Phoenix Group Holdings (PHNX) believes that the Covid-19 outbreak – and “lower for longer interest rates” – will conspire to generate buying opportunities, as chief executive Andy Briggs reckons that “insurers will be increasingly focused on freeing up capital by divesting their heritage books, while corporates will seek to offload balance sheet risk arising from pension schemes”.
That would be good news for the life and pensions consolidator, which has already received a major catalyst for cash generation through the recently completed £3.25bn cash/scrip deal to acquire ReAssure, the UK insurance unit of Swiss Re AG (SWX:SREN). The group’s cash generation target range has been increased to £1.5 bn-£1.6bn from £800m-£900m. The integration of ReAssure has brought in another 4.1m in life policies and £84bn in assets under management.
Phoenix had been doing well enough prior to the deal, evidenced by a sizeable increase in net underwriting fees, an 11 per cent rise in operating profit, and another hefty Solvency II surplus.
It was not all cream. Net investment income was shredded through the period, though positive outcomes for changes in insurance and investment contract liabilities flattered the bottom line. Mr Briggs may have put a positive spin on the interest rate environment, but it remains problematic for the insurers.
Consensus adjusted EPS comes in at 68.71p, rising to 73.28p in 2021.
| PHOENIX (PHNX) | ||||
| ORD PRICE: | 695p | MARKET VALUE: | £ 6.95bn | |
| TOUCH: | 695-696p | 12-MONTH HIGH: | 806p | LOW: 460 |
| DIVIDEND YIELD: | 6.7% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 513p* | SOLVENCY II RATIO: | 169% | |
| Half-year to 30 June | Net premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 1.58 | 217 | 3.70 | 23.4 |
| 2020 | 2.17 | 611 | 68.7 | 23.4 |
| % change | +37 | +182 | +1757 | - |
| Ex-div: | 13 Aug | |||
| Payment: | 04 Sep | |||
| *Includes intangible assets of £3.7bn or 371p per share | ||||
