to do.

A nudge up on MCEV would help, but they do have MCEV coming out of their ears! The exact terms of the refi will continue to drag on the share price until they are known.

Personally I think they should be able to negotiate a deal that will allow them to pay a dividend of well over 42p (either that or add share buybacks and hold the current dividend if the share price remains so undervalued).

The bond markets are currently awash with liquidity so I wonder if they could tap them in addition to new bank funding (although the bond market pricing would probably be more expensive - assuming it is subordinated/unsecured).

[jonwig] 13/12/2012 08:54

scburbs - I've checked back and it was your FT link in September which mentioned the census results. I hadn't realised it was so far back!

How, if at all, these will be factored into the next MCEV I don't know.

[scburbs] 12/12/2012 22:35

Good to see a bit of life, but still well behind events.

[jonwig] 10/12/2012 12:01

Cheers - I've added a link to the original article, which has a lot more.

[aleman] 10/12/2012 11:41

Thanks, jonwig. I've copied that link to a few other threads.

[jonwig] 08/12/2012 16:07

From Equity Development's regular round-up (p3)

Pensions – please don't fall asleep – you probably don't read "The Actuary", nor want to, but this week it highlights an article revealing that the 2011 Census enumerated significantly fewer men over 80 or, even more so, over 90, and women over 100 (and to a lesser extent, women over 80 or 90 and men over 100) than had been estimated based on the 2001 Census and subsequent registration of deaths. The shortfall in over-90 men was more than 15%.

This implies that the reports of a surprising improvement in mortality, and a
consequent jump in the estimated liabilities and deficits of pension schemes may
be erroneous and due to errors in the 2001 Census (you know: the one that said
the total population of Westminster was fewer than the number of heads of
household not only billed but actually paying council tax in Westminster). The
numerator (deaths) was right, but the denominator (number of those alive) was
more than 10% too high, so mortality rates were too low and expected longevity
and cost of pensions overstated.

If so, this means that the market is overconcerned about the reported deficits in private-sector schemes (also that the Actuaries' former estimates – blamed by New Labour's spin doctors for pension problems to distract attention from Brown putting all DB schemes into deficit at a single stroke – were right, or pretty close, all along). Some (not all) of the special payments into pension schemes will turn out to be/have been unnecessary and those shares marked down due to the pension deficit are due a modest re-rating.



Here's the original:



This was mentioned earlier on this thread. Obviously encouraging for holders of any companies with DB schemes, but definitely positive for PHNX ...

The MCEV balances assets and liabilities from a long-term DCF perspective which the statutory IFRS accounts can't cope with.

Assets (value of in-force business) are affected through a cut-off in the income stream, but liabilities (mainly early encashment through mortalities and annuities severed) certainly should be reduced significantly - and the numbers in the quote above aren't trivial.
The 2011 AR has, (p129):

It has been assumed that post-retirement mortality is in line with a scheme-specific table which was derived from the actual mortality experience in recent years, performed as part of the actuarial valuation as at 30 June 2009, ...

Will the March FY announcement be updated? These valuations seem to be triennial, so maybe!

[zcaprd7] 06/12/2012 17:36

Aha, fair enough, new recent high for the share price as well...

[hyden] 01/12/2012 17:26

Thanks, sc. I find your analysis very helpful.

[scburbs] 01/12/2012 12:42

Mid-2013 would be my guess (earlier if they can get a good deal). Gearing (debt/MCEV+Ignis NPV) set to have fallen from 58% in December 2009 to 43% at December 2012. The longer they wait the better the terms they should be able to secure due to the prodigious cashflow.

The crunch date isn't until November 2014 (really March 2014 as they need the auditors to sign off the December 2013 accounts which they won't do without an extension).

The interest rates step up from September 2013. It is unlikely they can refinance cheaper than the stepped up margins (2.5-3.75%), but a refinacing as close as possible to September 2013 should minimise the incremental interest costs.

[zcaprd7] 01/12/2012 10:33

Yawn, you'd think they'd try to get the re-terming done this side of Christmas, no?