Phoenix Says First-Half Cashflow Climbed After Fund Mergers ~ Finance Update

Phoenix Group Holdings (PGH), the U.K.’s biggest manager of closed life insurance funds, said first-half cashflow climbed after it merged groups of policies and reduced costs to squeeze more money from its funds.

Phoenix generated 496 million pounds ($813 million) of cash from its funds in the six months to June 30, up from 335 million pounds a year earlier, the London-based firm said in a statement today. That beat the 487 million-pound average estimate of four analysts surveyed by the company.

The increased cashflow was due to a “series of management actions such as fund mergers, tax hedging and tax shelters,” Chief Executive Officer Clive Bannister said in a telephone interview. “There are clearly relatively arcane and technical processes behind what we do, but it is our job to simplify and explain in words of one syllable such as cash.”

Phoenix, which buys life insurance policies and profits by releasing capital from them as they mature, is aiming to pay down its 2.7 billion-pound debt pile, almost half of which is due in 2014. The stock is the second-worst performer in the FTSE 350 Insurance Index over the last three months as investors speculated the European debt crisis may make rolling over the debt more difficult.

“We don’t think there’s going to be an issue about what will be a re-terming rather than a refinancing of our financial debt package,” Bannister said, referring to the market volatility of the past month.
Stock Climbs

The stock climbed 13.5 pence, or 2.6 percent, to 535 pence as of 8:45 a.m. in London trading, for a market value of about 923 million pounds.

Phoenix accrued the debt when it purchased Resolution Plc for 5 billion pounds in 2007, when the firm was run by Hugh Osmond, founder of U.K. restaurant chain Pizza Express. Osmond is now the firm’s third-biggest shareholder with a 5.6 percent stake, according to data compiled by Bloomberg.

The firm said it expects to meet its target of producing between 750 million pounds and 850 million pounds of cash this year. Net income fell to 90 million pounds from 179 million pounds in the same period a year earlier, Phoenix said.

The lower profit “reflects the impact of one-off positive experience variances that were recognized in the Phoenix Life operating profit in the first half of 2010 and further investment” in its asset management arm, Phoenix said in the statement.