Phoenix Group Holdings Plc

 
Phoenix Group Holdings Plc (LON: PHNX) is a London, United Kingdom-based largest specialist life and pensions consolidator of heritage life assurance funds in Europe. The group has a strategic partnership with Standard Life Aberdeen wherein the company operates an open business which underwrites and manufactures new products and policies.
 
On 9th March 2020, the company will announce the 2019 Full Year Results.
 
Recent News
On 6th December 2019, Phoenix Group Holdings proposed the acquisition of ReAssure (ReAssure Group plc). Phoenixis the largestpensionsand lifeconsolidatorin the European region. The company expects the acquisition will generate GBP 7.0 billionof additional cash flowsover time, between 2020 and 2023, the company expects to generate GBP 2.7 billion(approximately) and remaining GBP 4.3 billionwill be generated 2024 onwards. Phoenix’s approach to capital managementand highly efficient operating modelwill lead to capitaland cost synergies of around GBP 800 million.The acquisition will also add AUA (assets under administration) of GBP 84 billionand nearly 4.1 million policies.

Trading Update
On 28th November 2019,Phoenix Group Holdings announced its trading update.In 2019, the cash generation stood at £707 million, an increase from the £664 million in 2018. This is exceeding the top end of the year 2019 cash generation of £600-£700 million target range. On 30th September 2019, the solvency II surplus stood at £3 billion. The shareholder capital coverage ratio decreased to 156% as at 30th September 2019 against the 160% as at 30th June 2019. The incremental long-term cash generation from the new business was £440 million which includes new Open business of £205 million in 9M FY19 and 235 million pounds from 1.1 billion pounds of Bulk Purchase Annuity liabilities contracted year on year for nine months ended 30th September 2019. On a year to date basis, the illiquid assets of £1.1 billion sourced with an average credit rating of A+ and delivering a Solvency II benefit of £116 million. The company announced a partnership with Tata Consultancy Services before the announcement of a trading update. TCS will assist the company with Hybrid Customer Services and IT operating model. The company remained in line with total synergy target of GBP 1.2 billion for SLA (Standard Life Assurance) businesses transition. The company persists in exceeding or meeting all client service metrics.

Share Price Performance

Daily Chart as at10^th December 2019, before the market close (Source: Thomson Reuters)

On 10^th December 2019, Phoenix Group HoldingsPlc shares were trading at GBX 713.70 at the time of writing before the market close (at 8:11 AM GMT) and remained same against the previous day closing price. Stock's 52 weeks High and Low are GBX 759.00/GBX 536.72.

Conclusion
The above trading update shows a strong performance, with exceeding the cash generation in 2019 from the given target range by the company. This also shows a further reinforces, the company’s conviction in its capacity to generate Cash and expand its business model. For the upcoming years, the group provides resilience and exploit multiple avenues of progress to deliver long-term sustainable cash generation. The company continues to improve customer outcomes and delivering a high level of customer service. Though the company's hedging programme brings resilience to the Group' solvency position and cash generation, the market is expected to remain turbulent until the Brexit dust settles down. The company look forward to exploring new growth prospects to create value for all investors and bring sustainability to the long-term cash generation. The company’s proposal to acquire ReAssure will help the company to generate additional cash flows and will also bring capital and cost synergies.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 713.70 (as on 9th December 2019).

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