Finance costs tip Phoenix into the red

Phoenix Group, the insurance consolidation company which has attracted the interest of private equity, reckons it is doing just fine as an independent company after a year of 'considerable progress' in 2011, though the group's finance costs remain a concern.

By MoneyWeek

published 23 March 2012

in Features

Net income in 2011 declined to £6,490m from £7,543m in 2010, while profit before finance costs and tax dipped to £247m from £280m the year before. Those finance costs are not inconsiderable, however, clocking in at £251m in 2011 and £269m in 2010.

"The generation of £810m of cash, above the mid-point of our target range, and our improved group capital position reinforces our confidence in our ability to progress discussions with our lenders, as we look to align the maturity of our debt to the profile of our long term cash flows," said Group Chief Executive Officer, Clive Bannister.

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Operating earnings before tax on a Market Consistent Embedded Value (MCEV) eased to £535m in 2011 from £754m the year before. MCEV operating earnings after tax were lower at £394m (2010: £543 million) primarily due to a decrease in the long-term risk-free rate and the non-recurrence of significant positive experience variances in 2010.

On an international financial reporting standards (IFRS) basis, operating profit before tax grew to £387m in 2011 from £373m in 2010.

Chairman Ron Sandler announced his intention to resign this year once an appropriate replacement has been found.