Phoenix Group rises, ready for buying spree

Phoenix Group, the life insurer formerly known as Pearl, is preparing to go on a buying spree next year after announcing strong maiden results today. Britain's largest "zombie" insurance fund manager, which buys up funds that have been closed to new business, listed on the London Stock Exchange last month and expects to enter the FTSE 250 index in September, raising its profile and boosting its share price. Jonathan Moss, the chief executive, said the next priority for the company, which was previously owned by private equity investors, was to renegotiate the repayment schedule for its £2.7bn debt , much of which matures between 2014 and 2016. It wants to persuade its banks, which include Lloyds Banking Group and Royal Bank of Scotland, to spread the repayments "so we pay down the debt over the life of the business. The profit we will make will emerge over 20 to 25 years". He hopes to have revised terms in place by the first quarter of next year. Set up by pizza and pub entrepreneur Hugh Osmond, the company took over rival insurer Resolution in 2007 and then missed payments on the debt issued by Resolution. It had to seek a capital injection from Liberty Acquisition Holdings last year, and finally reached a £200m agreement to simplify its capital structure in June . "This has been a pivotal period for us, completing many key corporate objectives including the premium listing on the London Stock Exchange and a significantly simplified capital structure," said Moss Once its has its revised borrowing terms in place, the life insurer, which appointed Northern Rock chairman Ron Sandler as its own chairman to raise its credibility with investors, plans to go on an acquisition spree. Merging funds will cut the cost of managing the insurance policies. While there are still dozens of closed life funds left in the UK, Phoenix is only interested in the 10-20 that are worth £500m plus. Any purchases will be funded from cashflow. "We're not going to go and raise capital now," said Moss. "We have no intention of building a warchest." Cash inflows are expected to be at the top of its target range of £625m-£725m this year. Embedded value – a key measure, which estimates the value of assets and the income stream from life policies already in force – rose 7% to nearly £2bn in the six months to 30 June. Phoenix proposed an interim dividend of 21p a share. City analysts welcomed the results. "Management has accomplished quite a lot during the first half, and we expect another milestone soon with the FTSE 250 entry in September," said analysts at JP Morgan Cazenove. "The group continues to demonstrate that it can extract significant cash from its back book, and there is, in our view, further to come here, as funds merge and management optimises the capital structure."