Phoenix Share Discussion Threads

[scottishfield] 02/4/2014 16:15

If one were approaching retirement & one was casting around for the best annunity rates, would one come accross these exceptional rates, and would one have access to them, if one were not already a customer of some sort? Sounds too good to be true if so?

[scburbs] 02/4/2014 16:09

Hi DrDre, Yes it is difficult to imagine anyone not taking up a 11% annuity regardless of the budget. I am less clear as to how PHNX makes a profit out of writing a 11% annuity, but apparently they are collectively worth £191m of MCEV.

[drdre] 02/4/2014 15:35

Hi scburbs,

Those guaranteed annuity rates are pretty fantastic compared to what I have seen advertised and listed as best buys in the Times each week (4-6%).

Thanks for posting - great thread this, as most of the largely untreaded ones tend to be :)

[scburbs] 02/4/2014 15:32

Some detail on the synergy sharing arrangement with Standard Life.

"The second part that you referred to was the synergy sharing arrangement. That is in two five year bits, so it's five years and then five years optionality and at both sides. And how it works is that, I was going to say if, but when we do a closed life transaction, if those assets are managed by Standard Life and for the duration that they are managed we will get a 15% or 20% of the gross revenues generated from those assets managed by Standard Life. The difference between 15% and 20% is if it's less than £5bn transferred it's 15% and if it's more than £5bn of assets it's 20%."

[scburbs] 02/4/2014 15:16

Transcript is up. I notice that the GAR rates are seriously generous (11%), so it is unlikely that this part of the business will be impacted by the budget (except for anyone ill advised!).

"Given the recent budget proposals on annuities I wanted to speak for a few minutes about how we see this impacting Phoenix. The only new business we write is annuities which we offer to our existing pension policyholders when they reach retirement. In 2013 we wrote almost £800m of annuities of which almost two thirds have guaranteed annuity rates. The policies with guarantees provide attractive rates to policyholders. They typically pay twice the standard rate, for example, currently a 65 year old male typically receives an 11% annuity. And so we do not believe the recent budget proposals are likely to have a material impact on this component of our annuity business. This is particularly the case if the proposals around free guidance for policyholders are implemented, as we believe policyholders will continue to make rational financial decisions and will choose to take up those valuable rates rather than seek an alternative product.

...

On MCEV we included the expected future value from guaranteed annuities within the Group MCEV, on the basis that we expect policyholders to take up the valuable rates. The value of this was £191m at the end of 2013 which we do not believe is at risk for the reasons I've already mentioned. However, we fully reserve for policies with guarantees, and so to the extent fewer policyholders choose to take up their guaranteed rates than we expect there is the potential for positive experience variances to benefit the MCEV in future.

On the non-guaranteed annuities we don't make any assumptions around the proportion who will choose to take an annuity in the future as this is less certain, and so we recognise this as new business each year in the MCEV. In 2013 the contribution to MCEV post tax operating profits from writing non-guaranteed annuities was £18m."

hxxp://www.thephoenixgroup.com/~/media/Files/P/Phoenix-Group-V2/Attachments/pdf/FY13%20Results%20Presentation%20Transcript.pdf

[manrobert] 02/4/2014 08:06

pretty good xd 26.7 opening.

[hvs] 01/4/2014 16:30

Thats why I is in.

No problems here. After all its MY MONEY nOT OTHER PEOPLES.

[scottishfield] 01/4/2014 16:04

hvs, I take it you feel PHNX is something of a (very) good buy?

[dangersimpson2] 01/4/2014 15:34

Re: Wheatley - he's got to go surely?

The FCA's supervision of the co-op bank was so poor it allowed co-op to release results that made no mention that it was insolvent without additional capital. They let Lloyds get away with trying to shaft retails holders of ECN's and still can't come up with any guidance on what is reasonable behavior. Now they leak incomplete info to the press about a review that could have serious impact on insurance companies several days before announcing the details.

Given that their mandate is:

We intervene when firms:

treat consumers unfairly
behave in ways that risk the integrity of the market

And they have consistently allowed retail bond holders to be treated unfairly and themselves have behaved in a way that risks the integrity of the market then that has to be grounds to resign or be sacked.

[jonwig] 01/4/2014 14:30

DangerSimpson -

My layman's understanding of this is that by consolidating life funds that have previously had to hold capital against those policies. If they can net off the risks of the combined policies they have to hold less capital which they can keep - this cashflow has effectively come from the company that sold them the policy not the policy holder. Policies maturing also releases this capital.

That (capital requirements) is mainly my understanding too.
But there's also admin consolidation and using Ignis as manager with tracker funds.

hvs thinks some are idiots abounding - not you, I think!

PS. The resignation possibility of the FCA's Wheatley was mentioned on BBC R4 at lunchtime.

[dangersimpson2] 01/4/2014 13:10

Although it's not impossible for the FCA to challenge the strong cashflows that PHNX produces my understanding is that a good chunk of these (FY13: 332m out of 817m) come not from specifically managing policies but from 'management actions'. My layman's understanding of this is that by consolidating life funds that have previously had to hold capital against those policies. If they can net off the risks of the combined policies they have to hold less capital which they can keep - this cashflow has effectively come from the company that sold them the policy not the policy holder. Policies maturing also releases this capital. This combined with increased operational efficiency means that policy holders are not disadvantaged by PHNX' cashflow generation.

It's these cashflows that PHNX can generate by consolidating policies that are their real sustainable competitive advantage and why they are keen to give themselves as much flexibility as possible to do deals which I fully support. Might be wishful thinking but my hope is that this review will mean that a lot of other companies will be much less keen to hold onto closed books and PHNX can pick up some good deals out of this.

[aleman] 01/4/2014 11:17

It sounds like there may be a small number of firms charging obscene exit fees which are a particular problem.

[revell40] 01/4/2014 11:11

I think we may be in for a big drop tomorrow it's not doin Mutch today any thoughts anyone

[renew] 01/4/2014 10:26

Cant make my mind up re the potential negative impact on Phoenix from this review. Company says minimal but interview with Wheatly this morning gave the impression to me that FCA think there is some unfairness hidden in these zombie funds.They certainly make some big bucks from somewhere.
Would love to buy back in at these levels but would equally like to know precisely where the FCA are coming from to understand the potential negative side of this review.

[scburbs] 01/4/2014 09:27

Thanks Jonwig, Looks like some sensible commment from Cannacord. Didn't realise they had actually issued flat dividend guidance. A little disappointing, but clearly they are trying to build up acquisition capacity.

I think this might be a bit self defeating as the rerating from a progressive dividend policy would make equity issues for acquisition more of a possibility.

[scrabble1975] 01/4/2014 09:17

Taking a look...

[jonwig] 01/4/2014 09:15

Citywire this morning:

Canaccord Genuity has reduced its target price from 865p to 800p for closed book insurer Phoenix Group Holdings (PHNX.L), whose shares dived last week on reports the City regulator would examine insurers' historic pensions and investment business.

Analyst Ming Zhu said the lowering of the target was due to guidance of flat dividends issued last week, 'based on an unchanged target dividend yield of 6.75%, which equates to a 28% discount to our lower embedded value estimate'.

She added that while the Financial Conduct Authority was highlighting a lack of transparency in insurers' back books, 'we view Phoenix's disclosure of the back book structure as relatively good compared to others in the UK life market'.

Zhu maintained her 'buy' rating for the shares which yesterday added 7p, or 1%, to 659p. 'Phoenix's 0.1% admin margin on its with-profits book in 2013 and 0.55% on its unit-linked book (likely from 1% of charges) are unlikely to be deemed "rip-offs",' she said.

'As Phoenix only manages a closed book, ie, no new customers, we do not see it as at risk of breaching the requirements to treat its customers fairly. The management is also confident in the level of service it has provided to its customers.'

hxxp://citywire.co.uk/money/the-expert-view-easyjet-phoenix-and-shanks/a743913?ref=citywire-money-latest-news-list#i=4

[uppompeii] 01/4/2014 08:14

Recovery here not as strong as I expected? Aviva back at levels pre FCA nonsense, L&G and SL also within distance? Any ideas? Aviva up strongly again today and ex divi tomorrow

[revell40] 31/3/2014 17:11

Thanks think a drop then up up and away

[drdre] 31/3/2014 17:04

26.7p per share I believe

[revell40] 31/3/2014 17:01

Can anyone tell me how Mitch the divi is on we'd ta

[hvs] 31/3/2014 09:41

Just han in there.

These very very CIVIL SERVANTS have NO CLUE. Just look at the SHAMBLES at the SFO.