Phoenix Share Discussion Threads

[zcaprd7] 04/2/2013 22:19

Isn't that more than your entitlement?

[philo124] 04/2/2013 18:54

Sold 50% today - 1500 shares. Have confirmed to broker i want to take up my allotment on the 3000 originally held, plus applied for an additional 3000 on the basis it will be scaled back significantly, then will then cross all into SIPP.

[jonwig] 04/2/2013 18:46

That's right - if you have an online broker they should inform you of the position and have instructions for you.

The meeting is on 19/02 and the business should be finished on 21/02. I reckon you should be told by your broker early next week. I'll post when mine gets in touch (T D Direct).
Ring them if you get concerned.

[zcaprd7] 04/2/2013 18:17

Normally your broker will contact you. Log into your account, you may have a secure message. Just asked for my full rights myself with Hargreaves...

[robsy2] 04/2/2013 17:14

Hi Jonwig
I'm pleased that things are moving in the right direction here but I'm a bit confused?If you have a moment could / or some other kind soul,enlighten me as to what I have to do to get my free entitlement or take up my shares?
R2

[jonwig] 03/2/2013 14:24

zcap - funny about RSA, an elderly lady friend who uses a discretionary wealth manager has just bought a load of RSA @ c 130p.
For myself, I hold but don't buy.

As for PHNX, they aren't 'rights'. So you either take them up or lose the opportunity. They're already ex-entitlement.
If you don't want to increase your holding, sell X shares now (or whenever) @ 635p, say, and subscribe for X shares @ 500p. There's a free lunch, near enough!
(X being your entitlement.)

That's what I did last week. I'm happy with what I have, but don't want more.

[zcaprd7] 03/2/2013 13:05

Interesting. I off loaded my RSA last week. And dumped my direct line stag. If I see good capital growth on my high yielder I tend to bank the profit... Not sure what to do here, other take up the rights and grab the divi?

[jonwig] 03/2/2013 09:07

Hard to find that sort of yield [8.5%] these days.

Yes, yield has been whittled away during January in the insurance sector.
My other holdings have all done well recently - RSA (now below 7%), Chesnara (another life consolidator) and Randall & Quilter (the most boring share in the world?).

The real estate sector might have legs over the coming year - at least those companies which can maintain their dividends before growing them.

[scburbs] 02/2/2013 08:01

Before the announcement share price 590p divi 42p yield 7.1%.

Afterwards divi say 54p share price 760p based on the same yield. Certainly at 640p it is an enticing yield of near 8.5% despite the derisking! Hard to find that sort of yield these days.

[jonwig] 02/2/2013 07:25

From brokerforecasts.com, 1 Feb:

Investec has upgraded its recommendation on Phoenix Group Holdings [LON:PHNX] to 'buy' from 'hold' after the company announced plans to re-term its debt and increase its dividend cap.

The City broker has increased its price target by nearly 50 per cent to 734 pence (from 496 pence).

Analyst Kevin Ryan said: "The announcement on 30th January that Phoenix would re-term the largest part of its shareholder debt, issue some equity and strongly boost dividend payments should be viewed as good news, we believe.

"This de-risks the stock in the short term and offers attractive income in 2013."

Shares in Phoenix Group have increased in value by nearly 30 per cent in the past three months.

[jonwig] 31/1/2013 15:01

prallum - I take your point and sympathise: I, too, have had policies mature with disappointing results.

However, there are counter-arguments, unfortunately!

First, closed policies have tighter capital requirements, and hence lower returns.

Second, shareholder returns here are largely driven by admin efficiencies and regulatory requirements, not investment returns.

Crudely put, I hold shares in SSE and RDSB to hedge against my domestic power and fuel bills.

[prallum] 31/1/2013 14:10

As a long suffering endowment policy holder I can't understand how this company can pay shareholders a dividend when they are not able to make any money for me as a policy holder.

It's nice to hear that they are doing something nice for one group of people as they are not doing anything good for their unfortunate policy holders.

Perhaps they should swap all the securities 60bn plus of assets to their own shares. Then I might get some improvement on the return from my policies.

[philo124] 31/1/2013 08:13

Canaccord 710p target.

[scburbs] 30/1/2013 20:36

Some commentary from The Standard

"At first blush, this looks to sort out a lot of the problems that have plagued Phoenix. The new equity reduces the debt but it also puts it into a more manageable form, and it does appear to get the banks off the company's back. It makes the business much more equity-investor friendly by removing the cap on dividends.

The payout is immediately increased substantially, and there is clearly scope for it to be increased again in future. Indeed, a higher payout implies a serious uplift in the share price if it is to be rated on the same yield as its peers - but then the management would imply that off the record wouldn't it?

The bigger issue is whether the reform will bring growth. There are still a lot of insurance and pension assets out there which are ripe for consolidation but with all the financial and investment uncertainty of recent times buyers have been in short supply.

Phoenix is now in a position to re-enter the market, or will be when it has beefed up its share price a bit so it has a currency it can use to do deals. And interestingly, its shareholders old and new seem to be up for it.

So, after a long hiatus, maybe the insurance sector is going to get the consolidation it needs."

[jonwig] 30/1/2013 19:30

Couple of FT comments:

The pizza-to-pubs entrepreneur who led efforts to create Phoenix said the life assurance group had scope to lead a fresh wave of consolidation in the sector after it unveiled plans to repay £450m of debt.

Hugh Osmond, who sits on the group's board, said Phoenix would be in no rush to make acquisitions but would be able to look at "decent-sized books" of business once the FTSE 250 company completed the restructuring.

"That's the whole point of this business in the end," he said.

Phoenix set out plans on Wednesday to raise £250m worth of fresh equity, the proceeds of which would be used to reduce debt originally taken on to help fund the 2008 purchase of Clive Cowdery's first Resolution life assurance business.

Shares in Phoenix, which had been depressed by a tight debt repayment schedule, rallied 6.6 per cent on Wednesday to 630p.

The group said it would launch a £170m open offer at 500p per share – a 15 per cent discount to Tuesday's closing price – while Och-Ziff, the hedge fund, plans to inject £80m of equity.

Existing cash would finance the rest of the debt repayment. Net debt will fall from £2.4bn to £1.9bn.

As a result of the restructuring, the average maturity of Phoenix debt would lengthen from 36 months to 78 months, said Clive Bannister, chief executive.

The agreement also ends restrictions placed by the company's lenders on the dividend Phoenix pays, and the company plans to increase its final dividend 17 per cent to 26.7p a share.

Some analysts remained cautious, however. Kevin Ryan at Investec said Phoenix would still have "significant gearing" in spite of the "sensible" measures.

Gearing – which Phoenix defined as gross shareholder debt as a percentage of gross embedded value, an insurance valuation measure – would fall from 56 per cent to 50 per cent.

The cost of interest on Phoenix's restructured loans will rise to 475 basis points above Libor – compared with the current level of 200bp, which had been due to increase to 300bp in September this year.

Phoenix, formerly known as Pearl, was set up to buy and merge life assurance businesses that had stopped writing new policies. However it put the strategy on hold while it renegotiated the debt burden.

Mr Osmond said he was mindful of regulatory and financial constraints on further deals in the sector. But he said the "strategic rationale" remained for further consolidation.

The consolidators argue both policyholders and shareholders ultimately miss out when closed funds run off individually because the process is inefficient. They seek to merge the funds to make capital, tax and operational savings.

Phoenix managers are hopeful that the changes will lead to a rise in Phoenix's credit rating.

An investment grade rating was "one of the outcomes that this restructuring helps us on the journey towards", said Jim McConville, finance director.

"Getting access to the capital markets is absolutely the next logical step," Mr Bannister added.



And:

A refinancing by Phoenix Group represents a stirring in the ashes rather than the rebirth of the inflammable fowl for which the insurer is named. The group sprung up in the noughties with the aim of making big profits from buying and jamming together life assurance businesses that had mostly stopped writing new policies. But Phoenix's deal addiction left it over-leveraged and unable to service its debts.

As a result, banks imposed a £72m ceiling on annual dividends. Now lenders have agreed to remove the restriction, shifting the balance of power modestly back in favour of shareholders. In return they have to inject £250m of new equity, topped up from the group's reserves to repay £450m of loans. That reduces net debt to £1.8bn, while pushing out the average maturity.

The figure is still well ahead of the equity capitalisation, though this jumped 11 per cent on Wednesday to £1.1bn in anticipation of higher divvies. Phoenix hopes future refinancings in the bond market will support these by reducing interest costs.

The group may also start acquiring again. Since rival Resolution has been discouraged from this by pitchfork-waving investors, prices should not be too demanding.

But both groups have failed to convince the market that consolidating big closed books of life policies is a better business than that of a conventional insurer. This humble drudge bears the cost of writing new policies, but not the expense of superfluous deal-doing by roomfuls of financiers in awe of their own brilliance. For example, shares in Phoenix trade at 75 per cent of book value compared with 93 per cent for Aviva, the Billy No Mates of its sector. Phoenix still has an awful lot to prove.



But, as already pointed out (DangerS) the GFC came between the float and now.

[scburbs] 30/1/2013 13:48

Good spot, I missed that. I am pretty sure they can find an extra £40m if they want to (even after the paydown they have £800m+ of cash at holdco level), but perhaps they will be more cautious on the dividend.

The one number I couldn't see was the Phoenix Life Surplus number at 31 December 2012. This tells you if they have raided the piggy bank to meet 2012 target cashflow and gives you an idea of how 2013 is looking. My guess is that they still have a bit in hand and could have gone higher than £690m if they wanted to. Has anyone seen this number in any of the docs?

[dangersimpson2] 30/1/2013 13:42

Higher dividend payments by PGH will be subject to making debt repayments in excess of target amortisation....

Mandatory: £60m p.a.
Target: £120m p.a.

the excess has to be above target not mandatory so they would have to pay more than £120m to raise the £125m+£10m pa cap.

Still an 8.7% yield growing at c8% a year isn't bad!

[dangersimpson2] 30/1/2013 12:54

New gearing methodology excludes the NPV of Ignis profits, so true financial situation a bit better than the headline gearing figure.

[jonwig] 30/1/2013 12:42

Thanks - hadn't looked for that.

By my reckoning dividends of £145m pa would equate to over 64p/sh on increased capital.

[scburbs] 30/1/2013 12:34

Presentation up on website. Potential to increase dividends beyond the £125m +10m p.a. if they accelerate amortisation of the new facility. It looks like in order to be able to pay an additional £20m dividend they need to amortise an extra £40m debt (to pay £40m they would need to amortise £106m extra debt). Given they are already planning to amortise debt £60m faster than schedule the expected dividend capacity appears likely to be £145m p.a. not £125m p.a. (+10m p.a)

[jonwig] 30/1/2013 11:18

LOL - seems an age ago.
Are we still there?

[dangersimpson2] 30/1/2013 11:17

GFC = Global Financial Crisis?

Yes, sorry thought that was one in common use, but maybe not!

[topvest] 30/1/2013 11:15

Good news overall, with minimal dilution - deserves a re-rating.

[zcaprd7] 30/1/2013 11:12

Open offer is a no brainer. And the new shares get the final dividend!