Phoenix Share Discussion Threads

[yupawiese2010] 20/3/2017 09:54

Jonwig.

Back in January, - Deutsche had the following to say.

As you will observe in the last paragraph , conclusion was that any potential deal up to £1 - 1.5 billion could be done with cash / debt


Link.

From Citywire:

"Deutsche likes Phoenix’ fire power

Deutsche bank has upgraded its recommendation for Phoenix Group Holdings (PHNX), believing the market under-estimates the life insurance consolidator’s capacity to make another value-enhancing acquisition this year.

Insurance analyst Oliver Steel lifted the stock to ‘buy’ from ‘hold’, but lowered his share price target to 835p from 870p, explaining the purchases of the AXA Wealth and Abbey Life legacy pension businesses last year left Phoenix in a strong position to snap up another closed book of policies this year.

‘Phoenix has finally emerged from seven years of balance sheet recovery with the announcement of two acquisitions in 2016. We think investors are under-estimating the rapid improvement in solvency and debt capacity over 2017e- 2018e,’ said Steel.

‘Specifically, we think a hypothetical £1 billion - £1.5 billion acquisition could be funded principally out of cash and debt rather than equity, adding either side of 25% to future value - something that in our view is not sufficiently reflected in the current share price. Reflecting this, we lift our recommendation to “buy” with a 835p price target,’ the analyst said.

[jonwig] 20/3/2017 08:30

"We believe there will be further consolidation in the UK life industry. We continue to explore opportunities as they arise."

It would have to be financed by equity, I would think. So if it's any size, another rights issue (rather than a smaller placing) would be on the cards. I wouldn't mind that!

[fenners66] 20/3/2017 08:19

Glad they summarised the above at the start - 10 minutes later still have not got to a P&L account - such a convoluted report.

[masurenguy] 20/3/2017 07:54

Looking good !

[rcturner2] 20/3/2017 07:28

Yes very happy with that. As I said above, anything below 750p was a bargain.

[garycook] 20/3/2017 07:23

Final,s look very good,and with forward guidance,and with a forward 50.2p dividend,or 6.3% Yield at current share price Also looking for more acquisition,s.

[deepe] 20/3/2017 07:22

Results are out and looking good:

 £486 million of cash generation2 (2015: £225 million), meeting the Group’s 2016 cash generation target
 Solvency II surplus of £1.9 billion3 as at 31 December 2016, compared to £1.3 billion as at 31 December
2015
 Shareholder Capital Coverage Ratio of 170% as at 31 December 20164 (154% as at 31 December 2015)
 Group operating profit of £351 million (2015: £324 million)
 Proposed final dividend of 23.9p per share, an equivalent 5% increase on the 2015 final dividend5

[dennisten] 17/3/2017 17:46

Looking forward to the results on Monday....

[edmundshaw] 13/3/2017 08:08

Results in a week. Hopefully that will boost the share price...

[garycook] 13/3/2017 07:48

Yes 4% of the fund.Shows confidence in PHNX,by Mark Slater,and his MFM Income fund.

[masurenguy] 13/3/2017 07:38

Phoenix is currently the largest individual holding in the Mark Slater MFM Income Fund.

[woodhawk] 03/3/2017 13:23

Indeed! I was talking near term, though.

[garycook] 03/3/2017 13:18

And higher long term £9/10,in time.

[woodhawk] 03/3/2017 12:07

Exactly what I thought, Gary. Potential 6%+ divi and excellent growth prospects... and less volatile than some of my other holdings :-) Could easily break out to 800p, I would have thought?

[garycook] 03/3/2017 12:02

Woodhawk,Welcome more the merrier.But a bit more quiet than the GVC thread.The dividend not sure until results,but should be between 45/50p,around a 6% yield.Great core holding.

[woodhawk] 03/3/2017 11:29

Just decided to join you here - very nice prospective dividend yield.

[mozy123] 16/2/2017 11:28

Theres a pearl assurance house building in a town near me. Looks empty!

[rl34870] 16/2/2017 11:23

Phoenix Assurance building in my home town is now student flats. Now there's a surprise!

[edmundshaw] 15/2/2017 23:11

Oh, Pearl. My first dealing with an insurance company was with Pearl, insured my first bike! A Honda 125. Sadly I wasn't insured for over-revving the engine... :-)

[rl34870] 15/2/2017 17:11

Alter ego : Thanks for that. With technology evolving as fast as it is the financial sector will surely change markedly over the next 40 years!

[alter ego] 15/2/2017 16:38

rl3487015 here is the history of Phoenix Group



Although Phoenix Assurance (Aka Phoenix Life) is one of the original components along with the Pearl, the Group as it stands today is unrecognisable from the old Phoenix I also worked for.

[rl34870] 15/2/2017 16:12

dangersimpson2 :thanks for the comprehensive explanation. I think I am right in saying that this is the same company of old ( my twin sisters first job was working for Phoenix Assurance in 1975) although how the company share capital has evolved over time I am not sure. Seems like the company over time will have plenty of opportunity to prevent it's own extinction. Valuing the company against its open book peers still seems tricky although most commentators suggest it is a great value stock.

[dangersimpson2] 15/2/2017 12:47

Roughly speaking they get cash from 2 sources:

1. Run off of the book. This is what MCEV is expected to represent although is highly dependent on a number of assumptions. Companies often trade at a discount to represent the risk of those assumptions being unrealistic.

2. 'management actions' this is where closed book transactions are accretive to the company. Partly by combining the IT systems and getting scale of administration but more importantly combining many policies narrows the variation of outcomes via the law of large numbers and means that the combined book has to hold less regulatory capital than the two books individually. This released capital is then available to management to pay out to shareholders or buy more closed book business.

So while cash flows from 1 will continue during wind down the real added value is from 2. That's why being a closed book consolidator is a good business and the transactions they do are win-win provided that a) there's enough books to consolidate, b) you don't over pay due to competition from other consolidators. The added benefit of 2. as well is that they come within the first few years of completing a transaction so their NPV is much higher than run off cash flows.

So cash flows don't cease if PHNX stop consolidating but they will slow down after a few years of the last completed transaction.

[sogoesit] 15/2/2017 12:06

Ok, so these companies "run out of business"... providing a yield for that risk along the way... but how long is this time period to run out (knowing that the discounted cash flow beyond, say, 20 years is meaningless in discounted terms but not nominal terms); 25 years, 40 years...?

[jonwig] 15/2/2017 11:51

I think it's a real possibility. At present there's a rush to get rid of closed books if they're viewed as non-core. At some point this will slow and companies might well prefer to keep them rather than dispose.
Also, Phoenix and others need to raise funds to buy closed books. They don't want more debt and equity might be hard to come by.

The present MCEV (or 'economic value' as it seems to be called) is a decent enough measure of what investors will get back (future-discounted) as these closed books run off. From memory, a broker marked PHNX as a 'sell' a year or so back based on this possibility*. For myself I wouldn't mind holding it if I knew I'd get back a decent premium to the existing share price.

EDIT: *In post #1688 I think.