March 22, 2013 / 10:02 AM / 6 years ago

Insurer Phoenix back on acquisition trail

LONDON (Reuters) - British specialist life insurer Phoenix (PHNX.L) said it was ready to consider acquisitions for the first time in two years after negotiating easier terms with its lending banks.

Phoenix, which makes money by buying life insurers that are closed to new customers and running them more efficiently, is on the lookout for takeovers but would only pursue deals that boost profits, Chief Executive Clive Bannister told Reuters.

“Whereas for the last two years I would just say no to any form of acquisition because it was an irrelevance to us, now we are in a position where we can think about doing deals,” Bannister said.

“The bar has to be high - the yield on our stock is at 8 percent, and we have to make sure any capital we deploy enhances that.”

Phoenix also said on Friday its 2012 operating profit rose a higher-than-expected 6 percent to 410 million pounds ($622.4 million), helped by more efficient management of its life insurance funds. Analysts had expected 380 million, according to a company poll.

Phoenix shares were up 7.3 percent at 649.5 pence by 1005 GMT, the biggest risers in the FTSE 250 .FTMC midcap share index. The stock has risen 18 percent since the start of the year, beating a 10 percent gain for the market as a whole.

Phoenix in January persuaded its lenders to raise a cap they had imposed on the company’s dividend payments after agreeing to repay about a third of its 1.5 billion pound bank debt, part-funded by a sale of new shares.

The higher dividend ceiling will increase investor appetite for Phoenix shares, and could make equity fundraising to pay for acquisitions a possibility, analysts have said.

British closed life funds - insurers that no longer accept new customers because they lack capital to underpin new business - are worth about 200 billion pounds, Bannister said, and their owners may become willing to sell because increased regulatory scrutiny of such funds is making them more costly to administer.

Phoenix generated 690 million pounds of cash last year, towards the top of its target of between 600 and 700 million, and said it aimed to generate a total of 3.5 billion in the five years to 2016, up from its previous objective of 3.3 billion.

Phoenix, formerly known as Pearl, was forced into a financial restructuring in 2009 after building up a debt burden of 2.5 billion pounds, much of it taken on to finance the acquisition of insurance tycoon Clive Cowdery’s Resolution venture in 2007.

Editing by David Holmes

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