Phoenix Share Discussion Threads

[jonwig] 10/3/2019 07:21

david - re timing and engaging, you're correct. I think the discussion was missing your main point.

What Phoenix has video-recorded are not its AGMs but analyst presentations: always well-attended. Analysts of course don't tend to bother with AGMs.

[davidosh] 09/3/2019 20:14

Just to be clear PHNX have a poor record on engaging from information I have been given...

2017....Jersey.....time NK.....shareholders 0....presentation NO

2018....London.....time 10am...shareholders 3....presentation NO

2019....Edinburgh..time 09am...shareholders ?....presentation refused

Do shareholders really think the directors are doing everything possible to engage with individual shareholders in what is the only official meeting of the year that we have the chance to do so ??

AGMs are very important meetings and should be respected as the investor community depend on these opportunities to ask questions and see the quality of the management teams. Next year will be different as ShareSoc are challenging this and it is wholly inappropriate for a FTSE100 company.

For the record I am not against moving the Agm location but companies should be forced to announce AGMs by RNS, they should have appropriate times for travel reasons ie. between 10.00am and 4pm.and should offer presentations with a Q&A to allow investors to engage and be attracted to attend.....I guarantee numbers attending will increase substantially then...

[tournesol] 09/3/2019 16:10

I attend AGMs whenever possible, particularly if the co is poorly covered by analysts and media. Ive been to lots of AGMs where I was the only PI in the room. Can't blame companies if they decide not to bother shipping their boards down to London for the day only to find nobody turns up. If I have a significant holding I will travel if need be. Used to go up to Aberdeen for DNX AGMs for example.Over the years I've made a lot of money by doing my own research. Attending AGMs and observing mgt and meeting them has been a vital part of that. Wrt PHNX my holding is too small to warrant a trip to scotland and in any case the co is adequate covered in the media.

[jonwig] 09/3/2019 14:56

@ alter ego - I agree with you. The 'off piste' part of the AGM where you can engage directors over coffee are valuable. I've been to AGMs where I've asked a question and then afterwards a director has approached me in conversation.

From what I've read over the years, some BoDs close down their AGMs to any sort of engagement. If you're at one of these, maybe get on the phone to sell!

As for davidosh's point, I've been to AGMs at company HQs (eg. Morrisons, near where I live) which have been well-attended by employee shareholders. I think it's a decent gesture on the part of PHNX to do the same. At least once, PHNX has produced a video of their full AGM.

[alter ego] 09/3/2019 13:28

Fair point with big companies with lots of analyst coverage. However, agm’s are a PI’s only real opportunity to assess management at close quarters for smaller companies. They provide the opportunity to ask questions outside the formal meeting and guage the quality and breadth of the answers. I’ve learned a lot about who is managing my money by bothering to go to an AGM.

[bothdavis] 09/3/2019 11:50

I invest...neer been to an AGM, not sure as to there worth for PI's....directors/companies feel its a waste of their time and the companies money, I tend to agree, personally.

[davidosh] 09/3/2019 11:32

Phoenix are not a very shareholder friendly company when it comes to Agms...

[actybod] 08/3/2019 08:25

Test 650 first ?

[jonwig] 08/3/2019 05:57

FT:

Life expectancy for 65-year-olds in the UK has fallen by five months according to new projections published on Thursday.

Men and women aged 65 in 2018 could expect to live a further 19.8 and 22.4 years respectively, a drop of about five months each from 2017, according to analysis by the Continuous Mortality Investigation (CMI), a company owned by the Institute and Faculty of Actuaries.

The drop, which confirms a trend first noted almost a decade ago, is expected to provide a boon for insurers but calls into question planned increases in the state pension age.

[garycook] 07/3/2019 08:31

RBC Capital Outperform with a 820p PT.Also HSBC Buy 825p PT.

[jonwig] 07/3/2019 05:45

Actybod - yes, either standard model or internal model. Most use latter.

[actybod] 06/3/2019 23:45

Most use internal model dictated by company for solvency.

[jonwig] 06/3/2019 15:45

Discussing yesterday how to value PHNX, L&G issued its FY results today, which disappointed the market (hence maybe today's reversal here).
The FT's take is:

L&G’s full-year results showed a surprise weakening in solvency, the ratio by which its assets cover liabilities. The new business strain of a record £10bn of annuity sales in 2018 meant L&G’s solvency ratio at the year end was 188 per cent, down 5 percentage points since the half year.
PHNX's ratio increased from 147% to 167% last year.
I don't know how much freedom there is to calculate one's own solvency ratio - I believe there is some leeway. Also, I don't know how closed books compare with open books. When I had a brief read of LGEN's headlines this morning, I thought they were pretty good, but that was more the asset management side, maybe.

[jonwig] 06/3/2019 05:39

riverman - FCF is always an attractive measure, yes. Wasn't it suggested there was over 20 years of this from the existing run-offs alone?

Answer - yes from Barclays last October: " we believe the dividend is sustainable for the next 20 years". And that's just the dividend part.

[riverman77] 05/3/2019 22:08

Went through the accounts in a bit more detail and think the best way to value these is cash generation 664m, minus recurring cash outflows (operating costs, debt costs and pension costs) of 169m. This gives a free cashflow of around 500m (fcf yield of just under 10%).

Phoenix expect cash generation to grow to 3.8bn over the next 5 years, which would be around 750m per year, while I'd imagine the cash outflows to be fairly static. They seem to be quite prudent so cash generation could well exceed this, and this doesn't include any future acquisitions.

One thing I particularly like is this 3.8bn figure has been stress tested under lots of different scenarios (eg a 20% fall in equity markets) and is broadly unaffected in each due to their hedging strategies. You are therefore getting an incredibly safe fcf yield of almost 10%, with the potential for this to grow further.

[jonwig] 05/3/2019 16:25

FT includes some broker comment:

Phoenix has traditionally focused on consolidating old books of life insurance and Mr Bannister said that the company was “open for business” for future deals.

He expects more opportunities as old-fashioned insurance conglomerates break themselves up and focus on growth: “How long can you stick a thoroughbred next to a plough horse? They’re both legitimate, but need to be broken up.”

But he added that the company did not need to do a deal. As well as giving Phoenix a book of old business, the Standard Life Aberdeen deal brought an open business selling pensions products. Mr Bannister said that within five to 10 years, the flow of new business coming in would match the natural run off of the group’s closed books.

The new targets came as Phoenix reported results for 2018. Operating profit rose from £368m to £708m, which was ahead of analysts’ expectations.

According to Paul De’Ath, analyst at Shore Capital, that was “thanks in part to a large £168m release of longevity reserves due to the decline in life expectancy increases in the UK”.

Gordon Aitken, analyst at RBC Capital Markets, said that the mortality reserve releases “are not a one-off” and that there will be more to come once UK mortality data for 2018 is released.

The final dividend was increased by 3.5 per cent to 23.4p per share.

Mr Bannister said 2018 had been “a very successful year for Phoenix in which we exceeded our cash generation targets, further improved our capital resilience and transformed the business through the acquisition of the Standard Life Assurance businesses”.

[edmundshaw] 05/3/2019 15:19

Actually RCTurner, Phoenix is no longer quite a pure play closed book company (as I expect you know) - indeed the open book is expected to be very useful in growing the business going forward to extend the longevity of current assets. The active book may seem a small part of the business, but over the long term I think it will be quite significant...

[jonwig] 05/3/2019 14:43

RCT, SteMiS, Jeff - thanks for the comments. (Anyone using eps will need to explain why a loss happened in 2017).

[essentialinvestor] 05/3/2019 14:20

Very nice update.

[jeff h] 05/3/2019 14:09

From JP Morgan:-

"....Run off vs. Growth: There are some interesting slides in the results pack (such as slide 22) that shows that run off from legacy heritage business is expected to be covered from growing open pensions book. This doesn’t include benefits from bolt on BPA deals and M&A transactions. This shows the sustainability and growing prospects of Phoenix at the group level..."

[stemis] 05/3/2019 14:05

Market cap at 725p is £5.2bn. It generated £664m free cashflow in 2018 (£653m in 2017). 2019 cash generation target of £600 - £700 million. Long-term cash generation target for 2019 - 2023 of £3.8 billion (= £760m pa average).

So basically it's valued at 7.9 times historic free cash, falling to around 6.9. Current annual dividend cost (at 46p) is £332m, so exactly 2 x covered and a yield of 6.3%. If it follows free cash flow then hopefully we could see it rise by 3% per annum over next 5 years (to 53.3p, costing £384m and yielding 7.4%).

[rcturner2] 05/3/2019 14:03

Gents, do not use eps for a company like Phoenix, it is totally meaningless.

LGEN and AV. are very different businesses from Phoenix and not all comparable.

Phoenix does not write any new business of any substance they are simply running off old pension books and generating their income from the surplus cash that is released in that process. Theoretically they will run down to zero at some point although they can continue to buy up other people's books and may now start to write new business. LGEN for example has a huge (I mean huge) investment book of ISAs and so on that generate income through management fees, Pheonix does none of that. LGEN also writes all different kinds of insurance policies.

Phoenix is a pure play closed pension book company.

[porsche1945] 05/3/2019 13:21

value trap just like direct line and aviva, will dive as soon as they go ex dividend, same as always.

[riverman77] 05/3/2019 13:10

Thanks Jonwig, I think market cap to cash generation looks a reasonable measure in that case.

[riverman77] 05/3/2019 12:59

Thanks, it's more expensive than AV certainly, but you'd expect that as there are longer standing issues which is keeping the share price low.